Sekisui House Ltd., Japan’s second-biggest home builder, said it expects operating profit to increase almost 80 percent to a record in three years as business in China starts to generate earnings.
The Osaka-based company expects operating profit, or sales minus the cost of goods, to reach ¥125 billion for the year ending in January 2015, compared with ¥70.9 billion in the last fiscal year, Chairman Isami Wada said in recently in Tokyo.
Similar profit from its international businesses may grow to as much as ¥25 billion by the year ending in January 2015, compared with a ¥3 billion estimate for the current year, he said.
Sekisui and its bigger competitor, Daiwa House Industry Co., are expanding abroad to counter falling demand at home as Japan’s population begins to decline. Sekisui, which develops and sells houses and apartments in China, Australia, Singapore and the U.S., expects its overseas business division that was created this year to account for as much as one fifth of the company’s total profit in three years.
“We are starting from zero,” Wada said. “We expect profits from overseas projects to be realized around the business year ending in January 2015.”
The stock rose as much as 1.9 percent to ¥761, set for its biggest gain in more than six weeks.
Sekisui started to buy sites for overseas projects in 2009 and doubled the acquisition of land in 2010 and tripled the purchase to ¥138.5 billion in 2011, according to the company.
Sekisui became the first Japanese home builder to open a factory in Shenyang, China, this month. The factory makes building materials and interior goods, including kitchen systems and bathroom products, which are supplied to Sekisui’s projects in the country.
Japanese home builders are turning overseas to seek growth as the nation’s housing starts have fallen below 1 million units since 2009, according to data by the land ministry. Daiwa has focused on rental apartments in China since 1985 and began developing and selling homes in the country in 2007.
Sekisui plans to invest about ¥220 billion this fiscal year in overseas projects, more than triple the spending planned by Daiwa House for the same period, according to Yoji Otani, an analyst at Deutsche Bank AG in Tokyo who cautioned against large, “risky” investments over a short term.