OSAKA -- Omron lowered its profit forecast for the second time this fiscal year as the trade war and slowing Chinese economy dampens demand for factory automation equipment.
The Japanese company said Wednesday that net profit for the year ending in March is now expected to shrink 21% to 50 billion yen ($459 million), down from the 58.5 billion yen projected in October, which itself was a downgrade from 64.5 billion yen in April.
"U.S.-China trade frictions and other negative factors resulted in a worsening global business environment during the fiscal third quarter" through December, the company said in its earnings statement, highlighting "slower capital investment by Chinese manufacturing companies."
Omron cut its annual sales forecast by 25 billion yen from October to 855 billion yen, which represents a 1% decline from a year earlier. The estimate for operating profit was reduced by 11 billion yen to 72 billion yen, which would mark a 17% decrease from the prior year. Plans for the annual dividend were left unchanged at 84 yen a share.
The mainstay industrial automation business is expected to suffer an 18% operating profit drop as semiconductor fabrication loses steam in China and South Korea, while capital spending slows in Europe and the U.S. "The impact of the slowdown in the Chinese economy is spreading to other regions," Executive Officer Tsutomu Igaki told reporters.
The smartphone-related business also lacks momentum. Apple's decision to cut iPhone production has dealt a major blow "to the entire smartphone supply chain," Igaki said. Smartphone makers are curbing development of new products, another factor working against the company.
Operating profit in the electronic and mechanical components segment is expected to plunge 32% for the year. As Chinese consumer spending decelerates, demand for components used in home electronics has fallen off.
For the nine months ended in December, net profit dropped 17% on the year to 38.7 billion yen, the Kyoto-based company said Wednesday. Sales in the industrial automation segment sank 8% in December on the back of a pronounced slowdown in the economy.
"The market environment will remain harsh in April and beyond," Igaki said. But he upheld the company's fiscal 2020 target of a 100 billion yen operating profit on sales of 1 trillion yen. "We will achieve that by actively investing in focus areas and slashing fixed costs," he said.