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Chemical Company Sales, Profits Shrink In Japan

Finance: Global slowdown takes toll on major Japanese chemical firms

by Jean-François Tremblay
November 9, 2012 | A version of this story appeared in Volume 90, Issue 46

Large chemical producers in Japan mostly reported lower sales and earnings in the first half of the fiscal year, which ends March 31, 2013. The companies blamed their poor performance on the global economic slowdown.

One year ago, only Sumitomo Chemical reported a loss in the fiscal first half. This time around, Sumitomo widened its loss while Mitsui Chemicals and Teijin also went into the red. Others barely managed to stay profitable. For instance, the profit margin at Mitsubishi Chemical, Japan’s largest chemical maker, is barely above zero.

“The current situation is much worse than 2008, when Lehman Brothers went bankrupt,” says Yoshihiro Azuma, a chemical stock analyst in the Tokyo office of the investment bank Jefferies & Co. Japanese firms will announce cost-cutting measures next year, he expects.

Results were particularly dire in the petrochemical sector. Although Sumitomo’s petrochemical plants in Japan and abroad were operating faster than a year ago, when some facilities were undergoing maintenance, the business’s earnings this year were lower because prices had gone down. Similarly, Mitsubishi noted that its petrochemical business was less profitable than a year ago.

Some companies managed to buck the trend. Shin-Etsu Chemical boosted its net earnings by 9% compared with a year ago, mostly as a result of the strong performance of its polyvinyl chloride business. JSR, a producer of synthetic rubber and electronic materials, boosted its net earnings by 17% thanks to strong sales of materials to manufacturers of liquid-crystal displays.


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