Japanese firms earnings outlook raised on improving market conditions

Japanese firms earnings outlook raised on improving market conditions - Nomura

	Published : Mon, 10 Sep 2007 10:51 By : Agencies Print this Story

TOKYO (Thomson Financial) - Nomura Securities has upgraded its revenue and profit projections for major Japanese companies after their April-June results underscored improved market conditions for carmakers and other manufacturers, Nomura's research team said in a report Monday.

Nomura now expects the combined current profits at 348 major Japanese companies, or the so-called Nomura 400, excluding financial firms, to expand by 12 percent in the year to March 2008 compared to the previous year.

Among the key companies included in the Nomura 400 listing are Toyota Motor Corp, Honda Motor Corp, Nissan Motor Corp, Sony Corp, Matsushita Electric Industrial Co, Nippon Steel and Sharp Corp.

In June, it had forecast an 8.4 percent rise in combined current profits at these companies.

Their combined revenues are now expected to grow by 6.0 percent in the current fiscal year, up from 4.4 percent predicted previously, Nomura said.

Nomura made the revision to reflect the results reported for the June quarter when non-financial companies in the Nomura 400 posted a 21.3 percent rise in combined current profits, it said.

'We alert attention to a rise back in the pace of current profit growth during the quarter as it had slowed gradually since the July-September quarter last year. We estimate that a weak yen only accounted for around five percentage points of the growth.

'The firm results in the first quarter (to June) are probably attributable to the slowed pace of rises in materials prices and a turnaround in the business environment, under which companies are now able to transfer the effects of higher materials costs to their product prices more smoothly,' the team of analysts said in the report.

Forex transactions at these companies saw the yen averaging 120.79 to the dollar in the quarter, weaker by 7 yen to the dollar compared with the year before. Current profit of these companies are boosted by 0.5 percent every time the Japanese currency falls by one yen against the dollar, Nomura said.

Nomura downplayed the impact of a strengthening in the yen since July, as well as any possible pressure on the US economy from the worsening subprime home loans.

'At this stage, changes in the business environment have a larger impact on earnings than does a strong yen. Unless the yen's strength goes to extremes, the profit growth trend of Japan Inc will remain intact.

'Even if subprime loan problems affect the US economy, any impact on Japanese companies' earnings will most likely be limited. The makers of cars, electrical equipment and precision equipment, which are highly dependent on US demand, have a surprisingly little link to (the fluctuations of) the US economy,' Nomura said.

Nomura also noted Japanese carmakers' rising share of the US market, as well as the technology sector's focus on product areas of growing demand such as semiconductors and liquid crystal display televisions.

yumiko.nishitani@thomson.com

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Japanese firms earnings outlook raised on improving market conditions - Nomura