Chemicals Division Strategies and Initiatives
Industry Environment and Fiscal 2008 Results
Prices for crude oil, naphtha and other raw materials plummeted dramatically after peaking in July 2008. In conjunction with fallout from the global financial crisis, the chemical industry saw prices drop sharply due to inventory and production adjustments in various industries as overall demand declined significantly in the second half of fiscal 2008. In light of these economic conditions, China, which is on a growth track in the chemical industry, and the Middle East, where the division is competitive in terms of pricing, will be increasingly meaningful markets.
Basic upstream petrochemicals and vinyl alkali were affected by the downturn, but the impact was minimal due to several years of focus on enhancing logistics and strengthening the sales network. In inorganic and agricultural chemicals, domestic and overseas agrochemicals and fertilizer operating companies and overseas salt production companies were the strongest performers, maintaining robust results.
However, synthetic resins, a mid-stream petrochemical, and downstream electronic materials were impacted by the worsening economic conditions of major customers such as automakers and electronics manufacturers. In combination with loss on valuation of securities and loss of withdrawal of affiliated companies, these factors resulted in a significant decline.
As a result, despite strong performance in the first half of the year, the second half rapidly gave way to the global economic slowdown and worsening business conditions. As a result, segment gross trading profit was down 2% from the previous year to 30.1 billion yen, while segment net income was down 7% to 5.2 billion yen.
Initiatives in Fiscal 2009
Leveraging Marubeni’s comprehensive domestic and international coordination capabilities, we will continue striving to achieve growth and expansion through optimally balanced trading and business operations. Our focus in fiscal 2009 will be on launching new projects that will serve as profit generators into the future, participating in growing industries and increasing our shares in existing profitable operations.
We also plan to pay special attention to developing business in Asia as a priority region, especially in the resource-rich Middle East region, China and India. Here our focus will be on increasing trading in raw materials for fertilizer, which is linked to the growing foods sector.
Furthermore, we created a new office in the division to address market conditions, staffed with experienced personnel, and deployed a system to identify and develop initiatives tailored to the special characteristics of each region around the world.
In fiscal 2009 we are projecting a slight year-on-year rise in segment net income as a result of our focus on trading in China, where the government is taking steps to stimulate domestic demand, and further trading of Middle Eastern petrochemical products in the Asian market.
