Denka records €100m extraordinary loss, halts US chloroprene rubber production

Tokyo – Denka Co. will record an extraordinary loss of Yen16.1 billion (€97 million) in the fiscal year ended 31 March, due to an impairment loss on manufacturing facilities at its US subsidiary, Denka Performance Elastomer LLC (DPE).

In a 13 May statement, Denka said after ceasing production for regular maintenance activities, DPE had elected not to restart production at its chloroprene rubber (CR) manufacturing facilities for “an indefinite period.”

Denka stressed that no decision regarding the permanent closure of the plant in LaPlace, Louisiana had been made, adding that “all options for the business, including a potential sale of the business or its assets, will be considered."

Denka will continue to supply customers through existing inventory and the Omi Plant in Japan.

Explaining the decision, Denka said DPE has faced “significant cost, production and other challenges” at the Louisiana site, including unexpected pollution control requirements.

These requirements involved the design, purchase, installation and operation of equipment not foreseen when DPE acquired the plant from DuPont in 2015, said Denka.

The company also cited rising energy costs and difficulties in securing skilled labour to operate the new environmental controls as another reason for the decision.

Also contributing to the decision were price increases for key raw materials and repairs, which were further exacerbated by US inflation, as well as shortage of skilled workforce.

In addition to rising costs and staffing challenges, DPE said it had faced declining volumes of chloroprene rubber production at its facility.

These, it said, were due in part to operational restrictions arising from the pollution reduction measures and unscheduled plant outages associated with supply chain disruptions and severe weather events.

“These challenges, combined with the impact of changes in the global economic environment affecting the chloroprene rubber market, have placed pressure on profits,” Denka said.

As a result of these circumstances, Denka said it would record an extraordinary loss of Yen16.1 billion as an impairment loss on related noncurrent assets.

DPE was originally established in 2014 as a second chloroprene rubber production site in North America and was acquired by Denka from DuPont in 2015.

DuPont permanently shut down its original CR production plant in Louisville, Kentucky, in 2008.

As of 31 Dec 2024, the DPE facility employs 250 people and is 70% owned by Denka and 30% owned by Diana Elastomers Inc., a wholly owned subsidiary of Mitsui & Co.