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Japan-Update

Ink maker DIC seen undershooting full-year forecast

Profitability deteriorates as raw materials costs climb

Sales of pigments for cosmetics have been strong.

TOKYO -- Japanese ink producer DIC's group operating profit is now expected to climb 3% to 56 billion yen ($498 million) for 2017, missing its projection of a 7% increase to 58 billion yen, as shrinking newspaper ink demand and rising raw materials costs damage profitability.

Sales are seen in line with the forecast of 5% growth to 790 billion yen.

January-September operating profit likely edged down 1% to about 40 billion yen, also less than forecast. Sales for the period likely climbed 4% on the year to around 580 billion yen. 

Printing inks account for just under half of total sales. Demand from packagers of food and consumer products has increased, but not enough to fully offset the newspaper ink downturn. Profitability is also declining, since rising costs of raw materials naphtha and titanium dioxide cannot be passed on to customers.

Higher raw materials costs also hurt profitability in operations for polymers, which provide resin and related products, and for compounds, which handle functional materials. The segments are on track to lower profits, despite improved sales volume and revenue growth.

A bright spot is the fine chemicals business, which is expected to log a second straight record profit in 2017 on brisk sales of functional pigments used in cosmetics and color filters for liquid crystal panels as well as other liquid crystal materials.

Although a decline in operating profit is expected for the January-September period, signs of recovery are emerging as the impact of higher raw materials costs eases in China and elsewhere for ink operations. The yen is also softening against the dollar and emerging-economy currencies, providing a tailwind the company expects to ride to better profit in the October-December quarter.

Nine-month earnings come out Nov. 14.

(Nikkei)

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