Denka downgrades elastomers unit forecast, notes chloroprene woes

Tokyo – Denka has downgraded business forecasts for its Elastomers & Infrastructure Solutions* business unit, which reported a 9.2% year-on-year decline in revenues to Yen85.8 billion over the nine months to 31 Dec 2023.

The sales decline reflected a 9.4% reduction in volumes, partly offset by a 2.9% pricing improvement, the Japanese group’s recently issued results for the first three quarters of its fiscal year show.

Operating income at the unit went from break-even in the prior-year period to a loss of Yen5.6 billion over the three quarters on lower volumes (-5.9%) and higher costs (-6.6%) and despite pricing gains (+7.0%).

The trends were typified by Denka’s chloroprene rubber business, where a dip in demand for applications in industry and adhesives and ongoing automotive-industry inventory adjustments offset stronger pricing.

Profits, it added, “decreased significantly with weak demand for chloroprene rubber, cost increases, including repairs and labour costs at Denka Performance Elastomers (DPE) in the US.”

This included a write-down in valuation of chloroprene rubber  inventory, linked to “lower utilisation capacity caused by a decrease in demand, as well as higher costs at DPE in the US.”

Looking ahead, Denka revised down its full-year 2023 sales forecast for Elastomers & Infrastructure Solutions to Yen110.0 billion, compared to Yen120 billion projected last November.

Meanwhile, operating losses at the unit are now expected to come in at Yen10.5 billion, compared to a previously forecast loss of Yen7.5 billion.

Factors behind downgrade included a Yen3.3-billion estimated impact of the Noto Peninsula earthquake, and production cutbacks for chloroprene rubber, noted Denka.

*Elastomer & Infrastructure Solutions’ portfolio includes functional elastomers, special cement additives, fertilisers, corrugated pipe, alumina fibre.