Automotive, electronics spark Japan to record profits
TOKYO — Manufacturers’ resurgent earnings have propelled corporate Japan to its most profitable year ever, surpassing the high-water mark reached just before the global financial crisis.
The combined pretax profits of 1,490 listed companies tracked by Nikkei Inc., excluding financial institutions, utilities and certain others, climbed 6% to 31.3 trillion yen ($262 billion) in the year ended March 31.
In a clear sign of recovery, the tally exceeded that of fiscal 2007 by 3%. Combined revenues grew 4%, rising for a fifth straight year. Net profits rose 7% to a new high.
Boosted by a weak yen, manufacturers’ combined pretax profits rose 10%, with the automotive industry cruising to a 15% gain. Toyota Motor’s profit climbed 19% to an all-time high, driven by strong North American sales. Mazda Motor also logged its best result ever, surging 51%. President Masamichi Kogai credited a new Mexican factory with making the automaker more resilient to foreign exchange head winds.
The electronics industry did even better, achieving a 19% profit increase. NEC boasted a 62% gain, thanks in part to a strategic rethink that saw the group pull out of the smartphone business.
Machinery makers also saw double-digit profit growth. Mitsubishi Heavy Industries’ record result reflected its efforts to streamline, which included shifting production of thermal power generators into a joint venture with Hitachi.
The automotive, electronics and machinery industries saw their combined pretax profits rise by roughly 1.8 trillion yen, more than half of the total gain for the 22 industries reporting higher results.
By contrast, the oil industry lost money on a pretax basis, hit by falling petroleum prices. JX Holdings and two other leading refiners booked a total of 650 billion yen in inventory write-downs. Drugmakers’ profits fell, with Takeda Pharmaceutical suffering a pretax loss after making provisions for legal liabilities.
Meanwhile, the nonmanufacturing sector’s profits were flat. Trading houses’ profits dropped, hurt by slumping commodity prices.
Still looking up
Corporate Japan’s new pretax profit record may not stand for long. Forecasts for the year ending March 2016 call for a 9% gain to a fresh all-time high, lifted by revived earnings at trading houses and oil companies.
Trading companies’ combined pretax profits are projected to grow 12%, or roughly 300 billion yen. With prices of oil and other commodities having bottomed out, the resource-related write-downs booked last fiscal year are unlikely to recur. Itochu also expects growth in nonresources businesses in China and other Asian markets, President Masahiro Okafuji said. Meanwhile, oil companies are expected to swing back into the black.
Earnings at domestic-demand-driven companies are looking resilient. Ground transport and railway operators are benefiting from an increase in foreign tourists. Retailers’ profits are expected to grow 16% this fiscal year now that the effect of last year’s consumption tax rise has faded.
Japanese companies face an uncertain outlook for external demand, and weak emerging-market currencies are likely to hurt overseas earnings.
“The importance of corporate efforts for raising profitability has become even greater than before,” said Hisao Matsuura, chief strategist at Nomura Securities.