A tough year wraps up for Japanese firms

Financial results for Japan’s leading chemical makers are out for their full fiscal year, which ended in March. Like their US and European counterparts, the companies improved financially after hitting bottom during the worst of the pandemic last spring. But Japanese chemical makers are more pessimistic than their rivals elsewhere that spikes in COVID-19 cases might set the economy back again.

Japanese results follow a familiar pattern: firms that emphasize durable materials were hit by halts in car manufacturing last year, while those with more activities in health, agriculture, and electronics fared better.

For example, Asahi Kasei had only a 2.1% sales decline for the year. Though its materials business was badly affected during the first fiscal quarter, that weakness was offset by its medical device business, which posted a 21% sales increase for the year.

Japan’s largest chemical maker, Mitsu­bishi Chemical, reported a 9.0% drop in sales for the fiscal year, while its net earnings swung to a loss. Its chemical segment reported a revenue decline of 18%.

In response to the sluggish conditions, Mitsubishi has been cutting back. It closed a polypropylene plant in Japan’s Chiba Prefecture in January 2021. It shuttered a low-density polyethylene facility in Kashima, Japan, this month and is discontinuing production of ethylene vinyl acetate there. It closed a methyl methacrylate plant in Texas in March.

Shin-Etsu Chemical reported declines in sales and earnings across most of its businesses. One bright spot was its electronic materials business, which posted modest gains in sales and profits, led by strong performance in photoresists.

Shin-Etsu’s US-based polyvinyl chloride (PVC) unit, Shintech, also performed well. It is completing capacity expansions for chlorine, vinyl chloride, and PVC this year.

Sumitomo Chemical managed to emerge from the pandemic year with a small increase in sales and a profit surge of nearly 50%. But management noted that the April–June 2020 quarter—in which the Japanese economy contracted 28%—was the country’s worst in the postwar period.

The economy “showed signs of a recovery in some sectors in the latter half of the year, but then it was hit by a sudden surge in COVID-19 infection,” Sumitomo’s earnings statement says.

Kaneka had a 13% earnings jump on sales down about 4%. Despite these decent results, the firm is dour about the COVID-19 outlook.

“There is still no sign of an end to the COVID-19 pandemic,” the company says in its earnings statement. “All around the world, people continue to mobilize all of their resources to fight the pandemic. It is as if the political, economic, and social systems built up by humankind have become dysfunctional on a global scale and are having a seizure.”