TOKYO -- Japan's listed companies are headed for their worst downturn since the global financial crisis, with aggregate net profit expected to shrink by 36% for the current fiscal year, a Nikkei analysis shows.
The drop is based on projections from publicly traded corporations. With the coronavirus hurting the global economy, 60% of businesses predict lower revenue and profit for the year. Yet many companies anticipate that earnings will pick up later in the financial year and that the effects from the pandemic will wane.
"The April-June quarter is the bottom," said Hisato Kozawa, chief financial officer of Mitsubishi Heavy Industries, citing the period when urban shutdowns were most prevalent.
As of Friday, 934 listed Japanese companies disclosed guidance for the year through March 2021, representing 66% of the total. Businesses have encountered delays in releasing projections due to the coronavirus.
Companies are on pace for a third straight decline in annual income. This year looks to reach only half the recent peak of fiscal 2017, nearing the level in fiscal 2012 when the Japanese currency strengthened to around 80 yen on the dollar.
Profits are headed for the biggest rout since fiscal 2008, when listed companies went red across the board. Aggregate sales are set to dip 10% this year, a drop not seen since the 11% fall in fiscal 2009, as many companies face slumping demand.
Isetan Mitsukoshi Holdings expects an annual loss of 60 billion yen ($566 million). The department store operator, which just reported a loss of 11.1 billion yen for fiscal 2019, has dealt with store closings this year.
Other department store companies, as well as airlines, have yet to reveal annual projections amid historically tight business environments. The financial picture could worsen once additional forecasts are released.
Toyota Motor forecasts a 20% drop in sales and a 64% plunge in profit. The automaker is bracing for a 13% contraction in global unit sales.
Honda Motor is staring at a 64% decrease in income on 14% less in sales, having incurred a downturn for two-wheelers in developing markets.
As businesses hold back on investments, Japanese companies dependent on outside capital expenditures have suffered. Komatsu, the construction machinery giant, forecasts a 15% slide in sales and a 56% plunge in profit.
"A recovery in earnings will more closely resemble an L-shape rather than a V-shape," Komatsu President Hiroyuki Ogawa said.
Fewer than 20% of listed companies predict gains in both revenue and income. Electronics supplier Ibiden expects a 32% jump in profit thanks to growing demand in electronic substrates for 5G base stations. Instant noodle maker Nissin Foods Holdings predicts record annual profit due to stay-at-home demand.
For the 585 companies that have disclosed both first-half and full-year projections, a pattern emerges of earnings improving as the fiscal year progresses. Overall, net profit is anticipated to decline 54% in the first half from a year earlier, then rise by 19% during the latter half.
The second half will generate 65% of the profit this fiscal year, up from the average of 55% dating to fiscal 2007.
But while sales are pegged to decline by 24% in the first half, a dip of 2% is expected to continue in the second half. This suggests that cost cutting will factor heavily in the healthier profits during the latter half. Motor maker Nidec anticipates annual income soaring 70% despite shrinking sales, a gain due entirely to lower costs.
"Employees are submitting tens of thousands of suggestions for improvement," Nidec Chairman and CEO Shigenobu Nagamori said.
The trade and technology tensions between the U.S. and China also have buffeted businesses. Advantest, a producer of chipmaking equipment, expects profit to sink 33% this fiscal year. Demand for the machines has diminished on concerns over declining smartphone shipments from China's Huawei Technologies.
Seven & i Holdings, the parent of convenience store chain Seven-Eleven, has embarked on a string of investments such as the $21 billion acquisition of Speedway gas stations in the U.S., looking to capture post-coronavirus demand.
"Structural reforms such as equipment reduction and exits from unprofitable operations will be necessary," said Tsutomu Saito, strategist at Mitsubishi UFJ Morgan Stanley Securities.