Japan electronics groups forecast growth

A string of Japanese electronics companies showed their confidence in an autumn recovery on Tuesday by forecasting sales growth from October.

Electrical conglomerate Hitachi, camera makers Casio and Olympus, and component companies Nichicon and Citizen all predicted that while sales will be down in the first half of the fiscal year ending March 2010, they will rebound in the second half.

The forecasts demonstrate the extent to which hopes of a return to profit in Japanese manufacturing rest on the assumption of global economic recovery later in the year.

Forecasts already released by other companies also predict a second-half recovery. Under Tokyo Stock Exchange rules, Japanese companies publish formal forecasts of their next year’s profits and turnover.

For the first half from April to October, Hitachi expects sales to be down by 23 per cent, Casio predicts an 8 per cent drop, and Olympus expects sales to be down by 22 per cent compared to the first half of last year, before the Lehman Brothers bankruptcy and the rapid appreciation in the yen.

For the second half, however, Hitachi forecasts a 2.3 per cent rise in sales, while Casio expects a rise of 14 per cent and Olympus expects sales growth of 8 per cent compared to last year. Nichicon, which is a leading maker of capacitors, and Citizen, which makes components such as LEDs as well as wristwatches, both forecast increases in second half sales of more than 10 per cent.

Casio and Olympus expect digital camera shipments to rise this year – Casio by 23 per cent to 7m - leading analysts to question their forecasts.

Last week, Barclays Capital analyst Masahiro Nakanomyo forecast a 9 per cent decline in overall digital camera shipments this year to 108.71m, and wrote in a note to clients that, “the rate of decline in shipments could widen to nearly 15 per cent in [the year to March 2010] depending on economic conditions.”

Most of the companies expect an autumn recovery to bring profits. Casio is forecasting Y5bn in net profit after a Y23.1bn net loss last year. Olympus expects Y40bn in net profit after a Y115bn net loss last year.

The computing and electronics group NEC was an exception, however, predicting no economic recovery or second half rise in sales. Instead, NEC claimed it would return to a net profit of Y10bn from last year’s loss of Y297bn through “exhaustive expense reduction” and “the elimination of non-profitable business”.

NEC’s estimate is supported by forecasts from research company Toyo Keizai, and most analysts expect a result around breakeven, because the company has already announced substantial restructuring, including a complete withdrawal from the European PC market.