The Japan Disaster Cuts Revenue of Japanese Companies

Osaka - Friday, April 29, 2011




Nikkei, Japan’s leading newspaper specialized in business and economy, reported today that the Japan disaster of the earthquake and tsunami is negatively affecting revenue of Japanese listed companies. Consolidated net profit for January – March 2011 was minus 32% from those of 2010. This is the reduction in revenue/profit when their revenue/profit has been improving consecutively for the last 6 quarters.



The main reasons include the extraordinary loss attributing to the damage to production equipment and the profit cut due to decrease in revenue.



As a result, the loss attributing to the damages of listed companies totaled approximately 1 trillion yen as of April 28. This clearly indicates that the Japanese companies had overcome the worldwide economic recession (Lehman's fall) and their profitability had been recovering but their management environment is now deteriorating to negatively affecting their profitability.



1. How did Nikkei come to the conclusion?



Nikkei collected financial data of 544 listed companies (excluding financial and new companies) whose financial announcement including revision of the previous estimation for January – March 2011 has been made by April 28 and calculated consolidated net profit of the 544 companies.



Nikkei also collected financial data of approximately 1000 listed companies whose financial announcement including revision of the previous estimation has been made for February and/or March 2011 and calculated their extraordinary loss.



2. What is the conclusion?



January – March 2011 was reduction in profitability. However, with accumulative profit of April – December 2010, their revenue and profit increased from those of previous year for fiscal year ending March 2011.



Financial performance of the Japanese companies has been recovering due to demand increase of emerging countries since they had overcome the worldwide recession.



However, for January – March 2011, the Japan disaster from earthquake and tsunami that occurred on March 11 negatively impacted their financial performance. This is why companies such as Seiko Epson and ANA ended up being in red for January – March 2011.



With calculation of the extraordinary loss from the disaster and other negative impact from the disaster across the industry, the total loss from the disaster of all companies is estimated to teach more than 1 trillion yen.



3. How the Japan Disaster affected the financial performance of Japanese Companies?



According to the calculation by Nikkei, the extraordinary loss totaled approximately 600 billion yen. This is more than that of the Kobe earthquake in 1995, which was approximately 400 billion yen.



Major Companies with Loss from the Disaster over 10 Billion Yen (in billion yen)


(Source: Nikkei, translated by the author)



Industry / Company Name / Loss / Main Reasons

Electronics & Machinery / Hitachi / 50.0 / Damaged power generation equipment plant

Electronics & Machinery / Fujitsu / 11.6 / Damaged factories, recorded loss of fixed cost due to operation halt

Electronics & Machinery / IHI / 10.5 / Eliminating production equipment, recovery cost

Iron & Steel / Sumitomo Metal Industries / 62.0 Damaged Kashima plant

Iron & Steel / JFE / 28.3 / Tsunami directly hit factory in Sendai

Iron & Steel / Nippon Steel / 23.7 / Kamaishi plant in Iwate flooded by tsunami

Oil & Chemical / JX Holdings / 126.0 / Damaged oil factory in Sendai and Miyagi

Oil & Chemical / Shin-Etsu Chemical / 21.0 / Damaged Kashima plant that produces vinyl chloride

Telecommunication & Transportation / NTT / 110.0 / Damaged power poles, optical cables, base station of mobile phones

Telecommunication & Transportation / JR East / 58.7 / Damage of railroads and bridges of Tohoku Shinkansen Lines

Telecommunication & Transportation / KDDI / 17.5 / Damaged base stations of mobile phones, loss from eliminating optical cables

Retailer / AEON / 30.0 / 200 damaged supermarkets

Retailer / Seven & i Holdings / 26.0 / Damaged supermarkets in North East Japan

* Loss of some companies excludes those of insurance



The extraordinary loss of the top 4 iron and steel companies totaled 114 billion yen. The main loss is of Sumitomo Metal Industry which is more than 60 billion yen. Another is of 23.7 billion yen of Nippon Steel that made financial announcement on April 28, with half of the extraordinary loss of Kamaishi plant in Iwate flooded by tsunami.



The impact of the disaster is not limited to extraordinary losses. There are some cases in which operating profit was negatively impacted by the disaster such as of Hitachi and Canon. The loss from the disaster excluding the extraordinary loss totals approximately 400 billion yen.



The loss from the disaster is to negatively impact the revenue for April – June 2011 of many companies, especially that of automobiles. It is estimated that the loss for retailers for fiscal year ending February 2012 is to total 80 billion yen.



Some experts say that the revenue across industries would start to recover from October 2011 benefitting from increased demand attributing to recovery from the disaster; however, many company executives are extremely anxious of the future.





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Nikkei, Japan’s leading newspaper specialized in business and economy, estimated that although financial performance of Japanese companies has been recovering lately, the loss of Japanese companies across the industry from the Japan disaster (earthquake and tsunami) is to total more than 1 trillion yen.