Hello friends, hope all is ok at the magical London. Fanuc results were not so good and forecasts were lowered, at least according to the figures showed at the company’s website. I was surprised by the US$/Yen they were forecasting for this FY: 116. Any thoughts? Thank you! Best wishes to all of you.

David Fuller's view

Many thanks for this thoughtful email.  I am pleased to say all is well with the Fullers in London and the Treacys in Los Angeles.

Here is a link to Fanuc’s website, which you have already seen, but I include it for the other subscribers interested in this leading industrial robotics company with a global presence.  China’s slowdown in factory automation appears to be the main factor behind Fanuc’s reduction in its annual profit forecast.

Fanuc (Bloomberg’s estimated p/e 23.43 & yield 2.75%) is certainly not the only Autonomy to experience a slowdown in China this year, which probably tells us more about the PRC than the global companies with interests there.  Whatever the official reports, China is clearly not growing at anything like 7%pa. 

A silver lining for Fanuc in these disappointing results is that it has presumably been able to buy back its shares more cheaply over the last three months.  The share will open lower in Japan tomorrow, as the results were released following today’s close.  However, it is clearly oversold following its decline since the first of June. 

I hold Fanuc in my personal long-term investment portfolio, as you may recall, and regard this pullback as a buying opportunity.  However, in common with other multinational companies, I do not assume that Fanuc will always have a dominant role in China.  Eoin points out that its main Chinese rival is Siasun Robot & Automation Co (est p/e 122.97 & yield 0.06%) but it is not cheap, as you can see.  This company, founded in 2009, will presumably gain plenty of business in China.  However, I think it will be a very long time, if ever, before Siasun can match Fanuc’s state-of-the-art software and precision machinery.  Even more importantly, well managed industrial robotics companies should have a brilliant long-term future. 

Lastly, regarding the USD/JPY question above, given all the QE taking place in Japan, I would be very surprised to see ¥116, even if the US Federal Reserve succeeded in weakening the Dollar.  Japan still needs a soft currency but the Dollar is in a lengthy consolidation of the first step in a gradual long-term bull market, fuelled by US technology and America’s ability to produce domestic shale oil and gas whenever prices are rising.