Osaka - Sunday, June 26, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported today that performance of Japanese listed companies for the latter half of fiscal year 2011 ending March 2012 is to rapidly recover. This is expected to result in as small as 6% decrease vs. previous year for consolidated profit for the total fiscal year ending March 2012.
This is primarily to be driven by demand from recovery from the Japan disaster, which is why revenue increase by24% is anticipated in the latter half of 2011. It is possible that automobile production recovery quicker than their original plan also is to contribute to profitability enhancement.
Having said that, the reality is the performance among many industries was at a low level in the first half of 2011 due to the disaster. Moreover, if yen should get higher than anticipated it could trade off the anticipated revenue increase.
1. How did Nikkei come to the conclusion?
Nikkei collected and analyzed financial data of 1,533 listed companies (excluding financial and new companies) whose financial announcement for financial announcement ending March 2010 has been made by June 25. EBITA (earning before income tax) was used for companies that adopt GAAP (generally accepted accounting principles). TEPCO (Tokyo Electric Power Co., Inc) was excluded because their outlook is uncertain.
2. What is the conclusion?
Profit for the fiscal year ending March 2012 is estimated to be 22.76 trillion yen, which is only 6% decrease from the fiscal year ending March 2011. Profit has been increasing for the past three quarters since the quarter ending March 2009 and therefore the estimation may sound negative. However, this is far greater than the fiscal year ending March 2010 which was 15.53 trillion yen. This is approximately 70% of the greatest profit in history for the fiscal year ending March 2008.
The trend of the fiscal year ending March 2012 is expected to be “slump in the first half, recovery in the second half”.
3. What are the reasons for the slump of the first half of the fiscal year?
They are primarily the broken link of supply chain and depressed consumer consumption. As a result, profit is estimated to be 8.8 trillion yen, which is minus 32% from the previous year.
In the case of Toyota for example, it is estimated to be in the red by 100 billion yen. And for automobile and its component industries, profit is expected to be minus 93% from the previous year.
Slump of automobile impacts wide a scope of industries. For example, profit of Furukawa Electric Co., Ltd. is estimated to be 9 billion yen, which is minus 44% from the previous year because of the decrease in orders of automobile components. The company is cautious in making estimation of production recovery; it estimates that their production for July and August this year will be only as much as 80% of the July and August of 2010. Automobile shipment is estimated to be 1.1 million cars, which is minus 26% from the previous year according to NYK Line.
4. What are the reasons for expected drastic recovery in the second half of the fiscal year?
Demand increase of the recovery from the disaster and increase in overseas sales are expected to highly contribute to 24% increase in profit from the previous year, reaching profit of 13.96 trillion yen.
For example, profit of Toshiba is expected to increase by 42% from the previous year, which is to be a drastic recovery from 13% decrease in the first half. This is because of the anticipated demand increase of recovery from the disaster in sectors such as consumer electronics and infrastructure. For the same reason, 53% increase in profit is expected for iron and steel and 26% increase in profit is expected for construction as well.
With such profitability recovery, 48% of companies calculated are expected to improve in revenue and/or profitability.
Automobile production in Japan is to return to the previous year level by as early as July. Honda even plans to increase by 20% after autumn.
5. Are there any possible negative factors for performance recovery?
Yes, there are.
One is exchange rate. Many companies estimate the exchange rate to be 1 USD = 80 – 85 JPY and 1 Euro = 115 JPY. However, the current yen exchange rate is already at their profitability limit and if the yen should get higher there is a risk of decrease in their profitability from export business.
Limit in electricity supply is the other major negative factor. If re-start of operation of nuclear power plants that are currently being inspected for regular inspection and maintenance should delay, it would be a negative factor for the performance for the second half of the fiscal year ending March 2012.
Resources:-
Nikkei, Japan’s leading newspaper specialized in business and economy, estimated that financial performance of Japanese companies are to drastically recovering in the second half of fiscal year ending March 2012, from slump in the first half attributing to the broken supply chain and consumer spending cut due to the Japan disaster. Such recovery is expected primarily because of demand increase of recovery from the disaster. However, there are possible negative factors for the drastic recovery such as exchange rate (high yen) and electricity supply limit.
2011年6月12日日曜日
Recovery from the Japan Disaster – Achievements and Challenges
Osaka - Sunday, June 12, 2011
Nikkei, Japan’s leading newspaper specialized in economy and business, reported on June 11 about the recovery status from the Japan Disaster that resulted in 23,500 people dead or missing after 3 months. Business community in general has been recovering well. Production of many global companies is recovering even in the most hardly hit industries such as automobile and electronics.
However, recovery in other area/items remain slow. Over 90,000 people remain evacuated and much time is required for victims to return to normal lives. Financial assistance to victims and small and mid-sized companies impacted by the disaster remains insufficient. Converge of Fukushima nuclear plant accident seems to take time and electricity shortage is spreading nationwide as explained in the previous article Electricity Shortage Throughout Japan – Effects and Solutions.
1. How is the recovery status of each item?
1) Items related to lives of victims
(1) Electricity
Electricity for all houses and buildings are expected to recover by June 20 excluding those that have been swayed by the tsunami.
(2) Water
97% has recovered. 59,000 houses remain without water (as of June 7).
(3) Financial institutes
Total of 55 branches in Iwate, Miyagi and Fukushima remain closed (as of June 9).
2) Transportation infrastructure
(1) Railways
Shinkansen bullet train operation is to return to normal in autumn this year. Recovery of some local trains of East Japan Railway remains a question.
(2) Roads
All national motorways have recovered excluding those in the caution zone of the nuclear plant accident. 148 sections of prefectural motorways and local roads remain blocked (as of June 6).
(4) Ports
Approximately 45% docks of major ports have recovered (as of June 6).
3) Business community
(1) Supply chain
Overall supply chain has been recovering quicker than anticipated. This is because head offices and business partners made upmost efforts to quickly absorb the local needs to take actions for supply chain recovery.
(2) Automobile
Toyota and Nissan mostly have returned to normal production status. Honda is operating at 70 – 80% of its plan.
(3) Electronics
Semiconductor/micro computer shipment is to recover by autumn this year.
(4) Oil
Production facility of a leading Japanese oil company in Sendai is expected to recover in summer next year.
2. What is a particular case of a global company based in Japan?
An example introduced by Nikkei was of Sony.
10 production sites once stopped operating but the site in Miyagi that was the slowest to recover started partial production in the end of May. The site produces such products as Blu-ray disc recorders and the damage from the tsunami was extraordinary,
Their plan was not to recover as it was before the disaster but to remake a site to a new one. Items produced at the site were selected with care for higher efficiency and productivity. The space created is to be rented to local small and mid-sized companies that lost their offices from tsunami. Mr. Stringer, the CEO, commented when he visited the site that he felt the passion from the shop floor members to make the new site that is far better from pre-disaster.
3. How are small and mid-sized companies?
Recovery of small and mid-sized companies remain rather slow, which is why over 40,000 people in Iwate, Miyagi and Fukushima became unemployed from the disaster and seeking to fine a new job.
This is mostly because of insufficient financial assistance to such companies and individual business owners, although on June 10 Minister of Financial Affairs said with pride that maximum efforts have been made by Financial Service Agency. Some are forced to transfer not only production site but also head office function because of the ongoing effect from the nuclear plant accident, which means much financial burden.
In such a severe situation, many of them have been working hard to overcome challenges. One example is a component manufacturing company supplying to car navigation system manufacturers. The company was located in the coastal area but all production equipments were swayed by the tsunami. The top executive once gave up business continuity but transferred the facility to a warehouse which in 49km inland area and restarted its operation.
4. What are the author’s final thoughts?
Considering the geographical size and complexity of the disaster, the recovery pace is amazing in general. This seems to mostly attribute to “gembaryoku” (leadership and management capability of the local community and shop floor members), which is the strengths of Japan and its companies as often mentioned.
What is lacking yet critical to speed up the recovery in the slow recovery areas/items is strong leadership especially from the government. In contrast to “gembaryoku”, leadership and management capability of the people high up in the organization are often said as the weakness of Japan. Such weakness became prominent in the recovery from the disaster.
The last paragraph of the Nikkei article depicts this and the compelling message from the victims and the citizens. It is the fact that when Mr. Okada, Secretary General of the Democratic Party of Japan visited Sendai, a victim whose house is severely damaged with landslide said to Mr. Okada, “why don’t politicians really understand the reality of the devastated area and quickly take actions instead of fighting among politicians in the Diet”.
Resources:-
The recovery from the Japan disaster in the 3 months since March 11 is in general remarkable. This is mainly due to efforts by local people and companies. However, recovery of small and mid-sized companies and lives of victims remain slow. This is mainly due to insufficient financial support from the government. What is critical to boost recovery pace is strong leadership especially from the government.
Nikkei, Japan’s leading newspaper specialized in economy and business, reported on June 11 about the recovery status from the Japan Disaster that resulted in 23,500 people dead or missing after 3 months. Business community in general has been recovering well. Production of many global companies is recovering even in the most hardly hit industries such as automobile and electronics.
However, recovery in other area/items remain slow. Over 90,000 people remain evacuated and much time is required for victims to return to normal lives. Financial assistance to victims and small and mid-sized companies impacted by the disaster remains insufficient. Converge of Fukushima nuclear plant accident seems to take time and electricity shortage is spreading nationwide as explained in the previous article Electricity Shortage Throughout Japan – Effects and Solutions.
1. How is the recovery status of each item?
1) Items related to lives of victims
(1) Electricity
Electricity for all houses and buildings are expected to recover by June 20 excluding those that have been swayed by the tsunami.
(2) Water
97% has recovered. 59,000 houses remain without water (as of June 7).
(3) Financial institutes
Total of 55 branches in Iwate, Miyagi and Fukushima remain closed (as of June 9).
2) Transportation infrastructure
(1) Railways
Shinkansen bullet train operation is to return to normal in autumn this year. Recovery of some local trains of East Japan Railway remains a question.
(2) Roads
All national motorways have recovered excluding those in the caution zone of the nuclear plant accident. 148 sections of prefectural motorways and local roads remain blocked (as of June 6).
(4) Ports
Approximately 45% docks of major ports have recovered (as of June 6).
3) Business community
(1) Supply chain
Overall supply chain has been recovering quicker than anticipated. This is because head offices and business partners made upmost efforts to quickly absorb the local needs to take actions for supply chain recovery.
(2) Automobile
Toyota and Nissan mostly have returned to normal production status. Honda is operating at 70 – 80% of its plan.
(3) Electronics
Semiconductor/micro computer shipment is to recover by autumn this year.
(4) Oil
Production facility of a leading Japanese oil company in Sendai is expected to recover in summer next year.
2. What is a particular case of a global company based in Japan?
An example introduced by Nikkei was of Sony.
10 production sites once stopped operating but the site in Miyagi that was the slowest to recover started partial production in the end of May. The site produces such products as Blu-ray disc recorders and the damage from the tsunami was extraordinary,
Their plan was not to recover as it was before the disaster but to remake a site to a new one. Items produced at the site were selected with care for higher efficiency and productivity. The space created is to be rented to local small and mid-sized companies that lost their offices from tsunami. Mr. Stringer, the CEO, commented when he visited the site that he felt the passion from the shop floor members to make the new site that is far better from pre-disaster.
3. How are small and mid-sized companies?
Recovery of small and mid-sized companies remain rather slow, which is why over 40,000 people in Iwate, Miyagi and Fukushima became unemployed from the disaster and seeking to fine a new job.
This is mostly because of insufficient financial assistance to such companies and individual business owners, although on June 10 Minister of Financial Affairs said with pride that maximum efforts have been made by Financial Service Agency. Some are forced to transfer not only production site but also head office function because of the ongoing effect from the nuclear plant accident, which means much financial burden.
In such a severe situation, many of them have been working hard to overcome challenges. One example is a component manufacturing company supplying to car navigation system manufacturers. The company was located in the coastal area but all production equipments were swayed by the tsunami. The top executive once gave up business continuity but transferred the facility to a warehouse which in 49km inland area and restarted its operation.
4. What are the author’s final thoughts?
Considering the geographical size and complexity of the disaster, the recovery pace is amazing in general. This seems to mostly attribute to “gembaryoku” (leadership and management capability of the local community and shop floor members), which is the strengths of Japan and its companies as often mentioned.
What is lacking yet critical to speed up the recovery in the slow recovery areas/items is strong leadership especially from the government. In contrast to “gembaryoku”, leadership and management capability of the people high up in the organization are often said as the weakness of Japan. Such weakness became prominent in the recovery from the disaster.
The last paragraph of the Nikkei article depicts this and the compelling message from the victims and the citizens. It is the fact that when Mr. Okada, Secretary General of the Democratic Party of Japan visited Sendai, a victim whose house is severely damaged with landslide said to Mr. Okada, “why don’t politicians really understand the reality of the devastated area and quickly take actions instead of fighting among politicians in the Diet”.
Resources:-
The recovery from the Japan disaster in the 3 months since March 11 is in general remarkable. This is mainly due to efforts by local people and companies. However, recovery of small and mid-sized companies and lives of victims remain slow. This is mainly due to insufficient financial support from the government. What is critical to boost recovery pace is strong leadership especially from the government.
2011年6月11日土曜日
Electricity Shortage Throughout Japan – Effects and Solutions
Osaka - Saturday, June 11, 2011
Nikkei, Japan’s leading newspaper specialized in economy and business, reported on June 10 that not only TEPCO but also Kansai Electric Power Co., Inc. (KEPCO) in western Japan, also is to request 15% electricity cut in summer. This is because they cannot plan to re-start operation of nuclear plant currently going through regular inspection and maintenance and they are to make the request before the electricity supply shortage becomes a reality.
Other electricity companies such as those in Kyushu (in southern Japan) are also studying to make a same request, and thus electricity supply shortage issue is now not limited to eastern Japan.
1. How is electricity supply plan in eastern Japan directly impacted by Fukushima nuclear plant accident?
Due to the accident, Fukushima nuclear plant operation is terminated and therefore electricity shortage is a critical issue in eastern Japan. This is why there had been “planned” blackouts even in Kanto (e.g. Tokyo, Yokohama, Chiba) in March.
For this reason, electricity power companies in eastern Japan, i.e. Tokyo/Tohoku Electric Power Co., Inc. (TEPCO) is to execute limiting electricity supply based on Electricity Business Act by Ministry of Economy, Trade and Industry (METI). Under this law, companies and organizations that consume large amount of electricity (with contract of over 500 kW) are obliged to cut electricity use from July by 15% from the peak last summer. If this is not achieved, companies and organizations are to get penalty of less than 1 million yen.
The 15% electricity cut request will not have a legal power over organizations with contract of less than 500kW and individual householders; however, they also would be encouraged to cut electricity use by 15% and will be rewarded when achieved.
2. What is KEPCO’s request and why was it made?
The same request i.e. 15% electricity cut from July is to be made by KEPCO to organizations in its responsible area (e.g. Osaka, Kyoto, Hyogo, Mie, Gifu, Fukui) but this would not have a legal obligation.
KEPCO decided to make the request because from July, three out of eleven nuclear plants in KEPCO area will be going through regular inspection and maintenance, which means together with the nuclear plants that are already going through regular inspection and maintenance, six out of eleven nuclear plants will not be in operation. This is because of lack of understanding and approval to restart the operation of the nuclear plants after the inspection and maintenance. Consequently, it is estimated that electricity supply will become short by some 5% at the peak in summer.
3. How are electricity power companies in other area?
Electricity power companies in Kyushu (southern Japan), Hokuriku (Japan Sea Cost area) and Shikoku (Shikoku Island in western Japan) may also follow KEPCO for the very same reason.
The only are that is not impacted is Okinawa because there is no nuclear plant in Okinawa.
4. How would this impact business community?
It is quite certain that this would have increase negative impact on production and business strategy of business community because many of them have been transferring part of their production from eastern to western Japan due to the current electricity shortage in eastern Japan.
For example, Toshiba has already decided and is transferring the production of system LSI and micro computer from Iwate to Kyushu. The company also has already planned to shift data centre operation from eastern to western Japan.
5. What are the author’s final thoughts?
KEPCO’s request is rationale because it is necessary for them to take action before it is too late. However, what really needs to be discussed and solved are the new energy policy of the country and the roadmap and plant for smooth transition to the new policy.
The new energy policy discussion would include topics such as positioning of nuclear power and possibilities of alternate energy. This is of a mid to long-term, political issue, to be initiated by the government.
The transition discussion would include topics such as termination/restart of nuclear power plants after regular inspection and maintenance together with pros and cons, possibilities of electricity generation by other means, and efficient use of electricity. This is mostly of short-tem issues, to be initiated by the government.
And, in execution, concise message needs to be developed and communicated with transparency by the government and electricity companies to all stakeholders to convince them and win their understanding and support. This means strong leadership is required.
Resources:-
Electricity shortage is spreading to not only eastern Japan but nationwide. This is because nuclear power plant operation cannot be restarted after regular inspection and maintenance due to lack of understanding and consensus from the local community. This is to impact business community when many companies have been transferring their production and other functions from eastern to western Japan. Japan needs strong leadership to develop and execute new energy policy with smooth transition.
Nikkei, Japan’s leading newspaper specialized in economy and business, reported on June 10 that not only TEPCO but also Kansai Electric Power Co., Inc. (KEPCO) in western Japan, also is to request 15% electricity cut in summer. This is because they cannot plan to re-start operation of nuclear plant currently going through regular inspection and maintenance and they are to make the request before the electricity supply shortage becomes a reality.
Other electricity companies such as those in Kyushu (in southern Japan) are also studying to make a same request, and thus electricity supply shortage issue is now not limited to eastern Japan.
1. How is electricity supply plan in eastern Japan directly impacted by Fukushima nuclear plant accident?
Due to the accident, Fukushima nuclear plant operation is terminated and therefore electricity shortage is a critical issue in eastern Japan. This is why there had been “planned” blackouts even in Kanto (e.g. Tokyo, Yokohama, Chiba) in March.
For this reason, electricity power companies in eastern Japan, i.e. Tokyo/Tohoku Electric Power Co., Inc. (TEPCO) is to execute limiting electricity supply based on Electricity Business Act by Ministry of Economy, Trade and Industry (METI). Under this law, companies and organizations that consume large amount of electricity (with contract of over 500 kW) are obliged to cut electricity use from July by 15% from the peak last summer. If this is not achieved, companies and organizations are to get penalty of less than 1 million yen.
The 15% electricity cut request will not have a legal power over organizations with contract of less than 500kW and individual householders; however, they also would be encouraged to cut electricity use by 15% and will be rewarded when achieved.
2. What is KEPCO’s request and why was it made?
The same request i.e. 15% electricity cut from July is to be made by KEPCO to organizations in its responsible area (e.g. Osaka, Kyoto, Hyogo, Mie, Gifu, Fukui) but this would not have a legal obligation.
KEPCO decided to make the request because from July, three out of eleven nuclear plants in KEPCO area will be going through regular inspection and maintenance, which means together with the nuclear plants that are already going through regular inspection and maintenance, six out of eleven nuclear plants will not be in operation. This is because of lack of understanding and approval to restart the operation of the nuclear plants after the inspection and maintenance. Consequently, it is estimated that electricity supply will become short by some 5% at the peak in summer.
3. How are electricity power companies in other area?
Electricity power companies in Kyushu (southern Japan), Hokuriku (Japan Sea Cost area) and Shikoku (Shikoku Island in western Japan) may also follow KEPCO for the very same reason.
The only are that is not impacted is Okinawa because there is no nuclear plant in Okinawa.
4. How would this impact business community?
It is quite certain that this would have increase negative impact on production and business strategy of business community because many of them have been transferring part of their production from eastern to western Japan due to the current electricity shortage in eastern Japan.
For example, Toshiba has already decided and is transferring the production of system LSI and micro computer from Iwate to Kyushu. The company also has already planned to shift data centre operation from eastern to western Japan.
5. What are the author’s final thoughts?
KEPCO’s request is rationale because it is necessary for them to take action before it is too late. However, what really needs to be discussed and solved are the new energy policy of the country and the roadmap and plant for smooth transition to the new policy.
The new energy policy discussion would include topics such as positioning of nuclear power and possibilities of alternate energy. This is of a mid to long-term, political issue, to be initiated by the government.
The transition discussion would include topics such as termination/restart of nuclear power plants after regular inspection and maintenance together with pros and cons, possibilities of electricity generation by other means, and efficient use of electricity. This is mostly of short-tem issues, to be initiated by the government.
And, in execution, concise message needs to be developed and communicated with transparency by the government and electricity companies to all stakeholders to convince them and win their understanding and support. This means strong leadership is required.
Resources:-
Electricity shortage is spreading to not only eastern Japan but nationwide. This is because nuclear power plant operation cannot be restarted after regular inspection and maintenance due to lack of understanding and consensus from the local community. This is to impact business community when many companies have been transferring their production and other functions from eastern to western Japan. Japan needs strong leadership to develop and execute new energy policy with smooth transition.
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