Asahi Glass: Plans Y360B Capex Over Next 3 Yrs

Nearly 20% of the company's sales come from Europe and 60% from Japan.

For the year ending in March 2004, the company said it now expects a group operating profit of Y75 billion, down from its earlier target of Y95 billion.

The weakening of the European economy resulting in lower demand for flat glass will likely push down the glass division's operating profit by Y16 billion, the company said.

The waning popularity of cathode ray tube television and computer displays in favor of liquid crystal displays is also hurting the electronic display division's operating profit, which will likely come in Y4 billion lower than previous estimates.

Japan's top flat glass maker also said group net profit for fiscal 2003 will likely to reach Y35 billion, down from its earlier estimate of Y45 billion. The firm pegs group sales at Y1.31 trillion, versus its earlier goal of Y1.34 trillion.

Asahi Glass -2: Plans Y360B Capex Over Next 3 Yrs

The company also unveiled its new business plan for the three years to March 2006.

Asahi Glass said it will allocate Y360 billion for capital expenditure over the three years, pegging 45% of the total for use in its glass business, 35% for electronic displays and the rest for its chemical division.

Asahi Glass will spend half of the Y360 billion on new projects to increase capacity. It will spend about 30% on maintenance and renewal of its existing facilities, while 15% will be spent on further facility rationalization, the company said.

The company said it will continue to work on improving its return on equity from around 6% expected for the year to March 2004, to 10% in the year ending March 2006.

For the glass division, the company aims for Y66 billion in operating profit by the end of March 2006, up from Y39 billion expected next fiscal year, through such measures as further cost-cutting in the domestic flat glass business and the launch of new kilns in the growing Russian market and in Mexico.

The global consolidation of automakers is also pushing the global glass manufacturers to operate more cost-effectively. Asahi Glass said it will conduct further restructuring in Europe to minimize costs, while boosting operations in China. In the U.S. market, the company said it will strengthen its production capacity for Japanese automakers - Asahi Glass' main clients in the market, while developing more value-added products.

Asahi Glass anticipates demand for weight-based glass for TVs and personal computers will rise modestly in the next two years. The company may also strengthen its global glass business for Plasma Display Panels (PDPs) and Thin-Film Transistor Liquid Crystal Displays (TFT-LCDs).

Asahi Glass also announced Thursday it will begin processing glass substrate for PDPs in South Korea starting May, by investing in a Y400 million-joint venture with a local sales partner.

The new processing plant will have a monthly production capacity of 50,000 sheets, the company said. Asahi Glass plans to boost its stake in the venture to 70% by June 2003, from its initial stake of 49%.