In Japan, the economy remained steady thanks to factors such as strong capital expenditure and consumer spending, despite concern over slow economic growth amid falling profitability of exports due to the strong yen. In other Asian countries, China sustained a high economic growth backed by robust investments, and ASEAN countries achieved moderate economic growth. In Europe, the economy continued to be steady in Eastern Europe, including Russia, while the economy slowed down gradually in Western Europe influenced by confusion in financial markets and fear of inflation. In the U.S., a sluggish housing market and declined employment weighed down capital investment and consumer spending, highlighting a deteriorating economy.
As for the target markets of the AGC Group, the market for glass substrates for flat panel displays (FPDs), particularly glass substrates for TFT LCDs, continued to be strong. Flat glass market remained sluggish in Japan and North America, and weakened in Europe. The market for chemical products were steady.
Under such market circumstances, the Group posted net sales of 377.5 billion yen for the first quarter under review, down 12.5 billion yen or 3.2% from a year earlier; operating income of 54.0 billion yen, up 10.6 billion yen or 24.3%, and ordinary income of 37.6 billion yen, down 3.7 billion yen or 9.0%. Net income decreased 1.3 billion yen or 4.4%, year-on-year, to 28.2 billion yen.
(2) Overview of the first quarter of 2008 by business segment
- Glass operations
Sales in the flat glass business decreased from the same period of the preceding year. Demand remained strong in fast-growing markets such as Russia, while prices fell in Western Europe as the tight supply-demand situation slackened. In North America, demand continued to weaken. Accordingly, the Group decided to stop some operations of glass production facilities and withdraw from the unprofitable glass fabrication business in North America. In Japan, shipments decreased, affected by weak demand as well as accelerated regular repairs at the Kashima Plant. Price hikes in raw materials and fuels affected operations in all regions.
In the automotive glass business, sales decreased slightly from the previous year due to a decline in auto production in North America, despite a steady rise in global auto production. Sales of other glass products dropped from the previous year because the Group fully withdrew from the fiberglass business at the end of October 2007. As a result, net sales from the Glass operations for the first quarter under review decreased 16.5 billion yen or 7.8%, year-on-year, to 194.6 billion yen, and operating income decreased 7.5 billion yen or 47.3% to 8.3 billion yen.
- Electronics and Display operations
In the display business, overall sales increased from the previous year. Although shipments of CRT glass sagged due to the demand shift to FPDs, shipments of glass substrates for TFT LCDs and glass substrates for PDPs continued to be strong. With respect to the electronics materials business, overall sales decreased from the preceding year, hurt by slowed shipments of some display materials, despite continued steady shipments of semiconductor process materials and photonics components. This decrease is also attributable to the Group’s withdrawal from the business of smalland medium-sized display panels.
As a result, net sales from the Electronics and Display operations for the first quarter under review increased 3.4 billion yen or 3.5%, year-on-year, to 101.3 billion yen, and operating income increased 19.9 billion yen or 88.6% to
42.4 billion yen.
- Chemicals operations
As for the chlor-alkali & urethane business, sales of caustic soda and vinyl chloride-related products continued to be steady. In the fluorochemicals & specialty chemicals business, shipments of fluorinated resins for coating, water and oil repellents, and fluorinated resins remained robust.
For both businesses, price revisions were made in response to price hikes of raw materials and fuels, but such revisions failed to fully offset the cost increase. As a result, net sales from the Chemicals operations for the first quarter under review increased 0.9 billion yen or 1.2%, year-on-year, to 77.1 billion yen, and operating income decreased 1.7 billion yen or 38.4% to 2.7 billion yen.
- Other operations
In the ceramics business, earnings remained steady thanks to strong domestic demand both in the glass engineering sector and the environmental energy sector. As a result, net sales from Other operations for the first quarter under review increased 1.1 billion yen or 5.9%, year-on-year, to 19.6 billion yen, while operating income stood at 0.7 billion yen, relatively flat compared with the corresponding period of the previous year.
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