Denka targets recovery in chloroprene rubber earnings after US suspension

Tokyo — Denka Co. expects a sharp improvement in profitability from its chloroprene rubber (CR) operations over the next two years as restructuring measures, including the suspension of its US production, take effect.

Speaking during the group’s latest strategy briefing 27 Feb, Denka director and president Ikuo Ishida said “drastic measures” implemented in the chloroprene business are already delivering results and are expected to lift operating income significantly.

According to the Japanese group, the measures are projected to generate an increase of Yen9 billion (€50 million) in operating income in FY2025 (ending 31 March) and Yen15 billion in FY2026 compared to an Yen8 billion loss reported in FY2024.

The group, therefore, expects operating income from the CR-related business to reach Yen6.5 billion in FY2026, rising further to Yen7.5 billion by FY2028, based on current plans.

According to Denka, global chloroprene rubber demand is estimated at 230–240 kilotonnes per annum (ktpa), and the group aims to increase sales at its Elastomers & Infrastructure Solutions division to Yen110 billion in 2028 – from Yen100 billion in 2025.

The improvements follow restructuring steps centred on the closure of Denka Performance Elastomer (DPE), the group’s chloroprene rubber production unit in LaPlace, Louisiana, which halted operations last year due to regulatory and cost pressures. (ERJ report)

Denka confirmed at the time that the plant would remain under indefinite suspension, with the company shifting supply toward material produced at its Omi facility in Japan.

In its latest strategy update, Denka said its Elastomers and Infrastructure Solutions division, which includes the CR business, is now focused on “optimising and restructuring the business chain to transform [it] into a cash cow.”

Despite the halt in US production, Denka said it intended “to continue maximising the use of the customer and sales networks we have established in the US market.”

Another key element supporting profitability is the group’s Omi plant in Niigata, Japan, which serves as the main production base for chloroprene rubber following the US suspension.

Denka highlighted the site’s hydroelectric power generation capacity as an important structural advantage.

“Our Omi plant in Niigata… possesses a significant profit factor in its hydroelectric power generation,” said Ishida, noting that the benefit is expected to grow as carbon costs increase.

“As the burden of carbon taxes is expected to increase in the future, the benefits of hydroelectric power are anticipated to expand further,” the Denka president added, saying the cost advantage will help the CR business shift toward a stable “cash cow” operation.