Showa Denko Announces Operating Income Increase of 22% in First Half 2005.Tokyo, Japan, Aug 9, 2005 - (JCN JCN Japan Corporate News JCN Journal of Cognitive Neuroscience JCN Journal of Cardiovascular Nursing JCN Journal of Christian Nursing JCN Job Control Number JCN Journal of Child Neurology JCN joint communications network (US DoD) Newswire) - Showa Denko Showa Denko K. K. (昭和電工株式会社 K.K. (SDK (Software Developer's Kit) See developer's toolkit and Windows SDK. SDK - Software Developers Kit (or "Software Development Kit"). ) announces a 22.0% increase in operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the first six months (January - June) of 2005, to JPY JPY In currencies, this is the abbreviation for the Japanese Yen. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 27,115 million, on net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of JPY 390,950 million, up 12.3%, from the same period of last year. Ordinary income also rose 44.5%, to JPY 23,446 million, due partly to improvement in the balance between interest expense and interest/dividend income. Net income was up 227.0%, to JPY 20,866 million, due partly to JPY 5,049 million of extraordinary profit, including gain on the sale of shares in SDS 1. (company) SDS - Scientific Data Systems. 2. (tool) SDS - Schema Definition Set. Biotech K.K. During the period, despite inventory adjustments by the electronic parts industry, the Japanese economy underwent a gradual recovery owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de improved consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. and recovery in the US and Asian economies. In the chemical and nonferrous metals industries, costs of naphtha naphtha (năp`thə, năf`–), term usually restricted to a class of colorless, volatile, flammable liquid hydrocarbon mixtures. , aluminum ingot ingot Mass of metal cast into a size and shape such as a bar, plate, or sheet convenient to store, transport, and work into a semifinished or finished product. The term also refers to a mold in which metal is so cast. , and other raw materials remained at high levels. However, demand for chemical products increased, helped by steady exports to China and other Asian countries. In the electronic parts/materials industry, the situation remained severe due to prolonged inventory adjustments that had started in the latter half of 2004. Under the circumstances, the Showa Denko Group proceeded with the development of the "strategic growth businesses" as defined in the Sprout Project, while continuing to restructure operations and reduce costs. The following are summary of the results by business segment: [Petrochemicals] Production of ethylene and propylene propylene /pro·pyl·ene/ (pro´pi-len) a gaseous hydrocarbon, CH3CHdbondCH2. propylene glycol a colorless viscous liquid used as a humectant and solvent in pharmaceutical preparations. in the first half of 2005 increased slightly over the same period of last year due to steady demand. Sales of olefins were up due to higher selling prices, reflecting soaring raw material costs. Sales of organic chemicals were also up due to the rise in selling prices of acetic acid acetic acid (əsē`tĭk), CH3CO2H, colorless liquid that has a characteristic pungent odor, boils at 118°C;, and is miscible with water in all proportions; it is a weak organic carboxylic acid (see carboxyl group). , vinyl acetate Vinyl acetate, also known as VAM for vinyl acetate monomer, has the chemical formula CH3COOCH=CH2 and is a colorless liquid with a sweet flavor. Systematic names include 1-acetoxyethylene and acetic acid ethenyl ester. and ethyl acetate ethyl acetate n. A colorless volatile flammable liquid, CH3COOC2H5, used in perfumes, flavorings, lacquers, pharmaceuticals, and rayon and as a general solvent. , reflecting higher feedstock costs. Sales of plastics by Showa Highpolymer Co., Ltd. and sales of plastic products by Heisei Polymer Co., Ltd. both increased slightly due to an increase in selling prices, reflecting the rise in feedstock costs. As a result, the Petrochemicals segment's sales rose 21.6%, to JPY 142,611 million, and operating income shot up 49.6%, to JPY 11,408 million. [Chemicals] Production of liquefied ammonia increased over the same period of last year when there was a scheduled shutdown. In the gases & chemicals operations, sales of industrial gases fell as a result of the transfer in 2004 of the commodity gas business to TG Showa K.K. Sales of industrial chemicals, including acryolonitrile and ammonia, were up due to steady shipment volumes and prices. Thus, overall sales of gases & chemicals increased slightly. In the specialty chemicals operations, sales of Shoprene polychloroprene synthetic rubber synthetic rubber: see rubber. increased due to steady shipment volumes and prices. Shipment volumes of isophthalonitrile (an agrochemical agrochemical Any chemical used in agriculture, including chemical fertilizers, herbicides, and insecticides. Most are mixtures of two or more chemicals; active ingredients provide the desired effects, and inert ingredients stabilize or preserve the active ingredients or aid intermediate) rose while those of feed-additive vitamin C vitamin C or ascorbic acid Water-soluble organic compound important in animal metabolism. Most animals produce it in their bodies, but humans, other primates, and guinea pigs need it in the diet to prevent scurvy. and chelating agents chelating agents (kē`lātĭng). Certain organic compounds are capable of forming coordinate bonds (see chemical bond) with metals through two or more atoms of the organic compound; such organic compounds are called chelating agents. fell. Thus, overall sales of specialty chemicals declined slightly. Sales of agrochemicals fell sharply following the sale of SDS Biotech K.K. in March 2005. As a result, the Chemicals segment's sales fell 6.0%, to JPY 36,250 million, but operating income rose 55.4%, to JPY 2,577 million. [Electronics] Shipment volumes of hard disk (HD) media increased substantially over the same period of last year following the consolidation of Showa Denko HD Trace Corporation in Taiwan in July 2004 and the expansion of the Group's HD capacities in the latter half of 2004. Meanwhile, shipment volumes of gallium phosphide phosphide Any of a class of chemical compounds in which phosphorous is combined with a metal. Phosphides exhibit a wide variety of chemical and physical properties. Phosphides that are rich in metal have high melting points and are hard, brittle, and chemically inert; these (GaP) for LEDs declined substantially due to inventory adjustments by the LED industry. Combined sales of HD media and compound semiconductors were up. In the electronic materials business, sales of semiconductor-processing specialty gases and electroceramics decreased due to inventory adjustments by the electronic parts industry. However, shipment volumes of magnetic alloys increased due to the recovery of demand for rare earth magnets rare earth magnets, n.pl magnets made from materials such as samarium, cobalt, neodymium, and boron. These magnets generally produce relatively strong magnetic fields. . Shipment volumes of fine carbons increased as well. Thus, overall sales of electronic materials were up slightly. As a result, the Electronics segment' sales increased 21.9%, to JPY 62,667 million, and operating income rose 12.8%, to JPY 7,768 million. [Inorganic Materials] Production of graphite electrodes increased from the same period of last year. Sales of ceramics were up due to brisk demand for alumina. The graphite electrode business of both Showa Denko K.K. and its U.S. subsidiary Showa Denko Carbon, Inc. recorded increased sales, reflecting a growing demand for steel worldwide. As a result, the Inorganic Materials segment's sales increased 11.8%, to JPY 29,843 million, and operating income jumped 50.0%, to JPY 4,152 million. [Aluminum] Production of automotive heat exchangers in the first half of 2005 increased in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , but decreased in Japan and Europe. Production of extrusions and rolled products fell, but production of Shotic forged products rose. Sales from ingot marketing rose slightly, reflecting the trends in the international market. Sales of rolled products fell slightly as increases in the shipment volumes of high purity foils for capacitors were more than offset by decreases in the shipment volumes of general extruded sheets. In the extrusions/specialty products business, shipment volumes of extrusions decreased while those of aluminum cylinders for laser printers increased, resulting in a slight decline in overall sales. Sales of heat exchangers decreased as shipment volumes fell in Japan and Europe. Sales of Shotic forged products increased due to a growing demand for automotive parts applications. Sales of aluminum cans also increased due to increases in shipment volumes. As a result, the Aluminum segment's sales increased 4.6%, to JPY 119,580 million, but operating income decreased 28.0%, to JPY 4,554 million. Major steps taken in the first half of 2005 [Petrochemicals] - Completion of structural reform of plastic processing businesses. The Company decided to transfer its shares in Hymold Co., Ltd., a consolidated subsidiary engaged in the plastic processing business, to the Toyo Denka Kogyo Group. The Company also took measures to increase efficiency at Heisei Polymer Co., Ltd. and Showa Denko Plastic Products Co., Ltd., both engaged in the plastic processing business. Thus, the Company completed overall restructuring in this sector in accordance with the Sprout Project. [Chemicals] - Sale of an agrochemicals subsidiary through MBO MBO See: Management buyout . In March, the Company transferred all of its shares in SDS Biotech K.K., a consolidated subsidiary engaged in the agrochemicals business, to the board members of SDS and Mizuho Capital Mizuho Capital Co., Ltd. (みずほキャピタル株式会社 Partners Co., Ltd. through a management buyout Management buyout (MBO) Leveraged buyout whereby the acquiring group is led by the firm's management. management buyout See going private. (MBO) scheme. - Dissolution of a nylon specialty joint venture. In June, the Company transferred all of its shares in EC-SHOWA DENKO K.K. to the joint venture partner EMS-CHEMIE AG of Switzerland, withdrawing completely from the nylon specialty business. [Electronics] - Expansion of HD media production capacity. The Company has decided to increase its hard disk (HD) media production capacity by 3.05 million disks a month, to 13.75 million disks a month, by March 2006 to meet a growing demand for small diameter media for use in mobile music players. The expansion will be carried out through construction of new lines and debottlenecking of existing lines with capital investment of approximately JPY 12 billion. - Commercial production of perpendicular magnetic recording technology HD media. The Company started the world's first commercial production of perpendicular-magnetic-recording-technology-based HD media, enabling a dramatic increase in media recording density. They are 1.89-inch-diameter media for use in mobile music players, having the capacity of 40 gigabytes per disk-double the capacity of conventional longitudinal-recording-technology-based products of the same size. - Commercial production of 0.85-inch-diameter HD media. The Company started commercial production of the world's smallest 0.85-inch-diameter HD media. Demand for very-small-diameter HD media, including the 0.85-inch type, is expected to grow rapidly in the near future as they will be installed in cellular phones to enable handling of music and TV programs transmitted via Internet. - Development of new charge dissipating agent for processing of semiconductors. The Company developed a new grade of charge dissipating agent, Espacer 300F series, substantially enhancing the efficiency of electron-beam lithography process in the production of integrated circuits Integrated circuits Miniature electronic circuits produced within and upon a single semiconductor crystal, usually silicon. Integrated circuits range in complexity from simple logic circuits and amplifiers, about 1/20 in. (1. . The agent helps ensure pattern accuracy by preventing positional errors due to electrostatic charge Noun 1. electrostatic charge - the electric charge at rest on the surface of an insulated body (which establishes and adjacent electrostatic field) electric charge, charge - the quantity of unbalanced electricity in a body (either positive or negative) and . A further integration of ICs requires semiconductor processing at narrower line widths. Espacer 300F contains a proprietary conductive polymer A conductive polymer is an organic polymer semiconductor, or an organic semiconductor. Roughly, there are two classes-- the Charge transfer complexes and the conductive polyacetylenes. . [Inorganic Materials] - Dissolution of a low-carbon ferrochrome joint venture. In March, the Company transferred all of its shares in Middelburg Technochrome (Pty) Ltd., a joint venture with Samancor Limited of South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. and Marubeni Corporation for the production of low-carbon ferrochrome, to Samancor. With this, SDK completed restructuring of its metallic materials business. - Development of separators for high-performance fuel cell. The Company developed a high-performance molded carbon/resin separator for polymer electrolyte fuel cell to be used as a power source for homes, cars and mobile devices. In addition to basic properties comparable to those of conventional separators, the new product offers such advantages as higher crack resistance and lower cost. The product is a fruit of interconnections of inorganic and organic chemical technologies, namely, the development of artificial graphite with electrical conductivity 10 times that of conventional one; and the selection of an appropriate binder resin and its processing. [Aluminum, etc.] - Sale of shares in Nippon Amazon Aluminium. In January, the Company sold all of its shares in Nippon Amazon Aluminuim Co., Ltd. (NAAC NAAC National Assessment and Accreditation Council (India) NAAC National Albanian American Council NAAC National Accessible Apartment Clearinghouse NAAC National Association of Agricultural Contractors (UK) ) to Mitsui & Co., Ltd. NAAC is a company established by Japanese investors in the aluminum smelting business in Brazil. - Dissolution of Showa Alumi Viewtech. In February, the Company decided to dissolve, by the end of 2005, its aluminum extrusion consolidated subsidiary Showa Viewtech Co., Ltd. - Consolidation of aluminum sheet sales. To strengthen competitiveness in the rolled products business, the Company will consolidate the commodity aluminum sheet sales in Eastern Japan at its consolidated subsidiary Showa Denko Aluminum Trading K.K. (SDAT SDAT Senile dementia–Alzheimer type, see there ) in October 2005. Commodity aluminum sheet sales in Western Japan has already been consolidated at SDAT since January 2004. SDAT will also take over aluminum sheet processing operation from Showa Denko Sakai Aluminum K.K., optimizing the production and increasing efficiency. - Cooperation in water treatment business. Our consolidated subsidiary Showa Engineering Co., Ltd. (SEC) formed an alliance with Veolia Water S.A. of France in the environmental protection business, centering on waste water treatment. SEC transferred 49% of shares in Showa Environment System Co., Ltd., its subsidiary engaged in waste water treatment operation, to the Veolia Water Group to jointly conduct a water treatment business. Projections for 2005 (full-year) (1) Overall projections As to the Japanese economy in the second half of 2005, production and exports are expected to remain steady owing to continued growth of overseas economies, centering on the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and China. However, due to the influence of inventory adjustments by the electronic parts industry, and expected continuation of high prices of oil and other raw materials, the business environment is forecast to remain severe. Under the circumstances, the Company will promote the growth strategy as defined in the Sprout Project and pursue thorough cost reductions, thereby striving to improve competitiveness and earning power Earning power Earnings before interest and taxes (EBIT) divided by total assets. earning power 1. The earnings that an asset could produce under optimal conditions. For example, AT&T may currently be earning $2. . The Showa Denko Group's performance forecast for 2005 (full-year):
(Unit: millions of yen)
Forecast term Results term Difference Rate of
ending 12/31/05 ended 12/31/04 change
Net sales 790,000 740,706 49,294 6.7%
Operating income 56,000 52,071 3,929 7.5%
Ordinary income 46,500 38,912 7,588 19.5%
Net income 31,000 7,596 23,404 308.1%
Net sales, operating income and ordinary income will increase over the previous year to JPY 790,000 million, JPY 56,000 million, and JPY 46,500 million, respectively. Net income will increase about JPY 23,400 million, to JPY 31,000 million, as we expect a decline in extraordinary loss. The above forecast is based on the assumption that the exchange rate of the yen will be JPY 105 to the U.S. dollar and the naphtha price will be JPY 35,000/KL. (2) Net sales by business segment
(Unit: millions of yen)
Forecast term Results term Difference Rate of
ending 12/31/05 ended 12/31/04 change
Petrochemicals 287,000 254,351 32,649 12.8%
Chemicals 73,000 80,188 -7,188 -9.0%
Electronics 130,000 112,455 17,545 15.6%
Inorganic Materials 60,000 55,295 4,705 8.5%
Aluminum 240,000 238,419 1,581 0.7%
Total 790,000 740,706 49,294 6.7%
Financial Conditions 1. Assets, liabilities and equity at June 30, 2005 As we continued our efforts to reduce total assets, including the sale of SDS Biotech in the first half of 2005, the figure decreased JPY 12,293 million, to JPY 931,614 million. Interest-bearing debt further decreased JPY 27,135 million, to JPY 475,297 million. As a result, total liabilities fell JPY 35,296 million, to JPY 685,764 million. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. increased JPY 20,961 million, to JPY 198,662 million, due to increases in retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. and security valuation surplus. 2. Cash flows in first half of 2005 Net cash provided by operating activities increased JPY 17,739 million from the same period of last year, to JPY 36,722 million, due to a substantial rise in operating income. Net cash used in investing activities increased JPY 5,621 million, to JPY 13,259 million, due to higher capital expenditures than in the same period of last year. Thus, free cash flow increased JPY 12,118 million, to JPY 23,463 million. Net cash used in financing activities increased JPY 13,938 million, to JPY 23,509 million, due to reductions in interest-bearing debt. As a result, cash and cash equivalents at June 30, 2005 increased JPY 333 million, to JPY 29,485 million, after changes in accounting period of some of the consolidated subsidiaries. 3. Projections for 2005 (full-year) For the full-year of 2005, cash flows from operating activities will increase due mainly to the rise in operating income. Net cash used in investing activities will also increase due to the rise in capital investments. Thus, free cash flow for the year is expected to decrease around JPY 6,100 million, to JPY 41,000 million. Interest-bearing debt at the end of the year will be JPY 452,000 million, down JPY 50,400 million from the end of last year. 4. Trends in cash flow indexes
2002 1H2003 2003 1H2004 2004 1H2005
Equity ratio 15.2% 16.2% 17.7% 18.7% 18.8% 21.3%
Equity ratio on
market value basis 17.4% 24.7% 29.2% 33.1% 32.0% 32.3%
Debt maturity (years) 15.5 -- 8.3 -- 8.4 --
Interest coverage ratio 3.3 4.7 6.0 3.9 5.9 8.2
[Notes] Equity ratio: Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. / Total assets Equity ratio on a market value basis: Total market value of listed shares / Total assets Debt maturity (years): Interest-bearing debt / Cash flows from operating activities Interest coverage ratio: Cash flows from operating activities / Interest payment - Each index is calculated by relevant formulas with financial figures quoted from the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . - Market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. is calculated by multiplying the closing share price at the year-end by the number of shares issued, after deduction of own shares at year-end. - As to the cash flows, the amount of "cash flows from operating activities" in the consolidated cash flow statement is used. "Interest-bearing debt" refers to all debts with interest out of all liabilities listed in the consolidated balance sheet. - As to the interest payment, the amount of "interest expense" in the consolidated cash flow statement is used. Copyright [c] 2005 JCN Newswire. All rights reserved. A division of Japan Corporate News Network K.K. |
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