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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Ube Industries, Ltd.    4208   JP3158800007

UBE INDUSTRIES, LTD.

(4208)
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End-of-day quote. End-of-day quote Tokyo Stock Exchange - 01/21
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Dupont, Dow to help global automakers avoid output crunch

04/19/2012 | 11:47pm EST
United Auto Workers union member Carrie Attwood uses an ergonomic-arm to install a front seat in a Chevrolet Volt electric vehicle at General Motors Detroit-Hamtramck assembly plant in Hamtramck

DETROIT (Reuters) - Dupont (>> E I Du Pont De Nemours And Co) and Dow Chemical (>> The Dow Chemical Company) are among chemical firms working with global automakers who are bracing for a crunch in production, after a German chemical plant explosion cut a chunk of supply of a nylon resin used in brake and fuel systems.

DETROIT (Reuters) - Dupont (>> E I Du Pont De Nemours And Co) and Dow Chemical (>> The Dow Chemical Company) are among chemical firms working with global automakers who are bracing for a crunch in production, after a German chemical plant explosion cut a chunk of supply of a nylon resin used in brake and fuel systems.

The risk of production cuts is greater for car markers in the United States and France, and less in Japan and Germany, UBS said in a research note.

"We see high risk of production stoppages in the second quarter," UBS analysts said in the research note issued on Thursday. But they also saw an "equally high probability" that alternatives would be found within the same quarter.

The global supply of PA-12, used in several industries including auto manufacturing, was already stretched thin before the explosion at an Evonik Industries AG <RAGES.UL> plant in Marl, Germany on March 31, that led to the nylon resin shortage.

Auto experts and analysts are not clear how the shortfall would affect China, which has overtaken the United States as the world's largest auto market.

Florian Schattenmann, research director for Dow Automotive Systems, said Dow "has allocated essential resources to find alternative solutions" to the use of the nylon resin PA-12, also known as Nylon-12.

DuPont CEO Ellen Kullman, in an earnings conference call with reporters on Thursday, said the company has three polymers that could be a replacement in some automotive applications.

As the race is on to find alternative substances to the nylon resin and as automotive engineers seek "work-arounds" to keep making cars without PA-12, solutions likely will not be found in time to keep global auto production from falling in the second quarter, several analysts said.

Evonik is the leading maker of cyclododecatriene, or CDT, which is a base material used to make PA-12. The UBS research note said Evonik had 70 percent of the global available capacity of CDT used for the nylon resin PA-12.

Evonik made 40 percent of the world's supply of CDT, said UBS. The available supply figure is higher because some makers of CDT do not make it available to other companies to make the nylon resin PA-12, UBS said.

Two workers were killed in the March 31 blast. Evonik stopped all its production of CDT.

Evonik has said it will be at least three months and perhaps until the start of next winter before it can resume full production of CDT. <ID: nL2E8FHD9C>

LMC Automotive said on Thursday that North American automotive production, "which has been in overdrive in recent months" faces a "real and substantial risk" of slowed output.

Automakers will be forced to more closely manage inventory and the types of vehicles they produce to cope with the "looming shortage," said Jeff Schuster of LMC Automotive.

Neither LMC or UBS, nor major automakers around the world contacted by Reuters this week, have said how deeply production may be cut in the coming months.

JAPAN, GERMAN AUTOMAKERS LESS AFFECTED

Japan's automakers rely on Asia's biggest maker of PA-12, Ube Industries (>> Ube Industries) based in Yamaguchi, and German automakers can turn to Switzerland's Ems Chemie Holding (>> EMS-Chemie Holding AG), UBS said.

French automakers will be exposed, UBS said, because they largely rely on France's Arkema SA (>> ARKEMA) for the nylon resin and Arkema relies on Evonik for CDT to produce its PA-12.

U.S. automakers and suppliers are highly reliant on Evonik or companies reliant on the German industrial conglomerate to make PA-12.

"Whilst the industry will likely approve substitute materials within the second quarter, the disruption to production in coming weeks may disproportionately affect automakers with already weak balance sheets," the UBS note said.

Italy's Fiat SpA (>> Fiat SpA) and France's PSA Peugeot Citroen (>> PEUGEOT) were named by UBS as two automakers that "may experience further working capital disruptions in the second quarter" due in part to payment to suppliers for first-quarter production.

All suppliers, even those that do not make auto parts using PA-12, will be affected by the shortage, UBS said. If the shortage impacts brake and fuel systems, it will affect other components because it is difficult to assemble vehicles and fit critical parts later, the bank's analysts said.

Schattenmann of Dow Automotive said: "While we do not manufacture CDT or utilize the resin made from CDT in our manufacturing processes, we are actively evaluating alternative material solutions that could replace PA-12 in select applications."

And Kullman of DuPont said: "Our specialists are working on the ground with the specific (automakers) and understanding if we could provide those that it does look like we'll get some upside from that."

She said it was too early to say how deeply DuPont would become involved in the business of supplying polymers for auto suppliers and automakers, but that the effort would be "positive" for DuPont.

Invista Inc, a subsidiary of privately held Koch Industries of Wichita, Kansas and the maker of Stainmaster carpets, produces CDT. Invista will help the auto industry with CDT supply as much as it can, but has little to spare beyond its existing customers, said Invista spokeswoman Jodie Stutzman.

TI Automotive <TIATO.UL> CEO Bill Kozyra sounded the alarm on the severity of the nylon resin PA-12 shortage to customers in a letter last week. That was followed by a meeting of major automakers and suppliers in suburban Detroit attended by more than 200 people.

Frank Buscemi, spokesman for TI Automotive, said cooperation among automakers, suppliers and chemical companies was high.

"Alternatives may not be the same for every type of auto part that uses PA-12," said Buscemi, who added that different suppliers and automakers may use different solutions to keep making the same type of tubing, hoses or fuel tanks.

(Editing by Jacqueline Wong)

By Bernie Woodall


© Reuters 2012
Stocks mentioned in the article
ChangeLast1st jan.
ARKEMA -1.63% 95.48 Real-time Quote.3.76%
BASE CO., LTD. 4.31% 6050 End-of-day quote.-1.63%
BASE,INC. 17.53% 12940 End-of-day quote.32.58%
EMS-CHEMIE HOLDING AG -0.77% 832.5 Delayed Quote.-1.64%
ONE STOP SYSTEMS, INC. -4.71% 4.05 Delayed Quote.1.25%
PEUGEOT SA -4.21% 21.85 End-of-day quote.-2.32%
SEEK LIMITED 3.78% 28.82 End-of-day quote.1.02%
UBE INDUSTRIES, LTD. 0.00% 1935 End-of-day quote.3.37%
URBAS GRUPO FINANCIERO, S.A. -2.66% 0.0183 Delayed Quote.6.21%
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Financials
Sales 2021 588 B 5 669 M 5 669 M
Net income 2021 13 088 M 126 M 126 M
Net Debt 2021 135 B 1 302 M 1 302 M
P/E ratio 2021 14,9x
Yield 2021 4,59%
Capitalization 196 B 1 890 M 1 886 M
EV / Sales 2021 0,56x
EV / Sales 2022 0,48x
Nbr of Employees 10 890
Free-Float 93,9%
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Technical analysis trends UBE INDUSTRIES, LTD.
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Mean consensus OUTPERFORM
Number of Analysts 8
Average target price 2 311,25 JPY
Last Close Price 1 935,00 JPY
Spread / Highest target 55,0%
Spread / Average Target 19,4%
Spread / Lowest Target -4,39%
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Managers and Directors
NameTitle
Masato Izumihara Executive President, CEO & Representative Director
Yuzuru Yamamoto Chairman
Masayuki Fujii CFO, Director & Head-Investor Relations
Genji Koga Executive Officer & Head-Information Systems
Atsushi Yamamoto Director
Sector and Competitors