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Thursday, Nov. 13, 2008
Not all firms hurting in hard times
While the yen's surge and the recession may be battering the sales and profits of the country's blue-chip firms, others are making headway through the storm, posting record half-year profits even as the global financial turmoil hammers financial firms and export-driven manufacturers such as Sony Corp. and Toyota Motor Corp.
For example, many convenience store chains recorded their highest-ever operating profits, in part because people dined out less often and bought inexpensive ready-to-eat packaged meals instead.
The nation's second-biggest convenience store chain, Lawson Inc., said last month its net profit jumped 25.9 percent for the March-August half-year period to a record ¥15.5 billion from a year earlier.
"People who are worried about the economic slowdown visit our stores instead of dining out," Lawson spokesman Hiroyuki Yaginuma said, adding that sales of staples such as rice and bread products are particularly strong.
And faced with high gas prices, some people in rural areas are even buying a wide range of groceries at nearby convenience stores instead of driving to supermarkets far away from home, Yaginuma said.
Convenience stores are also profiting from a jump in cigarette sales. Often smokers who shun the new ID-activated cigarette machines pick up something to eat or drink when they come in to buy cigarettes, he said.
"Even if the economy deteriorates, people can't give up the convenience," said Shinya Torihama, an analyst at Okasan Securities Co.
"Convenience stores sell all the necessities of life, and it is hard for consumers to save money by not going there," he said, noting the gloomy economy will not only benefit convenience stores but some supermarkets and delicatessens.
Other winners in the earnings season include those that have proactively cultivated demand.
Shin-etsu Chemical Co. has steadily expanded its markets and posted record sales and profits over the past several years, including the April-September period.
Sales of vinyl chloride, which is used for a wide variety of construction materials, have been robust, especially in emerging markets in Central and South America, the Middle East, and Africa.
Even though exports to these areas are hurt by the yen's appreciation, the world's top vinyl chloride maker said it forecast record sales and profits for the full business year to March.
Game giant Nintendo Co. is also enjoying success thanks to having cultivated game markets, especially outside Japan. It said on Oct. 30 it posted a 9.4 percent gain in first-half profit.
The maker of the popular Wii console and DS hand-held device booked net profit of ¥144.8 billion in the April-September period as a result of its efforts to woo the European market as well as the huge U.S. market.
The result exceeded last year's profit of ¥132.4 billion. For the full year, it expects a 34.1 percent increase in net profit to ¥345 billion.
"It was the first time in Nintendo's history that sales in Europe surpassed those in North America," Nintendo President Satoru Iwata told reporters last month.
Elsewhere, rising oil and raw materials prices have pushed up profits at trading houses.
All major traders except Mitsui & Co. posted record-high net profits for the six-month period, although their earnings outlook is less optimistic for later this year as the rise in materials and energy costs slows.
Elsewhere the outlook for later this year also isn't so rosy. Some economists said companies will struggle to cope with deteriorating consumption.
As of Tuesday, 990 companies, or 80.7 percent of all firms listed on the first section of the Tokyo Stock Exchange, had announced their earnings, and according to a survey by Shinko Research Institute Co., those firms expect a 26.2 percent drop overall in net profits and a 24.7 percent fall in pretax profits.
Credit Suisse Securities (Japan) Ltd. also said Monday it had lowered its profit forecast for Japanese companies listed on the first section to a 40 percent decline for the business year to March, from its previous forecast of a 30 percent fall, amid growing risk of the yen's further appreciation.
"Even companies that logged profits may face tough earnings results in the last half of the business year," said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute, adding that the current credit crunch will hurt all business sectors because declining stock prices weigh down personal spending at home and abroad as well as companies' capital spending.