Zeon eyes elastomers recovery amid continuing cost rises

Tokyo – Zeon Corp.’s elastomers business has posted a major dip in operating profit for its fiscal year 2022, ended 30 March, due mainly to the rising raw materials and energy costs.

The unit, which produces synthetic rubber (SR), latex and chemicals, reported an 11% year-on-year increase in sales to Yen222 billion (€1.3 billion), helped by selling-price adjustments.

SR volumes fell year-on-year "due to shipment adjustments for regular repairs at main plants but rose [13% in Q4 vs Q3] after repairs complete," Zeon also noted.

Further pressures on the business unit stemmed from "continued excess latex inventory for gloves and excess chemical inventory for adhesive tapes."

Operating profit, however, fell 45% year-on-year in fiscal 2022 to Yen10.2 billion, reflecting a Yen35.7-billion surge in raw materials and energy costs.

Profits were further impacted by a Yen5.5-billion decline in volumes as well as a Yen3.5 million rise in cost of ocean freight, according to Zeon's 26 April report.

The higher costs were only partially offset by a Yen11-billion currency gain and Yen25-billion impact of sales-price adjustments.

In its 2023 outlook, Zeon foresaw challenges ahead for the elastomers business due to anticipated weak demand but signs of recovery in the second half.

Segment annual sales are set to come in at Yen218 billion this year, down by about 2% on the level reported for fiscal 2022.

While first-half sales will see a "relatively flat development," Zeon expects demand to recover in the second half of its fiscal year 2023.

In the SR market, Zeon forecast automotive demand "to be on par" with fiscal 2022 levels, as well as a significant step-up in overall demand in the second half.

Operating income is, meanwhile, projected to decline by around 36% year-on-year in 2023, to Yen6.5 billion

Zeon's forecast of a decline in earnings was linked in part to "increased costs associated with human capital resources, etc."

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