UPDATE: Japan’s Sumitomo Chemical trims fiscal H1 net loss; eyes LDPE output cut

SINGAPORE (ICIS)–Sumitomo Chemical trimmed its fiscal H1 to September 2024 net loss to Japanese yen (Y) 6.5 billion ($42 million), aided by sales growth of about 5%, while it seeks to rationalize operations to boost profitability.

• Return to profit expected for year-to-March 2025
• IT-related chemicals’ fiscal H1 core operating profit more than doubles
• Chiba Works LDPE output to fall by 20,000 tonne/year

in billion yen (Y)	Apr-Sept 2024	Apr-Sept 2023	% change	Yr-to-March 2025 (revised forecast)	Yr-to-March 2024 (actual)
Sales revenue	1,241.4	1,186.9	4.6	2,600.0	2,446.9
Core operating profit	29.5	-96.7	–	100.0	-149.0
Operating income	121.2	-133.7	–	180.0	-488.8
Net income	-6.5	-76.3	–	-25.0	-311.8

Revenues for the period increased on higher selling prices of synthetic resins,  methyl methacrylate (MMA) and various industrial chemicals due to higher raw material prices, the company said in a statement.

Sumitomo Chemical’s Essential Chemicals & Plastics segment posted a lower core operating loss of Y36.7 billion, with sales up by 3.3% year on year to Y403 billion, it said.

However, it noted that earnings were weighed down by a deterioration in the financial performance of its 37.5%-owned affiliate Saudi Arabia’s Rabigh Refining and Petrochemical Co.

Meanwhile, IT-related chemicals posted a 10% increase in sales to Y224.3 billion, with core operating income more than doubling to Y37.5 billion, on the back of strong demand for display-related materials and processing materials for semiconductors, it said.

For the whole of fiscal year ending March 2025, Sumitomo Chemical lowered its sales forecast by Y70 billion to Y2.6 trillion, but raised its net profit forecast by Y5 billion to Y25 billion.

The forecast marks a return to profitability for Sumitomo Chemicals, which incurred a Y312 billion net loss in the previous fiscal year.

LDPE OUTPUT CUT BY END-MARCH 2025
In a separate statement on 29 October, the company announced plans to reduce its low density polyethylene (LDPE) production at Chiba Works by 20,000 tonnes/year, citing declining domestic demand.

Operations at a portion of the company’s LDPE facilities at the site will be suspended by March 2025 – the end of its current fiscal year.

Sumitomo Chemical has an LDPE plant in Chiba prefecture with a 172,000 tonne/year capacity, according to ICIS Supply and Demand Database.

“The company expects this measure, combined with the various rationalization efforts that it has implemented thus far, to lead to improving the overall operating rate of the remaining facilities,” Sumitomo Chemical said.

Japan’s LDPE demand “is not anticipated to have significant future growth”, it said, citing a declining population and an ageing society with a low birth rate.

Sumitomo Chemical said that it is “accelerating business restructuring as part of its short-term intensive performance improvement measures”.

Other measures include improving the company’s product portfolio “to cater to high value-added areas”, as well as working on fixed cost reduction at its remaining facilities, including a joint study with Maruzen Petrochemical to optimize operations of their joint venture Keiyo Ethylene.

The Japanese producer said that it “will steadily advance these measures to ensure a V-shaped recovery in fiscal 2024, while also carrying out fundamental structural reforms”.

Focus article by Pearl Bantillo

($1 = Y153.3)

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