TOKYO -- Toray Industries' operating profit for the April-June quarter probably shrank by more than 10% on the year to around 34 billion yen ($306 million) as the Japanese company had difficulty passing on higher materials costs in its carbon fiber prices.
Toray sells carbon fiber to U.S. aircraft maker Boeing under a long-term contract, which hinders passing on the cost increase.
Carbon fibers, produced by baking synthetic fibers to strengthen them, have broad applications, including in composite materials used to make aircraft and automobiles. Toray is the world's leading supplier and Japan's biggest textile company by sales.
Demand for aircraft fibers, a Toray strength, was strong in the three-month period. But supply costs increased as prices of a key raw material rose about 20% on the year, driven up by more expensive crude oil and reduced supply.
Meanwhile, Toray faced intense competition in carbon fibers used in wind turbine blades and sporting goods. Costs linked to the July acquisition of a Dutch carbon fiber processor, TenCate Advanced Composites Holding, also weighed down profit.
Toray's first-quarter sales probably rose nearly 10% from the year-earlier 508 billion yen. The fibers and textiles business, which generated about 40% of Toray's fiscal 2017 sales, continued to fare well in the first quarter. Poor weather dampened demand for apparel, but shipments of materials for automotive air bags increased.
In the performance chemicals business, resins used in automobiles and lithium-ion battery materials sold well.
Toray will announce its first-quarter results on Monday. For the full year ending in March 2019, the company has projected an operating profit increase of 5% to 165 billion yen on sales of 2.4 trillion yen, up 9%.