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May 22, 2006
Volume 84, Number 21
p. 10

Japanese Results

Another Good Year

Profits are up in Japan, but rising costs present a challenge

Jean-François Tremblay

Profits rose at most major Japanese chemical companies in fiscal 2005, which ended March 31. Rising costs for raw materials, however, held back commodity businesses at several firms.

Net profit jumped 68% at Mitsui Chemicals, which makes mostly industrial chemicals and petrochemicals, but the improvement was largely due to a gain on securities in its pension fund. Income from its main businesses was down because of rising costs and sagging market conditions, Mitsui says.

At Asahi Kasei, the situation was similar: Net income was up 6%, but this was mostly due to a reduction in balance-sheet adjustments. Operating income was down overall. Margins rose 9% in the firm's electronic materials business but dropped 2.5% in its more substantial residential homes unit. The company says it could not pass on cost increases to customers.

Sumitomo Chemical's net earnings leapt 41% to a record $772 million, thanks to higher sales and margins and also to a gain on the sale of a pharmaceutical subsidiary. Unlike Mitsui, Sumitomo claims that it enjoyed buoyant market conditions in its basic chemicals and petrochemicals businesses.

Shin-Etsu Chemical enjoyed another year of record profit, its 11th in a row. Net earnings rose 24% to $979 million, closely mirroring the rise in its operating income. The firm says it was sustained by healthy economic conditions worldwide. Its two main products are polyvinyl chloride resin and silicon wafers.

Though concerned about the prices of raw materials, Shin-Etsu expects to increase its net profit again in fiscal 2006, by 16% to $1.1 billion. Mitsui, on the other hand, expects its net income to shrink by 20% to $300 million.

Chemical & Engineering News
ISSN 0009-2347
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