26 November 2010 - JCR assigned on Friday a preliminary A- rating to the JPY5bn bonds No 1 of Japanese pine chemical company Arakawa Chemical Industries Ltd, which will be issued on 21 December 2010.
The agency issued the following press release:
(1) Arakawa Chemical Industries, Ltd. is Japan's largest company in the pine chemical industry with the rosin being the main raw material, and is also a pioneer in the domestic industry. Although the applications of rosin expand to wide-ranging areas, production size is limited, making the pine chemical a niche market, which is oligopolistic. The Company supplies its core products to the leading manufacturers in relevant business fields and is positioned as a leading supplier by these companies, thereby establishing a firm business base. However, the price of rosin is becoming increasingly volatile, which can easily affect earnings. Therefore, a caution is required in this respect. On the other hand, the Company is expanding its business domain by taking advantage of its knowledge in pine chemicals. It is focusing on the overseas development of the electronic materials segment and its foundation business segments, centering on adhesive resins, which form new earnings sources in addition to the domestic business base.
(2) Despite the soaring price of rosin, the main raw material, the Company expects an operating profit of 2.6 billion yen for the fiscal year ending March 31, 2011, down 8.8% from the previous year, unchanged from its forecast at the beginning of the year. However, JCR needs to closely watch future changes in the rosin price and the possibility that they will adversely affect the spread with product prices. The Company's financial structure is satisfactory, and JCR considers that it can be maintained for the immediate future. Although the funds to be raised by the bond issue will be appropriated for the capital expenditures and the repayment of short-term borrowings, JCR expects the impact of the issue on the financial structure will be limited.