Tuesday, April 12, 2011

Effect Japan Earthquake on 2011 Earnings

I have just watched a clip that is disturbing in terms that the next major earning report for 2011 will show a large decline for international companies due to the 2011 japan earthquake.

Japan is the third largest company in terms of GDP and is a major consumer and supplier for the major companies of the world. The 2011 Earthquakes and radiation fallout is having a significant effect on companies earnings for 2011.

Below is major areas which have been affected.

Auto Companies
Toyoto has shutdown plants in USA and Britian
Components for other Auto companies have also been affected as auto companies have to source equipment form different locations or face shortages while Japanese companies get back on track. .

70% productions of key component of lithium-ion batteries come from Japan
Japan consumers also purchase a large number of smart phones and other telecommunication equipment.

Electronic Devices

Nearly 14 percent of all global electronic equipment revenue came from the Japan

Japan accounted for 16.5 percent of total consumer electronics revenue and the country also represents around 10 percent of data processing revenue in worldwide .

Companies in Japan at least contribute more than 1/5 of global world’s semiconductor production last year.

Companies headquartered in Japan was ranked third among largest chip manufacturing companies in the world’s productions.

The risks to Disney in Japan include film distribution and the Disney Stores there, as well as Tokyo Disneyland which accounted for 18% of operating income in Disney's parks' segment.

Financial Companies
Japan repatriates funds to help in the rebuilding of Japan will mean less money available for investment in other countries. This will mean less liquidity, transactions and amount of money to make money on.

Insurance Companies
One of biggest natural disasters in Japan have a negative affect on insurance companies as re-insurance companies will have to pay for it which will mean higher rates for other companies not affected by the earthquake.

Luxury Goods
Japan is the second largest consumer market in the world for luxury goods so the earthquake plus rising costs in other areas of peoples budges i.e energy will affect companies that deal in Luxury goods.

Japanese tourist rank seventh in the world biggest spenders in tourism and spend around 25 billion in 2009. In Fiji its in the top five.

Fuel Prices
Fuel prices is one of the most significant costs in all companies. Due to the issue with nuclear reactors a lot of the energy has to now come from oil which in turn drives up cost of oil which will in turn effect earnings in 2011.

I am sure there are other factors concerning effect japan earthquake on 2011 earnings. But the most worrying aspect is once the effect has been reported how will this effect stock market and corresponding financial implications.


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