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Business trends

Fortunes turn among Japan's trading houses, builders

Mitusbishi steals crown from Itochu; Kajima leads contractors

TOKYO -- The recovery in natural resource prices helped Mitsubishi Corp. return to its perch as the highest-earning trading house in fiscal 2016, while construction demand related to the Tokyo Olympics propelled Kajima to the top spot among contractors.  

Mitsubishi regained the lead position after a one-year gap by surpassing Itochu, which took the crown for the first time in fiscal 2015. Mitsubishi reported a net profit of 440.2 billion yen ($3.95 billion), helped by a rebound in its natural resource business. The company's metal segment, which includes coal operations, also bounced back as crude oil prices bottomed out and coal prices rose.

Although Itochu lost the top spot, it actually set a net profit record thanks to a 47% jump driven by the strong performance of its food business. "I would like [investors to] look at the rankings over the three-year total of our medium-term plan [ending in fiscal 2017]," said Itochu President Masahiro Okafuji.

Japan's four largest general contractors also saw record net profits in fiscal 2016, with Kajima surging ahead after coming in second the previous year. Demand across the industry was brisk as construction linked to the 2020 Tokyo Olympics picked up, allowing contractors to choose profitable projects. Kajima also completed many large orders for integrated facilities and condominiums.

Taisei, which took first in fiscal 2015, also saw profit growth, but extraordinary losses from an antitrust violation by a subsidiary took a toll.

Third-place Obayashi is expected to come in first in the current year. Competition is expected to intensify within the sector.

In the communications sector, SoftBank Group eclipsed Nippon Telegraph and Telephone. SoftBank's domestic communications business has continued to perform well and margins at U.S. subsidiary Sprint have improved. The company also received a profit boost from the sale of stockholdings.

Meanwhile, change may be on the way in the airline industry in fiscal 2017. This will be the first year that net profit at All Nippon Airways parent ANA Holdings will surpass Japan Airlines' since the latter's relisting in September 2012. Since JAL went bankrupt in 2010, its net profit has greatly exceeded ANA's thanks to tax benefits.

Costs to install a new passenger management system will weigh on JAL. On the other hand, ANA will record an extraordinary profit from a reassessment of the share value of Peach Aviation, which it recently made a consolidated subsidiary.

Overall, Japan's listed companies, excluding financial services firms, boosted net profit 18% in fiscal 2016 to a new record. 

(Nikkei)

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