Overview of Results for FY2022
During the fiscal year ended March 31, 2023 (April 1, 2022 – March 31, 2023), the global economy was supported by the gradual normalization of socio-economic activities in step with the relaxation of movement restrictions aimed at preventing the spread of COVID-19 infection. However, the prolongation of Russia’s invasion of Ukraine led to surges in prices of raw materials, fuels and other items. Around the world, countries have thus been stricken with steep inflation, prompting the financial authorities of the United States, EU members and other nations to continue with monetary tightening. This policy trend, in turn, resulted in a looming sense of vigilance against major recessions and negatively affected capital expenditure and personal consumption. Because of these and other factors, the economic situation remained unstable.
Although the MGC Group has benefitted from the depreciation of the yen, the business environment surrounding it remained harsh under the influence of surges in raw material and fuel costs, slower-than-expected recovery in demand in China, declining demand in the United States and Europe in the face of anxiety over economic deceleration, and other factors. Furthermore, sales of PCs, smartphones and other electronic devices have dropped as demand for these items ceased to be strong due to the end of temporary surge seen during the pandemic, with inflation now leading to sluggish consumption. In addition, there has been notable stagnation in demand for semiconductor-related and other products in the second half of the fiscal year due mainly to the growing volume of supply chain inventories.
Against this backdrop, the MGC Group has promoted a medium-term management plan launched in April 2021. In line with this plan, the Group aims to shift to a profit structure resilient to changes in the business environment. To this end, the Group is striving to:
- “Further strengthen competitively advantageous (“differentiating”) businesses,”
- “Accelerate creation and development of new businesses,” and
- “Reevaluate and rebuild unprofitable businesses.”
These efforts will help push ahead with business portfolio reforms.
In addition, the Group is countering surges in raw material and fuel prices and transportation costs by revising sales prices upward to align with an overall increase in costs. Through these and other initiatives, the Group is endeavoring to maintain and enhance its earnings power.
The MGC Group’s net sales increased, despite lower sales of electronic materials and other offerings, due mainly to the impact of foreign exchange fluctuations and upwardly revised sales prices aligned with higher raw material and fuel prices and growing transportation costs, along with the recent inclusion of a South Korea-based polyacetal sales company into the scope of consolidation.
Operating profit decreased, despite the depreciation of the yen, robust polyacetal sales and other positive factors, due primarily to surges in raw material and fuel prices and transportation costs, along with lower sales of electronic materials and other offerings as well as growth in repair costs and R&D expenses.
In the face of downturns in methanol market prices, ordinary profit decreased despite an increase in equity in earnings of affiliates in light of such positive factors as the reversal of deferred tax liabilities at an overseas methanol producing company. This decrease was mainly attributable to a decline in equity in earnings of affiliates related to engineering plastics and the decrease in operating profit.
Profit attributable to owners of the parent
Results by Business Segment
The methanol business saw increases in both net sales and earnings thanks to the depreciation of the yen, an increase in equity in earnings of affiliates and other positive factors, despite somewhat lower market prices compared with the previous fiscal year.
Methanol and ammonia-based chemicals posted a decrease in earnings due mainly to deterioration in neopentyl glycol market prices and an increase in repair costs, despite progress in profitability adjustments offsetting the negative impact of higher raw material and fuel prices.
High-performance products posted a decrease in earnings due mainly to the lower sales volume of meta-xylenediamine, despite the higher sales volume of aromatic aldehydes.
Xylene separators and derivatives saw a decrease in earnings due to rises in raw material and fuel prices, and resulting deterioration in the profitability of purified isophthalic acid (PIA).
Foamed plastics posted a decrease in earnings due mainly to rises in raw material and fuel prices outpacing the timing of product price revisions.
Inorganic chemicals posted a decrease in earnings despite progress in the upward revision of sales prices to align with rises in transportation costs and prices for raw materials and fuel, with sluggish semiconductor demand leading to the lower sales volume of chemicals for use in semiconductor manufacturing in some market regions.
Engineering plastics saw increases in net sales and earnings, despite lower sales volumes of polycarbonates and polycarbonate sheet films, thanks to constantly robust sales of polyacetal as well as the inclusion of a South Korea-based polyacetal sales company into the scope of consolidation.
Optical materials posted a decrease in earnings amid stagnant demand for smartphones, a primary application of optical polymers, despite the disappearance of the negative impact of inventory adjustments carried out by customers in the prior fiscal year.
Electronic materials saw decreases in net sales and earnings. This reflected such factors as declining demand for general-purpose materials for use in PC-related devices and home appliances, which constitute a part of BT materials for IC plastic packaging, the core product category for electronic materials. Other negative factors included stagnation in demand for highly functional materials for use in smartphones and memory devices.
Earnings from oxygen absorbers such as AGELESS™ declined due mainly to rises in raw material prices and transportation costs.