Rising costs, stronger yen chip away corporate earnings

Surging raw material prices, the sluggish U.S. economy and the rising yen have shaved away earnings at major domestic companies, according to statistics compiled by a private think tank.

And the situation is expected to worsen.

Shinko Research Institute Co. analyzed the earnings results for fiscal 2007 through March released by Friday by 144 companies listed on the First Section of the Tokyo Stock Exchange.

The institute's report Monday showed that combined sales revenues at the 144 companies increased by 9.1 percent from a year earlier, smaller than the 12.7-percent year-on-year rise in fiscal 2006.

Combined pretax profit jumped by 7.2 percent, but it was still lower than the 9.8-percent rise marked in the previous fiscal year.

The institute expects combined pretax profit for fiscal 2007 of about 1,200 listed companies it will survey will surpass the total figure for fiscal 2006.

However, the institute said the figure for the current fiscal year through March 2009 will likely decline for the first time in seven years.

In the steel industry, Sumitomo Metal Industries Ltd. on Monday announced a 9.7-percent decline in operating profit from its core business operations in fiscal 2007.

Nippon Steel Corp., the domestic industry leader, and Kobe Steel Ltd. also posted decreases in operating profits.

Oji Paper Co. and Nippon Paper Group Inc., the nation's two largest papermakers, announced Monday that their operating profits for fiscal 2007 plunged by 33.3 percent and 26.5 percent, respectively, from a year earlier.

They cited surging costs for fuel and materials.

Many electric appliance makers were affected by weak sales in the United States and other markets.

Sharp Corp. on April 25 announced its operating profit in fiscal 2007 dipped 1.5 percent from the previous year for the first year-on-year decline in six years.

Sharp, the leader in the Japanese market for liquid crystal display TVs, failed to achieve its sales targets in the United States and Europe.

Strong demand in emerging economies benefited automakers, which saw their sales revenues and profits grow in fiscal 2007.

However, the appreciation of the yen, which started early this year, and rising prices of raw materials are expected to seriously hurt corporate performances in fiscal 2008.(IHT/Asahi: April 30,2008)