Higher Cost to Suffer Japan Major Electric Wire Makers’ Profitability

Japanese 3 electric wire makers out of major 6 firms posted lower consolidated recurring profit for the year ending March 2008 from previous year due to higher yen rate. Sumitomo Electric Industries, Furukawa Electric and Hitachi Cable expect lower recurring profit for the year ending March 2009 due to higher yen rate, higher depreciation under new accounting system and higher raw materials cost. The major makers try to improve the profitability trough higher sales for strategic products, cost cutting effort and price hike. Sumitomo Electric estimates the higher yen rate reduces the sales by more than 50 billion yen and the operating profit by more than 10 billion yen for the year ending March 2009 from previous year. The operating profit decreases by total 26 billion yen including higher depreciation. Furukawa Electric expects 6.5 billion yen of negative impact on operating profit from higher taxation, 5.8 billion yen of negative impact from higher cost for raw materials and energy and 2.7 billion yen of negative impact from higher yen rate. SWCC Showa Holdings expects lower operating profit due to higher yen rate and higher tax. The demand decreased for optical fiber network devices and construction application in the year ending March 2007 from previous year. The major makers try to improve the profitability by focusing the resources into strategic items. Sumitomo Electric focuses on automotive wiring harness while Furukawa Electric expands the optical cable and high voltage cable in offshore operations. Fujikura, Hitachi Cable and Mitsubishi Cable Industries try to reduce the operating cost for the strategic items. The demand is expected to improve for construction electric wire and electronic materials in and after second half of the year ending March 2009. However, the higher cost and lower selling price for electronic materials could suffer the makers unless they would succeed price hike.