NEC forecasts 40% drop in profits

Japanese electronics group NEC cut its net profit outlook by 40% for the business year just ended, surprising the market. The shortfall is due restructuring costs, a Reuters report said.

The company added that the restructuring of its mobile phone and microchip operations would help operating profit exceed its previous forecast by 15%. NEC, which makes servers, computers and telecom equipment, has been trimming costs at struggling subsidiaries in response to the demand for new networks from financial institutions and phone operators.

The electronics conglomerate now expects a net profit of €109 million (US$173 million) for the year ended 31 March, down from its previous forecast of €182 million (US$288 million) because of restructuring its battery manufacturing unit, NEC Tokin, a cancelled sale of assets and a write-down of deferred tax assets.

That compares with a consensus estimate of €168.8 million (US$267 million) by 14 analysts polled by Reuters and €55.3 million (US$87.6 million) profit the previous year.

In operating terms, NEC was helped by fixed cost cuts at microchip unit NEC Electronics, which raised its annual operating profit outlook to Â¥5 billion (€30.41 million) from the previous forecast of zero.