Hitachi Ltd raised its annual outlook above market expectations after cost-cutting and robust revenue in emerging markets helped quarterly operating profit nearly double, underscoring the progress in its restructuring drive.

The forecast for the industrial electronics conglomerate's biggest profit in 20 years highlights Hitachi's fight-back from one of the biggest losses in Japanese corporate history reported only two years ago under the weight of a high-cost structure and lack of operational focus.

Led by Hitachi President Hiroaki Nakanishi, the company is overhauling its sprawling empire of some 900 firms to focus more on its growing infrastructure businesses while shedding unprofitable operations. It is on track to turn its first net profit in five years.

"I think it can still go higher," said Shigeo Sugawara, senior investment manager at Sompo Japan Nipponkoa Asset Management, referring to Hitachi's new 440 billion yen ($5.4 billion) full-year operating profit forecast.

"With profit at this level, I think its restructuring efforts can be rated very highly," he said.

Hitachi, which makes everything from washing machines to railway systems and is General Electric's partner in nuclear power, raised its operating profit forecast to 440 billion yen from 410 billion yen for its fiscal year ending March 31.

That beat the average forecast of 424.6 billion yen in a poll of 20 analysts by Thomson Reuters I/B/E/S and would mark its biggest profit since the year to March 1991.

Operating profit in the October-December quarter soared to 119.8 billion yen from 66.3 billion yen a year earlier, and cruised past the average estimate of 77.35 billion yen in a survey of four analysts.

Social Networks
Hitachi is targeting stable growth by shifting focus to its social infrastructure businesses, which include a range of operations such as power generation and transportation, while it reduces involvement in areas seen as vulnerable to market volatility.

But Hitachi's biggest third-quarter revenue gain came in its construction business on the back of demand in China and elsewhere in Asia for hydraulic shovels and other machinery.

Sales in the construction machinery business rose 29 percent from a year earlier. Sales in its automotive systems segment, also lifted by demand in emerging markets, revved up 10 percent.

Overall sales in Asia soared 20 percent. By contrast, sales in Japan, which makes up over half the total, inched up 2 percent.

Caterpillar Inc , which competes with subsidiary Hitachi Construction Machinery Co , last week reported a higher-than-expected quarterly profit and raised its sales forecast as rising commodity prices increased mining industry demand for its earth-moving equipment.

On a net basis, Hitachi raised its full-year profit forecast to 230 billion yen from 200 billion yen, which would roughly match its record profit set in the year to March 1991. That comes just two years after Hitachi's 787 billion yen net loss was the biggest ever by a Japanese manufacturer and second largest overall.

Hitachi Executive Vice President Takashi Miyoshi expressed confidence that the company could yet reach a new record in net profit.

"That's the least we are targeting," he told reporters after the earnings announcement. (Reuters)