Hitachi Cuts Full-Year Forecasts Feb 25, 2005

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Japanese electronics maker Hitachi said profits jumped sharply in the 9 months to December, but it cut its full-year forecasts sharply, citing falling prices and lower profitability in some information technology (IT) projects.

Net profit rose 759 percent from a year earlier to 67.8 billion yen (approx. U.S. $652 million) while pretax profit was up 51.4 percent to 206.91 billion yen (approx. $2.0 billion) on sales of 6.43 trillion yen (approx. $61.1 billion), up 6.0 percent.

Hitachi said it faced weaker demand for digital products and rising oil and other raw material prices, while the Japanese economy lost steam on slower exports and capital spending.

"Due to plunging prices of digital home appliances and electronic devices, we are now destined to fall short of the previous revenue and profit targets," said Takashi Miyoshi, senior managing director of Hitachi.

Going forward, Hitachi expects the Asian economies to remain healthy on strong Chinese demand but sees slower growth in the United States as the effects of tax cuts and low interest rates fade.

Hitachi also expects to double restructuring charges to 40 billion yen (approx. $380.4 million) for the year to March in the face of falling sales prices and worsening profitability in some projects in the IT business.

The company said that for the year to March 2005, it now sees net profit sharply lower at 50 billion yen (approx. $475.5 million), down from the 100 billion yen (approx. $951 million) projected earlier, with a pretax profit of 235 billion yen (approx. $2.2 billion) rather than 300 billion yen (approx. $2.9 billion).

Operating profit is now estimated at 260 billion yen (approx. $2.5 billion), down from 300 billion yen (approx. $2.9 billion), and revenue at 8.84 trillion yen (approx. $84.1 billion), down from 8.90 trillion yen (approx. $84.6 billion).

At a glance, the 50 billion yen (approx. $475.5 million) net profit for the year is smaller than the 9-month total of 67.8 billion yen (approx. $644.8 million), which would imply a net loss in the March quarter. However, the calculation is more complex, a Hitachi official said. (Technology.Designerz.com)

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