Yamaha Motor Co., the world's second-largest motorcycle maker, cut its profit forecast and is reducing domestic motorcycle production 20 percent as demand slumps. The shares fell the most in five months.
Yamaha lowered its net income forecast 23 percent because of ``the worsening financial crisis in the United States,'' it said in a statement today.
Sales will be 6 percent lower than initially forecast.
The Iwata City, Japan-based company expects its first decline in operating profit in eight years after U.S. sales of Royal Star Venture and Roadliner motorcycles dropped 22 percent in the first half. Gasoline prices of more than $4 a gallon and the lowest consumer confidence in 16 years has eroded U.S. demand for the $17,000 bikes.
``Yamaha is taking a severe hit from the economic downturn in the U.S.,'' said Koji Endo, a senior analyst at Credit Suisse Group in Tokyo, who rates the company ``neutral''. ``Demand for big touring motorcycles and boats is drying up.''
Yamaha fell as much as 9.7 percent to 1,761 yen after the earnings announcement, and traded at 1,836 yen as of 1:47 p.m. on the Tokyo Stock Exchange today.
The company reduced its forecast to 45 billion yen ($416.8 million) from an earlier prediction of 59 billion yen. It lowered its operating profit forecast 24 percent to 78 billion yen. Sales will be 1.72 trillion yen, 6 percent lower than the initial forecast.
Net income in the second quarter plunged 85 percent to 3.6 billion yen, according to Bloomberg calculations. Sales dropped 4.2 percent in the period.
Motorcycle Sales
Motorcycle sales in Japan dropped 23 percent in the first half. In Europe, sales fell 12 percent. The company will cut production of motorcycles for Europe, according to spokesman Takashi Kitagawa. In Asia, excluding Japan, sales gained 27 percent. That failed to boost earnings as the smaller bikes the company sells in Indonesia and Vietnam have lower profit margins.
The company said it will cut motorcycle production 20 percent compared with a year ago in response to the slow-down. The output cut will erode operating profit by 10 billion yen this year.
Yamaha also cut capital expenditure for this year to 91.2 billion from its initial plan of 102.3 billion yen.
``There's no end in sight to the severe conditions,'' said Kozo Shinozaki, the company's general manager of finance and accounting.
Yamaha expects sales growth in Southeast Asia to slow due to higher fuel prices. Indonesia raised fuel prices by more than 25 percent in May, the first increase in almost three years. Vietnam on July 21 raised the retail price of the most commonly used grade of gasoline in the country by 31 percent to reduce the burden of government subsidies paid to fuel retailers.
Earnings also fell because of a stronger yen against the dollar and the euro. The stronger currency cut 15 billion yen in operating profit in the first half.
original article
Bloomberg.com: Worldwide
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