Taiyo Nippon Sanso (TNSC) has seen encouraging signs of demand in its gas business.

Net sales for the first two quarters of fiscal 2010 (1st April to 30th September 2009) were ¥204.157m, compared to ¥255.990m in 2009, a differential of 20.2%.

Operating income dropped 29.7%, to ¥12.761m, and net income stood at ¥6.828m, having fallen by 31.3%.

During the first two quarters of fiscal 2010 the Japanese economy showed signs of a bottoming-out. This was primarily due to increased consumer spending, the implementation of economic stimulus packages in the world’s leading economies, including Japan’s, and a recovery in demand, which pushed up capacity utilisation rates in leading industries, owing largely to growth in exports to China and other markets.

However, the future direction of the economy remained unclear; as manufacturers continued to curb capital investment, and concerns over high unemployment persisted.

In the company’s main user industries – the steel, non-ferrous metals, automotive, and semiconductor industries – inventory adjustments ran their course and production recovered against the backdrop of an increase in exports, mainly of LCDs and steel products to China and other East Asian countries.

The increase in demand, as a whole, however, was still insufficient to realise a full-scale recovery.

Amid these circumstances, the group made concerted efforts to further reduce costs and recover profitability.

These efforts were insufficient to offset the adverse effects of weak demand.

In its gas business, TNSC experienced resurgence in demand from Japanese companies exporting LCD panels and steel products to the Chinese and other East Asian markets.

The company also saw some encouraging signs of a recovery in demand from it users, primarily chemical companies, automakers, and steelmakers. Even so, a full-scale recovery has yet to occur, with sales volumes of its mainline products of oxygen, nitrogen, and argon, as well as specialty gases, staying below the levels of the corresponding six-month period of the previous fiscal year.

Overseas, meanwhile, demand for gases in America remained weak, and the effects of the yen’s appreciation against the dollar compounded this factor, pushing sales down sharply on a year-on-year comparison.

As a result, sales of the gas business declined by 18.5% year-on-year, to ¥142,603 million, while operating income fell 31.5% to ¥9,608m.

In Japan, in the gas business the start of a recovery in demand was seen from the company’s user industries of chemicals, electronics, and steel, but demand remained sluggish in the shipbuilding, metal processing, and construction industries.

In North America the ongoing economic downturn caused demand to remain weak in both the gas and machinery and equipment businesses, causing sales of oxygen, nitrogen, and argon to post year-on-year declines in North America. A sharp fall in sales of specialty gases to the electronics industry was also recorded.

In Southeast Asia, sales in the company’s mainstay gas business posted a year-on-year decline for the six-month period.

Growth in demand as a result of the beginnings of an economic recovery was insufficient to fully offset a substantial decline in sales to the company’s major users in Taiwan - semiconductor and LCD manufacturers.

Sales on a Japanese-currency basis declined year-on-year, which is attributable in part to the yen’s appreciation.