Annual Report 2017

Advanced Materials

Organic Chemicals

Bioscience

 

The Specialty Group contributed nearly a third of Tosoh's consolidated operating income in fiscal 2017.

  • Snapshot

    The Specialty Group meets the needs of its varied customers for high-value-added bioscience, organic chemicals, and advanced material products and technologies. Its extensive offerings are solidly positioned in stable and expanding niche markets and drive Tosoh’s profitability.

    The Specialty Group’s clients span the globe and include companies in the pharmaceutical, healthcare, semiconductor, consumer electronics, and automobile industries. Among them are emerging businesses whose successes hinge on the Specialty Group’s development of solutions to fuel their progress. Innovative products and technologies from the Specialty Group align Tosoh with market opportunities and offer potential for sustainable expansion strategies.

  • Group Performance

    In fiscal 2017, Specialty Group net sales increased 0.8% from a year earlier, to ¥175.9 billion (US$1.6 billion). That constituted 23.7% of Tosoh’s consolidated net sales, up from 23.2% in fiscal 2016. Group operating income climbed 8.2%, to ¥35.4 billion (US$326.6 million), and accounted for 31.8% of Tosoh’s consolidated operating income, compared with 47.1% a year earlier. The group’s operating margin was 20.1%, an increase from 18.7% in fiscal 2016.

    Ethyleneamine product prices declined on the back of a strong yen and softening markets overseas. Shipments of ethyleneamines by the Specialty Group decreased in fiscal 2017.

    The year saw an increase in fused silica glass shipments for the semiconductor industry. Among the group’s separation-related products, shipments of liquid chromatography packing materials also rose. Looking at diagnostic-related products, shipments of in vitro diagnostic reagents increased. Shipments of high-silica zeolites (HSZ) for use in automotive catalytic converters likewise increased, as did shipments of zirconia for dental applications and ornamental products.

  • Developments

    Capital Investments

    Tosoh announced in fiscal 2017 that it will increase its production capacity for Toyopearl liquid chromatography separation and purification media at its Nanyo Complex nearly 50% at a cost of around ¥5 billion. This is in response to growing global demand for purification media from the antibody drug manufacturing industry. Construction on Toyopearl manufacturing facilities began in October 2016 and is slated for completion in August 2018, with commercial operations due to commence in April 2019.

    In March 2016, the Specialty Group launched the commercial production of zirconia powder at the Nanyo Complex’s new zirconia manufacturing facilities. This was followed by a similar launch at the Yokkaichi Complex in March 2017, further boosting Tosoh’s zirconia production capacity.

    Work is also progressing on the construction of a reaction tower for the Specialty Group’s bromine operations at other Tosoh facilities in Japan. When completed in fiscal 2018, the state-of-the-art tower will lower production costs and raise competitiveness for Tosoh’s bromine business.

    Network Expansion

    Tosoh expanded and strengthened its bioscience operations with the early fiscal 2016 acquisition of Indian in vitro diagnostics company Lilac Medicare Pvt. Ltd. Renamed Tosoh India Pvt. Ltd., Tosoh is leveraging erstwhile Lilac's domestic network and product familiarity to introduce the Specialty Group’s immunological and diabetes diagnostic analyzers. Tosoh India will continue to play a central role in the Specialty Group's plans to grow its presence in India for its bioscience business.

    Group Consolidation

    In October 2017, Tosoh’s wholly owned subsidiaries Tosoh Finechem Corporation, Tosoh F-Tech, Inc., and Tosoh Organic Chemical Co., Ltd., will merge, leaving Tosoh Finechem Corporation as the surviving entity. Each of the three subsidiaries have developed, produced, and sold organic compounds of distinct characteristics. The merger will combine their technologies to accelerate the development of chemical compounds and to improve responsiveness to customers’ diverse needs.

  • Positioning

    Organic Chemicals

    The Specialty Group has three main objectives for its organic chemicals business. Firstly, it aims to boost profitability through a reinforced production structure and competitive pricing in ethyleneamines, bromines, and flame retardants. Secondly, it intends to create new business amid emerging demand for environmentally friendly polyurethane amine catalysts, heavy metals treatment agents, and industrial cleaners. Finally, it will hone the group’s reputation as a source of organic electroluminescent materials.

    Tosoh is a global leader in production of ethyleneamines, exporting around 80% of its 71,000-metric-ton annual output. Tosoh intends to uphold this position by prioritizing increased production of high molecular weight amines. This is part of a continued effort by the Specialty Group to shift toward high molecular weight amines while enlarging the group’s ethyleneamine derivative network globally. Further efforts include developing systems that better produce the isocyanates and polyols for the group’s RZETA polyurethane catalyst operations, which are essential to the automotive and furniture industries, and buttressing the capacity of its Toyocat facilities.

    Long-term, the Specialty Group maintains a twofold business strategy for its eco-business products and services. It will continue to produce the piperazine-based agents essential to its environmental product line, and will at the same time expand to emerging markets in Asia, including China, where rapid economic development has brought pressing environmental concerns.

    Advanced Materials 

    Zeolites

    Tosoh is expanding production capacity for HSZ at its Nanyo Complex about 30% at a cost of ¥10 billion. Construction on additional HSZ manufacturing facilities at the complex is due to begin in May 2018 and to be completed in March 2019, with commercial production expected to start in August 2019. The new facilities will join the HSZ production facility Tosoh built in Malaysia in 2016 in furthering Tosoh’s HSZ manufacturing capacity.

    Ceramics

    The Specialty Group intends to remain a key contributor to the global fine ceramics market, a position it has held since introducing Zpex, a translucent, colored, high-strength grade of zirconia, in 2011. This was furthered by the introduction of Zpex Smile, a high-translucency zirconia for front teeth, in 2014.

    The Specialty Group will build on that positioning by capitalizing on zirconia’s popularity in applications for wristwatches, car accessories, and mobile phones.

    Battery Materials

    Tosoh is the world’s largest producer of electrolytic manganese dioxide (EMD), which has positioned Tosoh as a top supplier of EMD to the global conventional battery market.

    Elsewhere, demand for lithium-ion secondary batteries is expected to continue growing amid expanding demand and production of electric vehicles, as well as rising standards of living globally, which has seen an increased use of portable and electronic devices. To capture this interest, the Specialty Group is establishing itself as a principal producer of manganese-based cathode materials for the lithium-ion secondary battery market.

    Electronic Materials

    Demand is also growing for thin-film materials and quartz, two areas where the Specialty Group is expanding operations. In fiscal 2017, fused silica glass shipments for the semiconductor industry grew on the back of increased demand for handheld devices, automobile and other consumer electronic products, and digital information technologies.

    Further developments include pursuing measures to serve the next-generation memory and printable electronics markets, and expanding sales of products for atomic layer deposition and coating applications.

    Bioscience

    Separation and Purification

    Tosoh is committed to a major presence in the global bioscience market. Through its Specialty Group, it has established its bioscience brands in the leading markets of Japan, the United States, and nations in Europe. The group now targets high-growth markets in China, India, Southeast Asia, and the Middle East. Over the medium term, the focus is on selling high-performance liquid chromatography (HPLC) separation columns and Toyopearl separation media.

    Tosoh began expanding its Toyopearl production facilities at the Nanyo Complex in October 2016. Construction is expected to end in August 2018, and commercial operations are anticipated to launch in April 2019. The new facilities should expand Toyopearl production around 50% and enable Tosoh to respond to growing global demand for purification media from the antibody drug manufacturing industry.

    Clinical Diagnostics

    Tosoh continues to build its worldwide presence in clinical diagnostic systems. The company has an especially positive reputation in the global diabetes market thanks to its line of Specialty Group glycohemoglobin (GHb) analyzers.

    The Specialty Group’s plans include producing compact, reasonably priced GHb analyzers suitable for developed and developing countries and expanding the support network for all of its GHb analyzer models.

    The global molecular testing market, too, is growing steadily and is estimated to be worth over ¥500 billion. Market growth is particularly strong in emerging countries, where molecular testing is most valued in testing for infectious diseases, for which Tosoh’s nucleic-acid amplification testing products are particularly useful. The group has made steady inroads in the market, especially with its next-generation TRCReady-80 molecular testing system.

  • Medium-term Business Plan

    Tosoh’s medium-term business plan targets ¥40 billion in operating income and an operating margin of 21.7% for the Specialty Group by fiscal 2019. These aims represent increases of ¥4.6 billion and 1.6 percentage points, respectively, over fiscal 2017.

    The plan’s three-year strategy for advanced materials is to develop new grades of and to boost production capacity for HSZ. On the capacity front, demand for HSZ is on the rise. Tosoh has been proactive in meeting that demand. Commercial operations began at Tosoh’s new HSZ plant in Malaysia in April 2017. And Tosoh’s next-phase increase to its HSZ manufacturing centers at the Nanyo Complex is expected to finish construction in March 2019.

    Tosoh’s zirconia product strategy is to continuously market distinctive grades. The Specialty Group will work on increasingly translucent zirconia dental materials and on accelerating development to meet customer needs. Tosoh, meanwhile, increased its zirconia manufacturing capacity at the Yokkaichi Complex in March 2017.

    The Specialty Group’s focus in EMD, quartz glass, and sputtering targets is on advanced functionality. This includes heightening the differentiation of Tosoh’s EMD. It also includes raising the competitiveness of Tosoh’s quartz glass by reducing manufacturing costs and developing new materials. The Specialty Group will also emphasize sputtering targets and the development of high-performance products for touch screen applications. Touch screen demand should grow as emerging economies follow developed countries in expanding smartphone usage.

    The strategy for the Specialty Group’s organic chemical operations in ethyleneamines, urethane foaming catalysts, and bromine and flame retardant product lines is to improve profitability and to stabilize new business. The Specialty Group is integral to Tosoh’s aim of significantly improving profitability by shifting to high molecular weight amines. It will also focus on sales of urethane foaming catalysts, most notably highly functional products for Toyocat, and on bolstering Tosoh’s marketing in European nations and in the United States for RZETA. Its efforts in bromine and flame retardants are furthered by Tosoh’s investment in more efficient bromine production facilities, which began commercial operation in spring 2017.

    Tosoh’s strategy for bioscience instruments, columns, separation media, immunoassay analyzers, and reagents is to expand markets through R&D and acquisitions and to cultivate demand in emerging economies. Initiatives include acquiring new technologies and products. And the group plans to increase Tosoh's share of this approximately ¥50 billion and rapidly growing market.

    The Specialty Group will develop columns and separation media for the biopharmaceutical market and increase as anticipated by summer 2018 its production capacity for Toyopearl separation media. It has complemented its fiscal 2015 launch of its diagnostic AIA-CL2400 automated immunoassay analyzer with the compact AIA-CL1200. It will also expand its offerings of distinctive reagents in growth areas and cultivate the Indian market through Tosoh India. It will be helped hugely by the completion of Tosoh’s reagent production capacity enhancement in October 2016 to 30% beyond then current capacity. The Specialty Group, meanwhile, will continue to pursue various M&A opportunities.

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