Annual Report 2018

“A steady reduction of interest-bearing debt and an increased equity ratio position us to move rapidly and decisively on M&A and future investment.”

Policy 1: Balanced commodities and specialties

Policy 2: Stronger financial base

Policy 3: Safe and stable operations

Medium-Term Business Plan

Fiscal 2019, which began on April 1, 2018, marks the final year of the medium-term business plan Tosoh issued prior to the start of fiscal 2017. The plan outlines Tosoh’s goals and initiatives for the three-year period from fiscal 2017 to fiscal 2019, which ends on March 31, 2019. Its triple tenets are to optimally balance the company’s commodities and specialties operations, to maintain and fortify the company’s financial standing, and to implement safety reforms throughout the company’s operations.

The medium-term business plan’s financial targets include net sales of ¥750 billion, operating income of ¥85 billion, and an operating income ratio and a return on equity (ROE) of 10% or better. By fiscal 2018 year-end, fully a year in advance of the plan’s completion, the company had already achieved each of these targets.

This feature presents the highlights and results of the plan and of the strategies the company is employing in its commodity and specialty operations to meet the plan’s targets and to stabilize its profitability. It is based on information available at the time of writing. So be advised that changes in economic conditions and that other, unknown factors in Japan and internationally could cause actual results to differ significantly from any projections presented.

Business Positioning

Tosoh has a dual operating strategy, whereby its commodity and specialty operations complement one another. Under its medium-term business plan, Tosoh is strengthening its commodity operations to secure steady cash flow and profitability by investing to enhance production capacity and other resources. The company’s commodity operations must continue to meet Tosoh’s internal needs for utilities and raw materials and robust demand globally for basic raw materials.

Tosoh’s commodity business comprises the Chlor-alkali and Petrochemical Groups, which supply products within Tosoh and to markets worldwide. The Chlor-alkali Group boasts the largest integrated chemical commodity production capacity in Asia and provides such raw materials as chlor-alkali, cement, and polyurethane. The Petrochemical Group involves olefins and polymers and works constantly to keep pace with changing market conditions. Its compatibility with various feedstocks, such as naphtha, ethylene, propylene, and benzene, enables it to suppress costs and mitigate raw material price variations.

The medium-term business plan’s focus for the company’s specialty operations involves investing in growth fields and collaborating with business and academic entities in R&D and M&A.

The specialty operations are Tosoh’s growth engine. They encompass the Organic Chemicals, Bioscience, and Advanced Materials Divisions, whose products are basic materials of such high quality that they lend added value to the products of other manufacturers. Featured among Tosoh’s specialties are battery materials, quartz, zirconia, chromatographic systems and media, and ethyleneamines. These are well-positioned and profitable and protect the company from the fluctuations to which commodities are especially susceptible.

Tosoh is thus investing aggressively in its specialty and commodity operations. It is expanding the scope of its specialty operations with a focus on areas it deems to show the greatest potential for growth and on the development of new products. And it is bolstering its commodity operations to enhance their efficiency and productivity. In so doing, Tosoh intends to achieve the overall operational stability to enable it to endure fluctuations in its business environment and thereby maximize its corporate value.

Specialty Business


Advanced materials initiatives under the medium-term business plan focus on high-silica zeolite (HSZ), zirconia, electrolytic manganese dioxide (EMD), quartz glass, and sputtering targets. Demand for HSZ is rising, and Tosoh is increasing production capacity, with construction under way at the Nanyo Complex, and developing new grades. The company is also scheduled to begin construction at the Nanyo Complex to raise its production capacity for zirconia 30%. That and the development and marketing of new zirconia grades featuring higher quality and functionality will contribute to Tosoh’s ability to keep pace with steady growth in demand.

Advanced functionality is the company’s focus in EMD, quartz glass, and sputtering targets. Tosoh seeks to distinguish itself with high-performance products for new applications and by enhancing product cost-competitiveness through reductions in production costs and the development of new materials.

The medium-term business plan’s three-year strategy for organic chemicals calls for improving the profitability of ethyleneamine, polyurethane foaming catalyst, bromine, and flame retardant products and for stabilizing business in new products. Tosoh will transition to high molecular weight amines, such as triethylenetetramine, or TETA, and tetraethylenepentamine, or TEPA, to enhance profitability. It will also augment marketing activities for its polyurethane catalyst RZETA® in Europe and the United States and look to increase sales of its TOYOCAT® amine catalysts. An upgrade of its bromine manufacturing facilities has already greatly enhanced their efficiency.

Tosoh plans to invest aggressively in bioscience R&D and M&A to expand its sales of chromatography instruments, columns, separation and purification media, immunoassay analyzers, and reagents in established markets and to nurture new markets. M&A should also help the company acquire new products and technologies. Tosoh is in particular targeting the separation media market, which is expected to grow to about ¥150 billion by fiscal 2019. It will increase its TOYOPEARL® production capacity and develop columns and separation media specifically for the biopharmaceutical market. The company will also expand its lineup of differentiated reagents in regions where growth is expected, such as India, where Tosoh India will work to grow the market.

Financial Progress & Targets

Net sales for specialty operations in fiscal 2018 reached ¥187.1 billion, topping the fiscal 2019 target of ¥184.0 billion by 1.7%, and operating income was ¥33.9 billion, which fell short of the fiscal 2019 goal of ¥40.0 billion. Operating income was affected by reduced revenue from ethyleneamines caused by an increase in raw materials prices and a decrease in market prices, by the squeezing of profit margins for zirconia products resulting from increased prices for key raw materials.

Commodity Business


The Chlor-alkali Group’s initiatives toward fulfilling the goals of Tosoh’s medium-term business plan by year-end fiscal 2019 include the following. It will enhance its ability to secure raw materials at competitive prices, maximize its efficiency in areas such as power generation and consignment, and improve the profitability of its soda and chlorine derivatives.

Asian demand for methylene diphenyl diisocyanate (MDI) is forecast to grow 6% on average annually. So, the Chlor-alkali Group will transition to the manufacturing of high-value-added MDI. This, together with a strengthening of its functional urethane operations, will bolster the group’s ability to rapidly shift from commodity to specialty products and raise its proportion of system sales over single-item sales. The Chlor-alkali Group will also expand its functional urethane sales into medical fields and augment its hexamethylene diisocyanate (HDI)-derivative production capacity.

The Petrochemical Group will focus on enhancing olefin production—particularly of ethylene, propylene, and cumene—by sustaining high naphtha cracker operating levels, thereby maximizing its profitability. It will also strive for heightened competitiveness by raising the efficiency of its energy inputs and by formulating a pricing scheme that ensures improved margins.

Tosoh’s refinery and petrochemical modeling system (RPMS) enables it to balance its rate of production, product portfolio, and market prices through measures such as the adjustment of its naphtha cracker output mix. This creates business opportunities that the company is poised to take full advantage of. It enables the Petrochemical Group to shift further, for example, into the production of unique, high-value-added polymer products—mainly the functional polymers of chloroprene rubber (CR) and chlorosulphonated polyethylene (CSM). The group will look to increase its sales of its special CR grades, including sulfur-modified and injection-mold CR.

Financial Progress & Targets

In fiscal 2018, commodity operations generated ¥509.8 billion in net sales, surpassing the fiscal 2019 target of ¥441.0 billion by 15.6%. Operating income totaled ¥89.1 billion, again comfortably exceeding the fiscal 2019 goal of ¥38.0 billion. Net sales for the Chlor-alkali Group were ¥335.0 billion, surpassing the fiscal 2019 target of ¥277.0 billion by 20.9%, while the Petrochemical Group posted net sales of ¥174.8 billion, 6.6% above the fiscal 2019 goal of ¥164.0 billion. Chlor-alkali Group operating income was ¥66.6 billion, more than triple the ¥21.0 billion target established for fiscal 2019. Operating income for the Petrochemical Group was ¥22.5 billion, exceeding the ¥17.0 billion goal for fiscal 2019 by 32.4%.



The Engineering Group’s operations are led by Organo Corporation. This Tosoh water treatment subsidiary forecasts robust capital investment in the electronics manufacturing industry—particularly in Taiwan and China—and this will be an area of focus amid its efforts to expand its overseas operations. Under its new mission and long-term vision, Organo will apply the expertise it has accumulated in its water treatment business, such as separation and refinement, analysis, and manufacturing technologies, to the development of businesses in non-water fields, including solvents and electronic materials.

Organo will, of course, continue developing products such as standard water treatment systems and water treatment chemicals, bolstering the overseas operations of its mainstay business. But it will also cultivate new areas of business.

It will, for example, develop separation and purification technologies for lithium-ion battery applications, for the rapidly growing semiconductor manufacturing domain, and for the extraction of medicinal ingredients in the biopharmaceutical field. It will also fortify its abilities in vital manufacturing technologies for the food processing industry with an eye to expanding that aspect of its business. Organo, moreover, intends to grow its share of the Chinese electronic materials market to capitalize on continued robust capital investment in China. It likewise seeks to expand its offerings in business solutions.


Net sales for the Engineering Group in fiscal 2018 were ¥84.8 billion, down ¥1.8 billion from fiscal 2017. Operating income, meanwhile, totaled ¥4.9 billion, down marginally from fiscal 2017.

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