Hitachi loss narrows on robust power equipment sales

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TOKYO, Oct 31 (Reuters) Japan's Hitachi Ltd, which makes consumer electronics, hard drives and nuclear reactors, posted a smaller first-half loss on Wednesday, lifted by rising sales of power plant equipment as demand for electricity grew.

Hitachi, which also makes industrial robots and control systems, is battling weaker prices for hard drives and plasma TVs in markets where bigger rivals Seagate Technology and Matsushita Electric Industrial Co Ltd reported growth.

The company, which raised its first-half earnings forecast just last week, kept its outlook for a net profit of 40 billion yen (8.2 million) for the year to March, from a 32.80 billion loss the previous year and in line with a consensus estimate of 39.2 billion yen by 14 analysts polled by Reuters.

Growing sales of power plant equipment, such as turbines, water tanks and nuclear reactors, will outweigh mounting losses in its flat TV business, said Chief Financial Officer Toyoaki Nakamura.

Hitachi posted a smaller net loss of 13.06 billion yen for April-September, compared with a 78.09 billion yen shortfall last year, helped by sales of thermal power plants and trains in Europe, as well as elevators and excavators in emerging markets.

The company expects profit from power plants, train systems, elevators, excavators and other industrial systems products to quadruple to 150 billion yen from 36.3 billion yen in 2006/07, when it was hit by costs to repair turbines at nuclear power plants in Japan and cost overruns at U.S. plants.

These power systems businesses are set to contribute around half of Hitachi's operating profit this year.

The company expects losses in its digital media and consumer devices business to reach 72 billion yen, from a 58.4 billion yen loss last year.

''There are various areas of concern with Hitachi and they still haven't been solved. So there's a need to wait and see,'' said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

Akino said he would watch to see if Hitachi would unload its loss-making hard drive unit, which he expects will post a 0 million loss in calendar 2007.

Sources have told Reuters the group is seeking a strategic partner to invest in the hard disk drive unit, which has not posted a profit since Hitachi bought it from IBM five years ago.

''I am beginning to be convinced that we will be able to post a profit in HDDs in October-December,'' Chief Financial Officer Toyoaki Nakamura said at a news conference.

''(But) I can't see the top of the mountain we need to climb,'' he later told reporters. ''There's so much to do.'' Hitachi shares rose 3.4 percent prior to the announcement, against a 0.5 percent rise in the benchmark Nikkei average Hitachi's shares have fallen 17 percent since hitting a five-year peak in April, when the company sold its stake in Japan Servo Co to precision motor maker Nidec Corp The benchmark Nikkei average fell 6.28 percent in the same period.

REUTERS MP HT1630

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