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Nintendo lifts profit guidance on weaker yen, sees slower console sales

Nintendo logo is seen in a GameStop in Manhattan, New York

By Kiyoshi Takenaka

TOKYO (Reuters) -Japanese videogame maker Nintendo Co Ltd cut its full-year Switch sales projection by nearly 10% after microchip shortages constrained console production, but raised its annual net profit forecast, thanks to a softer yen.

Nintendo, which earns about 80% of its revenues overseas, expects net profit of 400 billion yen ($2.73 billion) for the year to March 2023, up from the previous forecast of 340 billion.

The new projection still falls short of a consensus profit forecast of 463 billion yen in a Refinitiv poll of 21 analysts.

The creator of such blockbuster titles as "Super Mario Bros." and "Legend of Zelda" cut its Switch console sales forecast for the business year to 19 million units from 21 million.

Nintendo President Shuntaro Furukawa said, however, that chip supply had begun recovering in recent months, helping boost Switch production. The industry is heading into the crucial year-end shopping season.

"From October on, we have been manufacturing (Switch) at a rapid pace .... Our outlook is a little brighter now than at the start of the business year," Furukawa told an online briefing.

Analysts said easing chip shortages and a strong software lineup were likely to help boost profit for Nintendo.

"Chip supply is getting better and strong games like 'Pokemon' are coming up. We can expect earnings recovery from the year-end to early next year," said IwaiCosmo Securities analyst Tomoaki Kawasaki.

Upcoming Nintendo software titles include role-playing games "Pokemon Scarlet" and "Pokemon Violet" to be launched this month.

The Kyoto-based company changed its assumption for the dollar-yen rate to 135 from 115, to reflect a sharp depreciation of the Japanese currency this year.

In the July to September period, Nintendo sold 3.25 million units of its Switch console, now in its sixth year on the market.

That was down from 3.83 million a year earlier, but roughly on par with the 3.3 million units of PlayStation 5 (PS5) sold in the same quarter. The Sony Group Corp's console was launched more than three years after the Switch debut.

"Usually in the past, Nintendo hardware sales peaked around the third year, then went downhill from there ... But this time, Switch has not lost much of its momentum in the fifth and even in the sixth year," said Toyo Securities analyst Hideki Yasuda.

Nintendo's software sales rose 11% in the three months to 54 million units, helped by strong demand for the latest "Splatoon" title.

The company has said "Splatoon 3", featuring an inky turf battle among players, sold more than 3.45 million units in Japan in the three days after its Sept. 9 launch, in Nintendo's highest domestic launch sales ever.

($1=146.7700 yen)

(Reporting by Kiyoshi Takenaka; Editing by Bradley Perrett and Clarence Fernandez)