U.S. Slowdown May Keep Kyocera From Raising Profit (Update1)
12/26/00 10:29:00 PM
Source: Bloomberg News
URL: cnetinvestor.com
(Adds analyst comment in paragraph 4, adds last section)
Kyoto, Dec. 27 (Bloomberg) -- The recent economic slowdown and stock declines in the U.S. may keep Kyocera Corp. from raising its profit margin for the year starting in April, the world's largest maker of semiconductor packages said.
If parts demand slows at a faster-than-expected pace in January and February, Kyocera may not stick to its goal of group pretax profit reaching 18 percent of sales in the next fiscal year, Kyocera President Yasuo Nishiguchi said in an interview. That's after he said Nov. 24 that the company aims to boost the profit ratio to that level from a record 17 percent estimated for this year.
Kyoto-based Kyocera, which also makes capacitors that regulate the flow of electricity in mobile phones, is one of many Japanese manufacturers whose profits have surged this year on growing demand for components used in handsets and personal computers. Nishiguchi's remarks suggest that these companies, face tough times ahead.
''It's becoming an issue whether component makers will be able to boost profits'' next year, said Mamoru Takagi, a senior analyst at Societe Generale Securities (North Pacific) Ltd. ''The stock market sees risk of declining profits.''
In the past month, the Nasdaq Composite Index has fallen more than 13 percent on concern a slowing U.S. economy is likely to cut profit growth especially in technology companies. The annualized rate of growth in the world's largest economy fell to 2.2 percent in the July-September period from 5.6 percent in the second quarter.
Japan's benchmark Nikkei 225 stock average fell 6 percent in the past month.
''I'm concerned about what's happened in the past half month'' when U.S. and Japanese stocks declined, Nishiguchi said. ''I can't figure out right now if a slowdown (in parts demand) will turn out worse than I had expected'' when planning the 18 percent profit-to-sales target, he said.
17 Percent Level
Still, Kyocera is confident of at least keeping the pretax profit-to-sales ratio at 17 percent next year because its mobile phones and copier businesses will increase profit, Nishiguchi said. The company's units include Kyocera Wireless Corp., the handset-making unit bought in February from Qualcomm Inc., and Kyocera Mita Corp., the copier and printer subsidiary.
Kyocera hopes to boost the profit ratio for its equipment business to 10 percent next year from 7 percent estimated for the second half of this year, Nishiguchi told analysts on Nov. 24. The profit margin for components for the second half is forecast at 26 percent, helped by AVX Corp., a U.S. subsidiary that makes capacitors.
''Even if profit in our parts business turn out lower next year, that in our equipment business will never go down from this year because of restructuring,'' Nishiguchi said during the interview. ''They will cancel each other out.''
For the year ending in March, Kyocera forecast net income of 115 billion yen ($1 billion) and pretax profit of 217 billion yen on sales of 1.28 trillion yen, all record highs. That exceeds the company's original target of a 15 percent pretax profit ratio on sales of 1 trillion yen in the year starting April 2001.
Kyocera is sticking to its sales outlook of 1.28 trillion yen for this fiscal year because the company had factored in slower parts demand, Nishiguchi said.
New Investment
Kyocera, which plans to spend 99 billion yen on plants and equipment this year, will probably boost the investment next year to more than 100 billion yen, Nishiguchi said. Of that, the company plans to use 30 billion yen to expand production facilities in China.
While KWC plans to sell in the U.S. from February a new handset combining the functions of a mobile phone and an electronic organizer, Kyocera doesn't plan to market the product in Japan, Nishiguchi said. The phone functions will use so-called CDMA technology developed by Qualcomm, and the organizer runs on an operating system licensed from Palm Inc.
Kyocera is rather interested in developing its own personal digital assistant, Nishiguchi said. He declined to elaborate further, including which operating system it will use.
Shares of Kyocera are down 52 percent so far this year. They fell 20 yen, or 0.2 percent, to 12,850. |
