Tokyo – JSR Corp. is planning to undertake structural reforms to improve earnings in its elastomers business, the company has announced.
The measures will include a review of the segment's product-mix and a move reduce costs, said CEO Eric Johnson in a 27 earnings call.
In addition, JSR will minimise investment in the segment and carry out minimal maintenance as part of the scheme to enhance profitability.
For the year ended 31 March, the elastomers business saw a significant decline in results, leading JSR to miss its final target for the financial year 2019, according to Johnson.
The unit was impacted by “dramatic changes” in the business environment, including macro market drivers for crude oil, as well as supply/demand balance shifts caused mainly by new capacities in China, the JSR official explained.
Operating profit of the unit, which contributes more than 40% of total group sales, plunged to negative Yen1.8 billion (€15.4 million), on 11% lower sales at Yen178.8 billion
JSR linked the drop to a decline in sales volume as a result of “a significant deterioration in the market and a slump in the automobile and tire markets including China.”
Japan’s domestic tire production increased in the first half of the financial year, but declined significantly in the final quarter of year.
Globally, JSR said tire markets remained sluggish while automotive production followed a negative trend, particularly in China.
“In China, production was recovering from a sharp drop in FY18 toward December 2019, but production decreased significantly in the fourth quarter due to the impact of Covid-19,” Johnson said.
For the full year, JSR expects the elastomers business to register a negative Yen5 billion operating profit, due mainly to the Covid-19 pandemic. Sales are projected to fall 19% to Yen145 billion for the year ending March 2021.