AGC profit increased 340% on construction in Southeast Asia
TOKYO – Materials maker AGC is expected to have achieved group operating profit of around 90 billion yen ($ 822 million) in the middle of January to June, posting a jump of around 340% on the year in large part thanks to a rush for infrastructure projects in Southeast Asia.
Sales likely increased 24% to around 810 billion yen. The Tokyo-based company is reportedly outperforming its profit and sales forecast, which was just revised upward in April, by 5 billion yen and 10 billion yen, as well as its performance in the first half of 2019, before the coronavirus. does not spread across the world.
Much of the impetus came from its chemicals segment, which accounts for one-third of total sales. The demand for polyvinyl chloride, commonly used in applications such as water pipes and power cable coatings, has increased with the development of infrastructure in Southeast Asia.
PVC prices have also climbed to around 30% in Southeast Asia this year, providing new favorable winds for AGC. Major producers in the southern United States were forced to shut down production in February due to widespread power outages in Texas, reducing supply.
The price of ethylene, a petrochemical used to make PVC, has also increased as the global economic recovery from COVID-19 pushed up oil prices. But PVC prices have risen faster, increasing AGC’s profits.
Polypropylene glycol, used to make resin for construction and automobiles, jumped 40 yen per kilogram, or more than 20%, in April. Demand for caustic soda, which is used to denitrify factory emissions, has also picked up as manufacturers scale up operations.
Overall, AGC expanded its operating profit margin in its chemicals segment by 11% in 2020.
In addition, the company has since 2016 made inroads in contract development and manufacturing of pharmaceuticals, which it sees potentially as a growth engine to replace display glass substrates. It has seen an increase in orders related to the coronavirus, including for materials used to produce the Pfizer vaccine, just as it had increased its capacity through acquisitions and investments in Italy and Belgium.
In its electronics segment, AGC this year saw an increase of approximately 50% in sales of blanks for semiconductor masks manufactured with advanced technology in the extreme ultraviolet.
In the future, automotive glass will likely be the key to AGC’s continued success. The company is one of the few that can produce large, foldable glass parts for digital dashboards. Automotive production trends and AGC’s ability to win contracts for these profitable types of glass will impact its future profits.
AGC’s official results for January-June are expected on August 2. The 25 billion yen profit from the sale of a North American architectural glass unit, announced in June, will be counted in the July-September results.
The company is expected to exceed its forecast for annual net profit by 83 billion yen in 2021. Analysts see net profit jump about 190% to 96.1 billion yen as sales rise 16% to 1.64 trillion yen, according to the QUICK Consensus survey.