Tokyo – JSR Corp.’s elastomers business went into red as volumes fell due to a global slump in the automotive and tire markets, caused by Covid-19 pandemic.
Over the three months to end of June, operating profit of the unit fell to negative Yen5.6 billion (€44.3 million) down from Yen300 million gained in 2019, JSR reported 30 July.
The segment, which contributes more than 40% total group sales, posted a 40% year-on-year decline in revue to Yen27.4 billion, due to weak demand caused by the Covid-19 pandemic.
JSR linked the operating loss to a 40% overall decrease in volumes, which reflected drops in “almost all” of synthetic rubber products, during the quarter.
Demand was particularly hit by a 50% fall in global automotive production and a 35% decline in Japan's tire manufacturing.
In addition, JSR noted the impact of low butadiene (BD) prices, which fell from around $1,000 in fiscal year 2019 to about $350 in the first quarter of 2020, on its profits.
The price gap, said the materials supplier, was affected due to the discharge of relatively expensive raw material inventories while raw material prices fell during the quarter.
For the full year, JSR expects the segment to remain loss making with operating profit estaimated at negative Yen5 billion, on sales of Yen145 billion.
Following consecutive quarters of weak performance, JSR announced in April that it was planning to undertake structural reforms to improve earnings in its elastomers business.
The measures will include a review of the segment's product-mix and a move reduce costs, according to CEO Eric Johnson.
In addition, JSR is planning to 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.