Japan: outlook for glass negative, says report

The outlook for Japan“s glass industry is negative, although not uniformly so, according to a new industry report “Industry Outlook: Japan“s Glass Industry”, from Moody“s Investors Service.
“For t…

The outlook for Japan“s glass industry is negative, although not uniformly so, according to a new industry report “Industry Outlook: Japan“s Glass Industry”, from Moody“s Investors Service. “For the industry as a whole, worsening economic trends and weakening demand growth will pressure earnings, and energy costs will remain a major risk despite the recent decline in fuel prices”, according to Emiko Otsuki, Moody“s senior vice president – regional credit officer. However, the outlook for sub-sectors is uneven; FPD glass is seen as stable, reflecting ongoing growth in demand and a relatively tight demand/supply balance, although large investments and potential mismatches between demand and supply are potential risk factors. The outlook for flat glass and auto glass, the two largest sectors, is negative due to slowing demand growth in their end markets and is a major reason for the negative industry outlook overall. “Nevertheless, Moody“s rating outlooks for the individual Japanese glass makers remain stable, given their global leading positions in oligopolistic markets, business and regional diversification, technological advantages, and conservative financial policies”, writes Mr. Otsuki. “In our view, the three rated Japanese glassmakers – Asahi Glass (AGC), A1/P-1; Nippon Electric Glass (NEG), A2; and Nippon Sheet Glass (NSG), Baa3 – are stable given their global leading positions in oligopolistic markets, business and regional diversification, technological advantages, and conservative financial policies”. Their leading positions in oligopolistic markets will help the three manufacturers deal with negative market trends, a situation they are already addressing with countermeasures that include adjusting capacity and cutting costs, as well as passing cost increases on to customers, according to the report. The rated Japanese glass companies are less vulnerable to negative market trends because they rely more on relatively stable products or regions. “We also believe that the rated companies will maintain their leading positions in the oligopolistic glass markets as well as their conservative financial policies (with an emphasis on cutting debt), which will support their current ratings”, Mr. Otsuki writes.