March 27, 2014 2:56 am JST

Resin demand may lift Kuraray's profit to record in fiscal 2014

TOKYO -- Kuraray Co.'s group operating profit is expected to rise 14% to a record 57 billion yen ($551 million) or so next fiscal year, topping the all-time high of 54.7 billion yen logged in fiscal 2011.

     Sales at the Japanese chemical and materials manufacturer are projected to climb 12% to 460 billion yen in the year ending March 2015. The vinyl acetate business, part of the plastics field that accounts for 40% of Kuraray's sales and a large chunk of operating profit, remains a big earner.

     Ethylene vinyl alcohol resin with strong gas barrier properties, typically used in automotive gasoline tanks, has drawn increasing demand from overseas automakers. Sales of the resin are expected to remain brisk beyond the current fiscal year. Water-soluble film used in individual packaging for laundry detergent and other items are poised to reap growth at home and abroad.

     Equipment troubles at a European unit will weigh down profit by around 2 billion yen this fiscal year. But associated expenses will subside in fiscal 2014, resulting in a profit boost. Demand for optical films used in LCD televisions and other devices remains sluggish, but rising sales volume will keep sales and profit on a par with the current year.

     Isoprene operations are performing well in such areas as heat-resistant plastics used for autoparts and LED reflectors. The functional-materials business is expected to turn profitable, thanks to the rollout of new high-value-added products for use in soccer spikes and automotive seats.

     But some uncertainty looms. Kuraray announced last November that it would acquire DuPont's vinyl acetate operations for more than $500 million. It aims to complete the transaction in the first half of 2014. Sales will increase, but goodwill charges and other expenses could squeeze profit.

     For the year ending Monday, group sales are expected to rise 11% to around 410 billion yen, while operating profit may rise just slightly to 50 billion yen. Both figures would be in line with guidance.