Japan’s Showa Denko revises up H1 petrochemical earnings forecast

Author: Pearl Bantillo

2021/05/10

SINGAPORE (ICIS)--Showa Denko expects stronger profitability from its petrochemicals segment in the first half of 2021, as well as across most its business segments, which will enable the company to swing to an overall net income for the period.

“In the petrochemicals segment, market prices of products have been exceeding the level in the previous forecast due to a rise in raw naphtha prices and strong demand in Asia,” the Japanese producer said on Monday.

Showa Denko has raised its H1 net sales forecast for the segment by 30% to Japanese yen (Y) 125bn ($1.1bn), with operating profit forecast doubled to Y9bn.

Petrochemicals’ operating income has been rising in the wake of strong demand in Asia, the cold snap in the US that disrupted supply and rising prices of feedstock naphtha, it said.

In billion yen (Y) H1 2021 (revised forecasts) H1 2020 (Actual results) % change
Petrochemical net sales 125 95.7 30.6
Petrochemical operating income 9 -3.7 -
Overall net sales 695 326.6 112.8
Overall operating profit 34 -25.8 -

The company's overall net profit in the first half of 2021 is expected to be Y9bn, a reversal of the earlier forecast of a Y16bn loss.

A total extraordinary loss of Y11.7bn will be booked in the first half, of which Y9bn in the first quarter is related to construction at its Kitakata aluminimum specialty components plant.

There was groundwater contamination by fluorine and other chemicals exceeding environmental standard at the plant, which the company decided to address.

The remaining Y2.7bn, on the other hand, will "reflect the special early retirement allowance incurred due to the structural reform in the Showa Denko Materials segment”, Showa Denko said.

Meanwhile, Showa Denko’s materials segment is also expected to perform better than initially expected, backed by strong sales of semiconductor-related products “due to tighter supply-demand situation”.

First-half operating income of the materials segment is forecast at Y10bn, sharply higher than the previous forecast of Y1bn.

This is made possible by “increased sales of electronic materials and circuit board materials resulting from market growth in the semiconductor industry and the data center industry, the company said.

“In addition, operating income from sales of mobility materials has been exceeding the previous forecast due to the recovery of production in the car industry which is stronger than expected,” Showa Denko said.

($1 = Y108.8)

Photo: At Yokohama port in Japan - 14 May 2020 (By FRANCK ROBICHON/EPA-EFE/Shutterstock)