The Urethane Blog

Tosoh Posts Big First Half

Japan’s Tosoh set to bust through first-half profit goal

Chemical maker churns out urethane materials as supply tightens, prices jump

Tosoh’s production of urethane raw materials, made at plants like this one, stayed steady in the April-September half as rivals ran into trouble.

TOKYO — Japanese chemical maker Tosoh‘s April-September group operating profit apparently grew 30% year-on-year, greatly surpassing the projected 7% growth for a record first half,¬†as natural disasters and other setbacks hit rival producers of¬†urethane raw materials.

Operating profit for the half likely reached about 55 billion yen ($489 million). Sales apparently jumped to just under 400 billion yen, beating projected 10% growth to 370 billion yen. The focus will be on whether the company will upgrade its full-year guidance when it reports earnings Oct. 31.

The Tokyo-based company’s profits are susceptible to global economic trends and chemical prices. In July-September, urethane raw materials sold for $3,000 per ton on average on the Asian market, roughly double the rate for the period the year before. Some companies competing with Tosoh in Asia and Europe suffered production trouble at their plants, and factories in the U.S. state of Texas halted output due to floods from Hurricane Harvey, tightening the international supply and demand balance.

China’s demand for urethane raw materials looked stagnant through early spring, but then buyers began to shore up their stockpiles, mainly to fill demand for use in synthetic leather and shoe soles.

Tosoh kept churning out urethane raw materials without difficulty, and its stable output combined with rising prices helped lift profit. Prices of benzene — a material used in producing urethane materials — also remained stable, contributing to better-than-expected margins.

Other materials produced in the same complexes as urethane raw materials, such as vinyl chloride and sodium hydroxide, also sold well. Operating profit in Tosoh’s Chlor-alkali segment — which produces urethane raw materials and vinyl chloride — very likely beat the standing projection of 17.8 billion yen by about 10 billion yen, lifting profit across the board.

Tosoh’s fiscal 2017 forecast calls for group operating profit to slide by about 10% to 100 billion yen. But the company already made nearly three-fifths that sum in April-September, and moreover, its profit tends to concentrate in the second half. The QUICK Consensus survey of analysts’ forecasts calls for operating profit to instead grow roughly 5% to just over 116 billion yen.