Displaying items by tag: Sumitomo Osaka
Two of Japan's largest cement producers have reported reduced domestic cement sales in the country this week. First, Taiheiyo Cement revised its forecast for its 2017 financial year, ending on 31 March 2017, bringing its estimated net sales down by 2.3%. Then, Ube Group reported that its cement sales had fallen by 7.2% year-on-year to US$1.05bn in the first half of its financial year. Both producers blamed poor weak demand locally, but Ube also cited a poor export market.
Graph 1: Domestic and export cement sales in Japan, 2006 - 2015. Source: Japanese Cement Association.
This last point is interesting because it differs from the latest data released by the Japanese Cement Association (JCA). As can be seen in Graph 1 JCA figures show that exports of cement have been rising since 2013. So far this trend looks likely to continue in 2016. Ube's different experience may arise from its market mix and its distribution of cement plants and transport infrastructure. Both of its cement plants are based in the south of the country. Commentators have attributed the boost in exports to the devaluation of the Yen in 2015 as well as strong brand perception overseas. Unfortunately, this overall rise in exports has been matched by a fall in domestic sales at the same time and this is causing a headache for the major producers. Production too has started to drop since 2014 (Graph 2).
Graph 2: Cement production in Japan, 2006 - 2015. Source: Japanese Cement Association.
Japan's cement market is dominated by four producers - Taiheiyo Group, Mitsubishi Materials, Ube Industries and Sumitomo Osaka Cement - which hold nearly three quarters of the nation's production capacity between them. According to Global Cement Directory 2016 data, Taiheiyo Cement and its subsidiaries is the market leader with over 30% market share with the other three holding 10 - 20% each.
Graph 3: Cement production capacity share in Japan (Mt). Source: Global Cement Directory 2016.
Taiheiyo's downgraded forecast follows poor first quarter results, in which its net sales for its cement business fell by 16% to US$1.19bn. This follows a slight rise in net sales for its cement business in its 2016 financial year due to a boost in sales from its overseas subsidiaries, particularly in the US, that surpass a fall in domestic sales. Sales volumes were 14.7Mt domestically and 4Mt in exports in 2016. Mitsubishi Materials has posted a similar picture with cement sales and profits rising in 2016 before suffering in the first quarter of 2017. Mitsubishi Materials blamed the poor market on a delay in construction work mainly due to labour shortages and sluggish growth in demand from the public sector. Ditto Sumitomo Osaka Cement.
As highlighted by such decision as Tokyo Cement's move to resume exporting clinker to Sri Lanka in early 2015, Japan's cement industry is working hard to compensate for falling demand at home. Increasing exports in Asia Pacific among other massive exporters such as China, Vietnam and South Korea is impressive, although the prominent foothold by Japanese companies in the recovering US market may offer some advantage here. On-going weak demand in China though cuts out one major market for Chinese exporters. However, being a major exporter in a region of major cement producers must be a concern. Although commentators such as Ad Ligthart dismiss the chances of China flooding the world with cheap cement, if they are wrong and Japan continues its reliance on exports it may find itself in deep water. The other risk is if the US authorities decide to get tougher on foreign exports it may knock out one more market for Japanese exports. Too much reliance on exports is always dangerous. In this context, it’s no surprise that Japanese cement producers are blaming the government for insufficient infrastructure spending.
Japan: Japan's Sumitomo Osaka Cement consumed 1.41Mt of coal in financial year 2015 to March 31, 2016, down 2.7% year on year. Petroleum coke consumption in FY2015 was 0.10Mt, up 19%.
Japan: Sumitomo Osaka Cement's operating profit rose by 14% year-on-year to US$83m in the April – September 2015 period, according to Reuters. Its sales rose by 3.7% to US$937m and its net profit rose by 84.8% to US$62.4m.
Japan: In the April - June 2015 period, Sumitomo Osaka Cement's operating profit rose by 26.8% year-on-year to US$35.5m. Its sales rose by 6% to US$455m, according to Reuters.
Japan: Cement producers in Japan aim to upgrade their shipping fleets following brisk demand from the reviving construction industry. Three cement producers are expected to spend more than US$95m to acquire new and used vessels in early 2014 according to Nikkei Report. Roughly 70% of cement is moved by sea in Japan.
SumitomoOsaka Cement will spend US$65m, first adding a large ship that can carry 8000t in February 2013 and then purchasing two 2000t ships and one 5500t ship after April 2015. Following the decommissioning of three ships the company will expand its fleet to 20 ships with a combined capacity of 93,000t in 2015 from 19 vessels with a capacity of 82,000t in 2013.
Ube-Mitsubishi Cement plans to start using three new large ships, each with a capacity of roughly 7000 - 12,000t, from February 2014. The company is expected to spend about US$14m on the additions, two of which will be newly built and the other rented.
Taiheiyo Cement will add three large ships for about US$19m in 2014 or later.
Japanese cement producer reduced their shipping fleets following declines in the market in the early 1990s. A reversal of this trend has been attributed to growing construction in large cities, rebuilding after the 2011 earthquake and tsunami and an anticipated rise in demand ahead of the 2020 Tokyo Olympics.
Japan: Sumitomo Osaka Cement has reported that its operating profit rose by 77% to US$38.5m in the first quarter of the 2012 - 2013 Japanese financial year that ended on 30 June 2013. In the quarter ending on 31 March 2012 it was US$21.8m. The Japanese cement producer noted that public-sector demand for cement was increasing due to reconstruction following the March 2011 earthquake and tsunami disaster and that private-sector demand had also increased in urban areas.
The company's sales revenue rose slightly in the first quarter of the 2012 – 2013 financial year to US$547m from US$539m. Net profit increased by 151% to US$25.8m from US$10.3m. Sales from the company's cement business in the quarter were US$440, a slight increase year-on-year.
Japan: Sumitomo Osaka Cement plans to invest US$12m to install waste heat recovery (WHR) systems at two of its cement plants. The company has decided to build WHR technology at its Tochigi plant and to a plant in Aomori Prefecture operated by a subsidiary. Previously Sumitomo Osaka installed WHR systems at its Ako plant in Hyogo Prefecture and at its Kochi Precture plant.
China: Sumitomo Osaka Cement intends to increase cement production by 80% in China's Yunnan Province by 2016. The Japanese cement producer has been making cement in Yunnan Province since 2007 in partnership with a local steelmaker and a Hong Kong construction materials company. That operation involves four plants, each run by a separate joint-venture firm.
With infrastructure investment still active in Yunnan, the plan is to build two more cement plants with a combined production capacity of 6.4Mt/yr. This will make the operation the province's largest, with a capacity of 14.6Mt/yr.
The first new plant will be built in December 2014 and the second in 2016. Sumitomo Osaka Cement will invest around US$42m for its share of the project.
Japan: Sumitomo Osaka Cement has announced plans to lift sales of power generated in-house at its Tochigi Prefecture plant using wood biomass fuel. The current fuel mix is 85% wood chips and 15% coal, 20% more wood chips than previously.
The group's operating profit is expected to surge by 41% to US$144m in the fiscal year ending March 2013. Sumitomo Osaka Cement does not disclose power-related earnings, but the steady advance of power sales is expected to become a factor that boosts operating profit by US$12.5-25m.
The power generation facilities at the Tochigi plant were completed in February 2009 and went into full operation in April 2009. Current output is 25,000kw.
Sumitomo Osaka Cement suspended operations at one of the plant's two kilns in January 2012 as part of restructuring measures, giving it capacity to supply more of its leftover power. It aims to contribute to the power supply by selling the excess electricity, especially with Japan's nuclear plants remaining offline due to the aftermath of the Fukashima radiation leak following the March 2011 earthquake and tsunami disaster.
Japan: Taiheiyo Cement Corp. has released interim results for the first nine months of its current fiscal year, which ended on 31 December 2011. The results showed a group revenue of US$7.0bn, slightly up on the first nine months of the previous fiscal year.
Its operating profit was reported as US$242m, more than double the US$111m seen in the previous fiscal year. Its pretax profit was US$134m and its net profit for the period was US$14.2m, a turnaround from a US$72.1m loss made in 2010.
Taiheiyo forecast that the whole of the 2012 fiscal year (ending 31 March 2012), would see a revenue of US$9.3bn, an operating profit of US$350m and a net profit US$146m.
Taiheiyo's results come after a decision by Morgan Stanley MUFJ Securities to increase its rating for the Japanese cement sector to 'attractive,' the highest ranking on its three-tier scale. Shares in major companies such as Taiheiyo and Sumitomo Osaka Cement jumped sharply with the new rating.
Analysts at the brokerage said that profits at cement firms will rise in line with their ongoing efforts to cut costs. It also said that higher prices, an increasingly balanced supply and demand relationship and rising demand related to earthquake reconstruction efforts will also support profits in the cement industry.
The analysts also said that investors have undervalued shares of Sumitomo Osaka Cement and Taiheiyo Cement despite expectations that their earnings will improve in the 2012 fiscal year.