Zeon Corp (4205) and JSR (4185) FY17 Q1 Results Meetings Comments.....
Key Points
- Zeon Corp and JSR both reported better than expected results for FY17 Q1. However, the full-year guidance now looks conservative in both cases. Electronic materials performed well for both companies, but the direction of earnings for elastomers was surprisingly disparate. The following pages illustrate quarterly data for the two companies.
- Zeon’s shares rose 11.1% after its midday announcement on July 31st. FY17 Q1 OP growth (+37.7% YoY) was supported by strong demand for Zeonor film for use, we are presuming, in the iPad Pro 2017 tablet. Q2 reportedly looks firm too. LiB materials and printer toner performed well. Q1 RP growth (+87.3% YoY) was boosted further by foreign exchange factors.
- Zeon’s Elastomer OP contracted on lower spreads, after a spike in FY16 Q4, as high-cost inventory remained after a price spike in raw material butadiene. It is not easy to pin down the reasons but, in contrast, JSR’s Elastomer OP surged. Zeon suggests its Elastomer margins should improve in Q2 on shipment timing factors. JSR admits that the spreads it saw in Q1 were probably too good, but expects support in H2 from growing S-SBR sales. JSR, incidentally, reported results for the first time using IFRS, and restated data accordingly.
- In Fine Chemicals, IC materials performed particularly well for JSR. ArF shipments to US and Korean IC manufacturers were strong, based, we presume, on brisk demand for 20nm and 16nm chips. We remain concerned, however, that JSR will likely lose market share to Shin-Etsu Chemical (4063) in the transition to 10nm and 7nm processes.
Zeon is the parent company of a group engaged in the manufacture and sale of chemical products. Along with its affiliates, Co. operates in three business segments: elastomer, specialty materials, and others. Co.'s principal products include synthetic rubbers; synthetic latices; chemicals, such as C5 petroleum resins and thermoplastic elastomers; specialty chemicals, such as synthetic aroma chemicals and industrial chemicals; information materials, such as elastromics materials and polymerized toners; specialty plastics, such as cyclo-olefin polymers; optical materials; medical products; RIM formulations; RIM products; paints; butadiene extraction technology; housing materials; and others.
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