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Japan’s chemical makers enjoy strong first half

Cutbacks in China help fuel domestic production of basic chemicals

by Michael McCoy
November 9, 2017 | A version of this story appeared in Volume 95, Issue 45

Japan's first half


Earnings rose sharply at most major companies.

Note: Percent change over previous year’s first half.
Source: Companies
A table of Japanese chemical company financial performance.

Earnings rose sharply at most major companies.

Note: Percent change over previous year’s first half.
Source: Companies

Sales and earnings increased by double digits for most Japanese chemical companies in the first half of their fiscal year as business boomed in sectors as diverse as petrochemicals, electronic materials, and health care.

Japan’s chemical makers are typically more diversified than their U.S. and European competitors. Many large companies are involved in everything from basic chemicals to prescription drugs.

At the country’s largest chemical company, Mitsubishi Chemical, business was best in the chemical segment, where sales rose by more than 40% thanks to strong demand for commodity products such as methyl methacrylate (MMA). In the firm’s health care segment, sales were up only modestly, and operating income was down.

At Sumitomo Chemical, Japan’s second-largest chemical maker, sales rose 17% and profits a whopping 256%. The firm pointed to higher prices for fibers and MMA as well as increased shipments of resorcinol, a business from which a major competitor, the U.S. firm Indspec, exited in July. Sumitomo also enjoyed higher shipments of touch screen panels and polarizing films for electronics and prescriptions drugs in North America and Japan.

Anticipating continued good business, the firm raised its sales and earnings forecasts for the full fiscal year, which ends on March 31, 2018. Yoshihiro Azuma, a stock analyst who covers Sumitomo for the investment firm Jefferies, noted that cutbacks in Chinese chemical production because of heightened environmental restrictions will continue to be a boon to Sumitomo’s petrochemical business.

Mitsui Chemicals also had a good first half. The firm’s basic materials business, which accounts for almost half of its sales, did particularly well. In a reverse of the usual narrative, the firm’s sales of polyethylene and polypropylene were good in Japan, but sales of the polyester intermediate purified terephthalic acid stagnated in China.


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