Business Concentrates FINANCE
Japan’s strong run ends First-half results paint mixed picture for chemical industry In a shift from the past three years, when profits steadily rose at major Japanese chemical companies, the picture was definitely mixed in the first half of the fiscal year that will end on March 31, 2017. Compared with a year ago, profits dropped at more than half of the companies surveyed by C&EN. And some of the ones that increased their net income did so with the help of one-time gains. Asahi Kasei managed to post a 12% increase in net profit in spite of deterioration in its business. The company’s net income from operations suffered because of reduced styrene shipments and a write-down of goodwill in its lithium-ion battery separators business. The higher net income was thanks to a gain on the sale of securities and a reduction in taxes. At Sumitomo Chemical, by contrast, such exceptional items caused additional pain. The company posted a net profit that was less than one third what it had been
one year ago, partly because of a loss in the value of its stake in an affiliated firm. Operating income in Sumitomo’s petrochemi-
Japan’s first half The profit picture was mixed in the fiscal first half. Asahi Kasei Hitachi Chemical JSR Mitsubishi Mitsui Shin-Etsu Sumitomo Teijin Toray Industries Ube Industries
Sales –7.0% –6.7 –6.8 –10.8 –19.7 –5.1 –16.3 –9.9 –7.0 –13.1
Earnings 12.2% –1.2 –12.8 16.7 –2.4 14.1 –68.4 –12.6 8.0 –48.2
Note: Percent change over previous year’s first half. Source: Companies
PETROCHEMICALS
Cracker project is a headache for contractor The first new U.S. ethylene project in the shale gas era, Chevron Phillips Chemical’s cracker in Baytown, Texas, has run into difficulties. Fluor Corp., a construction contractor for the project, is taking a $154 million charge due to complications resulting from bad weather and lackluster productivity. Chevron Phillips is spending $6 billion on the Baytown cracker and a pair of polyethylene plants in Old Ocean, Texas. Fluor is building the cracker in partnership with Japan’s JGC, while a joint venture between Technip and Zachry Industrial is erecting the polyethylene units. On a recent conference call with analysts, Fluor CEO David T. Seaton blamed the weather. So far this year, he said, the site has received about 250 cm of rain. Another Fluor project, a Dow Chemical cracker 100 km away in Freeport, Texas,
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received normal rainfall of about half that much. The Baytown flooding led to an out-of-sequence work schedule and lower productivity, Seaton said. In a separate conference call, Tim G. Taylor, president of Phillips 66, which owns half of Chevron Phillips, said additional labor was needed at the site at the same time that the industry was experiencing a shortage of skilled laborers such as pipe fitters. Chevron expects the cracker will run between 5% and 10% over budget and be completed during the second half of next year. The company expects the polyethylene plants will be finished, on time and on budget, in mid-2017. The contract for the ethylene project is at a fixed price, which leaves Fluor on the hook for cost overruns.—ALEX
TULLO
cals business fell, while profit margins in its electronic materials business were wrecked by lower prices for liquid crystal display polarizers. While most of its peers struggled with profitability, Shin-Etsu Chemical once again increased its net profit, by 14% this time. The firm is the world’s largest manufacturer of both polyvinyl chloride and silicon used in semiconductors. Although the profitability of Shin-Etsu’s silicon business was unchanged from a year ago, operating income in PVC and chlor-alkali increased by a remarkable 26% because of strong results recorded in the U.S. In addition, Shin-Etsu boosted margins by 21% in its specialty chemical business, which consists largely of cellulose-based materials. In general, major Japanese companies— Shin-Etsu included—said they were challenged by the rising value of the yen, which reduces the amount of profits they can earn from sales outside Japan. Adverse factors faced by the companies also included lackluster economic conditions in China and Europe.—JEAN-FRANCOIS TREMBLAY
BY THE NUMBERS
$184 billion The value of U.S. chemical exports in 2015, equal to 14% of all U.S. exports, according to the American Chemistry Council, the industry’s largest trade group. If implemented, the Transatlantic Trade & Investment Partnership would generate an additional $15 billion in economic output from domestic chemical manufacturers, ACC estimates. TTIP and many other trade pacts are opposed by Presidentelect Donald Trump.
