Mitsui Fudosan's profit falls on a tough comparison — but its property businesses just posted record profit

Mitsui Fudosan's revenue and operating profit both fell sharply in its fiscal first quarter, the developer said in results released today, but the drop traces to an unusually strong comparison: the same quarter a year earlier included a round of property sales that will not repeat every year.

Revenue for the three months through June came to ¥616.9bn, down 23.1% year on year, while operating profit fell 35.4% to ¥103.5bn, the company said. Business profit, ordinary profit and net profit attributable to shareholders were also lower, down 44.3%, 37.9% and 39.0% respectively. Even so, Mitsui Fudosan noted that operating profit and ordinary profit were its second-highest for any first quarter on record, trailing only the year-ago period that set the bar so high.

Look inside the numbers, though, and the group's core property operations show no sign of slowing. Segment profit at each of Mitsui Fudosan's three main operating businesses — leasing, management and facility operations — hit its highest-ever first-quarter level, the company said.

Leasing carries the quarter

The leasing segment, which covers earnings from domestic and overseas offices and commercial facilities, generated ¥51.7bn in segment profit, up ¥6.0bn year on year — 28.8% of its ¥180.0bn full-year target. Mitsui Fudosan attributed the gain to higher revenue and profit from Japanese and overseas offices and to sales growth at its commercial facilities, the malls and retail complexes that make up much of the ground floortok tracks building by building.

The management segment — property-management contracts plus the Rehouse individual-brokerage business — added ¥2.4bn to reach ¥19.8bn, on more properties under management and higher transaction volumes and unit prices at Rehouse, 26.5% of its ¥75.0bn full-year plan. Facility operations, spanning the group's domestic hotels and Tokyo Dome, rose a smaller ¥0.6bn to ¥15.0bn — 33.4% of target — helped by climbing hotel average daily rates and growth at the Dome, the company said.

Mitsui Fudosan left its full-year forecast unchanged from the ¥2.8tn revenue, ¥410.0bn operating-profit targets it set on 13 May, and said results are tracking within that plan — a forecast the company itself already frames as an all-time high for revenue, business profit, ordinary profit and net profit if it is met. Read together with the quarter's headline decline, the picture looks less like a company losing momentum than one whose earnings mix, always lumpy around big-ticket property sales, is being steadily smoothed by recurring leasing and management income. Whether that overseas and domestic leasing contribution keeps growing relative to any single project's swings is worth watching every quarter Mitsui Fudosan reports.