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Japan-Update

Japan's Watami seen sinking to net loss in fiscal 2016

Restaurant shutdowns took a bite out of earnings

TOKYO -- Watami likely swung to a group net loss of roughly 2 billion yen ($17.6 million) in the year ended March 31, weighed down by write-offs from closing unprofitable restaurants.

This would mark a comedown from 7.8 billion yen profit that the eatery and pub chain operator posted for fiscal 2015. It initially projected a net profit of 200 million yen for fiscal 2016.

Pretax profit likely came to 700 million yen or so, up from the year-earlier 1.1 billion yen loss and beating the company's forecast by around 500 million yen. This would mark its first black ink on a pretax basis in three years.

Sales apparently declined 20% on the year to some 100 billion yen, hit by the sale of nursing care operations.

The mainstay restaurant business is showing signs of recovery. Existing-store sales likely grew 3% as efforts to shore up the operations paid off. Some locations were converted into newer types of eating and drinking establishments. Increased sales of low-priced alcoholic beverages and staple dishes are also seen contributing to the recovery.

Operating profit likely swung to roughly 200 million yen from the previous year's 290 million yen loss.

In the meal delivery business, factory productivity improved. Unloading the nursing care business also helped as interest charges on lease obligations decreased.

The current fiscal year through March 2018 will very likely see the company return to a net profit, buoyed by a continued recovery in the restaurant business.

Watami releases its fiscal 2016 earnings Monday.

(Nikkei)

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