Asahi Kasei Corp., Asahi Kasei Chemicals Corp., and Asahi Kasei E-materials Corp. have made a decision to strengthen their petrochemical operations in Japan as described below.
Having identified acrylonitrile (AN) and solution-polymerized styrene-butadiene rubber (S-SBR) for fuel-efficient tires as world-leading businesses in its strategic management initiative “For Tomorrow 2015,” the Asahi Kasei Group is proactively expanding production capacity for these products overseas, mainly in Asia.
In contrast, the operating climate in the domestic Japanese petrochemical market is expected to be increasingly challenging, with contracting demand and increasingly severe competition from low-priced imports. Based on careful study of how to best realign operations in such a climate, it was determined that the following measures would establish the optimum production configuration from feedstock to derivatives in balance with domestic demand in order to heighten competitiveness and ensure a stable earnings base.
Framework of the measures to strengthen operations
In light of the challenging operating climate of recent years, including sluggish market prices due to deterioration of the supply-demand balance, rising feedstock prices, etc., the decision was made for closure of the AN plant in Kawasaki in August 2014. In addition, the 100,000 ton/year AN plant in Mizushima, currently used to produce another product as well, will be dedicated to the production of the other product, resulting in AN production concentrated on the most cost-competitive facilities at three sites. This realignment will further enhance competitiveness by engendering supply more clearly focused by geographic area, with production in Mizushima focused on the market in Japan, production in Korea focused on the market in Korea, China, and Taiwan, and production in Thailand focused on the market in ASEAN countries.
A deterioration in the supply-demand balance is expected, as the expansion and construction of large-scale plants in Asia are planned. The decision was therefore made for closure of the older, 320,000 ton/year plant in Mizushima in March 2016, and focus on the domestic Japanese market and in-house consumption. This renewed focus will reduce risks associated with fluctuations in the Asian market price, enabling earnings to be stabilized.
Impact on financial performance
In relation to the measures to strengthen operations described above, Asahi Kasei plans to record an extraordinary loss of ¥18.0 billion for consolidated results for the fourth quarter of fiscal 2013 (January 1 to March 31, 2014). As a result, the forecast for consolidated net income for fiscal 2013 announced on February 5, 2014, has been revised downward by ¥12.0 billion to ¥65.0 billion. There is no change in the year-end dividend forecast of ¥8 per share (an increase of ¥1 per share from the previous year, for a total annual dividend of ¥15 per share) which was announced on February 5, 2014.