TOKYO -- More than 70% of Japan's publicly listed companies are expected to post an increase to net profit on the year in April-June, with manufacturers in particular successfully tapping rising demand in foreign markets where the economy is steadily improving.
Nikkei Inc. compiled the data from 528 companies that had announced their April-June results by Monday, excluding the financial sector. They amount to 33% of companies with a fiscal year ending March, or 42% in terms of market capitalization.
The companies enjoyed a 7% increase in sales overall, marking the largest year-on-year growth since January-March of 2014. Pretax profit rose 29%, while net profit jumped 63% -- the first profit increase for April-June in two years.
Other companies will be announcing their results through mid-August, but most are expected to fall in line with the upward trend.
Manufacturers enjoyed an 82% surge in net profit. Mitsubishi Electric announced Monday that it saw a 58% jump to 67.7 billion yen ($613 million), thanks to demand for factory automation equipment in South Korea and China. "We have been receiving more and more orders, and we expect this trend to last through the year, at least," said director Akihiro Matsuyama.
Fanuc previously projected a fall in profit, but now forecasts an increase on sales of its numerical control machines -- the "brain" of industrial machinery. "We expect good conditions to last for a while in the U.S. automotive and aerospace sectors," Chairman and CEO Yoshiharu Inaba said.
Strong April-June results "are largely a result of changes to the companies' earnings structure," said SMBC Nikko Securities analyst Keiichi Ito. Nippon Steel & Sumitomo Metal updated old, inefficient steel-processing equipment to lower production costs. Combined with a nearly 30% increase in sales, its profits shot up.
Companies outside manufacturing also posted a 38% increase in net profit on the year in April-June. Shipment volumes are going up as the global economy recovers, driving a 270% jump for maritime shipper Mitsui O.S.K. Lines.
On the other hand, NTT Docomo suffered an 8% drop amid competition from budget mobile carriers. Yamato Holdings, a logistics provider suffering from a labor shortage, posted a 7.9 billion-yen net loss from contracting out more of its deliveries. It had enjoyed a 3.6 billion-yen profit a year prior.
Overall, the companies have already achieved about 29% of their full-year profit targets, and 40 or so had already upgraded their yearly forecast as of Friday. Even those that held steady could still revise their projections later on. "Our operating profit for April-June is higher than we had expected," said Hitachi Chief Financial Officer Mitsuaki Nishiyama.
Overall, including companies that still have not announced April-June results, sales are expected to rise 5% and net profit by 11% for the whole fiscal year. It remains to be seen whether strong corporate earnings will translate to higher wages and other trends that could bolster Japan's economy.
The country's labor shortage and rising wages are expected to remain a problem as corporations head into their second half of their fiscal years. Government spending could also drop in China after the Communist Party congress there this fall, which could weigh on its economy.