Denso Corp. posted a 3.3 percent rise in quarterly operating profit today thanks to solid sales and cost cuts, and kept its full-year outlook for a sharp rise in profits.
"The market may have compared Denso's announcement with that of (fellow Toyota group supplier) Aisin Seiki Co., which lifted its forecasts today," said JP Morgan analyst Yoshiki Masaki.
"Personally, I'm not reading too much into Denso's projections, since the company will almost certainly exceed them easily," he added.
Denso's group operating profit for the October-December third quarter totaled $738 million (89.1 billion yen). The rise was much smaller than the 15.5 percent seen in the first six months.
Third-quarter net profit grew 9.0 percent to $513.3 million (61.73 billion yen) on revenue of $7.71 billion (927.88 billion yen), up 14.7 percent, thanks partly to increased sales of Toyota's high-margin Lexus LS sedan.
"The sales growth was due to the increase in domestic and overseas car production for Japanese auto manufacturers," Managing Officer Koji Kobayashi said in a conference call, adding that higher volumes and cost reduction efforts made up for a rise in raw material costs.
Denso, which makes almost half its annual revenue from group firms of Toyota including minivehicle firm Daihatsu Motor Co. and truck maker Hino Motors Ltd., has also been beefing up its business with non-Japanese brands thanks to its edge in advanced electronics components and systems.
Most recently, Denso unveiled plans late last year to boost production of common-rail diesel systems in Hungary by more than 50 percent to 1 million units by the 2008/09 business year to meet growing demand for diesel engines in Europe.
For the full year to March, Denso kept its net profit forecast at a record $1.60 billion (193 billion yen), a 14 percent rise from 2005/06.
Aisin Seiki, a supplier of transmissions, clutches and other functional parts, raised its full-year operating profit forecast to $1.06 billion (128 billion yen) from the previous 118 billion yen after a 6.7 percent rise in nine-month profit.
It lifted its net profit forecast to $515.5 million (62 billion yen) from 58 billion yen. The new profit figure would represent a 1.5 percent rise from 2005/06.