TOKYO -- Corporate Japan is on track to log a second year in a row of record net profit, driven by electronics makers, trading houses and other sectors making up for the weakness of automakers.
Aggregate fiscal 2017 net profit at listed companies is expected to grow 4% from the previous year to 21.81 trillion yen ($192 billion), with results improving at more than 60% of companies. Profit rose 21% to 20.9 trillion yen in fiscal 2016.
Friday marked the peak of earnings season, with a record 767 companies with March book-closings releasing results. The Nikkei compiled results put out by 1,332 nonfinancial firms up to that day, representing 85% of listed companies and 92% of total market capitalization.
Electronics manufacturers, trading companies and shippers will enjoy strong profit growth this fiscal year. Sony's sales of smartphone camera image sensors have improved, and the company projects a profit of more than 100 billion yen in its formerly money-losing semiconductor segment. It sees net profit growing 3.5 times to 255 billion yen in fiscal 2017. "We will deliver results," Chief Financial Officer Kenichiro Yoshida said.
Fujitsu forecasts its first record profit in three years. "We are heading toward growth as the electronic devices market recovers," said Hidehiro Tsukano, a senior executive vice president.
Recovering prices of natural resources are boosting profits in a number of sectors. While Mitsubishi Corp. and four other major trading houses recorded nearly 2 trillion yen in impairment losses over two years due to weak resource prices, the recovery in such commodities as crude oil lifted them into the black for fiscal 2016. All five project profit growth in fiscal 2017.
The shipping industry is also sailing away from rough waters. Prices for iron ore and coal have bottomed out, improving charter fees for bulkers that carry such commodities. Nippon Yusen and Kawasaki Kisen are also predicted to turn profits in fiscal 2017, after booking impairment losses on certain vessels the previous year for net losses totaling more than 100 billion yen at each company.
Most companies are assuming an exchange rate in the range of 105 yen to 110 yen against the dollar, in line with average of 108 yen for fiscal 2016. While the soft yen's tailwind has stopped blowing, companies with steady earnings growth from accelerating overseas expansion and promoting new businesses stand out. At Daikin Industries, sales of energy-efficient air-conditioning units in Southeast Asia are seen growing. Toray Industries, whose carbon fiber operations have struggled, is cultivating its car battery materials business into a revenue source. Both Daikin and Toray are expected to log record profits for the current year.
Until fiscal 2015, automakers drove corporate earnings. But in fiscal 2016, Toyota Motor's profit dropped more than 20% because of a stronger yen. Toyota, Nissan Motor and Honda Motor each expect less black ink this fiscal year as sales slow in North America.
But Toyota is assuming an exchange rate of 105 yen to the dollar, about 10 yen stronger than the current rate. Since Toyota's operating profit grows 40 billion yen for each 1 yen softening against the greenback, the automaker could beat expectations should the yen prove weak.