NEC on Thursday became the latest Japanese electronics group to warn that profits this year would be lower than initially expected due to a slowdown in demand and sharp price falls.

The group said full-year operating profits would be 10 per cent lower than initially forecast, at Y135bn ($1.3bn), largely due to weak demand for its semiconductors.

Sales are now expected to be Y4,870bn, or Y30bn below previous estimates.

The revised full-year forecast means NEC now expects operating profits to be 26 per cent lower than last year's figure, while pre-tax profits will be 25 per cent lower.

The net profit forecast for the year is unchanged at Y60bn, which is a 46 per cent improvement on last year. NEC benefited from the listing of its DRAM joint venture, Elpida Memory, last November.

The lower forecast stems largely from a slow recovery in the semiconductor business and sluggish sales of mobile phones in Japan.

NEC had initially expected demand for semiconductors to recover early in 2005, but now forecasts a recovery later in the year.

The revision to NEC's full-year forecasts reflects disappointing results in the third quarter.

Sales in the last three months of 2004 were down by 4 per cent to Y1,115.6bn, while operating profits slumped by 39 per cent to Y20.6bn and pre-tax profits dropped by 26 per cent to Y27.5bn.

Although NEC held up well in IT solutions, helped by demand from the government sector and manufacturing industries, it suffered from a drop in shipmentsof mobile phones dueto a slowdown in the market.

Furthermore, in addition to the fall in demand for semiconductors stemming from inventory adjustments among customers, NEC transferred its plasma display business to Pioneer.

Separately, Kyocera, the ceramics company that makes electronic parts, also cut its full-year forecast as it reported a drop in third-quarter profits due to weak demand for its mobile phone components.

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