Shiseido to close two of six Japan plants

Japan's Shiseido Co Ltd, the world's fourth-largest cosmetics maker, said on Monday it will close two of its six main domestic plants by June 2006 in a key step towards much-needed restructuring.
Long-criticised for being slow to reform, Shiseido also said it would stop production at another plant belonging to one of its subsidiaries and would liquidate a unit making tissue paper by September 2005.
"Shiseido has started to review its domestic sales division and now we have this announcement so we seeing some change at the company," said Masami Sawato, an analyst at HSBC Securities.
"It's come about 30 to 40 percent along the way it needs to achieve for reform, but if you turn that around, its means there's still a lot of upside for the share price."
Shiseido, which is Japan's largest cosmetics maker and boasts the Ipsa and Cle de Peau Beaute cosmetics lines, is struggling in a saturated cosmetics market, high advertising costs and harsh price competition at home.
Although it posted record earnings last year on cost cuts after two years of red ink, it reported a 34 percent slide in net profit for April-September, the first half of the business year, to 6.56 billion yen ($58.48 million), hit by sluggish sales and pension-related costs.
Shiseido said the closures of its Maizuru plant in Western Japan, which had grown old, and its Itabashi factory in Tokyo, which was difficult to operate at night, would lead to increased capacity utilisation at its other domestic factories.
In addition to its six main plants in Japan, it has 10 plants overseas.
It said 400 full-time staff affected by the restructuring would not lose their jobs but would be moved to other factories, although part-time staff would not have their contracts renewed.
Shiseido said the restructuring would have a minimal impact on earnings this business year and for next year but it did not know the impact for the year ending March 31, 2006.
It is forecasting a net profit of 23 billion yen for the current year ending March 31.
Prior to the announcement, Shiseido's shares closed up 0.59 percent at 1,361 yen.
The shares have gained some nine percent in line with the benchmark Nikkei average since mid-February, when rival Kanebo Ltd abandoned plans to sell its cosmetics division to top household products maker Kao Corp and turned to a state-backed rehabilitation body instead.