During the six months ended June 30, 2014, the global economic environment surrounding Asahi Glass Co. (AGC) and its consolidated subsidiaries remained on a gradual recovery track. Specifically, while economic growth decelerated in China and other emerging markets, business conditions in Europe picked up and consumer spending in the U.S. maintained its stability. In Japan, the economy made a gradual recovery as business confidence was restored due to economic measures taken by the government and other factors.
Under such a business environment, the AGC Group posted net sales of ¥659.2 billion (approximately $6.4 billion), up ¥20.7 billion (~ $201.7 million), or a 3.2% increase, from the corresponding period of the previous year, thanks to increased shipments of glass products, centering on automotive glass, and chemicals, as well as the continued depreciation of the yen. However, the group was also affected by sales price declines in the LCD glass substrate business and the architectural glass business in Eastern Europe, price increases of fuels and raw materials, and reduced profitability of foreign subsidiaries due to the weak yen. As a result, operating profit decreased ¥12.6 billion (~ $122.8 million), or 32.7 %, year-on-year to ¥25.9 billion (~ $252.4 million), and profit before tax decreased by ¥13.3 billion (~ $129.6 million) or 42.4% to ¥18.0 billion (~ $175.4 million). Profit for the period attributable to owners of the parent was ¥3.7 billion (~ $36.0 million), a ¥16.0 billion (~ $155.9 million) or 81.3% decrease on a year-on- year basis.
In the flat glass business, shipments of architectural glass increased from the corresponding period of the previous year in all regions. Sales prices were stable due to the price improvement in the European region during the second quarter; in Eastern Europe, price levels remained below the levels of the same period of the previous year. Sales of architectural glass increased on a year-on-year basis, partly due to the weak yen.
In the automotive glass business, the AGC Group’s shipments increased, as auto production as a whole remained robust despite decreases in auto production in some regions. Sales increased on a year-on-year basis, partly reflecting the weak yen and the increased shipments.
As a result, net sales from the Glass Operations for the six months ended June 30, 2014 were ¥353.5 billion (~ $3.4 billion), up ¥32.7 billion (~ $318 million) or a 10.2% increase from the same period of the previous fiscal year. Operating profit/loss improved by ¥7.0 billion (~ $68.2 million) year-on-year to post a loss of ¥1.4 billion (~ $13.6 million), mainly due to the effects of structural reforms in the European architectural glass business, in addition to increased sales of architectural and automotive glass.
Among glass substrates for display devices, shipments of LCD glass substrates were about the same level as the same period of the previous fiscal year; however, their sales prices decreased from the same period of the previous fiscal year. Shipments of plasma display panel products decreased significantly as a result of reduced demand. Regarding electronic materials, shipments of both optoelectronics materials and semiconductor products increased from the same period of the previous fiscal year.
As a result, net sales from the Electronics Operations for the six months ended June 30, 2014 were ¥147.0 billion (~ $1.4 billion), down ¥27.0 billion (~ $263.1 million) or a 15.5% decrease from the same period of the previous fiscal year, and operating profit was ¥17.7 billion (~ $172.5 million), down ¥21.5 billion (~ $209.5 million), or a 54.8% decrease from the same period of the previous fiscal year due to the reduction of profitability of foreign subsidiaries affected by the progress of the weak yen in addition to the factors mentioned above.
In 2014, the world economy is expected to maintain moderate growth, but at a slightly accelerated pace. Under such a business environment, the AGC Group’s shipments of architectural glass are expected to remain robust in Asia, including Japan, and North America. In Europe, shipments have not recovered in full scale, but earnings are likely to improve due to restructuring measures. In the automotive glass business, shipments are projected to increase from the previous fiscal year with demand for automobiles forecast to grow mainly in emerging markets.
With regard to the business of glass substrates for display devices, shipments of LCD glass substrates are likely to remain stable for the full year, although the pace of market growth may slow. Demand for plasma display panel products are expected to fall significantly. In the category of electronic materials, shipments of both semiconductor-related products and optoelectronics materials are likely to be strong.
Regarding chemical-related products, shipments of chlor-alkali products in Asia and shipments of fluorine products are likely to remain stable. However, the shipments and sales prices of LCD glass substrates and specialty glass for display applications fell below the initial expectation during the first half of the year.
As a result, the financial results for the fiscal year ending December 31, 2014, are expected to fall below the company’s forecasts issued on February 7, 2014, and the company revised its financial forecast for the fiscal year 2014.