Profits Surge at Japanese Firms

Carried by a revival in the domestic economy, leading Japanese chemical companies sharply improved their financial results in the first quarter of the fiscal year that will end March 31, 2005. The firms had reported lackluster performance, or even losses, in the past few years.

Companies supplying materials to the electronics industry did very well. Sumitomo Chemical's consolidated net profit more than doubled compared with a year ago. The company's operating profit in its electronics materials business increased fivefold, while sales in the segment rose by nearly 60%. Dainippon Ink & Chemicals mostly credited improvement in its electronics materials business for its sevenfold improvement in net income.

Petrochemical producers expressed concerns about feedstock prices. Showa Denko said it was able to pass on higher costs to its customers and improve its operating profits for petrochemicals by 31% in its first half, but Sumitomo's operating profit in its petrochemical business shrank 38%.

Mitsui Chemicals, a company that mostly produces petrochemicals and other basic chemicals, stood out by describing business conditions as "extremely severe" in the first quarter. The firm nonetheless managed to improve its net earnings by more than four times compared with a year ago, an achievement that it attributed to "sales promotion initiatives" and cost reductions.

Asahi Kasei achieved the best improvement in performance by expanding its net income by 22 times compared with a year ago. Citing the buoyant Japanese economy, the firm more than doubled the operating profit of its chemical business. Asahi Kasei reduced operating losses in its residential homes business to $4.5 million from $47 million a year ago.

NOTE: All numbers were converted from yen at the rate prevailing on June 30, 2004, which was 108.38 yen = $1.00. a First-half results. b Net earnings before extraordinary items.