Toyota supplier Denso slashes full-year operating profit forecast on higher costs

Japan’s Denso, a major auto parts supplier to Toyota, slashed its full-year operating profit forecast by nearly a fifth, reflecting a drag from U.S. import tariffs and a hit from rising material and fixed costs.

The company cut its forecast for the fiscal year ending in March by 17.8 per cent to 535 billion yen ($3.44 billion) from a previous estimate of 651 billion yen.

The world’s second-largest maker of vehicle parts generates about 56 per cent of its revenue from Toyota group companies.

Denso shares fell after it released its reduced operating profit forecast, finishing the morning session down 1.5 per cent. Its shares were 1.6 per cent higher before the disclosure.

Even after the forecast cut, both full-year operating profit and revenue, which was revised upward, were expected to reach record highs, Chief Financial Officer Yasushi Matsui said.

The company said a positive impact from the yen’s exchange rate helped offset rising cost pressures and a smaller-than-expected impact from the measures it is taking to counter U.S. tariffs.

For the three months through the end of December, Denso reported a 9.4 per cent rise in operating profit to 164.5 billion yen, matching the average estimate from eight analysts polled by LSEG. In the year-earlier period, its operating profit was 150.3 billion yen.

The increase was driven by higher vehicle production volumes mainly in North America, Japan and Asia.

Revenue from Toyota group customers rose over the April-to-December period, supported by stronger hybrid vehicle demand in the U.S. and other major markets.

By contrast, sales to other foreign and Japanese automakers were mixed, with those to Honda Motor and Nissan Motor declining.