Love Hotel Operator Posts Impressive Results despite earthquake and recession

Alchemy Japan’s Japanese Leisure Hotels’ 2011 revenues grew to JPY2,074 million, a 2% improvement on 2010. EBITDA was on par with previous year, at JPY623 million, despite Japan’s biggest recorded earthquake and tsunami and its disruption on economic growth and consumer confidence.

2011 revenue growth was led by an increase in customer numbers of 6% reaching annual high water mark average occupancy rate of 272%.

In Q1 2011, Japanese GDP contracted by 3.7% (annualized) while Alchemy’s hotels posted 13% EBIDTA growth in Q1 driven by 6% revenue growth. Q2 was heavily impacted by nationwide supply chain problems caused by the 3/11 EQ and tsunami and after-effects which disrupted production and impacted consumer confidence. This also had an adverse direct impact on operations in Kanto area hotels. Q2 revenue slowed but exceeded Q1 by 2.3% and was 3% above previous year, while Q2 EBITDA was 6.8% ahead of Q1 and +3% on PY.

H2 2011 saw Alchemy’s hotels post resilient results, maintaining revenues with year on year growth in customer numbers. Bottom line results were impacted by cost inflation, particularly energy costs.

“Our hotels produced strong counter-cyclical performance achieving market share growth, sales growth and resilient earnings in 2011 despite recessionary and deflationary pressures and substantial external shocks. ” says Alchemy Japan CEO Miro Mijatovic. “While our hotels’ rate of revenue and earnings growth slowed post 3/11, bottoming out in the summer; our strong finish to 2011, with the winter holiday period posting record growth and revenue high water marks at a number of our hotels, established positive forward momentum into 2012 and provides us confidence that we can continue to produce growth in 2012.

“The improved liquidity and contracting caprates in the general Japanese property sector has started to trickle down to operational assets like Leisure Hotels. A number of deals were completed in 2011 with the return of financing to the sector subsequent to the closing of the Japan Leisure Hotels Ltd transaction in June 2011 at historically high caprates, setting a low point for valuations. On the supply side, attractive single turnaround opportunities are available from numerous operators who have not coped well with 2011’s regulatory changes and also portfolio deals where some institutional investors are looking to recycle capital on their long term holdings. We see the current trend for contraction of caprates to continue into 2012.” says Mijatovic.

http://www.propertyfundsworld.com/2012/02/08/161853/alchemy-japan-kk-japanese-leisure-hotels-continues-revenue-growth-2011

Pachinko Operators fail to declare Y100bn in taxable income

Tax authorities claim that about 40 corporate groups running pachinko parlors across Japan failed to declare over ¥100 billion in total taxable income with back taxes amounting to several billion yen, sources close to the matter said Sunday.

The authorities found out the income disparity at the groups, whose locations range from the Tohoku region in northeastern Japan to Kyushu in the southwest, in concerted nationwide raids on the industry, the sources said.

Among them, a group based in Tokyo's Shinjuku Ward failed to declare about ¥15 billion, but declined to comment when contacted by Kyodo News, citing the absence of a person in charge.

On advice by a tax accounting office in Tokyo's Chiyoda Ward, the groups reduced due tax payments through complex share transactions with subsidiary units.

The method is allowed typically for companies meeting certain conditions to shift shareholdings with other group companies without being subject to taxations in order to reorganize their operations.

The tax authorities deemed the pachinko companies used the method to avoid tax payments, the sources said.

According to the National Tax Agency, illicit activity is frequent in the pachinko industry, where cash transactions are common, with 40.4 percent of the firms investigated by tax authorities in the year to last June found to have engaged in what the authorities considered irregularities.

http://www.japantimes.co.jp/text/nn20120213a8.html

GDP Shrinks by 2.4% in Q4 2011

http://www.bloomberg.com/news/2012-02-13/japan-economy-shrank-at-2-3-annual-pace-last-quarter-more-than-estimated.html

Deflation Persists

Japan's core consumer prices fell for the third consecutive month in the year to December, and mild deflation is expected to persist this year as energy prices stabilize and worries about Europe's debt crisis suppress wage growth and economic activity.

Core consumer prices declined an annual 0.1 percent, matching the median estimate, and a narrower measure that excludes both food and energy also fell in a sign that Japan continues to grapple with a strong yen, which pushes down import prices and makes exporters reluctant to raise salaries.

Retail sales fell 1.2 pct in 2011, the first fall in two years, and auto and machinery equipment sales posted record falls in the series, which dates back to 1980. But sales rose an annual 2.5 percent in December, the biggest increase in 16 months.

The Bank of Japan and the government concede that the economy is in a lull, and they could come under increasing pressure to support it with currency intervention and monetary policy easing as Europe's debt crisis weighs on external demand.

Europe's downturn could offset the economic benefits of rebuilding the country's earthquake-damaged northeast coast.

"The stagnation of other developed countries is likely to push back the timing of Japan beating deflation from the mid-2010s as originally thought to the late 2010s," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"The BOJ will need to keep its ultra-easy stance in the meantime. If risks from the euro-zone debt crisis heighten, it could move for an additional easing in the near term."

Japan's core consumer price index (CPI) includes oil products but excludes volatile prices of fresh fruit, vegetables and seafood.

The so-called core-core inflation index, which excludes food and energy prices and is similar to the core index used in the United States, fell 1.1 percent in the year to December.

Core consumer prices in Tokyo, available a month before the nationwide data, fell 0.4 percent in the year to January. That compares with the median estimate for a 0.3 percent annual decline.

Annual data showed the core CPI slipped 0.3 percent in 2011, the third straight yearly fall. Japan's consumer inflation has been around zero or minus for over a decade, except a 1.5 percent rise in 2008 on the back of an increase in energy prices.

"Overall consumption is relatively firm partly supported by reconstruction demand. But it is hard to expect to see a self-sustainable recovery in private spending," said Masamichi Adachi, senior economist at JPMorgan Securities Japan.

"With uncertainty about the economic outlook and lackluster wage growth, consumers are unlikely to boost spending."

Nippon Keidanren, the country's largest business lobby, cited this week uncertainty about energy, the strong yen and a manufacturing shift overseas as reasons why pay raises are out of the question in annual labor union negotiations in the spring.

Japan's economy will likely show a mild contraction in the fiscal year ending in March but is expected to rebound next fiscal year, supported by reconstruction demand after the March 2011 earthquake.
Reconstruction could help narrow the gap between supply and demand but won't be enough to inflate demand in excess of supply and bring about an end to deflation, economists say.

Some Bank of Japan board members see a slight delay in post-quake reconstruction demand, and the global slowdown is somewhat more acute than previously thought, minutes of the central bank's December 20-21 meeting showed on Friday.


http://old.news.yahoo.com/s/nm/20120127/ts_nm/us_japan_economy

Panasonic, Sharp and Sony Bleed Red Ink

Japan's Panasonic Corp warned of a record annual $US10.2 billion net loss, joining beleaguered rivals Sony and Sharp in a sea of red ink as they struggle to fix their broken TV businesses and show they have not lost their way.

Panasonic's forecast loss of 780 billion yen ($US10.2 billion) for the year to March dwarfed expectations, and is almost all due to restructuring charges and writedowns for its Sanyo Electric unit.

At a press briefing in Tokyo on Friday, Panasonic President Fumio Ohtsubo apologised for the unprecedented loss. "I feel the responsibility for the huge amount," he said.

He gave no sign, however, that he would step aside to let someone else try to revamp the sprawling consumer electronics giant, as Sony's boss Howard Stringer has done.

Sony on Thursday pressed its reset button after warning of a bigger-than-expected annual loss, announcing that Kazuo Hirai will take over from Stringer as CEO in April, triggering an 8 per cent jump in its share price on Friday, its biggest one-day per centage gain in almost a year.

"We will accelerate our profit structure reform and make sure we achieve a V-shaped performance improvement in the next business year," Ohtsubo told reporters instead.

Together, Panasonic, Sony and Sharp Corp expect to lose $US17 billion this year, highlighting the savaging of Japan's electronics industry by foreign rivals led by South Korea's Samsung Electronics, weak demand and a strong yen.

With TVs becoming smart - linked to other devices like tablets and smartphones - an inability by Panasonic to win in the TV market risks hobbling sales across their wider consumer electronics line-up.

Panasonic trimmed its forecast for the number of flat-screen TVs it will sell by 1 million to 18 million sets.

"They don't seem like a company that's progressing towards a particular goal," said Yuuki Sakurai, CEO and president of Fukoku Capital, which managed assets worth $US7.6 billion as of last March.

"What exactly is this company good at? What does it want to do? They don't have answers to these questions."

Panasonic, which is in the process of shedding 17,000 jobs by end-March, also missed third-quarter market forecasts, diving to a loss of 197.6 billion yen from a profit a year earlier, much of the damage coming from the TV business.

Ohtsubo dismissed any suggestion he will ditch the TV business.

"I don't think it's a business that has lost its growth potential," he said. Panasonic, he explained, wanted to "develop TV in a different manner" by exploring growth in sales to businesses, such as high-quality monitors for hospitals, rather than direct to more fickle retail consumers.

Yet, even with expansion into niche markets, the living-room market still dominates and the near-term outlook for TV sales is grim.

By 2015, annual global sales of liquid crystal TVs will contract by 8 per cent to $US92 billion, forecasts flat panel industry research company DisplaySearch. Worse still, plasma sets, a market that Panasonic dominates, will shrink 38 per cent to $US7 billion.

If Panasonic's market share "keeps shrinking by 10 per cent or so, they may need to prepare some more restructuring," said Shiro Mikoshiba, analyst at Nomura Holdings in Tokyo.

Moody's Investors Service downgraded the debt ratings of Panasonic and Sony last month and retained a negative outlook for both, citing their continued TV losses.

It's not only TVs, though, that pose a risk to profits and are keeping investors away from Panasonic shares, say analysts.

Panasonic shares initially fell on Friday, extending a slide to their lowest in more than 30 years, but later rallied to close 1.2 per cent higher ahead of the quarterly results, likely helped in part by the jump in Sony shares.

Punching a big hole in Panasonic's finances, and adding to 514 billion yen in restructuring costs, is a 250 billion yen goodwill writedown from the 2009 acquisition of rival Sanyo, bought as part of a strategy to focus more on business-to-business markets such as auto components and green technologies.

If that business performs poorly, analysts say there could be a need for a bigger write-off.

"On its balance sheet, Sanyo's goodwill comes to 900 billion yen. That's really, really big and we know the situation of the battery business is really, really terrible," Nomura's Mikoshiba said before the earnings release.

"Panasonic's previous record net loss in 2001/02 was because of the impact of a sudden slump in PCs after the IT bubble burst, but there was hope then for growth in flat-screen TVs," said Hideyuki Suzuki, general manager for investment research at SBI Securities.

"This time, and not just for Panasonic, it doesn't feel like they've got rid of all the rot."

Ohtsubo said he had no regrets over buying Sanyo. The acquisition, he insisted, "provided clarity about the future course of Panasonic."


"One silver lining is that there is investment being made for the future," said Hiroyuki Fukunaga, CEO of Investrust.

"You could take the added restructuring costs as a serious move by the company to reform and improve its business. You could look at this as the bottom, to show all the losses and then move aggressively towards the next quarter," he said.

Panasonic does expect to make an operating profit - which excludes one off items such as restructuring charges - though this is now seen at just 30 billion yen, down from a previous 130 billion yen. Last year, Panasonic logged an operating profit of 305 billion yen.

Ohtsubo took up much of his earnings presentation talking about the company's most profitable parts: its refrigerators, washing machines and other household appliances, which increased quarterly operating profit by more than 8 per cent to 26 billion yen, with an operating margin of 8 per cent.

Next year, Ohtsubo promised more products to attract global consumers. The firm already sells a wide range of items from shavers, massage chairs and the more traditional kitchen appliances to bicycle pumps, fax machines, light bulbs, nose hair trimmers and lighted toilet seats.

http://www.smh.com.au/business/world-business/panasonic-joins-ailing-japan-giants-20120204-1qydw.html

Japanese Courts Finally Recognise Image Rights

 The Supreme Court on Thursday handed down the nation's first ruling on publicity rights, saying celebrities' names and photos are protected under publicity rights, but rejecting a compensation demand by the plaintiffs in the case, singing duo Pink Lady.

Presiding Justice Ryuko Sakurai said in the ruling: "Celebrities' names and images can help sales by attracting potential customers. They are protected under publicity rights."

By clarifying the status of publicity rights and providing a guideline on what constitutes a violation, the ruling will likely be seen as a wake-up call on using celebrities' names or images in publications and on the Internet without permission.

Pink Lady had demanded that Kobunsha Co. pay them compensation of 3.72 million yen, saying the use of their photos without their agreement in a magazine published by the company infringed on their publicity rights.

Though the top court admits the existence of publicity rights, the ruling upheld two lower court rulings that also turned down the singers' demand, saying the case did not constitute infringement of their publicity rights.

The two alleged that the Feb. 27, 2007, issue of "Josei Jishin" carried 14 photos of the duo, taken by the company in the past, in an article promoting a diet.

The plaintiffs insisted they were effectively commercial-use pictures, and the publisher aimed to profit by attracting fans of Pink Lady.

Although the court determined that photos are protected, in this case the ruling said, "In some cases, celebrities have to tolerate that their images may be used in certain situations such as news reports, news stories and others' creative products."

The ruling presented the guideline that an infringement of publicity rights occurs if photos themselves are sold or if they are mainly used for attracting customers.

The ruling said the case did not fulfill these conditions and thus the use of the photos did not infringe on the publicity rights of Pink Lady.


http://www.yomiuri.co.jp/dy/national/T120202006478.htm