CHEMICAL & ENGINEERING
NEWS OF THE WEEK MAY 20, 2002 - EDITED BY JANICE LONG & STEPHEN TRZASKA
EARNINGS
JAPANESE FIRMS END A BAD YEAR Losses abound in chemical industry, but 2002 outlook is better
M
OST JAPANESE CHEMICAL
companies posted either sharply lower profits or abysmal losses in thefiscalyear ending March 31, with companies having the least exposure to their home market suffering the least. There was one exception: ShinEtsu Chemical announced record earnings for the seventh year in a row It's an image of good, bad, and ugly from the firms that are part of the world's second largest chemical industry The yen caused the margins of Japan-based commodity chemi cal makers to shrink because they had to pay more for imported raw materials, says Masami Sawato, a chemical industry analyst at HSBC Securities in Tokyo. The profits of Japanese chemical mak ers are largely linked to the health of Japan's economy. Local de mand was particularly weak in the past year, Sawato says. Japanese producers that have global operations and interna tional customers kept their heads above water. Shin-Etsu said its commodity polyvinyl chloride business, largely foreign-based, did not drag down the overall performance of the company. The firm increased PVC exports to Latin America, Southeast Asia, and Africafromits U.S. subsidiary Shintech. Sumitomo Chemical posted an operating loss in its petrochemical business, a large portion ofwhich is based inJapan. Its specialty and HTTP://PUBS.ACS.ORG/CEN
fine chemicals businesses, which now represent about half of total sales, anchored the company's profitability Fine chemicals oper ating income rose 6.5%, and phar maceutical income rose Wo. Syntheticfibermanufacturers Teijin and Toray were able to avoid losses because many of their plants are outsideJapan and they have diversified away from the fiber business. But losses grew at Sekisui and Mitsubishi Rayon, twofibermanufacturers produc ing and selling mostly in Japan. Mitsubishi Chemical's expo sure to the Japanese petrochem ical business partly contributed to its whopping loss of $372 mil lion. But most of that loss was due to a reduction in the value of se curities owned by the company
RESULTS Earnings declined for most Japanese chemical makers CHANGE FROM 2000 SALES EARNINGS0 ($ MILLIONS) SALES EARNINGS
Asahi Kasei JSR Mitsubishi Chemical Shin-Etsu Sumitomo Chemical Tejin Toray
$9,833 $43.0 . -6% 38.9 -5 1,810 2 U.545 -372.2
PROFIT MARGINb 2001 2000
-79% -17 nm
0.4% 2.0% 2.1 2.5 def 0.2
6,376 8,377
563.6 248.5
-4 -2
6 -11
8.8 3.0
8.0 3.3
7,596 8,355
8.0 31.3
21 -6
-94 -78
0.1 0.4
2.1 1.6
NOTES: 2001 data are for fiscal years ending March 31, 2002. Numbers converted from Japanese yen at 2001 prevailing exchange rate of ¥121.57 per U.S. $. a After-tax earnings from continuing operations, b After-tax earnings as percentage of sales, def = deficit, nm = not meaningful.
A recent change in Japanese law requires companies to account for the securities they own at market value instead of purchase value. For most Japanese chemical companies,fiscal2001 was ayear to forget. Profitability, Sawato says, will likely improve this fiscal year. Sumitomo expects a 16% rise in net income. Battered Mit subishi Chemical expects a mod est return to profitability—J ΕΑΝ FRANCOIS TREMBLAY
EUROPE
Outlook In Germany: Cautiously Good
F
irst-quarter results of two late-report ing German chemical companies—Degussa and Celanese—confirm the cau tious optimism evoked earlier by Bayer and BASF. And that's despite their coming from the specialty and commodity ends, respec tively, of the chemical industry spectrum. At Degussa, earnings from continuing op erations were down 54% to $31 million. But excluding exceptional 2001 first-quarter gains, earnings actually rose 21%. Total sales were $2.7 billion, down 2% from first-quarter 2001. That figure reflects the sale of some noncore activities early this year. Degussa officials saw "no fundamental im
provement in economic conditions in the first quarter of 2002." The company said it still as sumes that the economy will only start to re cover in the second half. It expects the U.S. will be the driving force, with slow growth in Europe. Meanwhile, at Celanese, earnings from continuing operations were $24 miltion, the same as in first-quarter 2001. Sales for the quarter were $1.07 billion, down 11% from 2001. But Chairman Claudio Sonder noted that sales were 4% higher than in the fourth quarter of 2001, reflecting quarter-to-quarter improvement in most of the firm's businesses.-PATRICIA SHORT
C & E N / MAY 2 0 , 2002
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