Japan Companies Profits:

 Article Source:  https://mainichi.jp/english/articles/20220513/p2g/00m/0bu/062000c

Article:

TOKYO (Kyodo) -- The total net profit of listed companies in Japan dropped 41.3 percent to 4.94 trillion yen ($38.34 billion) in the January to March period from the previous quarter, reflecting the surge in raw material costs prompted by the Ukraine crisis, according to a recent tally by a securities firm.

Even excluding SoftBank Group Corp., an investment giant that reported a record net loss Thursday, the companies saw a 16.0 percent fall in combined net profit in the first quarter, show data from SMBC Nikko Securities Inc.

In the year that ended in March, overall net profit rose 31.8 percent to 28.53 trillion yen due to the yen's depreciation against the U.S. dollar.

Ideas:

There are always positives and negatives in an economy and the Japanese economy is no expception.

While the weak yen might be a postive for some companies its a negative for many companies.

The January to March period is a good example of how fast situations can change from quarter to quarter in any economy.

While the overall year was a positive just one not so good quarter can change things very fast. It looked like companies in Japan before Q4 were going to have a very good year, but Q4 changed the situation for many companies.

Article:

A weaker yen boosts exporters' profits earned overseas when repatriated.

The data covered 891 listed firms, or about 60 percent of the companies making up the Topix index on the Tokyo Stock Exchange that close their books in March and released results as of Thursday.

The net profit downturn was experienced in the January to March quarter even in the manufacturing sector, an industry which has been leading a recovery from the COVID-19 pandemic, sinking 18.3 percent to 3.90 trillion yen.

Ideas:

Some companies might have seen both positives and negatives in Q4 due the increase in energy and raw material costs increases and at the same time because of the weak yen, if they are an exporter, might have seen an increase in profits due to boosted by the weaker yen.

Large companies usually have the resources needed to ride any changes in the global landscape but small and medium sized companies are not so lucky and they will be the most vulnerable to extreme energy cost increases, extreme raw material cost increases and then add in the weak yen which increases the costs of both.

Some manufacturing companies might still be experiencing challenges related to the semiconductor chip situation and might not be fully recovered just yet. And now add in the weak yen and the eneryg and material cost increases and situation becomes even more challenging.

Article:

The transportation equipment sector, which includes automakers, posted a 36.5 percent decline in net profit for the reporting quarter.

Similarly, steelmakers suffered a 35.3 percent fall.

Food issues, which were directly impacted by soaring material costs, plunged by 47.7 percent.

In contrast, energy-related and nonferrous metal companies benefited from elevated material prices.

Among nonmanufacturers, marine transportation and airline operators logged greater losses amid soaring energy costs.

Ideas:

It looks like many sectors or industries were effected by a combination of higher energy costs and the weak yen. 

Again most likely the larger companies, while not happy with their losses are not going to be greatly effected by the losses, while the small and medium sized companies, with smaller profit margins, might have more challenges and might not be able to easily overcome the  challenges.

There is always the debate about how much should a government interefere in the normal workings of an economy. For example should the government just let the economy just let it be itself and not interfere with the idea the economy will sort it-self out or should or much should a government itervene with the normal activities of the economy for the good of society and the economy.

Article:

Including SoftBank Group, nonmanufacturers saw their combined net profit sink 78.9 percent to 649.30 billion yen. Excluding the investment firm, it was 9.9 percent lower at 2.75 trillion yen.

Hikaru Yasuda, an equity strategist at SMBC Nikko Securities, attributed smaller combined net profit by listed companies partly to reduced output among automakers in line with supply shortages sparked by the COVID-19 lockdowns in China and other factors.

Domestic demand-oriented firms are believed to have suffered from the double weights of elevated material costs and the weaker Japanese currency.

Ideas:

The chip shortage challenges seems to still be effecting companies even in Q4 and of course related to the ongoing situation in China with the lockdown and supply shortages.

Softbank is a major company in the Japanease economy, and most likely, while they or their stockholders might not like the smaller net profits, they have the resources to ride out the current challenges.

The same can't be said for smaller companies as they might not have the reserves or the resources to ride out the current challenges as easily as the big companies.

Export oriented companies might have a slight advantage in that the weak yen brings in extra profits even though they might have the same energy and material cost challenges as non-export oriented companies, while the non-export oriented companies just have the same advantage and have to rely on sales from home, or in Japanese, where consumers are feeling the effects of the increases too.

Article:

According to the data, sales in the first quarter rose 7.1 percent compared with the previous quarter, and climbed 11.4 percent from a year earlier.

Of the listed companies that end their business year in March, about 900 released earnings reports Friday, the peak day of this year's account settlement period.

Just like a fiscal year, a business year starts in April for most Japanese companies.

Ideas:

The difference between Q1 and Q4 just shows how much economic situations can change.

The article at the beginning doesn't mention about sales in Q4 but most likely as there were many companies with losses reported, it might be assumed that that their sales were not as good as expected.

But at the same time, they might have had sales increases but the large increases in energy and raw material cost increaes, might have been more than the sales increases thus resulting a lot of lost profits.

At this point in can be assumed that Prime Ministers's ideas of a 3% increase in wages from companies for their employees is not going to happen as many companies are seeing profit losses.

So once again Japanese employees might have to wait another year for a wage increase if companies only give out wage increases each April, the beginning of the new fiscal year.

Have a nice day and be safe!