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Business trends

Corporate Japan rakes in record quarterly profit

Led by manufacturers, one in four companies posted all-time highs

Masayoshi Son's SoftBank recorded one of the highest April-June profits ever in Japan. (Photo by Maho Obata)

TOKYO -- Japan Inc.'s aggregate net profit for April-June climbed 28% on the year to about 8.9 trillion yen ($80.4 billion), a second straight record for the quarter, thanks to the brisk global economy and rising natural resource prices.

Out of 1,588 listed companies that released earnings through Tuesday, 56% reported higher profit and 24% booked record profits, according to data compiled by Nikkei. Even when excluding Toshiba, which reaped a huge one-time gain from the sale of its semiconductor unit, total net profit would still have increased 14% to a record.

Revenue grew by 8%, the quarter's highest rate in five years. The net profit margin improved by one percentage point to 6.3%, the highest level since quarterly reports became required in fiscal 2008.

Earnings were driven by the manufacturing sector, whose business is booming thanks to the global economic expansion. Net profit for manufacturers rose 41% on an aggregate basis, far exceeding the 10% increase for the nonmanufacturing sector.

Profit growth in the semiconductor and electronic component industries proved particularly strong. Greater personal consumption worldwide has fueled investment in data centers -- needed for such fields as e-commerce -- resulting in increased demand for chips.

Tokyo Electron booked another record profit as sales of semiconductor manufacturing equipment grew. Nidec also posted a record thanks to steady sales of motor used in electric vehicles and robots.

Higher resource prices have provided a tailwind. Rising oil prices contributed to sharp profit growth at oil companies like JXTG Holdings and Idemitsu Kosan. Profit climbed at all of Japan's seven major trading houses.

Several companies set individual records. Toshiba's net profit exceeded 1 trillion yen, the highest figure of any company for the April-June quarter. The result was almost entirely driven by the sale of its memory unit, however, since operating profit -- an indicator of earnings from business operations -- was merely 700 million yen.

Toyota Motor's net profit of 657.3 billion yen was the second-highest ever for the quarter, while SoftBank Group logged the 14th-highest on record.

Robust earnings growth appears to be a global trend, with net profit for the quarter jumping 24% in the U.S., 10% in Europe and 18% in the rest of Asia.

Net profit for the full year ending March 2019 is expected to fall 0.3%, improving from the previous forecast of a 2% drop. Several companies have upgraded their full-year outlook based on sound results in the April-June quarter.

Sony now predicts that net profit will rise 2% to 500 billion yen, rather than a 2% decrease, as sales of games and other products grow. Kose upgraded its forecast by 6 billion yen thanks to demand for high-end cosmetics from visitors to Japan.

Many companies have also set conservative exchange rate assumptions. Earnings could get a lift if the yen keeps trading at around 111 to the dollar, weaker than companies' average assumed exchange rate of about 107.

The escalating trade war between the U.S. and China, however, has started to hit earnings at foreign companies. Conditions in emerging countries like Turkey are fluid, and there is uncertainty in the global economy and foreign exchange markets.

Yet fiscal 2018 may still yield a record net profit for the third straight year, considering that the April-June quarter already generated 30% of the annual estimate.

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