Bloomberg News

Hitachi Expects Profit to Drop 16%; Misses Estimates

June 09, 2011

(Updates with analyst comment in the fourth paragraph.)

June 9 (Bloomberg) -- Hitachi Ltd. forecast net income will drop 16 percent in the year ending March 31 after natural disasters in Japan crippled its factories.

Net income will probably decline to 200 billion yen ($2.5 billion) in the financial year, the Tokyo-based company said in a statement today. That compares with the 242 billion yen average of 12 analysts’ estimates compiled by Bloomberg.

Japan’s record earthquake and tsunami on March 11, which disrupted Hitachi’s six plants as well as operations at its suppliers and customers, will impact full year operating profit target by 110 billion yen, President Hiroaki Nakanishi said in Tokyo today. Radiation leaks at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant may also affect earnings at Hitachi, Japan’s second-largest builder of nuclear reactors.

“Outlook for the nuclear reactor business isn’t bright,” said Yuichi Ishida, a Tokyo-based analyst at Mizuho Investors Securities Co. which has an “outperform” rating on the stock.

Sales will probably rise 2 percent to 9.5 trillion yen in the 12 months started April 1, the company said. Operating income, or sales minus the cost of goods sold and administrative expenses, may slide 10 percent to 400 billion yen. That compares with the 9.1 trillion yen and the 415 billion yen average of analysts’ estimates respectively.

Power System Decline

Profit at Hitachi’s power-systems unit will probably tumble 55 percent to 10 billion yen this fiscal year and income at electronic-devices unit may decline 58 percent to 23 billion yen, the company said.

Earnings at the telecommunication systems division, Hitachi’s biggest profit generator, will probably rise 12 percent to 110 billion yen, it said.

The automotive systems unit’s profit may gain 8 percent to 20 billion yen, Hitachi said.

Separately, Hitachi set a sales target of 10 trillion yen for the year ending March 2013, down from 10.5 trillion yen projected a year earlier. Net income will probably exceed 200 billion yen for the year, Hitachi said, reiterating its previous goal.

Hitachi gained 1.3 percent to close at 469 yen on the Tokyo Stock Exchange before the announcement, extending its gain this year to 8.3 percent.

In April, President Hiroaki Nakanishi said profit at Hitachi, one of the three main manufacturers of nuclear reactors at Fukushima Dai-Ichi, will likely deteriorate after Japan’s record earthquake damaged company plants and choked supply of power and parts.

--Editors: Anand Krishnamoorthy, Subramaniam Sharma.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net.

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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