Profits Down at KH Neochem, Yushiro


Profits Down at KH Neochem, Yushiro

Yushiro Chemical posted lower operating income for the quarter ending Dec. 31, and KH Neochem’s performance materials segment had lower operating income for the fourth quarter and full year, as both companies noted that rising costs for raw materials exceeded their ability to compensate by raising their own prices.

Yushiro Chemical

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Metalworking fluids and industrial oil manufacturer Yushiro, whose fiscal year ends in March, reported cumulative operating income of ¥816 million ($6.1 million) for the nine-months period ending Dec. 31 – the first through third quarters of its fiscal year – a 3% decrease from ¥845 million. The reduction came in spite of efforts to pass on rising raw material prices in the form of higher prices to attempt to improve profit, the company noted in its earnings presentation. In the quarter ending Dec. 31, Yushiro’s operating income decreased 6% to ¥479 million, compared to the same period a year earlier.

Sales increased 24% to ¥34.2 billion for the nine-months ending in December, improving from ¥27.6 billion. The company attributed the increase to continued production recovery in Japan and overseas, while noting that a full-fledged recovery wasn’t achieved, due to the impact of semiconductor supply shortages among major customers, including automobile manufacturers. Sales for the quarter rose 24% to 9.5 billion.

Profit for each of Yushiro’s regional business segments is based on operating income.

Within its domestic Japan market, Yushiro posted a ¥3 million operating loss for the nine-months period, improving from a ¥63 operating loss. Sales in Japan increased 10% to ¥13.3 billion. Although raw material prices remained at a high level, the company said, sales increased due to revisions in sales prices, while it was able to shrink operating losses through the effects of cost reductions.

In the Americas, segment profit jumped 43% to ¥694 million for the period, while sales rose 44% to ¥12.5 billion. The company noted strong sales in Brazil and at its QualiChem subsidiary in North America.

In China, segment profit for the nine months fell 35% to ¥218 million, compared to ¥337 million. Sales in the country increased 19% to ¥4.4 billion. The company said that in spite of the government’s strict COVID-19 policies, its sales were relatively strong, though its profits were impacted by the ricing prices of raw materials.

In Southeast Asia and India, segment profit for the period fell 33% to ¥251 million, from ¥374 million. Sales in the region were up 26% at ¥4.1 billion. Its customers’ operating rates in the region were on a  recovery trend, Yushiro noted.

KH Neochem

KH Neochem reported a 21% decrease in operating income in the fourth quarter to ¥2.3 billion. Fourth-quarter net sales rose 5% to ¥13.7 billion.

During 2022, KH Neochem’s operating income fell 23% to ¥7.7 billion yen, compared to ¥10 billion. Net sales last year increased 5% to ¥46.2 billion.

The company specializes in oxo reactions to produce alcohols and esters. KH Neochem sells derivatives, such as 2-ethylhexanoic acid and isononanoic acid, for use as raw materials in lubricants. In addition, also manufactures fatty acids, esters and feedstocks for refrigeration compressor lubricants. The company noted that the global air conditioner market remained as strong as it did in 2021, remaining firm in China and other developed countries, with favorable demand continuing in emerging countries such as India. However, KH Neochem said in its earnings presentation, sales volumes decreased due to production troubles, including a bottleneck in raw material supply. The company said it revised prices in response to soaring naphtha prices, but an increase in liquid natural gas and other prices was only partially passed on to customers through higher product prices.