Japan's Denso lifts profit forecasts as sales shine

TOKYO, Oct 31 (Reuters) - Top Japanese auto parts maker Denso Corp (6902.T: Quote, Profile, Research, Stock Buzz) lifted its annual profit forecasts by about 10 percent on Wednesday after a hefty rise in interim earnings driven by domestic carmakers' robust overseas production.

Denso, one of the world's top auto parts suppliers and an affiliate of Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz), has been boosting sales of its high-tech electronics and other products that have drawn increased demand from carmakers seeking to improve fuel efficiency and reduce harmful tailpipe emissions.

For the business year to the end of next March, Denso, whose market value of $33 billion exceeds that of General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), now expects an operating profit of 337 billion yen ($2.94 billion) instead of 308 billion yen.

The new figure represents an 11 percent rise from 2006/07 and brings the profit closer to a consensus forecast of 339 billion yen in a survey of 14 brokerages by Reuters Estimates.

Denso expects a 2007/08 net profit of 228 billion yen, up 11 percent from last year and 10 percent from its previous forecast of 207 billion yen. Backed by the solid results, Denso raised its annual dividend forecast by 2 yen to 50 yen. It paid 45 yen per share last year.

For the April-September first half, operating profit jumped 22 percent to 169.13 billion yen, net profit grew 26 percent to 118.30 billion yen and revenue climbed 15 percent to 1.948 trillion yen.

"Sales growth was mainly due to the increase in overseas car production for Japanese auto manufacturers and the depreciated yen," Senior Managing Director Koji Kobayashi said in a statement. That more than made up for rising costs for raw materials, labour and depreciation, he said.

Denso also expanded its business with General Motors and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) in the Americas, and with Ford, Opel, Fiat SpA (FIA.MI: Quote, Profile, Research, Stock Buzz) and PSA Peugeot Citroen SA (PEUP.PA: Quote, Profile, Research, Stock Buzz) in Europe, it said.

Shares of Denso fell 8.7 percent in the year to Tuesday, faring better than Tokyo's transport sub-index , which has lost 12 percent.

Prior to the earnings announcement, the stock ended morning trade up 0.5 percent at 4,330 yen on Wednesday, against a 0.8 percent rise in the subindex.