Sumitomo Electric expects profit to rise 50%

Sumitomo Electric Industries expects operating profit to rise at least 50 per cent next fiscal year as a production rebound by Toyota Motor Corporation and sales of Apple’s iPad drive demand for its wiring products. “The bullish targets by Japanese carmakers will have a huge impact,” President Masayoshi Matsumoto said this week in an interview at the company’s Osaka headquarters. The profit may reach 150 billion yen ($1.8 billion) in the year starting April, he said, compared with a median estimate of 118 billion yen by 16 analysts surveyed by Bloomberg. Increased output by Toyota, which expects sales of its Toyota and Lexus models to jump 21 per cent this year, and other Japanese carmakers is expected to boost Sumitomo’s revenue from auto parts, a segment that accounts for 69 per cent of operating profit. The release this week of the newest iPad by Apple, which included Sumitomo in its most recent list of suppliers, may also increase sales, Matsumoto, 67, said. “My understanding is most of our orders from Apple are for the new iPad model,” he said. The device, an update of the company’s two-year-old tablet computer, will be priced starting at $499 and include a chip that enables better graphics, Apple said last week. The US company may sell 60 million iPads in all of 2012, about 50 per cent more than last year, according to ISI Group in San Francisco. “There’s no guarantee such demand for cars will materialize, casting doubt on the target,” Yasushi Mizoue, an analyst at TIW Inc. who has a neutral rating on Sumitomo, said today by telephone. Mizoue said Sumitomo received more orders for iPad components after a competitor lost some production capacity because of flooding last year in Thailand. “When that supplier recovers, there should be fierce competition again,” he said, declining to identify the competitor. Sumitomo’s operating profit, or sales minus the cost of goods sold and administrative expenses, in the year ending this month may miss its forecast of 100 billion yen, a target unchanged since May. “We are now in a very difficult position to achieve the goal,” he said, citing flooding that damaged supply chains in Thailand and the strength of the yen, which last year gained more than 5 per cent against the US dollar. “The figure may be lower than 90 billion yen.”