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Corporate Japan's winners find opportunity in economic adversity

Leading construction companies logged record profit in the April-June quarter despite a labor shortage.

TOKYO -- One in six listed companies logged record pretax profit for the April-June quarter despite corporate Japan's steep overall earnings slide, finding chances to thrive in adverse circumstances such as a labor shortage.

The Nikkei compiled results posted by more than 1,500 listed companies that had reported April-June earnings by Wednesday. Overall pretax profits at companies closing their books in March fell nearly 20% year on year. But 274 companies, including many in such domestic-market-bound industries as construction, railroads and food, reported their highest-ever profit for the period.

"We're seeing extremely strong interest from every sector except finance," said President Masamichi Mizuta of Temp Holdings. The human resources and staffing firm on Wednesday reported 44% pretax profit growth for the April-June quarter and upgraded guidance for the year ending March 2017.

A tight labor market has brought in more workers seeking help changing jobs and companies looking for temporary staff, primarily in the Tokyo area. The company's use of temps to recruit other potential workers has paid off as well.

Builders face a particularly chronic labor shortage. General contractor Obayashi has begun offering better compensation to draw in workers and stepped up the use of pre-assembled structures to cut overall labor needs. Such efforts helped grow profit 32%.

Companies addressing the needs of senior citizens are also riding high as Japan's population ages. Food maker Calbee used in-store marketing to promote a popular fruit-and-granola cereal as low-sodium, resulting in more purchases by older shoppers concerned about their blood pressure. This contributed to 5% profit growth.

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Others increased earnings through greater efficiency. Hitachi Transport System drew on artificial intelligence. Though shipments were slow during the quarter, "improving work efficiency helped profit increase," said Nobukazu Hayashi, general manager for accounting and finance, referencing the logistics company's 7% pretax earnings growth.

Similar efforts at improvement drove up manufacturers' and service providers' information technology investment. This was a boon to IT systems developers, yielding record profit at companies such as SCSK, NS Solutions and Nomura Research Institute.

Unique technologies and products helped businesses prosper as well. Toray Industries' development of material used to make lighter, higher-capacity lithium-ion batteries filled a need to build environmentally friendly autos, Vice President Yuji Fukuda said. The company has also developed nonwoven material for disposable diapers that is gentler on the skin and a specialized film allowing for more compact capacitors, increasing both profitability and sales volumes. These improvements more than countered the impact of a stronger yen during the quarter, helping raise pretax profit 8%.

Start Today, operator of leading Japanese online clothing retailer Zozotown, logged record April-June profit for the fourth year running. An increase in vendors and an expanding customer base produced 33% growth despite weakness in overall consumer spending. Kakaku.com's restaurant review site Tabelog, meanwhile, helped it serve up 13% profit growth.

Sluggish consumption at home and the strong yen's impact on exports are weighing ever more heavily on Japanese companies. Risks associated with developments such as the U.K.'s exit from the European Union are heightening global economic uncertainty as well. The ingenuity to create opportunities out of structural problems such as population aging is more valuable now than ever.

(Nikkei)

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