Firms' restructuring efforts appear to be paying dividends

Figures released Wednesday by the Finance Ministry indicate that companies’ restructuring efforts are paying dividends.

According to a quarterly survey, capital spending dropped 1.8 percent in the October-December term from a year earlier — a big improvement compared to a year of consecutive double-digit descents.

The same trend was seen in combined sales, which fell but not as steeply as in the previous three quarters.

Combined pretax profits meanwhile rose 22.7 percent.

The data also suggest that some companies are shoveling a portion of their earnings into investments.

Capital investment stayed nearly level after marking a 13.9 percent drop in the July-September period and a 15.5 percent fall in the April-June term.

“Although it’s still a negative figure, it marks an improvement from the previous double-digit declines,” a ministry official said. “The Cabinet Office’s monthly economic report (for February) has said capital spending is bottoming out, and this is in line with that trend.”

Manufacturers spent 10.8 percent less on plants and equipment than they did a year earlier. Although that was the sixth straight quarter of decline, it was an improvement from a 23.1 percent fall in the July-September term and a 23.7 percent drop in the April-June period.

Nonmanufacturers spent 2.4 percent more, the first improvement in five quarters, the survey said.

On a seasonally adjusted basis, capital investment covering all industries grew 3.9 percent, up for the first time in eight quarters.

According to the survey, combined sales fell 5 percent from a year earlier to 312.83 trillion yen, an improvement from a 6.9 percent drop in the July-September quarter and the record 9.2 percent fall in the April-June period.

Sales by manufacturers increased 2.6 percent to 95.18 trillion yen for the first expansion in seven quarters. A major contributing factor was a rise in exports of automobiles, the official said.

Nonmanufacturers’ sales dropped 8 percent to 217.65 trillion yen.

Combined corporate pretax profits soared for the second straight quarter following a 20.5 percent rise in the July-September term. The increase was attributed to growing sales and companies’ efforts to reduce capacity and cut costs.

Manufacturers’ pretax profits jumped 72.7 percent, the greatest rise since the July-September period of 1976, when it rose 129.9 percent.

Pretax profits of nonmanufacturers dropped 1.7 percent. While profits in the transport, telecommunications and real estate sectors rose, their gains were canceled out by drops in the wholesale, services and electricity sectors.

The survey covered about 18,700 randomly selected companies that are capitalized at 10 million yen or more. Financial institutions were not included in the survey.