Sumitomo Chemical cutting 10% of workforce to stem bleeding from record US$2bn losses

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SUMITOMO CHEMICAL will slash 4,000 jobs and restructure its business to “stop the bleeding” of its record loss of 312bn yen (US$2bn).

At an investors meeting held earlier this week, Keiichi Iwata, president of the Japanese chemicals major, forecast huge losses for 2023: “Our net loss exceeded 300bn yen, the largest loss ever recorded by our company.”

Iwata blamed the deterioration on competition from new large-scale chemicals plants in China, the inability of its pharmaceutical business to identify and develop new drugs, and a management structure that is too dispersed across five businesses.

To turn this around, the company said it will cut costs by making 4,000 of its 40,000 staff redundant. Half of the jobs will be lost at home in Japan. Sumitomo Chemical had forecast in February that its losses for 2023 would be around 245bn yen but they are now projected to be much higher, with its pharmaceutical business responsible for more than half. Iwata said there will be major cuts to R&D spend at Sumitomo Pharma and that corporate turnaround experts are being brought in to “stop the bleeding”.

Chemical detraction

There will also be a change of direction in its partnership with oil behemoth Saudi Aramco. Sumitomo has helped Aramco create the Petro Rabigh petrochemicals complex in Saudi Arabia – Aramco’s first venture downstream into the sector. The project has suffered growing losses following a prolonged downturn in petroleum and petrochemicals markets. Iwata said there has become a divergence in strategy between the two firms as Sumitomo shifts its focus away from commodity chemicals towards speciality chemicals.

He said Sumitomo will not invest any more in the “symbolic project” and has agreed to form a joint taskforce with Saudi Aramco to discuss how to improve the profitability of the venture.

It’s part of a wider shift at the company as it looks to restructure its chemicals business. It has recently sold its cyclohexanone business and is looking at how to cut costs at domestic Keiyo ethylene plant.

The company will be reorganised into four businesses this year that will focus on providing chemicals that help reduce environmental impact and solve social issues. These include products for the food industry, regenerative medicine, chemicals recycling, and semiconductor sectors.

For its chemicals business, it plans to develop processes for chemical recycling and for using CO2 and bio-based resources as chemicals feedstocks. Sumitomo Chemicals will push to commercialise these by 2035 and then license the technologies for use around the world. Iwata said that candidate technologies include processes to convert ethanol to propylene, CO2 to methanol, and producing olefins by the direct cracking of plastic waste.

Earlier this year, the company announced it had completed the construction of a pilot facility which uses CO2 generated from the incineration of waste, and hydrogen derived from renewable energy, to produce methanol.