TOKYO -- Itochu is likely to post a record net profit of more than 670 billion yen ($5.8 billion) this fiscal year through March 2022, up 70% from the previous year, Nikkei has learned, as the Japanese trading house caters to growing demand from clients seeking help with digital transformation.
Itochu, backed by Warren Buffett's Berkshire Hathaway, joins the list of companies offering support for business reforms through the use of artificial intelligence and big data.
The company's net profit is expected to rise by about 120 billion yen from the previous forecast, to a record high for a major trading company. All its business segments, other than textiles, are expected to exceed the results for the fiscal year ended March 2020. The figure for the April to September 2021 period is likely to have risen 80% from a year earlier to just over 450 billion yen, a record for the period.
The trading house, through its subsidiaries Itochu Techno-Solutions and others, offers a service that helps businesses with digital transformation. Net income from information and financial services is set to become the largest earner in the nonresource sector, which accounts for about 70% of the company's net income. Demand for data analysis and system development is growing.
Profits from consumer financial services are also expected to rise. Itochu is aggressively investing in fintech companies, including salary advance apps. Paidy, a Tokyo-based deferred payment service of which Itochu is the largest shareholder, will be acquired by U.S. payments company PayPal, generating a gain from the sale.
The metals business will also benefit from higher resource prices. Steady demand in China has pushed up the price of iron ore, which has raised the profitability of Itochu's iron ore business in Australia.
Japanese trading companies have been working to cut their dependence on resources. At Itochu, profits are rising, helped by higher resource prices, in addition to growth in its nonresource businesses.
Meanwhile, at its auto unit, sales of luxury imported cars at subsidiary Yanase are expected to increase from a year earlier. Sales of tires, paper and pulp in Europe, and of construction materials in North America, are also likely to grow, while food wholesalers in Japan will remain robust.
Convenience store chain FamilyMart, which became a wholly owned subsidiary last year, is seeing a recovery in the number of customers from earlier declines brought on by the COVID-19 pandemic.
One cause for concern for Itochu is a slowdown in the Chinese market. Investors are worried that the company, which is strong in China, may be affected if consumer spending slows in the country due to economic problems, including financial woes at China Evergrande, a major land developer.