Japan’s Denso, a major auto parts supplier to Toyota, reported an 11% drop in first-quarter operating profit on Friday, citing pressures from U.S. tariffs and a stronger yen. The decline was larger than analysts had forecast.
Operating profit for the April–June quarter fell to ¥107.2 billion ($720 million), down from ¥120.2 billion a year earlier and well below the ¥130 billion average estimate from seven analysts polled by LSEG.
Despite the shortfall, Denso maintained its full-year operating profit forecast of ¥675 billion, which would represent a 23% increase from the previous year. The company also revised its revenue target upward by 2% compared to its earlier estimate from April.
The company said the expected full-year hit from recently imposed U.S. tariffs would total around ¥130 billion. In response, it is seeking to mitigate the damage by localizing production where possible.
“We’ll take measures such as making things in the U.S. that can be made there … in order to thoroughly reduce it (the impact),” said Yasushi Matsui, Denso’s Chief Financial Officer.
The U.S. has imposed a 10% blanket tariff on imports from trading partners, while Japan recently reached a trade deal with Washington. The agreement will see Japan reduce tariffs on its car exports to 15% in exchange for a planned investment of $550 billion into the U.S. economy.