Under the COVID-19 pandemic, there are still some Japanese companies that have improved their profitability. The net profit of 620 Japanese companies from April to December 2021 hit a record high, accounting for 30% of the total. The proportion of companies with record profits is higher than in April and December 2019 before the epidemic. Manufacturing companies cut costs and seized the demand growth brought about by the economic recovery. There are also companies in areas such as shipping and trading companies that have reached unprecedented levels of profitability due to high resource prices.
Among the companies that have released their financial reports for April-December as of February 14 and the fiscal year divided by March (excluding finance, etc.), nihon Keizai Shimbun (Chinese edition: Nikkei Chinese.com) has counted 2,053 companies with comparable data for more than 5 years. Companies with record net profit accounted for 30.2% of the total, surpassing april-December 2019 (21.7%) before the epidemic. The fiscal year 2017 (ending In March 2018), the highest level of corporate profits in Japan, April to December 2017 was the highest.
In the manufacturing sector, some companies have seized on the growth in demand brought about by the rapid recovery of the world economy and expanded their profits. Taking the COVID-19 pandemic as an opportunity, the digitalization process has accelerated and the demand for semiconductors has been expanding. Edwin, a large semiconductor test equipment company, once again hit a new profit in 3 years, while HOYA, which operates the circuit pattern bottom plate "mask blank", and Kyocera, which manufactures equipment parts and components, also hit a new profit after 2 years.
Fiscal and monetary policies introduced to get rid of the COVID-19 pandemic have also led to a recovery in personal consumption. Toyota Motor sold SUV in North America and China, with profits increasing by 848.1 billion yen, the highest among listed companies. Murata Manufacturing sells electronic components for home appliances and PC-related equipment, and the company believes that "the final demand is strong, focusing on the demand of the next fiscal year, it will increase the necessary inventory", and is also confident about the future.
The rapid recovery in demand has led to an increase in the prices of goods and resources, which has greatly improved the earnings of steel, trading companies and chemical companies.
Nippon Steel lost JPY 123.8 billion from April to December 2020, while from April to Dec. 2021 it made a profit of JPY 507.8 billion as demand for steel expanded. Mori Takahiro, vice president of the company, said that "it is not only the price of raw materials that have risen, but also negotiations to get the value of products and services recognized," suggesting price increases for large customers such as automobiles and electromechanical products.
Five large trading companies, including Mitsubishi Corporation, Sumitomo Corporation, Mitsui & Co., ITOCHU Corporation, and Marubeni, all achieved record profits. Due to the high prices of raw coal, iron ore, and oil, the profits of the five trading companies increased by more than 1.8 trillion yen. Thanks to the rising prices of petrochemical products, the profits of large chemical companies such as Shin-Etsu Chemical Industries and Sumitomo Chemical also hit new highs.
Merchant Marine Mitsui's net profit increased by hundreds of billions of yen over the same period last year
Rising resource prices are currently driving up performance, but for the manufacturing industry, it will also lead to higher prices of components and materials as raw materials.
Hitachi Manufacturing achieved its highest profit on record through cost-cutting measures such as adjusting expenses, but the company believes that the situation of high raw material prices will continue. Hitachi Manufacturing's Chief Financial Officer (CFO) Yoshihiko Kawamura said that he "had to pass on the cost to the price and produce parts independently." Domestic demand enterprises have been affected by the high price of imported milk raw materials and coffee beans. Morinaga Dairy, which set a new profit record, said that it "increased the cost by 900 million yen in October and December alone," and companies are increasing their vigilance.
In the future, whether the rise in raw material prices can be passed on to the final product will become the focus. Ken abe, chief strategist at Daiwa Securities, believes that "if companies with new profits start to raise salaries and consume vigorously, the room for price pass-through will also expand."
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