Nippon Sheet Glass blamed soaring crude oil prices and the high cost of other materials for the fact that its profits for the year are likely to be 35% lower than investors' expectations.
Nippon is about half the size of Pilkington, so any takeover is dependent on its ability to win the financial backing of banks and other lenders. Such an extreme profit warning would be likely to dent the appetite to lend.
Today's reports of the profit warning are bound to hit the value of shares in Pilkington, headed by Sir Nigel Rudd, although The Times cited sources close to the takeover talks as saying that negotiations are still proceeding.
One analyst said: "Apart from the profits warning we have heard very little from Nippon, and the silence is starting to get ominous. There is a growing feeling that the delay comes down to more than just price.î
A month ago, sources suggested a deal was just a few days away, but nothing happened.
Nippon raised its bid to £2 billion as far back as December. Its offer is partly funded by Japanese banking giant Sumitomo, whose financial strength has given some confidence to Pilkington shareholders that a deal can be struck.
Nippon, which already owns 20% of Pilkington, was said in January to be prepared to pay £2.2 billion, or 165p a share. That would mean it having to pay £1.7 billion for the stake it does not already own.
A merger of Pilkington and Nippon would create a glass giant similar in size to the global dominator, Asahi of Japan.