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Kyowa profit improves

12-Nov-2003

Japan's Kyowa Hakko Kogyo has reported a 61.5 per cent rise in operating income to 12.6 billion yen (€99.8 million) for the six months to September 30, largely because of improved earnings in its biochemicals, chemicals and food businesses.

However, net sales declined 4.2 per cent to 177.5 billion yen, largely as the result of the sale of its alcoholic beverage business in September 2002.

Turnover in the pharmaceuticals business was flat at 71.6 billion yen, while operating income fell 46 per cent to 5.2 billion yen because of increased competition, government policies to reduce medical costs and an increase in R&D costs.

Sales in biochemicals increased 12.4 per cent to 33.7 billion yen while operating income jumped nearly 600 per cent to 4.5 billion yen, boosted by strong sales of amino acids for use in health foods, pharmaceuticals and pharmaceutical raw materials. The loss-making overseas subsidiaries that manufacture amino acids also returned to profit as Biokyowa of the US switched to the production of high value-added products.

Sales in the chemicals business rose 8 per cent to 33.0 billion yen, with operating profit reaching 1.6 billion yen compared with an operating loss of 200 million yen the year before. These improvements were mainly the results of product price increases, increased sales of solvents, and cost cutting, said the firm.

During the first half-year, Kyowa took further steps to improve its financial position and focus on the core businesses of each segment as it prepares to move to a holding company system in April 2005 that will be focused on pharmaceuticals and bio-products. It also resolved to dissolve its feed-grade amino acid subsidiary in Mexico and cancel the employee pension trust.

For the fiscal year to March 2004, Kyowa expects net sales of 348 billion yen, lower than the year before, because of the sale of its alcohol beverage operations. However, operating income is forecast to rise to 26 billion yen, an increase of 61.6 per cent over fiscal 2002.

Prior to this the firm's health and nutrition ingredients operations, which are currently located in several different businesses, will be brought together into the biochemicals division.

Meanwhile, the chemicals and food businesses will be made into separate operating units in April 2004 and April 2005 respectively, noted the company.

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