Toyota Supplier Denso Slashes Full-Year Profit Forecast by 21%

DENSO, a leading mobility supplier and key Toyota partner, has announced a significant revision to its full-year profit forecast, cutting it by 21% due to lower vehicle production volumes and slower vehicle sales in the second half of the fiscal year. The company attributed this revision to financial results in the second quarter, reflecting a 4.2% decrease in revenue and a 20.5% decrease in operating profit compared to the previously announced forecast. Despite strong vehicle sales in Japan and North America, Denso's profit forecast was revised downwards due to these factors, as well as uncertainties in the external environment.

Denso's revenue growth has been robust, with a 11.6% increase in the 2024 fiscal year compared to the previous year. This growth was driven by strong vehicle sales, particularly in Japan and North America, as well as foreign exchange gains and the expansion of products in electrification, safety, and Peace of Mind areas. However, the company's operating profit decreased by 10.7% due to a provision for quality issues and slower production volumes. The revised forecast for the next fiscal year, with revenue projected at 7,350.0 billion yen (US$48.5 billion) and operating profit at 714.0 billion yen (US$4.7 billion), reflects Denso's continued investment in these areas, but also the need to address operational inefficiencies.

The revision in Denso's profit forecast highlights the challenges faced by mobility suppliers in today's dynamic market. Despite strong revenue growth, operational challenges and external uncertainties can significantly impact profitability. Investors should remain cautious and vigilant, closely monitoring the performance of key suppliers like Denso and assessing their ability to adapt to market changes and manage risks effectively.