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Fanuc's orders dry up as trade war hits China robot demand

Japanese automation company cuts profit forecast for second half

Chinese buyers of Fanuc's factory automation systems have curbed orders as the U.S.-China trade war progresses.   © Reuters

TOKYO -- Fanuc's decline in orders amid an otherwise bright April-June quarter suggests Chinese buyers are pulling back on investment over fears of damage from a trade war with the U.S., setting up the Japanese robotics and automation company for a rough year.

Fanuc's net profit jumped 9.5% on the year to 44.7 billion yen ($403 million) for the first quarter of fiscal 2018, the company said Wednesday. Sales climbed 8.5% to 182.8 billion yen thanks to brisk shipments of factory automation equipment, including computer numerical control systems used to guide machine tools. A weaker-than-expected yen also contributed to earnings.

But this strong showing contrasts sharply with Fanuc's outlook for the rest of the year. Though the company added 7.5 billion yen to its net profit forecast for the year ending in March 2019, it still anticipates a 20% decline in the bottom line to 145.2 billion yen.

Moreover, orders in the quarter fell 14% on the year, with those from China diving 34%. Fanuc has cut its forecast for net profit in the October-March half by 2.5 billion to 69.4 billion yen, with Chairman and CEO Yoshiharu Inaba citing "various uncertainties."

Since U.S.-China trade tensions took a turn for the worse in June, more Chinese companies in sectors such as autos and machine tools have grown hesitant to make major capital investments, Inaba said.

"In the absence of a sudden improvement in U.S.-China relations, we are resigned to the fact that business is going to be tough," he said.

As the world's leading maker of computer numerical control systems, Fanuc's earnings reflect investment trends among a wide range of industrial companies. The robotics manufacturer already was bracing for a slowdown, as the market for "robomachines" used to process metal smartphone parts is largely saturated, and the company has stopped introducing new models. China and other parts of Asia, where many smartphones are made, account for nearly half of consolidated sales.

Now even factory automation orders, which Fanuc expected to rise, are down 1% on the year to 61.9 billion yen.

"This will not be enough to offset declines in other segments," an analyst said.

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