Japan Major Electric Cable Makers Forecast Lower Profits for F2011

Among Japanese 5 major listed electric cable makers, Sumitomo Electric Industries (SEI) and Furukawa Electric enjoyed year-on-year increase of consolidated recurring profit in fiscal 2010 ended in March 2011. SWCC Showa Holdings gained the first full-year consolidated recurring profit in fiscal 2010 since fiscal 2007. The main background was that car and electronic appliance markets recovered worldwide. Fujikura covered the profit decrease in the electronic material business segment with the profit increase in the telecommunication business segment. Hitachi Cable posted full-year recurring loss in fiscal 2010 since the business condition turned weak in the second half year.

SEI, Furukawa Electric and Fujikura forecast year-on-year recurring profit decrease for fiscal 2011. Hitachi Cable and SWCC Showa Holdings failed to disclose the half-year and annual financial forecasts for fiscal 2011 since the business circumstances are unclear.

Extraordinary loss related to Japan Earthquake was especially large at SEI and Hitachi Cable, mainly for restoration of damaged production facilities. Indirect impacts of the earthquake on consolidated operating profits were 1 billion yen at Furukawa Electric and 1.2 billion yen at Hitachi Cable.

Demand for automotive components, mainly automotive wiring harness, should decline for April-September 2011 along car makers’ output reductions. SEI, the largest automotive component supplier among the five makers, estimates its automotive business segment’s operating profit would drop by 70% to 10 billion yen for April-September 2011 compared with same period of fiscal 2010. The profit is expected to rebound to 38 billion yen for October-March, increasing by 20% year-on-year.

Demand for telecom products is steady in overseas markets while price competitions and strong yen trend impact the cable makers’ profits. For fiscal 2011, SEI, Furukawa Electric and Fujikura forecast year-on-year operating profit decrease at their telecom business segments.

As for electronic materials and components, the demand was strong in smart phone market but some of electronic appliances entered inventory adjustment phases in and after July-September. Thus the cable makers’ sales slowed down.

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