Corporate Japan now sees net profit surging 13% this fiscal year
A fifth of companies to top records despite strong yen, China risks
TOKYO -- Listed enterprises in Japan expect total net profit to jump 13.6% in the fiscal year ending March 2018, up 3 percentage points from the growth expected at the start of the term, with automakers upgrading projections on strong performance in Asia and Europe.
Nikkei Inc. compiled full-year forecasts by 1,549 businesses that close their books in March and had announced April-June results as of Thursday. These amount to 98% of such companies, or 99% by market capitalization.
Together, they expect 24.65 trillion yen ($226 billion) in net profit this fiscal year. While they usually do not revise full-year forecasts until after the April-September half, 110 have already upgraded projections and 13 have downgraded them. Now 64% expect net profit to increase -- and 320, or about 20% of the total, expect to top records.
Revving up the engines
Companies in the automotive sector, in particular, are growing more bullish about their prospects. They had initially expected net profit to decline 6.2% for the year but are now looking at a 0.9% increase -- a 280 billion yen upgrade.
Honda Motor is enjoying strong sales of two-wheeled vehicles in India and automobiles in China. Despite concerns that the North American market will soon top out, the company plans to overhaul its Accord sedan this fall. "By increasing the supply of Accords and other vehicles, we hope to mark record sales in North America," Executive Vice President Seiji Kuraishi said.
Toyota Motor is releasing an all-new Camry sedan in the U.S. in hopes of lifting its results. Suzuki Motor, meanwhile, has stuck with its full-year forecast despite strong performance in India and Europe. "We outperformed projections in April-June, but we are not changing our projections, since the year has only just begun," said Masahiko Nagao, a director.
Electronics makers are also doing well. Sony projects a nearly 250% increase in net profit this year. It enjoyed its second-best April-June quarter yet on a strong showing in smartphone image sensors and other products but is not revising its full-year forecast for now.
Even domestically oriented companies are growing profits. ANA Holdings looks to top records for the third straight year, thanks to higher international passenger and freight rates and more people flying business class for work-related trips. "Our operating profit exceeded the forecast by about 10 billion yen" in the April-June quarter alone, Senior Vice President Ichiro Fukuzawa said.
With the 2020 Tokyo Olympics approaching, construction companies have also enjoyed a boost from related projects. Increased demand has allowed them to take a stronger bargaining position with customers, while a rise in the amount of construction has fattened margins. Obayashi is projecting a record 95 billion yen net profit this fiscal year.
Others are homing in on tried-and-trusted products that people are willing to pay a little more for. A growing interest in health foods has lifted sales of Yakult Honsha's namesake probiotic beverages at home and abroad. Net profit is expected to top records at 30.5 billion yen.
Overall sales are seen growing 5% to mark the first time in three years that both profits and sales rise. Many companies have succeeded in restructuring unprofitable operations while also boosting sales, and the overall net profit margin for the April-June quarter was among the highest on record at 5.3%.
But a strengthening yen could spell trouble. Rising tensions over North Korea have led investors to flock to the Japanese currency, strengthening it to about 109 against the dollar. There is also concern that the Chinese economy could lose momentum in the second fiscal half.