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Business trends

Corporate Japan logs first profit dip in 3 years as China slows

Manufacturers' earnings nosedived in second half

Japanese companies with a global reach, such as electronics makers, are particularly susceptible to economic trends in China. (Photo by Masayuki Terazawa)

TOKYO -- Japan's publicly traded businesses suffered a 2% decline in net profit for the fiscal year ended March as China's slowdown squeezed demand for smartphones and semiconductors, while the Sino-American trade war continues to loom over future earnings.

Net profit had jumped 12.6% on the year in the April-September half but dropped 14.6% in the second, shows data compiled by Nikkei from 849 companies that had released full-year results as of Friday. The profit decline is their first in three years. The companies surveyed account for just under 60% of all listed enterprises in Japan, excluding financial and startup-market companies.

The companies are expected to log 4% growth for the current year ending March 2020. But the figure does not account for possible tariff hikes against China by the U.S. Rising tensions over trade are "gradually impacting auto sales and parts orders," Sumitomo Corp. Chief Financial Officer Koichi Takahata said.

Motor maker Nidec enjoyed 32% growth in net profit for the April-September half but a 55% plunge for the October-March period as Chinese demand fell beyond projections. Products designed for automobiles and home appliances suffered in particular, leading to Nidec's first annual profit decline in six years.

Fanuc, which builds industrial robots and other high-tech products, saw net profit fall 5% for the first half and 25% for the second as Chinese companies slashed capital investment. "We are bracing for things to worsen beyond our forecasts" in the future as well, President and CEO Kenji Yamaguchi said.

In the auto sector, Mazda Motor saw unit sales in China drop 11% for the first half and 34% for the second. Its full-year net profit fell 43%. Automakers and parts makers suffered a 53% plunge for October to March, partly because they had gotten a boost a year earlier from corporate tax cuts in the U.S.

Companies that operate globally, such as electronics makers, are particularly susceptible to Chinese economic trends. Manufacturers as a whole took a 22% hit to net profit in the second half of fiscal 2018.

But nonmanufacturers, many of them reliant mostly on domestic demand, took only a 3% hit in the second half. East Japan Railway, or JR East, topped records for annual net profit thanks to a wave of foreign tourists visiting the country. Isetan Mitsukoshi Holdings escaped the red.

Japanese corporations' revenue increased 7% for the full year, or 3% after adjusting for accounting changes at large trading houses. But net profit still fell, largely because major corporations that typically enjoy high margins are losing ground. Nidec's net profit ratio fell 1.5 points from the year before, and Fanuc's by 0.8 point. High prices of coal and other fuel led to higher costs across the board as well.

More Japanese corporations are scheduled to announce full-year results this week, which could further push down overall profit figures. Nissan Motor and Sumitomo Chemical are expected to log reduced profits.

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