March 20, 2014 2:00 am JST

Oji's fiscal 2013 pretax profit seen rising 10%

TOKYO -- Oji Holdings Corp. is expected to log a 10% gain in pretax profit this fiscal year, a better-than-expected performance thanks to a weaker yen.

     The Japanese paper giant is seen posting a pretax profit of more than 60 billion yen ($585 million) for the year ending March 31, topping the 58 billion yen projection. The weaker yen is pushing up profit even though sales will likely be close to the firm's outlook at 1.34 trillion yen, an increase of 8%.

     With the domestic market in a slump, Oji has been stepping up its presence in overseas markets where demand is projected to grow. This strategy is starting to contribute to earnings, with sales generated abroad expected to exceed 20% of overall sales for the first time this fiscal year.

     The factory of Brazilian pulp manufacturer Cenibra, which Oji turned into a subsidiary in June 2012, has been running at full capacity, and its exports to North America and Europe have been growing on the back of a weak Brazilian real. Meanwhile, Asia's growing population has led to stronger demand for corrugated board there, prompting Oji to build factories in Cambodia last March and in Vietnam last June. Oji also set up plants in China last year for churning out paper bags and other products.

     Oji's market share in Japan has increased because the weaker yen has made imported paper more expensive. Having loaned money to overseas subsidiaries as it pushed abroad, foreign exchange gains reached 12.8 billion yen for the April-December period.

     However, a weaker yen also hurts domestic operations because of higher dollar-based prices for fuel and raw materials, including wood chips and coal. Oji already raised paper prices in stages last year, and it plans to pass on higher costs to corrugated-board materials and other products.

     Next fiscal year, Oji's sales and profits are expected to rise. At home, price hikes conducted this fiscal year will contribute fully to earnings. It is also scrambling to tap into demand overseas, with a new corrugated-board factory slated to go onstream in India this July.