More than 40% of Japanese manufacturers saw profits fall in fiscal 2022

International Business News – There is uncertainty about the recovery of the performance of Japanese manufacturing industry. More than 40% of the companies that announced fiscal year 2022 (ending March 2023) earnings as of May 2 saw a decline in net profit. This is a record high since FY2019 (over 50%) when the new crown epidemic broke out. The electronics and auto parts industries, which have been deeply affected by the slowdown in the Chinese market and high raw material prices, are in a bitter struggle.

This time, 92 manufacturing companies listed on the TSE main (prime) market (equivalent to 16% of the whole including unannounced companies) that announced their financial results as of May 2 were counted. The rate of companies with declining profits reached 42%, a spike from 21% in FY 2021. Manufacturing net profit decreased 39% year-on-year in fiscal 2019, which was affected by the epidemic, followed by 34% growth in fiscal 2020 and 67% growth in fiscal 2021, both of which improved, but grew only 6% in the last quarter through May 2, which was slow.

Murata Manufacturing posted a profit decline after 2 years due to the impact of China’s economic slowdown squeezing earnings. The global smartphone market size is about 1.08 billion units, with China as the center of the reduction of hundreds of millions of units. Nidec’s profits fell by nearly 70% due to deteriorating profits and structural reforms in its China business, including multi-purpose motors.

In addition, the impact of rising raw material prices has continued over the long term. From the perspective of Toyota’s Aisin, in addition to the reduction in production, the increase in raw material prices and transportation costs became a heavy burden, and profits eventually fell. Alps Alpine was able to pass on material price increases, etc. to the price ratio of only about 50%.

On the other hand, companies that raise prices and capture new demand performed strongly. Komatsu implemented price increases centering on the U.S., while expanding sales, hitting a new profit high after three years. Fanuc’s pure electric vehicle (EV) manufacturing robots achieved growth.

Kenji Abe, chief strategist at Daiwa Securities, said, “China’s economy was previously underperforming due to anti-epidemic policies. As the economy restarts, demand is shifting from goods to services, posing a headwind for manufacturing.”