Japan's Sojitz seen on track to beat net profit target
Higher-than-expected coal prices, strong automotive sales buoy trader's earnings
TOKYO -- Japanese trading house Sojitz is likely to beat its net profit target this fiscal year, thanks to coal prices hovering at a high and strong car sales expected in the Philippines and Russia.
The Tokyo-based company initially forecast net profit to grow 23% to 50 billion yen ($463 million) in the year ending next March. But there is apparently a high probability it will beat that target by 3 billion to 5 billion yen.
Sojitz is set to generate more than half of its projected fiscal 2017 net profit during the April-September half. A year earlier, the trading house had only achieved 38% of its full-year forecast.
The trader assumes prices of $77.5 per ton for coal used in power generation for the current fiscal year. But with recent prices reaching over $80 a ton, profit in its metals and coal division will likely increase beyond company projections for 30% on-the-year growth to 13 billion yen.
In its non-resources business, automobile sales are strong. Sojitz distributes cars of such manufacturers as Mitsubishi Motors of Japan, Hyundai Motor of South Korea, and Germany's BMW in overseas markets. The automotive division generated net profit of 2.8 billion yen in the April-June quarter, reaching 70% of its full-year target. Sojitz has estimated the division's net profit will grow 11% to 4 billion yen in fiscal 2017. So far in the July-September quarter, sales have continued to grow in the Philippines, Russia and Puerto Rico.
However, exchange rate fluctuations and tensions in the Korean Peninsula pose immediate risks. Sojitz's net profit shrinks 100 million yen for every yen the Japanese currency strengthens against the dollar. For the current fiscal year, the trading house assumes an exchange rate of 110 yen to the greenback. As for the North Korean issue, earnings may suffer at its automotive division if Hyundai Motor's production is somehow impacted.