Volume 95 Issue 21 | p. 12 | News of The Week
Issue Date: May 22, 2017 | Web Date: May 17, 2017

Japan reaps benefits of closures

Major chemical firms increase profits, partly because of earlier restructuring
Department: Business
Keywords: Finance, Japan, annual, profits, Sumitomo, Shin-Etsu, Mitsubishi, Mitsui

After a mixed performance in the first half of the year, most large Japanese chemical companies reported higher profits for the fiscal year that ended March 31. The companies credited improved economic conditions in the U.S. and Europe as well as decisions to internationalize operations while shutting loss-making plants.

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Japan’s full-year earnings

Most chemical firms recorded a rise in earnings, significant in several cases.
Sources: Companies
A table summarizing the sales and profit increase (or decrease) at Japanese chemical companies in the last fiscal year.
 

Japan’s full-year earnings

Most chemical firms recorded a rise in earnings, significant in several cases.
Sources: Companies

Net earnings nearly tripled to $582 million at Mitsui Chemicals, a company that is mostly focused on the production of basic chemicals for the Japanese market. Mitsui cited the positive impact of “an optimized domestic production system and efforts to maintain stable operations at full capacity.” The firm recently closed urethane and phenol facilities in Japan.

Mitsubishi Chemical did even better than Mitsui by more than tripling its net earnings. The company said the improvement was mostly due to the lower-than-expected cost of exiting its purified terephthalic acid business in India and China last year. Profit margins in the company’s polymer business, meanwhile, surged by 22% owing partly to strong demand for methyl methacrylate but also to the closure of a polypropylene plant in Japan.

Most companies said economic conditions improved in the U.S., Europe, and, to a lesser extent, Japan. Shin-Etsu Chemical said an 18% improvement in its net earnings was largely the result of strong sales by its U.S. subsidiary Shintech. At the same time, the company’s long-struggling polyvinyl chloride business in Japan increased its sales and profits. PVC is one of Shin-Etsu’s main businesses.

Net earnings at Sumitomo Chemical increased by a modest 5%. The company noted that profit margins at its petrochemical joint venture with Saudi Aramco in Saudi Arabia improved last year. However, Sumitomo decided to book a $300 million write-down in the value of an unnamed subsidiary with a struggling business.

The volatile value of the Japanese yen was a challenge in the fiscal year, most companies said. Whereas year over year, the exchange range against the U.S. dollar was nearly unchanged, the yen strengthened by more than 10% last summer, making chemical exports more expensive.

 
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