Zeon anticipates recovery in second half of 2023

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

The unit, which produces synthetic rubber, latex and chemicals, reported an 11-percent year-on-year increase in sales to $1.7 billion (Yen 222 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 percent in Q4 vs Q3) after repairs (were) 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 percent year-on-year in fiscal 2022 to $77.7 million, reflecting a $271 million surge in raw materials and energy costs.

Profits were further impacted by a $41.9 million decline in volumes as well as a $26,600 rise in cost of ocean freight, according to Zeon's April 26 report.

The higher costs were only partially offset by a $83.7 million currency gain and $190 million impact of sales-price adjustments.

In its 2023 outlook, Zeon foresees 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 about 1.5 billion this year, down by about 2 percent 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 forecasts 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 percent year-on-year in 2023, to $47 million

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