Hitachi’s Profit Will Deteriorate on Quake, President Says
April 06, 2011, 6:07 AM EDTBy Mariko Yasu and Maki Shiraki
(Updates with president’s comments in 10th paragraph.)
April 6 (Bloomberg) -- Hitachi Ltd., one of the three main manufacturers of nuclear reactors at Fukushima Dai-Ichi, said profit will likely deteriorate after Japan’s record earthquake damaged company plants and choked supply of power and parts.
“I apologize for not being able to give a specific figure on earnings,” President Hiroaki Nakanishi told reporters in Tokyo today. The company may spend more than six months to calculate damages and intends to review plans for its nuclear power business, he said.
Japan’s record earthquake and tsunami on March 11 led to blasts and radiation leaks at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant. Hitachi, which built reactor No. 4 on the Fukushima site, has lost 18 percent of market value since the quake. Japan’s third-biggest company by revenue suspended six plants in northern Japan following the disaster.
Hitachi raised its annual profit forecast by 15 percent in February citing cost reductions at its home appliances and infrastructure businesses. Net income may total 230 billion yen ($2.7 billion) in the year to March 2011, compared with a loss of 107 billion yen in the previous year, Hitachi said Feb. 3.
“Naturally, we’ll have to review our business plan though we won’t get our hands off from the nuclear power business,” he said. The executive declined to elaborate whether the company’s mid-term business targets will be lowered or delayed.
Power Systems
Hitachi, Japan’s second-largest builder of nuclear reactors, aims to generate 380 billion yen in revenue from nuclear-plant operations in the year ending March 2021, almost double of 210 billion yen in the year ended March 2010, the company said in June. Hitachi plans to win at least 38 new contracts by 2030 and a third of global market share, it said at the time.
Nuclear-related operations made up 2.3 percent of Hitachi’s revenue in the year ended March 2010.
The Power Systems Group, handling thermal, nuclear and alternative power businesses, is targeting 1.2 trillion yen in revenue in the year to March 2016, compared with 882.1 billion yen in sales earned in the year ended March 2010.
Japan’s third-biggest company by revenue expanded its reactor business in 2007 when the company and General Electric Co. combined their nuclear-plant businesses into two ventures in the U.S. and Japan to compete with Toshiba Corp. and France’s Areva SA. GE would receive a net payment of “several hundred million” dollars, the Fairfield, Connecticut-based company said at the time.
Sacrifice
Hitachi isn’t legally obliged to pay compensation to evacuees from the areas around the Fukushima Dai-Ichi plant, said Nakanishi. “Still, we should make as much sacrifice as possible to bring back safety. Right now, we are spending a significant amount of resources to settle the case,” he said.
The Fukushima plant, built four decades ago when Japan’s first wave of nuclear construction began, had its power and back-up generators knocked out by the tsunami that followed the magnitude-9 earthquake. A lack of power to cool the reactor led to explosions and radiation leaks and forced the evacuation of more than 177,000 residents within 20 kilometers of the site.
“It surely has become harder to get the backing of residents to build a nuclear plant,” Nakanishi said. “Still, it’s not possible for Japan to totally eliminate the usage of nuclear power.”
Hitachi owns 80 percent of a Japan-based joint nuclear sales venture with GE and GE owns 60 percent of a U.S.-based joint venture, which operates the business outside of Japan.
--Editors: Suresh Seshadri, Vipin V. Nair
To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Maki Shiraki in Tokyo at mshiraki1@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
