Japan's MCG revises SoarnoL investment plan amid cost overruns

Reason for revising the investment plan

SoarnoL developed by Mitsubishi Chemical Corporation’s own technology, is an ethylene-vinyl alcohol resin that provides high gas barrier properties, oil resistance, and clearness. When used as a food packaging material, it helps preserve the flavour and quality of food for longer, thereby contributing to reducing food waste. It can also be made thinner than other materials, thereby contributing to reducing the amount of plastic used. Demand for this environmentally friendly material is expanding worldwide. To meet the growing demand for SoarnoL, MCG has been making capital investments to increase its annual production capacity in the United Kingdom by 21,000 tons. However, the investment involves irregular construction work due to design and operational constraints, leading to complex contracts and management frameworks that have caused delays at each stage and necessitated additional safety assessments. As the design and on-site estimates were further refined, it became clear that construction related costs would exceed the company’s initial projection, partly also due to surging material and personnel expenses amid recent global inflation. The overall project is also behind schedule.

In light of the higher-than-projected expenses and the schedule delay, MCG has had to increase the investment amount, which is expected to reduce profitability. The impact of the investment increase is outlined in “3. Impact on business performance.” The new manufacturing facility is scheduled to start operation in fiscal 2027. MCG’s management vision, KAITEKI Vision 35, designates food quality preservation as one of its business focus areas. SoarnoL, the core of the vision, remains a growth driver for the company’s Chemicals Business. MCG will continue to contribute to achieving a sustainable society by delivering materials that help preserve food quality.

Mitsubishi Chemical UK Limited, manufacturing and marketing of SoarnoL has a capital of €23,209 thousand (~$27.4 million).

Impact on business performance

Due to the revision of the investment plan, profitability is expected to decline. MCG will therefore post an impairment loss on SoarnoL related fixed assets, including investment-related expenses incurred to date. As a result, the company expects to record an impairment loss of approximately ¥30 billion (~205 million) for the fiscal year ended March 31, 2026. This impact was not factored into the consolidated earnings forecast for the fiscal year ended March 31, 2026, announced on February 5, 2026. The consolidated financial results for the fiscal year ended March 31, 2026, including the impact of the investment increase, are currently under review. MCG will promptly announce any necessary revisions to the earnings forecast.

Note: The headline, insights, and image of this press release may have been refined by the ALCHEMPro staff; the rest of the content remains unchanged.

ALCHEMPro News Desk (JP)