Fanuc Falls After Outlook Cut Dashes Hope for a Demand Rebound

(Bloomberg) -- Fanuc Corp. slumped the most in almost a month after the Japanese industrial robots maker trimmed its full-year profit and sales targets, reflecting fallout from U.S.-Chinese trade tensions.

The shares fell as much as 2.9% in Tokyo on Tuesday, the biggest intraday drop since Oct. 3. Yesterday, Fanuc cut its operating profit outlook 3.1% to 69.1 billion yen ($634 million), below the 102.6 billion yen estimated by analysts. It also lowered its revenue forecast 3.8%.

This is the second time Fanuc has trimmed its annual profit forecast this year, on top of two downward revisions in the previous fiscal year, as orders for machine tools from China continued to fall amid trade tensions. Chairman Yoshiharu Inaba in February had called a bottom in demand, but bookings continued to slide. The company has once again said it doesn’t expect the slump to worsen further, but also added that there are no clear signs of a rebound yet.

“The volatile demand environment in China seems to be challenging management’s confidence in its view,” Sho Fukuhara, an analyst at Jefferies Group, wrote in a report.

Fanuc reported a 54% slump in operating profit in the quarter ended September, missing analyst estimates. Orders declined 10% from the previous three-month period, 16% below the level they were a year ago. Machine tool demand in China and Taiwan dropped due to the impact of the trade war and bookings from South Korea and India remained sluggish.

The company also extended the period for a share buyback, which was set to expire this month, to the end of January. Fanuc has bought back 35.7 billion yen of shares so far of a possible 50 billion yen. Of the 21 analysts covering the company, eight have a sell rating, twice the number of buy recommendations.

“A genuine share price rally is therefore unlikely until capex increases in China and the IT industry,” Tsubasa Sasaki, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co., wrote in a report.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Vlad Savov

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