Nov 01, 2005. /Lesprom Network/. After Sumitomo Forestry Co. revised on September 29 its projection of group pretax profit for the year through March 2006 downward to JPY 16 billion ($137.3 million), down 14% from the previous year, domestic and overseas institutional investors actively sold the firm's shares. After posting a year-to-date high of JPY 1 292 ($11.1) on September 29, the stock price has declined about 20%. The downward revision of earnings projections is mainly attributed to sluggish sales of mainstay custom-ordered single-family homes. While the company projects a year-on-year increase of 4% in the number of orders for such houses in the current business year, the number of orders actually received from April to September fell 3% on the year. Advertising and publicity expenses also squeezed earnings. Since the company boosted the number of orders received on the effect of new products in the second half of the previous year, it will not be easy to secure a year-on-year rise in the number of orders in the latter half of the current business year, said Hiroki Kawashima, an analyst at Daiwa Institute of Research. "The company is adversely affected by the dwindling of the housing market, since its earnings almost fully depend on houses," said Yoji Otani, an analyst at Credit Suisse First Boston Securities (Japan) Ltd. While the stock price of Sumitomo Forestry was rising to post a year-to-date high in September, its shares were bought at some stages on the tide of searching for domestic demand-related issues. However, Daisuke Fukushima, a Nomura Securities Co. analyst, lowered his rating for the Sumitomo Forestry stock by one notch from "buying" to "neutral," since he judged that the company would not be able to win as many orders as expected though it spent heavily strategically to boost business. Since the firm's stock price to book value ratio is in the 1.2 range on a consolidated basis, lower than the housing industry average of the 1.6 range, many analysts maintain that the room for downside is limited. However, the firm's stock price will likely remain low in the near term, since the housing market is not expected to expand from a medium- and long-term perspective and there are no strong incentives. The company produces timber and building materials (plywood, laminated veneer lumber, and medium-density fiberboard) for its own construction uses and to sell to other builders. Sumitomo Forestry specializes in post-and-beam constructed single-family homes, but also builds condominiums and other types of subdivided housing, completing about 10 500 units annually.