Business Concentrates BUSINESS
FINANCE
Major chemical companies increase profits, partly because of earlier restructuring 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. Net earnings nearly tripled to $582 million at Mitsui Chemicals, a company that is focused mostly 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 due mostly 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 (PVC) business in Japan increased its sales and profits. PVC is one of
BY THE NUMBERS
564 Source: The Brookings Institution
12
C&EN | CEN.ACS.ORG | MAY 22, 2017
Japan’s full-year earnings Most chemical firms recorded a rise in earnings, significant in several cases. Asahi Kasei Hitachi Chemical JSR Kaneka Mitsubishi Mitsui Shin-Etsu Sumitomo Teijin Toray
Sales –3.0% 1.4 1.0 –1.3 –4.7 –9.8 –3.3 –7.0 –6.3 –3.7
Earnings 25.3% 4.3 25.0 –2.4 204.3 182.4 18.2 4.9 61.3 10.3
Sources: Companies
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. Although year over year, the exchange rate against the U.S. dollar was nearly unchanged, the yen strengthened by more than 10% last summer, making chemical exports more expensive.—JEAN-FRANÇOIS TREMBLAY
The number of cleantech patents per million residents awarded in Ann Arbor, Mich., from 2011 to 2016—the highest per capita rate in the U.S. The city boasts the research power of the University of Michigan, while its proximity to the Motor City makes it a hot spot for technology development by Ford and General Motors. Other high-density cleantech innovation towns include San Jose, Calif., Columbus, Ind., Bay City, Mich., and Durham-Chapel Hill, N.C.
AkzoNobel’s chemicals business, with annual sales of $5 billion, has entered a period of strong financial performance that will continue until well after it is carved out of AkzoNobel in about 12 months, according to its CEO, Thierry Vanlancker. The Belgian national, who has held senior roles with DuPont and Chemours, rejects comments by some analysts that the business’s commodity chemicals units need to be more profitable and that restructuring will be required. “The business units have been steadily improving,” he says. Furthermore, the chemicals business’s combination of commodities and specialties means that overall demand for its products will be steady through economic cyVanlancker cles, he argues. “The outside perception is that the surface chemistry and polymer chemistry businesses are the most technologically advanced and that industrial chemicals including salt, chlorine, and caustic are less exciting,” Vanlancker says of several of the firm’s businesses. “Honestly, all the businesses are equally performing, with a pretax profit margin of 18–22%.” PPG Industries’ recently rejected bid to acquire AkzoNobel has “nothing to do with” the planned carve-out of the chemicals business, Vanlancker says, acknowledging that the bid did move announcement of the plan forward by a few months. Analysts expect the chemicals business to fetch up to $12 billion. AkzoNobel plans to either float its shares on the stock market or sell it as a whole to another company. The chemicals firm spends about $110 million annually on R&D and has about 1,100 R&D employees. “I definitely don’t want to reduce R&D,” Vanlancker says.—ALEX SCOTT
CREDIT: AKZONOBEL
AkzoNobel chemicals CEO eyes solo future
Japanese firms reap benefits of closures
