Credit Suisse has upgraded Japan’s leading cement producer Taiheiyo Cement to Outperform from Neutral and sees improved profits for the company in the next fiscal.

The house sees a one-off but substantial shortfall versus guidance in the current fiscal year due to higher fixed costs and increases in cost outlays due to production-related issues. However, it expects the company to achieve profits in the fiscal ending March 2014 on a comparative profit rebound, relatively large benefits from lower coal prices and prospects of an increase in cement prices.

"We believe that even if the growth in domestic cement demand slows due to bottlenecks, the company can attain profit growth in the next FY (around one per cent YoY)."

Taiheiyo Cement operates six plants in Japan with a total clinker capacity of 14.4Mta. Domestic cement demand is projected have to reached 43Mt in 2012, an increase of 2.2 per cent compared to the previous year. Growth was driven by the government’s post-earthquake reconstruction efforts.