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Japan's Hitachi Cuts Full-Year Operating Profit Forecast

Monday, 4 Feb 2013 | 6:28 PM ET
Tomohiro Ohsumi | Bloomberg | Getty Images

Shares of Hitachi sagged 6.2 percent to 532 yen on Tuesday morning after Japan's biggest industrial electronics company cut its annual profit outlook by 13 percent due to a weak economic recovery in Europe and a slowdown in emerging markets.

Japan's Hitachi cut its full-year profit outlook by about 13 percent on Monday to 420 billion yen ($4.5 billion), citing a weak economic recovery in Europe and a slowdown in emerging markets.

The sprawling firm, which is cutting costs and trying to push into growth areas such as infrastructure, posted a 28 percent fall in its third-quarter operating profit, well below market forecasts for a small rise.

"The business environment facing our company is likely to stay unclear, including not only a prolonged European economic struggle but also a slowdown in growth in emerging markets, including China and India," Hitachi said in a statement

(Read More: Sharp Rebounds, Makes a Profit in December Quarter)

The company, whose products range from lightbulbs to nuclear plants, pointed in particular to a likely slow pickup in global demand for its electronics business, including semiconductors.

Hitachi logged an operating profit of 68.3 billion yen in the October-December quarter, down from 95.1 billion yen last year, and below an average forecast for a 98.3 billion yen profit according to Thomson Reuters.

Hitachi said it was hurt by a fall in profit at its construction machinery operations as well as its high functional materials and components operations.

Japan's biggest industrial electronics firm has been overhauling its empire of some 900 firms since reporting one of the largest losses in Japanese corporate history.

(Read More: GE Revenue and Profit Beat Estimates)

"We have been working for three years to change our system to step out of losses, and this business year we were able to achieve much of that," Executive vice president Toyoaki Nakamura told a briefing.

Hitachi bought a British nuclear project for $1.1 billion in October as it seeks markets outside Japan and plans to merge its thermal power business with that of Mitsubishi Heavy Industries in a bid to gain scale.

Hitachi and its domestic competitors lag overseas rivals in profitability.

Hitachi has an operating profit margin below 5 percent, while Toshiba is at 3.3 percent andMitsubishi Electric is at 5.6 percent.

(Read More: Siemens Profit Hit by Delayed Order, Restructuring)

Overseas counterparts such as General Electric and Siemens boast profit margins of 12.2 percent and 8.9 percent.

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