Japanese auto parts manufacturer and the world's second-largest automotive supplier, Denso Corporation, recently announced that its operating profit for the third quarter of fiscal year 2025 (October 1, 2024 – December 31, 2024) surged nearly sixfold year-on-year. The sharp increase was primarily driven by favorable exchange rates and cost-cutting measures, which offset the negative impact of lower vehicle production in Asia. Operating profit rose significantly from JPY 26.8 billion (approximately USD 177 million) in the third quarter of FY2024 to JPY 150.3 billion. However, this result fell short of analysts' expectations, as the average forecast of eight analysts surveyed by LSEG was JPY 152.5 billion.
For the first three quarters of FY2025 (April 1, 2024 – December 31, 2024), Denso's consolidated revenue declined by 1.2% year-on-year to JPY 5,288.4 billion. Meanwhile, consolidated operating profit increased by 68.3% to JPY 401.6 billion, and net profit attributable to the parent company's shareholders rose by 78.1% to JPY 312.7 billion.
Regional Performance
By region, for the first three quarters of FY2025:
In Japan, revenue declined by 0.8% year-on-year to JPY 3,121.8 billion, while operating profit surged 694.6% to JPY 177.7 billion.
In North America, revenue increased by 6.3% to JPY 1,366.4 billion, and operating profit jumped 163.6% to JPY 72.5 billion.
In Europe, revenue dropped by 5.9% to JPY 536.7 billion, while operating profit plunged 78.1% to JPY 4.9 billion.
In Asia, revenue declined by 3.8% to JPY 1,462.8 billion, and operating profit fell by 15.8% to JPY 125.9 billion.
In other regions, revenue increased by 9.6% to JPY 89.8 billion, and operating profit grew by 23.4% to JPY 18.6 billion.
Challenges in the Chinese Market
Denso has been grappling with challenges in the Chinese market, where traditional Japanese and European automakers face fierce competition from local Chinese brands. Additionally, declining vehicle production and sales across the Asia-Pacific region have negatively impacted the company's performance.
It is noteworthy that over half of Denso's revenue comes from the Toyota Group, including Hino Motors and Daihatsu Motor. However, during the April-December 2024 period, Denso's revenue from automakers such as Volkswagen Group, Nissan, Isuzu, and Hyundai-Kia declined, while revenue from the Toyota Group increased.
FY2025 Outlook and Market Reaction
Despite challenges, Denso has maintained its operating profit forecast of JPY 550 billion and pre-tax profit forecast of JPY 609 billion for FY2025. It has also raised its revenue forecast by JPY 70 billion to JPY 7,090 billion.
Denso's Chief Financial Officer, Executive Vice President, and Board Member Yasushi Matsui stated, "Denso will continue to manage the rising costs of auto parts, materials, quality control, and structural reforms while offsetting these challenges through foreign exchange gains and business improvement initiatives."
Following the announcement, Denso's stock price initially rose by 2.3% during intraday trading but later retreated, declining by 0.2% in midday trading.
