Raw Material Prices Impact Earnings

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Raw Material Prices Impact Earnings

Raw material prices were a common theme in the earnings of Japan’s KH Neochem and Yushiro Chemical for the quarter ending March 31. The higher costs blunted profits even though business recovery brought increased sales, Yushiro Chemical said. KH Neochem – which posted a large increase in profits – noted that revising its product prices helped balance the impact from raw materials.

Yushiro Chemical

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Metalworking fluids and industrial oil maker Yushiro Chemical reported that its fiscal year net profit plummeted 72% to ¥273 million, down from ¥978 million.

The company’s fiscal year runs from April 1 through March 31.

Operating profit for the fiscal year declined 18% to ¥894 million yen, compared with ¥1.1 billion. In the quarter ending March 31, operating profit plummeted 93% to ¥49 million yen, from ¥683 million in the same period last year.

Yushiro noted that despite increased sales, prices for raw materials soared and distribution costs increased, raising costs more than expected. This resulted in a decline of operating profit sequentially from the three previous quarters of the fiscal year, when operating profit ranged between ¥484 million and ¥687 million yen.

Sales for the full fiscal year rose 19% to ¥37.7 billion, improving from ¥31.7 billion.

In the quarter ending March 31, sales increased 11% to ¥10 billion. Quarterly sales are continuing an upward, sequential trend – rising from 8.9 million in the quarter ended in June 2021 to 9.5 million in the quarter ended in December – due to sales volume expansion driven by recovery of customer production, the company said.

KH Neochem

Japanese specialty chemical producer KH Neochem reported that operating profit for its performance materials segment rose 37% to 2.6 billion Japanese yen (U.S. $19.4 billion) for the first quarter, compared to the same period last year. Price differences for the performance materials segment contributed greatly to profits, the company noted.

Net sales for the segment increased 23% to ¥11.4 billion, improving from ¥9.3 billion.

Sales volumes remained at a high level year on year, the company said in its earnings presentation, with product price revisions progressing against the backdrop of soaring raw material prices and solid demand.

The company’s specialties are oxo reactions for production of alcohols and esters. Yushiro sells derivatives, such as 2-ethylhexanoic acid and isononanoic acid, for use as raw materials in lubricants. The company also manufactures fatty acids, esters and feedstocks for refrigeration compressor lubricants.

KH Neochem deemed demand for its refrigeration lubricant raw materials as solid in the first quarter, continued from the previous year, although it noted some demand differences were seen among consumers. Air-conditioner production remained strong in China toward the summer high demand season, the company added.

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