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Japanese Boeing supplier warms up to Airbus

Japanese analytical instrument and airplane component maker Shimadzu Corp has held preliminary talks with Airbus on a possible supply contract.

Japan's defense budget cuts have hurt Shimadzu's aircraft equipment business, prompting it to go after orders for control systems at Boeing. But Shimadzu's president said on Friday that the company now needs to expand its client base.

While its shipments to Boeing are still small, an expected delay in the US plane maker's new 787 Dreamliner would not help matters, President Shigehiko Hattori said.

“Initial research costs are huge in the air plane business and returns don't come in until seven years later,” he told reporters following a news conference about the company's mid-term plan. “Delays hurt.”

Shimadzu officials including Hattori have met with the head of Airbus's Japan unit, he said, without providing further details.

Airbus, which hopes to supply more aircraft to Japan Airlines Corp and All Nippon Airways, has said it aims to procure more parts from Japanese companies.

Shimadzu, which supplies turbomolecular vacuum pumps to makers of semiconductor-processing equipment such as Applied Materials Inc and Lam Research Corp, expects total sales to rise 13 percent in three years to ¥320 billion ($3.22 billion) in the year ending March 2011.

Strong demand for its pumps, depositors and digital panels - used to make products ranging from microchips to solar panels to tools to take mammographs - as well as demand for clean air and safe food, would help drive growth, Hattori said.

But he said airplane equipment sales would fall 17.7% to ¥24.7 billion in the same year, compared with its forecast for the year ending this month.

Wall Street analysts expect at least six months' delay for Boeing's new lightweight Dreamliner, due to last-minute design changes.

That could mean delivery in the second half of 2009, about 15 months behind the original schedule, which the US plane maker has pushed back twice.

Shimadzu is stepping up development and production in China of equipment to measure air pollutants and pesticides, betting demand from China would push overseas sales percentage up above the 40% expected this year.

Shimadzu also hopes to expand into equipment to measure fuel efficiency and pollutants in exhaust.

It now plans ¥35 billion in capital spending in the next three years, spending ¥6 billion on two new plants to make X-ray equipment and other medical devices, keeping cash on hand for potential acquisitions, Hattori said.

The firm is not now in talks to buy a company, he added.

Shimadzu targets an 11.3% operating profit margin in the year to March 2011 from an expected 9.7% in the year ending March 31.

Shares of Shimadzu closed up 1.3% at ¥932, slightly behind the pace of the benchmark Nikkei share average, which gained 1.8%. (Reuters)