Profits Derail In Japan

After several years of improvement in profitability, major Japanese chemical firms delivered a mixed bag of results for the fiscal year that ended March 31. Profits kept rising at some companies, but other firms were unable to stay the course.

The most prominent among the gainers was Shin-Etsu Chemical. Its profits rose even though operating profits slipped for polyvinyl chloride. The firm is the world's largest producer of this material. Shin-Etsu's 19% improvement in total net profit was mostly the result of a 52% improvement in margins in its electronic materials business. The company is also the world's largest producer of silicon wafers.

Other companies improved their profits, but gains were sometimes due to exceptional items. For instance, Mitsubishi Chemical achieved a 64% surge in earnings through a balance-sheet revaluation of its health care business. Mitsubishi Chemical otherwise faced difficult conditions in its petrochemicals business, which accounts for half of its total turnover and had margins that were less than a third of what they were last year.

Among the companies that suffered profit shrinkages, Teijin stood out with a net income that was 63% lower than last year. Operating income at the fiber and plastics maker dropped by 13% because of weak demand, but the main factors in the company's poor performance were write-offs of struggling film joint ventures in Luxembourg and the U.S.

At Mitsui Chemicals, earnings dropped more than 52%, largely because of a 37% drop in operating income in the company's basic chemicals business.

The story was similar at Sumitomo Chemical. Its profits slumped by 33% compared with last year, due to a 60% drop in petrochemical margins.