Fanuc Plunge Erases Post-Loeb Gain After Profit Forecast Cut

Updated on

Fanuc Corp. plunged the most in almost seven years in Tokyo trading after cutting its full-year profit forecast, erasing most of the gains made after activist investor Daniel Loeb announced he’d taken a stake in February.

Shares slumped 11 percent, the biggest drop since 2008, to 20,700 yen as of the close in Tokyo Wednesday. Net income will probably be 159.5 billion yen ($1.3 billion) in the 12 months to March 31, the maker of industrial robots said after the market closed Tuesday. That compares with its previous forecast for 191.2 billion yen.

Fanuc said in April it would double its dividend payout ratio and buy back more stock following pressure from New York-based Loeb to share more of its about $8 billion in stockpiled cash with investors. Net income rose 12 percent in the fiscal first quarter, the company said in a statement Tuesday, the slowest growth in six quarters. Operating margin slipped to 37.5 percent, the lowest since the end of 2013.

“Profit margins have already narrowed, so investors are worried the impact could be even bigger if China’s economy slows down more -- and that’s an open question,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo.

Fanuc shares are up 3.8 percent this year, compared with a 16 percent gain in the benchmark Topix index. The stock has slumped 17 percent in July, the deepest monthly decline since October 2008.

“Orders are decreasing rapidly towards the end of the first quarter, and are expected to diminish further from the second quarter on,” Fanuc said Tuesday in a statement on its website. “The future of the Chinese market is uncertain” with signs of a slowdown in demand for factory automation.