The deteriorating business performance of listed companies has become clear amid the stagnation in global economic activity caused by the spread of the novel coronavirus. Attention will be focused on how they respond to the pandemic crisis and devise forward-looking strategies.
The peak period has passed for companies listed on the Tokyo Stock Exchange to announce their earnings reports for the April-June quarter. As of Aug. 6, 275 of the companies listed on the TSE's First Section, excluding financial companies, had posted a decline in net profits.
It is said that more than 60% of the companies will report losses, and the total net profits will likely fall more than 70% from a year earlier.
There are concerns about the sluggish performance of automakers, which form a key industry and have a major impact on employment. Toyota Motor Corp.'s net profit fell more than 70% in the April-June period. Nissan Motor Co., Mitsubishi Motors Corp. and Mazda Motor Corp. forecast a net loss for the full-year term ending in March 2021, as well as in the April-June period.
This is because demand in countries around the world has plummeted due to the spread of the coronavirus. Demand is expected to recover in the future, but it is likely to lack momentum, as infections are spreading again.
Key to the growth of automakers are next-generation vehicle technologies called "CASE," such as self-driving and the conversion of vehicles to electric power.
For the year ending in March 2021, Toyota is expected to demonstrate its potential and secure a net profit of 730 billion yen. It is hoped that companies with surplus funds will not fail to make investments from a long-term perspective, by making efforts to cut costs and reform their business structure.
A number of manufacturers, including Mitsubishi Heavy Industries Ltd., posted record losses. Non-manufacturing companies also have struggled, and even East Japan Railway Co., whose financial situation was stable, suffered losses. Airlines, restaurant operators and retailers have also been hit hard.
Each company must drastically review its long-term management policy while focusing on securing funds.
Useful lessons can be learned from companies that are improving their performance despite the coronavirus disaster. These companies have successfully grasped the changes in social trends, such as the expansion of teleworking and "nesting consumption."
Sony Corp's net profit for the April-June period rose significantly as more people played games online. This is the result of the company focusing on the entertainment field.
Nidec Corp. increased its operating profits mainly due to brisk sales of miniature fan motors for personal computers. Drastic reform of its profit structure is taking place.
Iris Ohyama Inc., a major home appliance and household goods manufacturer, has started producing masks in Japan, and is greatly improving its sales, mainly due to sales of cameras that detect people who have a fever.
As people spend more time at home, demand for high-quality cooking appliances has increased. It is necessary to contrive ways to change the crisis into business opportunities, such as by creating new products and services that match the "new way of life" being followed to fight the coronavirus.
-- The original Japanese article appeared in The Yomiuri Shimbun on Aug. 11, 2020.
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