Profits Down for KH Neochem, Yushiro Chemical

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Profits Down for KH Neochem, Yushiro Chemical

In Japan, KH Neochem Co. reported steep declines in third-quarter operating income and net sales for its performance materials segment, while metalworking fluids and industrial oil producer Yushiro Chemical Industry reported an operating loss and lower sales.

KH Neochem

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KH Neochem’s performance materials segment, which includes refrigeration lubricant raw materials, posted operating profit of 3.6 billion yen (U.S. $34.5 million), down 44% from ¥6.4 billion in the same quarter in 2019.

Net sales for the segment declined 26% to ¥21.3 billion, down from ¥28.6 billion. Significant demand decline drove the segment decrease in sales volume, the company said.

In its earnings presentation, KH Neochem noted that continuing inventory adjustments of air conditioners and refrigeration lubricant raw materials contributed to a decrease in revenue and profit for the performance materials segment. These inventory adjustments were greater than expected in China and other countries during the third quarter, the company said. It predicted a recovery starting in the fourth quarter.

The company specializes in hydroformylation, or oxo reactions, that produce alcohols and esters along with derivatives such as 2-ethylhexanoic acid and isononanoic acid, which it sells as raw materials for lubricants. It also makes fatty acids, esters and feedstocks for niche lubricants used in refrigeration compressors.

Yushiro Chemical Industry

Yushiro posted a ¥72 million operating loss for the quarter ending Sept. 30 – considered the second of its fiscal year starting April 1 – falling from ¥1.2 billion operating income in the year-earlier period.

Sales for the quarter dropped 24% year-on-year to ¥14.2 billion, down from ¥18.8 billion.

Profit for each of Yushiro’s regional business segments is based on operating income. The company noted in its explanation of business results the continued impacts of COVID-19 pandemic-related restrictions and economic impacts globally and within Japan.

In its home country, Yushiro’s sales declined 26% year-on-year to ¥6.5 billion, and the segment reported a ¥215 million operating loss, compared to a ¥470 million profit a year earlier.

In the Americas, sales dropped 22% year-on-year to ¥4.4 billion, and segment profit dropped 75% to ¥128 million. The company noted that business performance in the Americas deteriorated due to the spread of new coronavirus infections, but results in the United States and Mexico improved sharply since June. In Brazil, customer utilization of the company’s products was delayed due to continued spread of infection, the company said.

In China, sales decreased 15% year-on-year to ¥1.8 billion, and segment profit declined 23% year-on-year to ¥87 million. Although business in China was affected by the spread of the pandemic, the company said it had recovered to the same level as the previous year since April.

In Southeast Asia and India, sales decreased 33% year-on-year to ¥1.5 billion, and segment income dropped 60% to ¥117 million.