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Asahi Kasei profit seen surging 20%, beating current forecast

TOKYO — Asahi Kasei‘s group operating profit is seen climbing 20% to around 190 billion yen ($1.74 billion) in the fiscal year ending March 31, thanks to a brisker-than-anticipated trade in petrochemicals and battery components.

The Japanese chemical materials maker had previously forecast a 15% jump in operating profit on the year to 183 billion yen. Both this figure and the upgraded number would mark a return to record profit, following a dip last fiscal year. Sales are seen growing 10%, exceeding 2 trillion yen for the first time.

The materials segment accounts for much of this growth. The price of acrylonitrile, used to make synthetic fibers, continues to rise, propelling growth in the petrochemical business. Environmental restrictions in China and the impact of a major hurricane in the U.S. have curbed supply from other chemical makers, creating a tight market where Asahi Kasei, one of the world’s top producers of the chemical, can thrive. Demand is also growing for products including high-performance plastics used in automobiles and synthetic rubbers used to make fuel-efficient tires.

Expansion in the electric-vehicle market has invigorated shipments of separators for lithium-ion batteries. And while demand for electronics used in camera modules and other smartphone parts could dim somewhat, the electronics business overall is set to remain energetic. The fibers and textiles business is seen staying strong as well.

Orders at Asahi Kasei’s homes segment dropped 7% on the year in the first half of fiscal 2017, but recovered during the quarter through December, putting the April-December figure roughly in line with that from the same period in 2016. How the segment performs in the three months through March will thus determine its outcome for the whole of fiscal 2017.

At the company’s health care segment, a strong showing by the acute critical care business handling devices such as defibrillators is seen leading gains.

These improvements stand to bolster Asahi Kasei’s group net profit, as does a cut in the U.S. federal corporate tax rate from 35% to 21% that took effect in January. This change will do away with deferred tax liabilities the company incurred in the 2015 acquisition of American separator maker Polypore International, giving a one-time boost to its bottom line.

Asahi Kasei could upgrade its earnings forecast for fiscal 2017 when announcing April-December earnings on Feb. 7.

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