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Denso Corp., Toyota Motor Corp.’s biggest auto parts supplier, said the strong yen is undermining its recovery from the March 11 earthquake and may prevent the company from raising its full-year profit forecast.

Denso raised its half-year net income forecast on Aug. 1 to ¥9 billion from ¥1 billion on a faster than expected recovery and cost-cutting efforts, while leaving its full-year forecast unchanged.

The yen trading at 76.71 per dollar, near a postwar high, is stronger than its estimate that the currency will average 81 for the full year.

Denso, which makes air conditioners, engine parts and electronic control units for most global carmakers, is hiring 1,200 temporary workers as it helps Toyota make up for weeks of factory shutdowns.

The strong yen cuts the value of repatriated earnings from exports, which make up about 20 percent of Denso’s Japan production.

“Because of the super-strong yen, manufacturing in Japan is placed in a very difficult position,” Denso President Nobuaki Katoh said Aug. 24 at company headquarters in Kariya, Aichi Prefecture. “The negative impact of the yen is offsetting our increase in production.”

Every ¥1 gain against the dollar cuts Denso’s operating profit by ¥2.9 billion, the company said.

Denso is expected to post ¥113.4 billion in net income for the full year ending in March, according to the average of 15 analyst estimates compiled by Bloomberg, compared with the company’s forecast of ¥98 billion.

The parts maker’s production returned to year-earlier levels in July, in time for Toyota’s Aug. 23 introduction of its revamped Camry sedan, the best-selling car in the U.S.

With more new models on the way, including a new version of the Prius hybrid, Toyota told suppliers it expects to build a record 8.9 million cars globally in 2012, up 11 percent from a forecast of 8.04 million this year, Katoh said.

As the yen hurts Denso’s profits, the company is aiming to cut production costs by up to 30 percent, he said.

While it is able to shift production to overseas plants, it will keep enough capacity to support Toyota’s pledge to maintain 3 million units of annual domestic production, Katoh said.

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