Profits of many Japanese chemical giants decline

Several major chemical companies in Japan announced their consolidated results for the fiscal year ended March 31, 2020. The profits of Mitsubishi Chemical, Sumitomo Chemical, Asahi Kasei, Mitsui Chemicals, Teijin, Tosoh and Ube Industries declined. Under the influence of the New Coronary Pneumonia epidemic, a global recession struck, and the Japanese chemical industry, which focused on high value-added products such as high-performance engineering plastics, was not spared.

Mitsubishi Chemical: PC, MMA demand frustrated, prices fell
Mitsubishi Chemical stated that the new coronary pneumonia epidemic has suppressed global economic activity in the fourth fiscal quarter. According to the report, Mitsubishi Chemical's net profit for the current fiscal year fell 68% to 54 billion yen (501.7 million US dollars). Operating profit fell 51% year-on-year to 144.28 billion yen. Sales fell by 6.7% to 3.5 trillion yen.

The company said that due to the continued trade friction between China and the United States, the market demand (especially semiconductor and automotive applications) stagnation, the company's profit was squeezed. Operating profit of Mitsubishi Chemical's functional products business decreased by 12.1% to 62.6 billion yen, and sales were 1.08 trillion yen, a decrease of 6.3%. The decrease in core operating profit was mainly due to the decline in the market price of phenol-polycarbonate (PC) chain materials in the advanced polymer business and the decline in sales of engineering plastics for advanced molding and composite materials.

Mitsubishi Chemical ’s largest segment, the chemical business, saw a 76% drop in operating profit to 30.2 billion yen, compared with 127.9 billion yen in the previous year, and sales of 1.05 trillion yen, a year-on-year decrease of 17%. Due to weak demand, MMA sales revenue has declined. In terms of petrochemical products, due to the planned maintenance of an ethylene production plant, the impact is relatively small. Although the sales volume has increased, due to the reduction in raw material costs, product prices have fallen.

Sumitomo Chemical: Petrochemicals and plastics business profits fell 76.4%
Sumitomo Chemical said that the company's net profit fell 73.4% to 30.92 billion yen, and sales fell 2.5% to 2.3 trillion yen. This figure includes one-time unrealized securities losses of 43.5 billion yen.

The company's largest business unit-petrochemicals and plastics business sales fell by 12.4% to 662.7 billion yen. Operating profit fell 76.4% to 14.4 billion yen, and the profit margin of petrochemicals, including MMA, continued to decline. As raw material prices fall, the market conditions for petrochemical products and plastics also deteriorate.

Asahi Kasei: Automobile market slows down, petrochemical prices drop
Asahi Kasei reported that net profit for the current fiscal year fell by 29.5% to 103.82 billion yen, with sales of 2.15 trillion yen, a decrease of 0.9%. The main reasons are weak growth in the Chinese market, a slowdown in the automotive market, lower prices in the petrochemicals market, and the global economic deterioration caused by the new crown pneumonia epidemic, which has weakened the company's operating performance.

Shin-Etsu Chemical: Net profit increased by 1.6%
In this fiscal year, Shin-Etsu Chemical's net profit increased by 1.6% to 314 billion yen. Operating profit increased 0.6% to 406 billion yen, and sales fell 3.2% to 1.54 trillion yen.

It is understood that Shin-Etsu Chemical Co., Ltd. has continuously released several new materials for 5G from 2019 to the beginning of this year. From the end of 2019 to the beginning of this year, new materials for high-frequency radio wave printed circuit boards and semiconductors have been released. In the case of stagnation in the demand for general electronic equipment and semiconductor materials, Shin-Etsu Chemical Co., Ltd. firmly grasped the 5G equipment expected to have higher growth in the future market.

Mitsui Chemicals: Lower naphtha prices push down sales prices
Mitsui Chemicals ’annual financial report showed that net profit fell by 50% to 37.9 billion yen. Net sales were 1.3 trillion yen, down 10%. The drop in prices of naphtha and other raw materials and fuels pushed down sales prices, and the pandemic of the new coronary pneumonia also affected sales. Mitsui Chemicals said that the extremely severe economic situation in the world will lead to a decline in demand, causing fluctuations in naphtha prices and chemical product prices.

Toray has not yet released consolidated financial results. It was originally scheduled to be released on May 13 and is now scheduled to be announced on May 28. The company said that due to the spread of the new coronary pneumonia epidemic, the settlement of accounts in Japan and overseas was delayed.

IHS Markit said that the Japanese government announced an economic package of 108 trillion yen on April 7 aimed at reducing the adverse effects of the spread of the new coronary pneumonia epidemic on the economy, but this seems unlikely to boost the economy. Because the new crown epidemic caused a sharp decline in global demand and a disruption in the supply chain, it is expected to reduce Japan ’s exports and curb private investment. IHS Markit said that due to the decline in sales and profits and continued cash flow difficulties, it is likely to promote some companies to invest in fixed assets.

Affected by the spread of the new coronary pneumonia epidemic, IHS Markit has lowered its growth forecast for the chemical industry. The direct impact of the New Coronary Pneumonia epidemic is mainly through disruption of Japanese industrial production through the supply chain; in addition, the sharp decline in global demand, especially the decline in demand in the United States and China, will hinder Japan ’s chemical exports and inhibit Industrial production.