The crisis met by Japanese chemical groups is caused by Which is going to open a new plant?

By Paul Abrahams in Tokyo
   Results from Japan’s largest petrochemicals companies for the year to March 31st reflect the crisis facing a sector plagued by sluggish domestic demand, over capacity, plunging prices and the appreciation of the yen.
   News of the sector’s dire trading position follow this week’s decision by Showa Denko to sell its poly styrene business.
   The company, a marginal manufacturer, sold its 30,000 tonnes a year Kawasaki Plant to Asahi Chemical, Japan’s largest polystyrene manufacturer with capacity of about 333,000 tonnes a year, equivalent to about 25 per cent of the market. The move was the latest in a series of alliances and mergers as the troubled industry restructures.
   Mitsubishi Petrochemical, the country’s biggest plastics group, reported a loss of Y 8.39 bn ($80m) compared with pre-tax profits last year of Y 8.25 bn. The group made an operating loss of Y 13.8 bn, the first since 1982. The poor result came despite cost cutting measures, lower raw material prices, and Y 4 bn worth of profits from equity sales.
   Turnover fell 12.2 per cent from Y 372 bn to Y 326 bn, as prices and volumes declined. Earnings per share, which reached Y 52.5 in 1991, fell to a loss per share of Y 9.44. The group, which is scheduled to merge with Mitsubishi Kasei on October 1st, cut its dividend from Y 8 per share to Y 4.
   Mitsubishi Kasei’s pre-tax profits fell 76. 8 per cent from Y 9.3 bn last year to Y 2.2 bn. The group reported its first operating loss in 40 years at Y 467 m, and only managed to post positive pre-tax results by selling Y15.7 bn worth of equities. Turnover fell 1.8 per cent, the fourth yearly decline, to Y696 bn. The dividend was halved to Y 3 per share.
   Mr. Morihisa Takano, managing director, said the newly merged group would generate pre-tax profits of Y 10 bn on sales of Y 55 bn during the year to March 1995.
   He predicted petrochemicals prices would bottom out during the summer. No decision had been made a bout the dividend, but the new company could pass it during the current year, the pre-tax profits at Mitsui Petrochemical Industries, Japan’s biggest polyethylene maker, plunged 75 per cent from Y 9 bn to Y 2.26bn on sales down 9.3 per cent at Y 272 bn. The company blamed poor demand for the slump which offset the benefits of cost-cutting measures. The dividend is unchanged at Y 6 per share. The group forecasts pre-tax profits for the current year marginally up at Y 3 bn on turnover of Y 276 bn.
   Shin-Etsu, one of Japan’s biggest makers of poly vinyl chloride, reported profits down 26.1 per cent from Y 17.6 bn to Y 13 bn. Sales increased 0.2 per cent from Y 275 bn to Y 276 bn. Net profits fell 26.6 per cent to Y 7.08 bn, or Y 21.85 per share.
   The group maintained the final dividend at Y3.75, making the full-year pay out Y7.5 per share. Shin-Etsu forecasts pre-tax profits for the cur rent year of Y 15.5 bn on sales of Y 277 bn.
   The outlook for the petrochemicals industry remains bleak. The imbalance between supply and demand for ethylene, the basic building block of petrochemicals, is about 2.8m tonnes of ethylene and is set to deteriorate further this year.
   A massive 700,000-tonne-a-year ethylene complex owned by Maruzen, Mitsui Petrochemical and Sumitomo Chemical comes on stream later this year and Mitsubishi Petrochemical is also commissioning a new 300,000-tonne-a-year plant this year.