May 3, 2014 12:09 am JST

Japanese cement makers' fiscal 2013 profits seen surging

TOKYO -- Japan's two leading cement manufacturers are expected to beat their forecasts and post significantly higher profits for the fiscal year ended March 31, partly due to demand related to post-earthquake reconstruction and an uptick in apartment building starts.

     Sumitomo Osaka Cement Co. is expected to report that consolidated operating profit surged an estimated 60% to a record 22 billion yen ($212 million) last fiscal year, overshooting its 20 billion yen forecast.

     Taiheiyo Cement Corp.'s profit likely jumped nearly 70% to around 70 billion yen, surpassing its 64 billion yen projection.

     Sumitomo Osaka is expected to register a 15% gain in sales to about 250 billion yen. Demand rose for cement for post-disaster repairs in places including Kyushu and Izu Oshima, an island south of Tokyo.

     The company's recycling business, which processes coal ash, was also steady thanks to an increased reliance in Japan on fossil-fuel-fired power plants.

     Taiheiyo's overseas businesses in the Philippines, Vietnam and elsewhere pushed up profit.

     Cement sales are expected to remain steady this fiscal year as well. Domestic cement demand is seen staying on par with the fiscal 2013 level, which was 47.7 million tons. And redevelopment projects will likely get a boost ahead of the 2020 Olympic Games in Tokyo.

     Taiheiyo and Sumitomo Osaka have ramped up shipping capacity by procuring vessels capable of transporting cement.

     Still, profit growth at the two cement makers may ease.

     Sumitomo Osaka will beef up facilities for receiving waste materials used to make cement at a plant in northeastern Japan. As domestic cement demand is seen slackening over the medium term, the company aims to expand its profit sources. Because of such investments, there is a good chance that operating profit will just inch up to just over 22 billion yen this fiscal year.

     Growth at Taiheiyo's overseas businesses will prop up profit. The company's U.S. operations, driven into the red by the Lehman shock, are seen returning to profitability for the first time in six years. U.S. housing starts are on the path to recovery, and profit margins will improve as price hikes take hold.

     Taiheiyo's cement sales in Asian markets including Vietnam are also expected to remain steady.