Asahi Glass: 2005 profit down, shift to LCD glass

Japan“s Asahi Glass Co. posted group profits down 23% for the business year ended 31 December 2005, citing a decline in demand for CRT glass and higher raw materials expenses.
The company said 15 Fe…

Japan“s Asahi Glass Co. posted group profits down 23% for the business year ended 31 December 2005, citing a decline in demand for CRT glass and higher raw materials expenses. The company said 15 February 2006 that its group net profit fell to JPY 60.01 billion from JPY 78.29 billion a year earlier. Its group sales rose 3.5% to JPY 1.527 trillion from JPY 1.476 trillion. However, Japan“s largest glass maker is betting it can improve its profitability under its mid-term plan, by increasing LCD glass production capacity by nearly 70% and cutting costs. The move is aimed at fulfilling strong demand for glass substrates from client electronics makers who are building new facilities to make more and larger LCD TVs. Asahi Glass said it is aiming for group operating profit of JPY 180 billion for the 2007 calendar year, up 52% from the JPY 118.19 billion operating profit it generated in the business year just-ended. It is also aiming for group sales of JPY 1.7 trillion in 2007, up 11% from 2005. Asahi Glass said demand for glass substrates is expected to rise at an annual rate of 20% – 30% in 2006 and 2007, with potential for even further growth. This growth would be supported by strong demand from such clients as Sharp Corp. the world“s largest LCD TV maker. Asahi Glass said it will raise production capacity to enable total output of 37 million square meters of glass substrates by 2007, compared with the current 22 million square meters. Specifically, the company will spend JPY 25 billion to add a new furnace capable of producing 5 million square meters of glass substrates a year and facilities for substrate polishing at its Takasago Plant in Hyogo Prefecture, western Japan. It will also spend JPY 30 billion to add similar facilities in Taiwan. It will also build another 5 million-square-meter per year furnace, although the size of the investment and the location remain undecided. In case of unexpectedly strong demand, it will build one more furnace with an annual capacity of 5 million square meters. For the 2005 fiscal year, the company said efforts to cut costs and promote higher value-added products failed to offset higher prices for crude oil and other raw materials. The company also cited a slowdown in global demand for CRT glass, with demand shifting to flat-panel display TVs. The prospects for its CRT glass business worsened due to a decline in product prices, prompting the decision to stop producing CRT glass in Japan by the end of March 2006. The company took a special loss of JPY 31.5 billion due to the writedown of the facilities and assets of its CRT glass-making business. It also cited weakness in prices for electronics parts, including filters for use in LCD projectors. For the full fiscal year ending 31 December 2006, Asahi Glass is predicting a 33% rise in group net profit to JPY80 billion, with a 4.8% gain in sales to JPY 1.600 trillion. The company reports its earnings under Japanese accounting standards.