Tokyo, Japan, Oct 17, 2006 - (JCN Newswire) - Showa Denko K.K. (SDK) at its board meeting today decided to withdraw from the production and sale of commodity aluminum foils used mainly for food packaging. SDK will stop receiving new orders on December 15 this year and terminate sales at the end of April next year.
While an extraordinary loss of around 1.3 billion yen will be incurred centering on the expenses for removal of facilities, the withdrawal will not have material influence on SDK's performance for 2006 as a reserve has already been provided to cover part of the cost. All employees at the Oyama Regional Office engaged in the business will be transferred to other sections of SDK.
The commodity aluminum foils market in Japan has long been in the state of oversupply as the market is reaching maturity and the demand is declining. Furthermore, the rise in aluminum ingot price since last year has worsened the profit situation. Under the circumstances, SDK has decided to withdraw from the business as it sees no possibility of improving profitability.
Meanwhile, Showa Denko Packaging Co., Ltd. (SPA), a consolidated subsidiary of SDK engaged in the production of a variety of high-performance packaging materials, is in good condition due mainly to the prosperity of its electronic-material packaging business. SDK will further expand SPA's operations.
Since the merger with Showa Aluminum Corporation in 2001, SDK has taken various steps to restructure its aluminum business. This year, SDK decided to dissolve its subsidiary Showa Aluminum Fabrication and to consolidate its aluminum alloys business through an alliance with Sumitomo Corporation.
In areas of high growth such as high-purity aluminum foils for capacitors, heat exchangers for car air-conditioners, and Shotic forged aluminum components, SDK will make positive investments and expand overseas operations with a view to improving the earning power of its core aluminum business.
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