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Japan Inc. headed for first revenue growth in 3 years

Global growth and price hikes are lifting top lines, driving profit expectations

Sales at Japan Inc. are seen growing for the first time in three years.   © Not selection

TOKYO -- Japanese companies expect to achieve an annual sales increase for the first time in three years, driving profit growth for the year ending in March.

Combined full-year sales look to rise 6% for 1,580 companies that announced interim fiscal 2017 results by Tuesday, a Nikkei compilation found. Manufacturers are selling more products amid global economic growth, while higher resource prices benefit general trading houses.

Full-year net profit is seen climbing 17% to a second straight record. Businesses relied on cost cutting to boost earnings in fiscal 2016.

Broad sales increase

Trading houses are on track to savor the largest jump in revenue. Mitsui & Co. expects to log a 236 billion yen ($2.07 billion) sales increase. The company upgraded its net profit forecast by 80 billion yen from an earlier projection to 400 billion yen, a 31% increase on the year. "Resource prices are lifting earnings," President Tatsuo Yasunaga said.

The yen averaged around 111 per dollar in the six months through September, or about 6 yen weaker than a year earlier. If Japan's currency stays at that average level, aggregate sales would get a boost of roughly 1 percentage point while net profit would receive a lift of roughly 3 points.

The electronic equipment sector likely will account for more than two-fifths of the overall increase in net profit for the year, benefiting from information technology investment by the semiconductor industry and other sectors. Sony and Fujitsu, enjoying brisk sales of smartphone components, are both on course to achieve record net profit.

Tokyo Electron, which produces chipmaking equipment, expects net profit to soar 72%. "Demand for semiconductors has ascended to another level," President Toshiki Kawai said.

In the auto sector, Suzuki Motor likely will achieve its highest global sales volume, supported by a strong presence in India. The company previously expected net profit to decline for the year but now projects a 13% increase to 180 billion yen.

Honda Motor's sales are poised to increase by 1.05 trillion yen, helped by its motorcycle business in Asia. The company upgraded its global motorcycle sales forecast by 410,000 units to 19.18 million, a 9% increase for the year. "Scooter sales will rise in India, Vietnam and Indonesia," Executive Vice President Seiji Kuraishi said.

Komatsu expects sales to grow by 525 billion yen, a reversal from two consecutive years of decline. Demand for construction machinery is recovering in China and Indonesia, and Executive Vice President Mikio Fujitsuka said that sales will rise in all regions.

Nintendo, which rolled out the Switch game console in March, upgraded its annual sales estimate to 14 million units from 10 million. The company now expects fiscal 2017 sales to surge 96% to 960 billion yen.

Nippon Steel & Sumitomo Metal, which has passed higher materials costs onto steel prices, is on course for 30% growth in net profit and a sales increase of 967.1 billion yen. "The Asian steel market including Japan will remain brisk until at least next year," Executive Vice President Toshiharu Sakae projects. Ongoing efforts to move production abroad, improve materials procurement and downsize personnel have lowered the break-even point, and greater sales are boosting earnings at the leaner company.

Mitsubishi Chemical Holdings also raised product prices to reflect higher resource prices. The company holds a roughly 40% share in its mainstay feedstock products for acrylic resin, which look to drive earnings growth. Demand for the resin is growing worldwide for applications such as automobiles and paint. Prices have risen due to supply cuts resulting from production disruptions and a major hurricane in the U.S.

Domestic players

Companies mainly serving the domestic market have prospects of milder sales growth. Some businesses are struggling to absorb higher costs amid a labor shortage. Package delivery service operator Yamato Holdings looks headed for a 34% drop in net profit. "Greater than expected growth in online shopping has left us short-handed and will squeeze earnings," said Kenichi Shibasaki, a senior managing executive officer.

To sustain high growth for Japanese companies, managers may have to bring home the abundant cash earned abroad, such as by wage hikes.


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