Earnings reports of companies for the March quarter have been released. Some stocks are expected to rise as performance turnaround from operating losses to profits is realized. We would like to introduce some stocks that are expected to have positive earnings for the fiscal year ending March 2025 although they were in the red for the fiscal year ended March 2024; Their operating income was in the red for the fiscal year ending March 2024 but is expected to be in the black for the fiscal year ending March 2025. Their product structure was as follows: 4.01/12.88/0.06 billion yen in operating income for 100-300 billion yen products, respectively.

RIZAP Group <2928> - Operating profit for the fiscal year ending March 2025 is planned at 6300 million yen, compared to 594 million yen for the fiscal year ending March 2024. The company's group operating profit and loss were still in the red for the whole fiscal year ending March 2024, but they have significantly improved when compared with the initial plan of -4,500 million yen. chocoZAP, a convenience store gym business, which they are focusing on, has significantly expanded and opened 904 stores in their 2012 fiscal year. The total stores at the end of March 2024 is expected to be 1,383. Their quarterly operating profit has been improving, with the first quarter of the fiscal year ending March 2024 being at -2864 million yen, the second quarter at -3083 million yen, the third quarter at 1,027 million yen, and the fourth quarter at 4,175 million yen. In their mid-term management plan, they aim for 30,000 million yen operating profit for the fiscal year ending March 2026 and 40,000 million yen for the fiscal year ending March 2027.

IHI <7013> - Operating profit for the fiscal year ending March 2025 is planned at 110,000 million yen, compared to -70,138 million yen for the fiscal year ending March 2024. The company is responsible for about 70% of Japan's jet engine production. In their 2023 fiscal year, their participation in the engine maker, Pratt & Whitney, which is owned by American defense giant, RTX, found problems in their aerospace engines, which need to be recalled. The company is also seeking compensation from airlines. Their additional inspection program for PW1100G-JM engines that have already been shipped and those that are expected to increase maintenance units in the next few years, between 2024 and 2026, is expected to average 350 ground parks. This will decrease the operating profit for the fiscal year ending March 2024 by more than 150,000 million yen due to compensation costs and additional maintenance costs. However, this cost burden is a one-time event, and significant improvement in performance is expected for the fiscal year ending March 2025 once this impact is removed. The world's air travel demand is increasing, and the civil aviation engine business is expected to grow. In addition, an expansion of the Ministry of Defense business is expected due to an increase in the defense budget. Due to these factors, IHI plans to make 110,000 million yen operating profits for the fiscal year ending March 2025.

Shimizu Construction <1803> - Operating profit for the fiscal year ending March 2025 is planned at 41,000 million yen, compared to -24,685 million yen for the fiscal year ending March 2024. Operating income for the fiscal year ending March 2024 was the first time since they went public in 1961 that it was in the red. Sales increased but profitability worsened as costs rose for large privately-financed construction works. Material and labor costs were higher than estimated when ordering construction, and profits were squeezed. Currently, the company is making efforts to receive new construction orders by tougher cost estimates and risk management. Although sales are expected to decline by 10% for 2025 fiscal year, operating profit is expected to be 41,000 million yen.

For the fiscal year ending in March 2024, the operating profit was a deficit of 2,468.5 million yen, and for the fiscal year ending in March 2025, they are planning an operating profit of 4,100 million yen. The operating profit for the fiscal year ended March 2024 was the first deficit since the company went public in 1961, despite increasing revenue. This was due to the high cost of private large-scale construction projects which impacted profitability. Materials and labor costs were higher than expected at the time of contracting for the project, and profits were squeezed. In response to this situation, the company is currently making construction cost estimates and risk management more stringent to receive orders for construction. Despite expecting a 10% decrease in revenue, they are forecasting an operating profit of 4,100 million yen for the fiscal year ending in March 2025 through these measures.

IHI <7013>

IHI <7013> - Operating profit for the fiscal year ending March 2025 is planned at 110,000 million yen, compared to -70,138 million yen for the fiscal year ending March 2024. The company is responsible for about 70% of Japan's jet engine production. In their 2023 fiscal year, their participation in the engine maker, Pratt & Whitney, which is owned by American defense giant, RTX, found problems in their aerospace engines, which need to be recalled. The company is also seeking compensation from airlines. Their additional inspection program for PW1100G-JM engines that have already been shipped and those that are expected to increase maintenance units in the next few years, between 2024 and 2026, is expected to average 350 ground parks. This will decrease the operating profit for the fiscal year ending March 2024 by more than 150,000 million yen due to compensation costs and additional maintenance costs. However, this cost burden is a one-time event, and significant improvement in performance is expected for the fiscal year ending March 2025 once this impact is removed. The world's air travel demand is increasing, and the civil aviation engine business is expected to grow. In addition, an expansion of the Ministry of Defense business is expected due to an increase in the defense budget. Due to these factors, IHI plans to make 110,000 million yen operating profits for the fiscal year ending March 2025.

Shimizu Construction <1803> - Operating profit for the fiscal year ending March 2025 is planned at 41,000 million yen, compared to -24,685 million yen for the fiscal year ending March 2024. Operating income for the fiscal year ending March 2024 was the first time since they went public in 1961 that it was in the red. Sales increased but profitability worsened as costs rose for large privately-financed construction works. Material and labor costs were higher than estimated when ordering construction, and profits were squeezed. Currently, the company is making efforts to receive new construction orders by tougher cost estimates and risk management. Although sales are expected to decline by 10% for 2025 fiscal year, operating profit is expected to be 41,000 million yen.