Investment Bridge Announces Investment Opinion: Bridge Report on ZEON CORPORATION Issued: Mixed Results in 1st Half FY3/15, Lower Profits Despite Higher Sales Expected in Full Year

Investment Bridge, one of Japan’s leading independent IR services companies, has released a "Bridge Report” on ZEON CORPORATION (TOKYO:4205) reviewing its earnings results for the first half results and full year earnings estimates for fiscal year March 2015.

Report Highlights

• Sales rose by JPY5.0 billion year-on-year to JPY153.3 billion during the current first half on the back of increases in sales volumes and the weaker yen. However, operating and ordinary incomes declined by over the same period.
• Zeon maintains its outstanding earnings estimates for the full fiscal year March 2015 without change and calls for sales to rise by 4.6% year-on-year to JPY310.0 billion, and operating income to decline by 23.2% to JPY25.0 billion due to uncertainties arising from the elastomer materials market conditions, small to medium sized film application demand, and the rapid weakening of the yen.
• Dividend payment is expected to be raised, marking the fifth consecutive year of higher dividends.

ZEON CORPORATION is a petrochemical manufacturer that maintains numerous products with large shares of global markets, including synthetic rubber used in automobile parts and tires, and synthetic latex used in oilproof gloves. The Company’s strengths include its innovative technology development function, research and development structure, and high earnings generation capability. The Zeon Group is comprised of the parent company, 57 subsidiaries and 10 affiliated companies. The Company operates manufacturing facilities in various locations in Japan and in overseas markets.

Sales rose by 3.4% from the previous first half to JPY153.3 billion in the current first half due to increases in sales volumes of optical film and a weakening in the yen of approximately 5%, and despite weakness in overseas market conditions for elastomer materials. Operating income declined by 13.3% to JPY14.5 billion over the same period due in part to negative pricing factors. A JPY0.7 billion year-on-year contraction in foreign exchange translation gains contributed to a 14.3% and 16.5% year-on-year declines in ordinary and net incomes to JPY15.5 and JPY9.0 billion respectively.

Current assets rose by JPY13.1 billion from the end of the previous fiscal year to JPY191.5 billion due to increases in cash and equivalents, accounts receivables, and inventories accompanying the higher sales. Increases in capital investments and depreciation caused tangible noncurrent assets to rise by JPY0.1 billion over the same period. Increases in accounts payables contributed to a JPY8.8 billion rise in total liabilities and net assets rose by JPY8.5 billion due to an increase in retained earnings. Consequently, equity ratio remained in line with the previous fiscal year end at 47.9%.

The outstanding full year earnings estimates have been maintained without any changes and call for sales to rise by 4.6% year-on-year to JPY310.0 billion, and operating income to decline by 16.4% year-on-year to JPY25.0 billion, due in part to a worse than expected deterioration in overseas market conditions for elastomer materials, small to medium sized film application demand, and the rapid weakening of the yen. A one yen increase in the dividend payment to JPY14 per share is planned, and would mark the fifth consecutive term of higher dividends.

The Bridge Report highlights the potential for further volatility in foreign exchange and numerous other uncertainties that currently exist. However, the Report also cites the potential for an upward revision to full year earnings given the attainment rates of the first half earnings already achieved. At the same time, the addition of a second manufacturing line at the Singapore plant can be expected to contribute to future growth in ZEON’s earnings over the longer term. Another factor to keep close watch upon is progress in the start of mass production of single wall carbon nanotubes.

To view the full report, please go to the website at the URL listed below.
http://www.bridge-salon.jp/report_bridge/archives/eng/4205/20150113.html

About Bridge Report:

Bridge Report is produced by Investment Bridge Co., Ltd. and provides accurate and objective information about the earnings, business strategies, and other information of publicly traded Japanese companies. Investment Bridge was founded in August 2000 and is one of Japan’s leading independent IR support services companies. Investment Bridge specializes in providing various solutions to Japan’s publicly traded companies with the goal of expanding our clients’ shareholder base and liquidity through increased recognition and understanding of companies.