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Japan’s Murata forecasts 28% profit drop on smartphone slump

Written by Nikkei Asia Published on   2 mins read

Parts maker scales back output amid weak demand and swelling inventories.

Japanese electronic components supplier Murata Manufacturing on Thursday cut its group net profit forecast for fiscal 2022 to JPY 226 billion (USD 1.76 billion), down 28% on the year, citing a sharp decline in demand for smartphones and computers.

The JPY 71 billion (USD 538.5 million) downgrade was its second for the fiscal year ending March 31. Sales are now expected to fall 7% to JPY 1.68 trillion (USD 12.7 billion), and operating profit to drop 30% to JPY 295 billion (USD 2.2 billion), both down from its last estimates in October.

“Demand for high-end smartphones slumped in China and elsewhere,” Chairman Tsuneo Murata said in a news conference.

With the Chinese economic slowdown, the company estimates global demand for smartphones at 1.07 billion units for fiscal 2022—a roughly 20% drop from fiscal 2021 and marking a downgrade from its initial prediction last April of 1.37 billion.

For the nine months that ended December, Murata reported a net profit of JPY 211.8 billion (USD 1.6 billion)—equivalent to 94% of its full-year forecast—indicating that its expectations for the current quarter are quite low.

Sluggish demand has led to plants running further below capacity, which the company estimates will contribute JPY 207 billion (USD 1.56 billion) to the reduction in operating profit from the previous fiscal year—a larger drop than in its October forecast.

“We’re lowering factory utilization rates to 80% in the January-March quarter in keeping with demand,” Chairman Murata said. Its plants had been operating at around 85% to 90% of capacity.

Inventory buildup has contributed to the production slowdown. In addition to components piling up at Murata itself on weak demand, the chairman noted customers holding larger-than-expected inventories amid factors including supply chain turmoil.

The yen’s recent strength has also been bad news for Murata. The company makes 65% of its products in Japan in sales terms, while earning 90% of its sales overseas, and had anticipated a boost from the Japanese currency’s plunge last year.

Currency factors are now expected to add JPY 109 billion (USD 826.6 million) to net profit compared with fiscal 2021, down from JPY 123 billion (USD 932.7 million) in the October forecast.

Murata is still calculating global smartphone demand for the fiscal year ending March 2024 but currently sees single-digit percentage growth, President Norio Nakajima said. A full-fledged recovery remains a long way off, he said.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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