• Kyodo

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Major Japanese companies, excluding those in the finance and utility sectors, are expected to log a 9.6 percent fall in combined net profit for fiscal 2019 through March, affected by the prolonged U.S.-China trade conflict and the spread of a new coronavirus, SMBC Nikko Securities Inc. data showed Tuesday.

The manufacturing sector is expected to drop 16.1 percent overall, with sharp net profit decreases projected for the steel sector at 70.3 percent, transportation equipment manufacturers such as automakers at 31.5 percent, and machinery at 30 percent, according to the data compiled by the brokerage house.

Earnings across companies are likely to continue to fall, with automakers still unable to resume operations at their plants in China, and a drastic decline in demand from foreign visitors at department stores due to the spread of the new deadly virus.

“We envisioned a scenario where the stock market would recover from the next quarter, but it doesn’t seem like business results have hit rock-bottom yet,” said Hikaru Yasuda, a strategist at SMBC Nikko Securities.

Combined group net profit in the first three quarters from April fell 7 percent from a year before, according to the data based on earning figures released by Monday from 492 firms, or 37 percent of all the firms listed on the Tokyo Stock Exchange’s first section. Their net profit totaled ¥7.65 trillion ($70 billion).

It is the second consecutive year firms have suffered a profit fall in the April-December period, with many impacted by the U.S.-China trade war, as well as the consumption tax hike in October.

The viral outbreak spreading from China, fueling concerns about a global economic slowdown, is likely to further bring down earnings for the year ending March.

The trade standoff between the world’s two biggest economies dealt a huge blow to the manufacturing sector’s combined net profit, which fell 12.7 percent.

Meanwhile, nonmanufacturers remained steady, with their net profits improving by 1.2 percent, and effects of the consumption tax hike varied depending on the industry.

The steel sector saw a significant net profit drop of 66.5 percent, while the machinery sector fell 34 percent and transportation equipment manufacturers 31.8 percent.

While the real estate and service sectors logged an increase in their net profits, the retail sector, experiencing a slump in sales for luxury goods, was down by 17.3 percent. The air transportation industry also fell 23.7 percent.

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