The NSG Group recently announced consolidated financial results for its fiscal 2015 second quarter. Market conditions during the first two quarters of the financial year were mixed, with improvements in some regions and reductions in others. A significant market recovery has not yet materialized in Europe.
In Japan, the increase in indirect taxation at the start of the year continued to affect architectural volumes negatively, although automotive volumes held up relatively well. North American markets showed further growth, particularly in architectural. Automotive markets in South America were weak, with a significant reduction in volumes from the previous year. Overall, technical glass markets were mixed, with improvements in some areas and reductions in others.
The second quarter cumulative operating profit represents an improvement on the previous year, particularly in North America and Europe, due to improved volumes and lower fixed costs. The group recorded a trading profit (before exceptional items and amortization relating to the acquisition of Pilkington) of ¥ 10,277 million (~ $87 million). The group recorded an exceptional gain of ¥ 13,161 million (~ $112 million). The profit attributable to owners of the parent was ¥ 7,456 million (~ $63 million).
Operating results in the architectural business were better than the previous year due mainly to the effects of the group’s restructuring program. Revenues improved with increased volumes in North America and the translational impact of the weakened Japanese yen. In Europe, representing 40% of the group’s architectural sales, second quarter volumes were stable. Low levels of economic activity continue to depress construction and refurbishment activity, particularly in the main Eurozone countries. Local currency revenues fell slightly, following the mothballing of under-utilized facilities during the previous year. Commodity glass prices were generally flat during the first two quarters and are still at historically low levels. The soft market conditions prevented any sustained upward pressure on prices. Profitability was similar to the previous year.
In Japan, representing 27% of architectural sales, cumulative volumes fell, following an increase in consumption taxes earlier in the year. Long-term prospects for architectural markets continue to be positive despite a fall in housing starts after the consumption tax increase. Revenues fell due to the reduced volumes. The group implemented a series of price increases during September, and the impact of these will be realized from the third quarter of the year. In North America, representing 12% of architectural sales, architectural glass markets continued to perform strongly. The group’s revenues and profits improved from the previous year. Volumes increased, with strengthening domestic demand and higher dispatches of solar energy glass. Domestic price levels were above the previous year. In the rest of the world, markets in Southeast Asia were strong, with improving domestic demand and increased dispatches of solar energy glass. Markets in South America were relatively weak, reflecting challenging economic conditions. The architectural business recorded revenues of ¥ 123,935 million (~ $1 billion) and an operating profit of ¥ 5,752 million (~ $49 million).
In the automotive business, revenues were similar to the previous year, with increases in Japan and
North America partly offset by reductions in South America. Europe represents 46% of the group’s automotive sales. Cumulative light-vehicle sales were similar to the previous year, with growth in Western Europe offset by a decline in Eastern Europe. In the OE sector, the group’s cumulative local currency revenues and profits were similar to the previous year. Automotive glass replacement (AGR) revenues were below than the previous year with sluggish demand following a relatively mild winter, although profitability was maintained with an improved mix of products.
In Japan, representing 17% of the group’s automotive sales, OE volumes were stronger than the previous year. Domestic demand was robust, despite an increase in consumption taxes earlier in the year. The group’s revenues improved with the increased demand, although profitability was impacted by increased input costs. AGR markets were similar to the previous year. In North America, representing 26% of the group’s automotive sales, revenues and profitability improved. OE market volumes continued to increase, and the AGR business benefited from robust demand following harsh winter weather conditions. In the rest of the world, revenues and profits fell.
Market conditions in South America were particularly difficult. Consumer confidence was weak, with uncertainty ahead of upcoming elections in Brazil and a challenging economic outlook in Argentina. Consequently, light vehicle sales were significantly reduced from previous year levels across both countries. The automotive business recorded sales of ¥ 155,744 million (~ $1.3 billion) and an operating profit of ¥ 3,854 million (~ $33 million).
Revenues in the technical glass business were below the previous year due mainly to a decrease in volumes. Profits fell slightly but remain at a satisfactory level. Overall market conditions in technical glass business during the second quarter were similar to the previous quarter. Revenues from thin glass for displays were impacted by increased competition. On June10, the group started its new ultra-fine flat (UFF) glass production line in Vietnam. Glass sales from this line will commence during the second half of the year. Demand for components used in multi-function printers improved from the previous year. Volumes of glass cord used in engine timing belts were similar to the previous year. The technical glass business recorded revenues of ¥ 29,182 million (~ $248 million) and an operating profit of ¥ 2,431 million (~ $21 million).
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