Sumitomo Chemical to downsize drug and petrochemical businesses

Following a major loss in its 2024 fiscal year, Sumitomo Chemical says it will downsize its pharmaceutical and petrochemical businesses.

Last November, the Japanese firm announced that it would post a final loss of more than $600 million for fiscal 2024. But Sumitomo’s performance was worse than expected, and in February it revised the loss to $1.6 billion. On April 30, the company disclosed that the loss would be $2.1 billion.

In response to this major deterioration in performance, Sumitomo has implemented what it describes as $3.3 billion worth of emergency measures. It plans to divest nonstrategic businesses, including a Chinese business making process chemicals for flat-panel displays and the US food coatings firm Pace International; both moves were announced previously. It will reduce overall employment by about 10%, or 4,000 jobs, by March 2025.

In pharmaceuticals, Sumitomo plans to cut about 1,100 employees in North America and additional staffers in Japan. In petrochemicals, the firm says it will not increase its management involvementin Rabigh Refining and Petrochemical, a joint venture with Aramco, which would have led to more capital expenditures. The company says it will form a task force with Aramco to work on improving profitability.

Noting that Sumitomo is shifting away from commodity chemicals, President Keiichi Iwata stated at a briefing that “the difference in strategic position with Aramco has become clear.”

Sumitomo has also begun streamlining its domestic petrochemical business, including Keiyo Ethylene, a joint venture with Maruzen Petrochemical, and plans to start working with other companies in the polyolefin business. “We hope to announce specific measures for rationalization of upstream petrochemicals by the end of this fiscal year and for reorganization of downstream operations in the first half of the fiscal year,” Iwata said.