Denka raises elastomers earnings forecast on strong CR pricing

Tokyo – Denka Corp. has raised the earnings forecast for its elastomers & infrastructure solutions business, due mainly to a strong pricing development in the chloroprene rubber (CR) segment.

For the full year, the business - which includes CR and cement production - is set to deliver an operating income of Yen3.5 billion (€24 million), up from an earlier outlook of Yen2.5 billion announced in August.

In an 8 Nov statement, Denka linked the expected growth to a decline in the prices of CR raw materials, such as coke, compared to the August forecast.

While there was no change in demand assumptions, Denka said it expected the market to return to 2019 levels.

“Sales volume and price increases should increase on par with August forecast, while positive impact is expected due to the weakening yen,” it added.

During the first half of the year, the elastomers & infrastructure unit posted a 1.3% increase in year-on-year earnings to Yen1.3 billion, on 11.5% higher sales of Yen63 billion.

Over the six-month period, demand for CR remained firm and shipments were largely in line with the same period in the previous fiscal year

Profit, said Denka, improved due to price hikes in response to rising raw materials costs.

Denka announced earlier this month that it is exiting the cement business, a by-product of which is chloroprene rubber.

The exit, it said in its earnings conference call 8 Nov, will have no impact on the production of CR at the Omi cement manufacturing plant which is being divested.

As part of the exit strategy, Denka will cease cement production and in-house limestone mining by 2025 and will purchase limestone for CR production from new owners, Taiheiyo Cement.