Nomura Cuts Profit Outlook for Japanese Companies on Strength of Yen

Nomura Holdings Inc., Japan’s biggest brokerage, cut its recurring profit forecast for the nation’s companies for this fiscal year and the next because of the yen’s appreciation.

Nomura lowered its earnings-growth projections for companies excluding financial firms on the Nomura 400 stock index to 13.3 percent for fiscal 2011, down from its September estimate of 19.8 percent, the brokerage said in a report dated yesterday. For 2010, it lowered the outlook by 1.3 percentage points to 56.2 percent growth in recurring profit. The strong yen versus the dollar this year is likely to be a major impairment to company earnings, Takashi Ito, a strategist at Tokyo-based Nomura, wrote in the report.

The yen’s surge to a 15-year high against the dollar contributed to the Nikkei 225 Stock Average’s 3.8 percent decline this year, as it damped the profit outlook for the nation’s exporters. The stronger yen reduces income at Japanese companies when overseas revenue is converted into local currency.

“When you consider the implications of their business performance on stock prices, shares will probably rise very very slowly until March,” Masanobu Kaizu, Chief Research Officer at Nomura’s Financial and Economic Research Center, said at a conference today. “From April to September, stocks may rise considerably as they reflect the improved earnings for the second half of 2011.”

Nomura estimates that recurring profit for the first half of 2011 will fall 2.9 percent before jumping 33.8 percent in the second half of the same year for the 353 non-financial companies in the 400 stock index, according to the report. Recurring profit rose 142.9 percent in the first half of this year, and will gain 7.6 percent in the second half of fiscal 2010, Nomura said.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.netToshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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