NEWS OF THE W EEK
ANNUAL RESULTS: Earthquake and
weak global economy take a toll
P
ROFITS AT MAJOR Japanese chemical compa-
nies were generally lower in the most recent fiscal year, which ended on March 31, compared with the year-ago period. Companies blame the drop in financial performance on the weakness in the world economy and the earthquake that struck Japan in March 2011. Nevertheless, most producers remained profitable. Alone among major Japanese chemical makers, Mitsui Chemicals, a producer of large-volume commodity chemicals, reported a small net loss of $12 million compared with a $301 million profit a year ago. Mitsui was hit by a $230 million reduction in its gross margins. Moreover, owing to a bleak long-term outlook, the company opted to write down the book value of its Japanese polyurethane production facilities by $140 million. Japan’s top chemical producer, Mitsubishi Chemical Holdings, reported a 58% drop in its net profit compared with a year ago. Higher than expected tax payments were largely responsible for the deterioration. In addition, business conditions in Japan and abroad were weak, Mitsubishi says. The company also had to contend with earthquake damage at its main petrochemical complex in Kashima, which took about two months to repair.
PAYING FOR POWER PLANT SHUTDOWNS NUCLEAR ENERGY: Funds to pay for decommissioning of reactors may run short, GAO warns
A
FORMULA USED BY the Nuclear Regulatory
Commission (NRC) lowballs how much money companies should set aside to close down their old nuclear power plants, warns a Government Accountability Office report. Therefore, it is possible that insufficient funds are being accumulated to cover the cost to eventually decommission and clean up the sites where 104 U.S. nuclear power plants are operating today. In a May 5 report, GAO, the investigative arm of Congress, looked at 12 reactors that were within a few years of reaching the end of their operating licenses. Because these reactors are near retirement, the reactors’ owners are required to make public their own estimates of decommissioning costs. The study found that for nine of the 12, the NRC method underestimates
Not all firms saw their earnings shrink. Shin-Etsu Chemical managed to raise its net earnings by nearly 1% to $1.2 billion despite suffering severe earthquake damage at its Japanese plants that produce polyvinyl chloride resin and silicon wafers. Despite disruption to its operations, Shin-Etsu was able to keep its gross margins at the same level as last year. To JAPANESE COMPANY RESULTS improve botProfits shrink at most major firms tom-line profitability, ShinPROFIT SALES EARNINGSa MARGINb Etsu shrank CHANGE CHANGE its foreign $ MILLIONS 2011 FROM 2010 2011 FROM 2010 2011 2010 exchange loss Asahi Kasei $19,090 1.1% $677 -7.5% 3.5% 3.9% to $5 million in DIC 8,910 -5.7 220 15.2 2.0 2.5 the latest fisJSR 4,246 2.7 320 3.3 7.5 7.5 Mitsubishi 38,929 1.3 431 -57.5 1.1 2.6 cal year from Mitsui 17,644 4.5 -12 nm def 1.8 $110 million Shin-Etsu 12,714 -1.0 1,221 0.5 9.6 9.5 one year ago. Sumitomo 23,637 -1.7 68 -77.1 0.3 1.2 For the Teijin 10,367 4.7 145 -52.4 1.4 3.1 current fiscal Toray 19,277 3.2 779 10.9 4.0 3.8 year, ShinNOTE: Fiscal year ended March 31. Monetary figures converted at March 31 Etsu says it is exchange rate of $1.00 = 82.41 yen. a After-tax earnings. b After-tax earnings as a percentage of sales. def = deficit. nm = not meaningful. unable to forecast its profit and sales because conditions in the world economy are so unpredictable. Other Japanese firms are more confident: Asahi Kasei, a diversified producer of commodity and specialty chemicals, expects to boost its net earnings 20%. DIC, a major producer of inks and pigments, also expects to increase its profit 20% by improving how it runs its operations.—JEAN-FRANÇOIS TREMBLAY
the funds that are necessary to set aside. For five plants, the formula would result in a fund that was only 50 to 76% of what the reactor’s owner calculated would be needed. Decommission costs will be high—from $400 million to $836 million per reactor—according to company estimates in the report. By law, the sites are to be dismantled and prepared for other uses during a 60-year period following shutdown. The GAO report includes a review of a series of reports spanning a decade and written by GAO, NRC, and NRC’s Office of the Inspector General. Those previous studies have turned up inadequacies in decommissioning funding because of a combination of NRC’s use of the outdated, 30-year-old funding formula; greater than expected radiological contamination; and poor decisions by owners about where to invest the funds they set aside for cleanup. One NRC study, discussed by GAO, looked at 27 of the nation’s 104 reactors and predicted a decommissioning shortfall of $2.4 billion.—JEFF JOHNSON
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DAVID CASE/WIKIPEDI A
JAPANESE FIRMS STRUGGLE TO PROFIT
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Not enough funds may be available to decommission reactors nearing retirement, such as the Indian Point nuclear power plant, in New York.
