By Daniel Leussink
TOKYO (Reuters) -Japan’s Denso Corp, a leading supplier to Toyota Motor Corp, reported an 86.3% rise in fourth-quarter operating profit on Thursday, benefitting from stronger sales and weaker lockdown-induced headwinds.
The company, a major manufacturer of automotive parts and chips, projected operating profit for the current business year that started this month to hit a record, after the result for the 12 months through March also reached its highest ever.
But despite the rosy outlook, Denso said it was still seeing impact from a global chips supply shortage and gave a stark assessment of the situation in China, where its capacity utilisation rate has been lower than originally planned.
Competition in China, the world’s largest auto market, has increased due to a rapid shift to battery-powered electric vehicles, which is posing a challenge for overseas automakers selling combustion-engine cars.
“Japanese makers have a little bit more inventory of new cars” in China, said Yasushi Matsui, Denso’s chief financial officer. “So they are making adjustments.”
Denso gets about half of its revenue from the Toyota group, which also includes Toyota truck unit Hino Motors and small-car maker Daihatsu, and counts Toyota Chairman Akio Toyoda as a board member.
While drag from a shortage in the global supply of chips would continue until June, the risks were smaller than last year and likely to ease from the summer, Matsui told reporters.
The company posted operating profit of 158.1 billion yen ($1.18 billion) for the three months to end-March.
That compared to an average 161.51 billion yen profit estimated by 10 analysts, and 84.9 billion yen in profit earned a year earlier.
Denso reported a 426.1 billion yen operating profit for the full business year and projected that to come in at 510 billion yen this year.
Its shares recovered after initially retreating on the release of the results, last trading up 2.5% at 7,713 yen.
($1 = 133.5300 yen)
(Reporting by Daniel Leussink; Editing by Jacqueline Wong and Stephen Coates)