Japanese Firms Struggle To Profit | May 14, 2012 Issue - Vol. 90 Issue 20 | Chemical & Engineering News
Volume 90 Issue 20 | p. 11 | News of The Week
Issue Date: May 14, 2012

Japanese Firms Struggle To Profit

Annual Results: Earthquake and weak global economy take a toll
Department: Business
Keywords: earthquake, loss, Mitsui, Shin-Etsu
Profits shrink at most major firms.
Table shows that profits are shrinking at most major Japanese chemical firms.
Profits shrink at most major firms.

Profits at major Japanese chemical companies were generally lower in the most recent fiscal year, which ended on March 31, compared with the year-ago period. Companies blame the drop in financial performance on the weakness in the world economy and the earthquake that struck Japan in March 2011. Nevertheless, most producers remained profitable.

Alone among major Japanese chemical makers, Mitsui Chemicals, a producer of large-volume commodity chemicals, reported a small net loss of $12 million compared with a $301 million profit a year ago. Mitsui was hit by a $230 million reduction in its gross margins. Moreover, owing to a bleak long-term outlook, the company opted to write down the book value of its Japanese polyurethane production facilities by $140 million.

Japan’s top chemical producer, Mitsubishi Chemical Holdings, reported a 58% drop in its net profit compared with a year ago. Higher than expected tax payments were largely responsible for the deterioration. In addition, business conditions in Japan and abroad were weak, Mitsubishi says. The company also had to contend with earthquake damage at its main petrochemical complex in Kashima, which took about two months to repair.

Not all firms saw their earnings shrink. Shin-Etsu Chemical managed to raise its net earnings by nearly 1% to $1.2 billion despite suffering severe earthquake damage at its Japanese plants that produce polyvinyl chloride resin and silicon wafers. Despite disruption to its operations, Shin-Etsu was able to keep its gross margins at the same level as last year. To improve bottom-line profitability, Shin-Etsu shrank its foreign exchange loss to $5 million in the latest fiscal year from $110 million one year ago.

For the current fiscal year, Shin-Etsu says it is unable to forecast its profit and sales because conditions in the world economy are so unpredictable. Other Japanese firms are more confident: Asahi Kasei, a diversified producer of commodity and specialty chemicals, expects to boost its net earnings 20%. DIC, a major producer of inks and pigments, also expects to increase its profit 20% by improving how it runs its operations.

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