Tokyo, Japan—Tosoh Corporation is pleased to announce its consolidated results for fiscal 2016. The company’s consolidated net sales amounted to ¥753.7 billion (US$6.3 billion), down ¥55.9 billion, or 6.9%, from a year earlier. Operating income, however, rose ¥18.0 billion, or 35.1%, to ¥69.4 billion (US$578.0 million). Ordinary income climbed ¥5.6 billion, or 9.3%, to ¥65.8 billion (US$547.8 million).
Net sales declined chiefly because petrochemical product prices fell in Japan and overseas in association with lower crude oil and naphtha prices worldwide. And although vinyl chloride resin sales volume grew as a result of expanded vinyl chloride monomer (VCM) production capacity, the margin of growth was insufficient to offset the declines in petrochemical product prices.
The increase in operating income was due mainly to improved trade conditions arising from lower prices of raw materials and fuel and an increase in volumes sold. Improvements in operating and ordinary income notwithstanding, profit attributable to owners of the parent company declined ¥22.6 billion, or 36.3%, to ¥39.7 billion (US$330.2 million). This was largely the result of deferred tax assets related to a carryforward loss from Tosoh’s merger with Nippon Polyurethane Industry Co., Ltd., posted during fiscal 2015.
In fiscal 2016, the Japanese economy recovered somewhat on account of the economic and fiscal policies of the Japanese government and the Bank of Japan. Entering calendar 2016 year, there was, however, downward pressure on the global economy, such that stock prices weakened and the yen strengthened. The resulting lack of confidence in business conditions amid increasingly negative consumer sentiment slowed Japan’s recovery.
Results by business segment
Petrochemical Group
Petrochemical Group net sales declined ¥48.3 billion, or 21.6%, to ¥175.4 billion (US$1.5 billion). The group’s operating income, however, rose ¥4.7 billion, or 67.7%, to ¥11.6 billion (US$97.2 million), owing to increased sales volumes.
Among shipments of olefin products, cumene shipments rose because of increased demand for derivatives. The cumene market, though, weakened abroad, and decreases in the cost of raw material feedstocks translated into low prices for cumene products in the Japanese market.
Shipments of polyethylene resin increased amid improved trade conditions for exports because of the weak yen and lower raw material prices. But polyethylene resin product prices in Japan declined, reflecting falling naphtha prices. The weak yen, meanwhile, improved export prices for chloroprene rubber and chlorosulfonated polyethylene.
Chlor-alkali Group
The Chlor-alkali Group’s net sales decreased ¥14.5 billion, or 4.9%, to ¥279.8 billion (US$2.3 billion). But operating income increased ¥9.7 billion, or 116.2%, to ¥18.0 billion (US$149.7 million), on account of increased sales volumes.
Shipments of caustic soda increased on the higher production volume ensuing from a rise in the operating rate of electrolysis equipment. Domestic caustic soda product prices declined slightly, however, while export prices improved owing to the weak yen. Shipments of VCM and polyvinyl chloride (PVC) rose given a boost in VCM production capacity in fall 2014. But VCM and PVC product prices fell, largely because of a decline in the price of naphtha.
Cement shipments in Japan decreased owing to falling demand. But cement exports increased.
Shipments of urethane raw materials were down because of a slowdown in China’s economy and softening overseas markets.
Specialty Group
Net sales by the Specialty Group decreased ¥323.0 million, or 0.2%, to ¥174.5 billion (US$1.5 billion). Operating income rose ¥2.7 billion, or 9.1%, to ¥32.7 billion (US$272.2 million) on account of improving trade conditions.
Shipments of ethyleneamines decreased as competitors expanded production capacity, exacerbating an imbalance between supply and demand. Ethyleneamine product prices increased abroad because of the weak yen.
In separation-related products, shipments rose for liquid chromatography packing materials. Similarly, in diagnostic-related products there was an increase in shipments of in-vitro diagnostic reagents.
Shipments of high-silica zeolites likewise increased, thanks to a boost in production capacity in fall 2014. Shipments of zirconia for dental applications also rose.
Engineering Group
Net sales for the Engineering Group increased ¥8.4 billion, or 11.1%, to ¥84.2 billion (US$700.7 million). Operating income climbed ¥1.2 billion, or 37.4%, to ¥4.6 billion (US$38.1 million).
Domestic sales of water treatment facilities, services, and related chemicals were up. This reflected growth in plant construction and requests for maintenance and renovation overall in the water treatment industry, primarily for the electronics sector. Overseas sales rose largely as a result of increased demand from a rising number of electronics plants.
Sales were down at construction subsidiaries.
Other
Other net sales declined ¥1.3 billion, or 3.1%, to ¥39.7 billion (US$330.7 million). Operating income also fell, ¥273.0 million, or 9.6%, to ¥2.6 billion (US$21.4 million).
The main factor in the declines was a drop in trading company sales, which offset robust sales at logistics subsidiaries.
Note: For reference purposes only, US dollar amounts have been translated, unless otherwise indicated, from yen at the rate of ¥120.15 = US$1, the average exchange rate during the period under review.
Outlook for fiscal 2017
Japan’s economic recovery should strengthen steadily in fiscal 2017 as personal income and the employment situation continue to improve. It should be noted, though, that business downturns beginning with China and ranging across other Asian developing nations and countries that provide raw materials are making it increasingly difficult to be certain about trends in the global economy and financial markets.
The Tosoh Group is making every effort to raise its profitability. It is expanding its sales volume, maintaining an optimum pricing structure, reducing costs, and boosting earning power throughout its operations, among other things.
For fiscal 2017, Tosoh projects net sales of ¥720 billion, operating income of ¥72 billion, ordinary income of ¥72 billion, and profit attributable to owners of the parent company of ¥47 billion. These forecasts are based on a domestic standard price for naphtha of ¥40,000 per kiloliter and on an exchange rate of ¥110.00 to the US dollar.
TOSOH CORPORATION
WHO WE ARE
Tosoh is the parent of the Tosoh Group, which comprises over 100 companies worldwide and a multiethnic workforce of over 12,000 people and generated net sales of ¥753.7 billion (US$6.3 billion at the average rate of ¥120.15 to the US dollar) in fiscal 2016, ended March 31, 2016.
WHAT WE DO
Tosoh is one of the largest chlor-alkali manufacturers in Asia. The company supplies the plastic resins and an array of the basic chemicals that support modern life. Tosoh’s petrochemical operations supply ethylene, polyethylene, and functional polymers, while its advanced materials business serves the global semiconductor, display, and solar industries. Tosoh has also pioneered sophisticated bioscience systems that are used for the monitoring of life-threatening diseases. In addition, Tosoh demonstrates its commitment to a sustainable future in part by manufacturing a variety of eco-products.
Stock Exchange Ticker Symbol: 4042
DISCLAIMER
This document may contain forward-looking statements, including, without limitation, statements concerning product development, objectives, goals, and commercial introductions, which involve certain risks and uncertainties. Forward-looking statements are identified through the use of the word anticipates and other words of similar meaning. Actual results may differ significantly from the results expressed in forward-looking statements.