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Toray says profit blow 'unavoidable' from Boeing 787 cutbacks

Japanese materials maker sole supplier of composite used in the aircraft

Boeing's assembly facility in the U.S. state of South Carolina.  The company said it plans to trim output of its flagship 787 aircraft due to falling overseas demand.   © Reuters

TOKYO -- Toray Industries will take a financial hit if Boeing goes through with plans to trim output of its large 787 passenger jet, an executive at the Japanese material producer said Thursday.

"If true, the effect on earnings will be unavoidable," Koichi Abe, an executive vice president for Toray, told reporters at a news conference announcing quarterly earnings.

Toray is Boeing's sole supplier of carbon fiber composite materials used in the wings, fuselage and other major parts of planes. Boeing said last month it will reduce its pace of production for the 787 starting in the later half of 2020. Monthly output would drop from 14 planes to 12.

U.S.-based Boeing blamed global trade factors, such as the lack of orders from China. But Abe stressed during the news conference that nothing is set in stone.

"We have received no formal notice regarding a 787 production cut, and our response is at the initial stage," said Abe. "We foresee no impact on earnings during the 2019 fiscal year."

Meanwhile, the delivery freeze on the smaller Boeing 737 Max is not expected to undermine Toray's finances, according to Abe. "The amount of carbon fiber composite materials used is negligible and the effect will be limited," Abe said.

Toray on Thursday reported a consolidated operating profit of 71.6 billion yen ($656 million) for the first half through September, down 8% from a year earlier. Sales shrank 6% to 1.12 trillion yen. The market for textiles and chemical products has soured amid Sino-U.S. trade frictions and the Chinese economic slowdown.

On the other hand, operating profit in the carbon fiber business jumped 80% to 10.7 billion yen. Not only did the material find a home in sporting goods, but demand surged for use in applications such as wind turbine blades. First-half earnings also benefited from last summer's acquisition of Dutch carbon fiber processor TenCate.

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