Edited from: "To our shareholders, customers and partners", annual report 2008 and “Petro Rabigh to spend $300m more for big project”, ICIS news 8 September 2008
During fiscal year 2007, Sumitomo Chemical states that it experienced “more difficult business conditions than it had anticipated”, including surging feedstock prices and a strong Yen. Though it believes that challenges still lie ahead, the company will focus on its three year business plan, ending fiscal 2009.
In addition, demand for information technology (IT) related products showed steady growth as the market for liquid crystal displays (LCD) televisions entered a period of full-scale expansion. Under these conditions, Sumitomo stepped up its marketing drives and endeavoured to realise price increases for its products, while at the same time working to rationalise operations in its efforts to achieve further business growth.
Three-year corporate business plan
Sumitomo has developed a new corporate business plan for the three years ending in fiscal 2009. Envisioning further expansion of its business on a global scale, the basic principle of the plan is to achieve and consolidate high profitability and secure sustained growth potential.
The new corporate business plan, founded on the concepts of its previous plan, places a high priority on realising solid returns on the significant business investments it has made, and at the same time, it will incorporate concepts aimed to propel the company to further heights in business growth.
In particular, it will focus on initiatives such as the “successful” completion of the Rabigh project, enhancing global management, enlarging the economic value added of each business sector, expanding life sciences and IT related materials businesses and enhancing their competitiveness, and paving the way for further growth.
The Rabigh project, a $9.8bn joint venture with its partner Saudi Aramco, to build an integrated refining and petrochemical complex in Rabigh, Saudi Arabia, has been progressing since March 2006. It had been expected to be completed and start commercial operation at the end of 2008. However, due to some technical problems at some of its units, it is now expected to start up early 2009.
A total of 23 plants producing 18.4m tonnes/year of petroleum-based products and 2.4m tonnes/year of ethylene and propylene-based derivatives make up the Rabigh project. It is believed that the project will strengthen the fundamentals and improve the profitability of its petrochemical business as well as greatly accelerate the globalisation of Sumitomo.
In addition, within the company’s existing core businesses, it is expanding its production capacity and developing new products as well as implementing cost rationalisations with the aim of expanding sales, adding new value to its products, and strengthening the cost competitiveness of each of its businesses to further improve performance.
Life sciences and IT-related materials are the fields where the company forecasts high market growth and expects continued high performance, capitalising on its technological and other strengths. In life sciences, it is increasing its investments in R&D and fortifying its business foundations for further global expansion. In the IT-related field, it will strengthen its competitiveness and improve the profitability of its LCD materials businesses, such as its polarising film business, where it expects strong demand growth.
At the same time, based on a long-term outlook, the company is investing its business resources in the research and development of organic polymer LEDs, which “hold promise” as materials for next-generation displays that exhibit high image quality combined with low electrical consumption. The company will focus its efforts towards the earliest possible commercialisation of these materials.
In the chemical industry, under its new three-year corporate business plan, it is directing a special focus in its R&D efforts to the development and cultivation of new business fields. In addition to the development of organic polymer LEDs, it will strengthen and accelerate its R&D in other areas, as well, particularly in IT-related materials, energy and life sciences. For example, it is focusing on battery materials, such as heat-resistant separators that improve the safety of lithium ion batteries.
Through the implementation of these initiatives, the company is aiming to achieve performance targets for fiscal 2009, the final year of its plan, of sales of Yen2,400bn and a net income of Yen150bn. The Rabigh project is expected to contribute approximately Yen50bn in equity earnings to the company’s ordinary income.
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Financial highlights: Sumitomo Chemical, year ended 31 March
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Sumitomo Chemical is one of Japan's leading chemical manufacturers. It offers a diverse range of products, including basic chemicals, petrochemicals, fine chemicals, agricultural chemicals and pharmaceuticals.
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