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Business

Japan pulls off another strong year

Profits remained high at large chemical producers

by Jean-François Tremblay
May 19, 2016 | APPEARED IN VOLUME 94, ISSUE 21

Although profits declined at a few major Japanese chemical companies, most posted healthy returns—and none recorded a loss in the fiscal year that ended March 31.

Japan’s results
[+]Enlarge
Although sales were generally stable or declined, profit mostly held steady or increased.
Note: Percent change over previous fiscal year. nm = not meaningful. Source: Companies
Although sales were generally stable or declined, profit mostly held steady or increased.
Note: Percent change over previous fiscal year. nm = not meaningful. Source: Companies

Companies attributed their strong performance to favorable economic conditions in Western countries and Japan, continued weakness in the value of the yen, and improved margins as raw material costs declined faster than the prices at which companies sell their products.

Toray Industries posted a 27% surge in its earnings to $802 million on the back of a 5% sales increase to $18.7 billion. “While the Chinese economy continued to slow down gradually and economies of other emerging countries showed signs of weakness, the U.S. economy maintained its recovery, and the European economy also picked up steadily,” the company stated.

Toray’s operating income increased across all product lines and not just in the carbon fiber that it supplies to the major airplane manufacturers Boeing and Airbus.

Shin-Etsu Chemical, the most profitable of the large Japanese chemical companies, boosted its net profit by 16% to $1.3 billion on sales that grew 1.9% to $11.1 billion. In polyvinyl chloride, both sales and operating income shrank as the U.S. PVC market contracted, Shin-Etsu said. But operating income in the company’s semiconductor silicon business surged 32%.

Not all the major chemical producers had a good year. JSR, a producer of synthetic rubber and electronic materials, recorded a profit drop of 20% on sales that went down 4%. Consumer demand for tires and electronic displays fizzled during the fiscal year, the company said. JSR’s overall profit margin, however, remained a healthy 6%.

Primarily because of an ongoing slowdown in the Chinese economy, several Japanese producers were guarded in their outlook for the current fiscal year. Mitsui Chemicals expects its operating profit to remain unchanged this year. Shin-Etsu didn’t issue a profit forecast because it considers economic conditions too uncertain.

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