There are signs of a turnaround in corporate earnings, which have been adversely impacted by the novel coronavirus pandemic. However, there is also a clear polarization. Companies that are suffering must overcome their difficulties by reforming and creating new businesses.
The announcement of half-year business results to September by companies listed on the Tokyo Stock Exchange has passed its peak. The combined net profits of the 1,217 companies listed on the First Section of the Tokyo Stock Exchange, excluding the financial sector, fell about 40% from a year earlier.
The situation has picked up since the April-June quarter, in which net profits fell by about 60% due to the declaration of a state of emergency and other factors. For the full year ending in March 2021, only a 20% year-on-year decline is said to be expected.
Noteworthy is the rebound in the manufacturing industry due to the recovery of overseas markets such as China.
In the auto industry, a number of companies raised their earnings forecasts for the business year ending in March 2021. The turnaround of a core industry that has a trickle-down effect to other industries is positive news.
Toyota Motor Corp. raised its net profit estimate from 730 billion yen to 1.42 trillion yen. In addition to a recovery in overseas sales, steady efforts to improve efficiency will also have an impact. Honda Motor Co. revised up its forecast for the business year ending in March 2021 to 390 billion yen.
It is expected that the situation will have a ripple effect on their business partners such as parts suppliers.
Changes in lifestyles caused by the novel coronavirus pandemic have been turned into opportunities by many companies.
Sony Corp. posted record profits for the first half of the business year to September thanks to brisk performance in its game business and music streaming. Nintendo Co., whose "Animal Crossing: New Horizons" game has gained worldwide popularity, also logged record profits.
Nissin Food Holdings Co., which posted record profits with strong sales of its instant noodles, said it aims to further boost its earnings by selling products aimed at health conscious consumers.
A management strategy that accurately meets consumer needs is essential.
On the other hand, all Japan Railways companies and airline operators posted record losses, hit hard by declines in passenger numbers. The tourism industry is also suffering from a sharp drop in demand for travel.
With no end in sight to the coronavirus crisis, structural reforms in these industries are urgently needed.
ANA Holdings Inc. plans to cut its employees' annual salaries by about 30%. The parent company of leading tourism company KNT Co. has announced that it will cut a third of the group's employees through voluntary retirements and other measures.
In addition to restructuring, it is also important to develop new businesses.
ANA is considering new business such as offering travel products online by utilizing customer data collected through mileage programs and other services. In the restaurant industry, some companies are rapidly expanding their home delivery and takeout sales.
It is hoped that companies will continue efforts to carve out a foundation for new growth.
-- The original Japanese article appeared in The Yomiuri Shimbun on Nov. 15, 2020.
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