Japan: glass majors change direction on investments

Major Japanese glass manufacturers are boosting their capital investments, moving away from a strategy in which they had sought to increase profits by cutting back loss-making operations.
Asahi Glass…

Major Japanese glass manufacturers are boosting their capital investments, moving away from a strategy in which they had sought to increase profits by cutting back loss-making operations. Asahi Glass Co. plans to spend JPY 550 billion in the three years through December 2007, 50% higher than the prior three business years. Nippon Sheet Glass Co. and Central Glass Co. also intend to boost their capital spend. Market reaction is cautious, however, because it is uncertain to what extent the strategy will help improve earnings. The major investment for Asahi Glass will be in LCD glass substrate production. The firm enjoys a large share of the LCD and plasma display markets and “will likely reach its operating profit goal thanks to expected growth of the LCD glass substrate market,” says a Mizuho Securities Co. analyst. The company hopes to increase sales from its electronics and display businesses to JPY 600 billion and raise its consolidated operating profit to JPY 180 billion in fiscal 2007. Asahi Glass shares are currently trading about 20% higher than in late 2003. Nippon Sheet Glass projects annual capital spending of JPY 15-20 billion through March 2008, with JPY 3 billion set aside for new plasma display facilities at two domestic plants. Central Glass plans to invest JPY 60 billion by the end of March 2008, including JPY 10 billion for plasma display glass substrate production. But future earnings drivers are not clearly visible for Nippon Sheet Glass and Central Glass, said an official at Deutsche Securities Ltd.