-- Denso (TYO:6902) reported higher profit and revenue for the fiscal year of 2026 despite various external factors, but predicted lower earnings in the following year due to the impact of the ongoing Middle East conflict on Japanese carmakers.
The profit attributable to owners rose 5.9% year on year to 443.8 billion yen, while revenue climbed 5.3% from a year earlier to 7.540 trillion yen, due to higher vehicle sales and cost recovery from changes to certain product programs, according to the company's Tuesday press release.
Operating profit jumped 6.5% year on year to 552.5 billion yen, beating the company's forecast of 500 billion yen.
"Although our profitability was affected by various factors - including tariff-related costs, higher parts and material prices, and increased investment in our workforce - our team's ongoing business improvements and higher production volumes enabled us to achieve a higher operating profit than last year," Denso's executive vice president and chief financial officer, Yasushi Matsui, said.
The automobile maker decided to pay out an annual dividend of 67 yen for the period.
The company has been profitable for the period despite withdrawing its proposal to acquire shares in ROHM (TYO:6963) after failing to secure support from ROHM's board and a special committee.
The decision was made after a review of the proposal's corporate value, which concluded that "continuing the proposal at this time would not necessarily contribute to the enhancement of its corporate value".
The deal could have been worth up to $8.3 billion, according to a Reuters report.
However, external factors, including the Middle East war, could have implications for Japan's automobile sector, especially when it comes to aluminum supply.
Denso, being the key supplier of Toyota (TYO:7203), is among the affected, as 70% of Japanese carmakers' aluminum imports come from the Middle East, according to a Bloomberg News report on April 20.
Denso forecasted that the attributable profit for the fiscal year of 2027 will drop to 382 billion yen, while revenue will rise to 7.670 trillion yen. Operating profit is also expected to fall to 500 billion yen.
"Our operating profit forecast decreased from the 2026 fiscal year, reflecting strengthened investments aimed at future growth and potential risks associated with a highly uncertain business environment," Matsui said.