Hitachi Shares Tumble After Full-Year Profit Forecast Cut

  • Analysts had expected an increase in the profit forecast
  • Higashihara, now president, to add CEO title in reshuffle

Hitachi Ltd. shares closed at their lowest level in nearly three years after the company slashed its full-year profit forecast as Chinese growth slowed and oil prices plummeted.

Hitachi closed down 7.8 percent Thursday on the Tokyo Stock Exchange at 512.6 yen, compared to the 0.9 percent decline in the benchmark Nikkei 225 Index. Hitachi shares are down 26 percent so far this year.

Japan’s second-largest manufacturer by workforce predicted net income of 240 billion yen ($2 billion) for the year ending March 31, compared with a forecast of 310 billion yen in its October earnings announcement, according to a statement Wednesday in Tokyo. Analysts had expected the forecast to rise to 316 billion yen, according to the average of 19 estimates in a Bloomberg survey.

“The shares could be overvalued in light of the current business climate,” Credit Suisse Group AG analyst Hideyuki Maekawa wrote in a report Thursday. “A question
mark will linger over its ability to achieve” ambitious targets, he wrote.

The Tokyo-based company is suffering from a slowdown in Chinese growth that has hit sales of construction machinery, as well as weak demand from oil- and gas-producing countries as crude oil prices plumb 12-year lows. 

Hitachi kept its sales forecast unchanged Wednesday at 9.95 trillion yen, supported by the purchase of Waupaca Foundry Holdings Inc. by the company’s Hitachi Metals Ltd. unit in 2014 and last year’s acquisition of Finmeccanica SpA’s rail business and its stake in a signals affiliate.

Hitachi separately said Toshiaki Higashihara, currently president and chief operating officer, will add the chief executive officer role as of April 1. Current CEO Hiroaki Nakanishi will retain his position of chairman. The move aims to improve decision-making before the company releases its next mid-term plan in May, Toyoaki Nakamura, chief financial officer at Hitachi, told reporters Wednesday in Tokyo.

“Nakanishi will still focus on Hitachi’s global operations and government relations,” Nakamura said. “We wanted to bring the roles together so there is one decision maker to make faster decisions.”

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