May 10, 2014 5:28 am JST

Japan Inc.'s outlook for fiscal 2014 takes on a cautious note

TOKYO -- Listed Japanese companies as a whole are expected to maintain profit growth in the fiscal year ending March 2015, but management, concerned by the recent sales tax hike and emerging-market slowdowns, have issued conservative earnings projections.

     Companies that have strong footholds in the steady U.S. market are seen performing particularly well. IHI Group projects a second straight year of record pretax profit in fiscal 2014, at 57 billion yen ($555 million). Thanks to the shale gas boom, natural gas liquefaction facilities in North America will contribute to earnings growth, predicts Director Ichiro Terai.

     Fujifilm Holdings Corp. is enjoying a recovery for multifunction color copiers, according to President Shigehiro Nakajima. Toshiba Corp.'s pretax profit is seen rising 38% to 250 billion yen, as it cultivates demand for power generation equipment, railway systems and other infrastructure in the U.S., Europe and Asia.

     Meanwhile, performances in emerging markets will likely be mixed. Mitsubishi Motors Corp. is on track for its third straight record profit, driven by strong sales in the Philippines and Indonesia. The automaker seeks to make business with members of the Association of Southeast Asian Nations into a profit center, said President Osamu Masuko.

     On the other hand, Hino Motors Ltd. will likely be weighed down by the political turmoil in Thailand, with truck sales taking a hit, according to Senior Managing Director Hiroshi Kajiwara.

     Meanwhile, the slowdown in emerging economies is casting a shadow on coal, iron ore and other resource prices. Industrial machinery maker Komatsu Ltd. expects its profit to drop this fiscal year on sluggish demand for mining equipment, reckons Chief Financial Officer Mikio Fujitsuka.

     Back home, the negative impact of the higher sales tax will likely vary. Tobu Railway Co.'s pretax profit is seen falling 14% this fiscal year. In the first six months through September, the drop is expected to be especially sharp, at 27%. "After the purchase rush before the sales tax increase, demand for train passes will likely fall," said Managing Director Shinji Inomori.

     But some companies expect the negative impact of the higher sales tax to be short-lived. "Thanks to the wage increase in the spring, people will buy good products even at high prices," said President Hiroyuki Endo of K's Holdings Corp., a mass retailer of appliances. The company plans to keep its pretax profit outlook generally flat on the year, aided by store openings.

     Housing equipment provider Lixil Corp. is strengthening its earnings potential through acquisitions, forecasting a record profit in fiscal 2014. U.S. bath and kitchen products provider American Standard, which Lixil bought last August, will push up the Japanese company's overseas profit, said President Yoshiaki Fujimori.

     Toyota Motor Corp. plans an "intentional leveling off," in the words of President Akio Toyoda, as it moves to step up growth investments even at the cost of profit in the short term. The automaker projects a slight decrease in pretax profit this fiscal year due to spending on next-generation vehicles.

     Soichiro Monji at Daiwa SB Investments notes that companies may upgrade their earnings projections, given that many use conservative assumptions about foreign exchange rates and cost cuts at the start of a fiscal year.