Capcom lowers profit forecast

Publisher drops annual profit forecast due to 1.7 billion yen in back taxes and poor overseas sales.

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TOKYO--Today, Capcom has made last-minute downward adjustments to its annual forecast for the fiscal year ending March 31, 2006. The company has lowered expectations of its consolidated gross income from its earlier forecast of 7.4 billion yen ($63 million) down to 6.4 billion yen ($51 million). As a result, its consolidated net income has also taken a plunge from 8.9 billion yen ($75 million) to 6.5 billion yen ($55 million).

In a statement made to investors, Capcom explained that the revisions are mostly due to a 1.7 billion yen ($14 million) tax audit based on transfer pricing adjustments from the Osaka regional tax bureau. The bureau ruled that Capcom failed to report 5.1 billion yen ($43 million) in earnings for March 2000 to March 2005. Capcom disagrees with the assessment and plans to file an appeal to the regional tax authorities.

However, Capcom stated that poor performance in the North American console game market and weak game sales in Europe have also affected its net income for the fiscal year.

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