Asahi Glass Co., Ltd. faced a sharper-than-expected decrease in worldwide demand for housing, automobile and home electronics in the fourth quarter. The market for glass substrates for flat panel displays (FPDs) continued to be strong until the end of the first half of 2008, but the number of shipments was affected by operational adjustments at panel manufacturers in the third quarter. The flat glass market remained sluggish in Japan and North America, and weakened in Europe. The market for chemical products was steady, but softened in the fourth quarter.
Based on the results above, the AGC Group posted net sales of 1,444.3 billion yen (approximately $16 billion) for the year, down 236.9 billion yen (~ $2.6 billion), or 14.1%, from the previous year; operating income of 154.0 billion yen (~ $1.7 billion), down 43.4 billion yen (~ $480 million), or 22.0%; and ordinary income of 109.8 billion yen (~ $1.2 billion), down 78.1 billion yen (~ $865 million), or 41.6%. Net income decreased 30.5 billion yen (~ $338 million), or 43.7%, to 39.2 billion yen (~ $434 million).
Sales in the flat glass business decreased from the previous year. In Western Europe, demand continued to weaken as the economy slowed down, and prices also dropped from a year earlier. Although demand remained strong in fast-growing markets such as Russia, it weakened in the fourth quarter, affected by the slowing economy. In North America, to cope with weakened demand, the AGC Group decided to stop some operations of flat glass production facilities and withdraw from the unprofitable glass fabrication business. In Japan, shipments decreased, affected by continued weak demand from the construction sector.
Responding to price hikes in raw materials and fuels, the AGC Group revised prices in Japan, Asia and North America, but this failed to offset all cost increases. On the other hand, shipments of glass for solar cells remained strong with an expansion of the market of solar cells.
In the automotive glass business, sales decreased from the previous year because of a decline in auto production throughout the year in North America, from the third quarter in Europe, and from the fourth quarter in all the regions in North America, Europe, Japan, and the rest of Asia.
Sales of other glass businesses fell from the previous year because the AGC Group fully withdrew from the fiberglass business at the end of October 2007. In addition, the appreciation of the yen that developed toward the end of the year was also one of the factors for a decline in the net sales of each operation. As a result, net sales from the Glass operations for the year decreased 124.7 billion yen (~ $1.4 billion), or 14.4%, from the previous year to 741.3 billion yen (~ $8.2 billion), and operating income decreased 45.0 billion yen (~ $499 million), or 70.7%, to 18.7 billion yen (~ $207 million).
In the display business, shipments of glass substrates for FPDs significantly increased in the first half of this fiscal year. However, overall sales for the whole year decreased from a year earlier, because operational adjustments at panel manufacturers resulted in decreased shipments of glass substrates for TFT LCDs in the second half of the year. In addition, overall shipments of display glass sharply declined in the fourth quarter.
In the electronics materials business, although shipments of photonics components in particular continued to be steady in the first half of the year, they decreased as a decline in demand became apparent in the fourth quarter. Net sales of the electronics materials business as a whole decreased as a result of the AGC Group’s withdrawal from the business of small- and medium-sized display panels. As a result, net sales from the Electronics and Display operations for the year decreased 92.5 billion yen (~ $1 billion), or 19.9%, from the previous year to 372.7 billion yen (~ $4.1 billion), and operating income increased 8.4 billion yen (~ $93 million), or 7.1%, to 126.6 billion yen (~ $1.4 billion).
In the ceramics business, earnings remained steady thanks to strong demand in both the glass engineering sector and the environmental energy sector. As a result, net sales from the Other operations for the year increased 8.9 billion yen (~ $99 billion), or 10.2%, from the previous year to 96.6 billion yen (~ $1 billion), and operating income increased 1.8 billion yen (~ $20 million), or 57.4%, to 5.0 billion yen (~ $55 million).
The outlook for the global economy in 2009 remains uncertain, and the economic growth of emerging countries that have led the worldwide growth is expected to slow down. Although there is a certain expectation for stimulative measures and financial policies of each country, the AGC Group forecasts these measures will not be enough to realize a full-fledged economic recovery.
In such circumstances, the AGC Group expect shipments of flat glass and automotive glass to remain flat throughout the year in Japan, Europe, North America and Asia. On the other hand, although the growth rate of glass for solar cells is expected to slow down as a result of the worsening economic climate, the Group expects its shipments will exceed those of the previous year. In the Electronics & Display operations, the Group forecasts that shipments of glass substrates for FPDs will gradually recover from the second quarter. For the Chemicals operations, the Group expects overall product demand to remain at low levels.
The AGC Group has implemented various measures in all its operations for earnings recovery, such as production adjustments consistent with demand trends, reviews and reductions of various expense items, and cost reductions through the efficient allocation of personnel. However, the influence of a decrease in demand is significant, and the AGC Group expects it will inevitably experience a fall in both earnings and profit. With this situation in mind, the AGC Group will review the production capacities, focusing on the Glass operations, and carry out structural reform.
Additional details are available at www.agc.co.jp/english