Annual Report 2018

 

“We are a proud company with a rich history of achievement, innovation, and significant societal contribution.”

We are each year presented with a new set of challenges—changes and developments in the geopolitical, economic, and environmental arenas that can impact our operations in seemingly innumerable ways—and each year Tosoh employees align to move forward toward our common goals. Over the past few years, we have set our sights on consolidating our finances, on ramping up our investment in the technologies that will make possible the products and services of the future and on strengthening and optimizing the efficiency of our operations. Our efforts yielded results in fiscal 2018, and I am proud to share them. I hereby present Tosoh Corporation’s annual report for fiscal 2018.

As in past years, we remained dedicated to our core mission: delivering innovative products that serve society. It was therefore imperative that we strengthened our financial foundation, invested in our R&D in the interest of commercializing innovative technologies and products that address global environmental and societal issues, and sustained our safety-related efforts to ensure the continued trust of society. I am pleased to announce that our endeavors, and favorable trade conditions, contributed to records in consolidated net sales and operating income for Tosoh in fiscal 2018.

Net sales rose significantly compared with fiscal 2017, 10.7%, to ¥822.9 billion, and operating income climbed 17.4%, to ¥130.6 billion. Ordinary income likewise rose, 16.9%, to ¥132.3 billion, as did net profit attributable to owners of the parent company, 17.4%, to ¥88.8 billion.

Our efforts internationally have continued to bear fruit. Exports and sales by our overseas subsidiaries grew to account for just under half of Tosoh’s consolidated net sales in the year under review. Asia beyond Japan remains our single most successful market overseas, and prospects are excellent for continued growth in the region.

Tosoh’s medium-term business plan outlines the company’s objectives for the three-year period ending in March 2019. At the conclusion on March 31, 2018, of only the plan’s second year, we had already exceeded our fiscal 2019 targets of ¥750 billion in net sales and ¥85 billion in operating income. Our operating profit margin in fiscal 2018, of 15.9%, also surpassed our fiscal 2019 goal, of 10% or better, and the operating profit margin achieved in fiscal 2017. And our strong 19.6% return on equity was nearly double the 10% or better target established in the medium-term business plan for fiscal 2019.

A steady reduction in interest-bearing debt and increase in our equity ratio contributed strongly to our record sales and profits in fiscal 2018. These factors also heightened our retained earnings, which positions us to move rapidly and decisively on mergers and acquisitions (M&A) and future investment.

The needs of society are changing rapidly amid the influence of political, economic, environmental, and other factors. This requires that we pursue research and development (R&D), facility upgrades, M&A, and other activities with increased resolve. We are rebuilding three of our eight R&D facilities to enhance their ability to generate significant innovations—particularly in the electronics, life science, environment, and energy fields, which we view as having the highest potential for growth.

Our investments in facility upgrades in fiscal 2018 amounted to ¥39.5 billion, a figure that we are planning to increase more than 70% in fiscal 2019. When we include funds allocated to M&A activity in the year ahead, we anticipate surpassing our fiscal 2019 medium-term business plan target for cumulative investment of ¥160 billion. We also expect that our facility upgrades and our bolstered R&D will contribute substantially to sustaining the consistently high operational rates so crucial to the continuous generation of stable profits.

In all that we do, we emphasize the importance of corporate social responsibility (CSR). The principal issues faced by management correlate to CSR and include meeting the expectations of stakeholders with regard to earnings, operational safety, growth strategies, increasingly stringent governance and compliance standards, and fortified worksite capabilities.

We continue to educate our employees on issues such as the importance of safety awareness on a daily basis. This involves reminding them of the need to act voluntarily instead of awaiting instructions and of the significance of maintaining high standards of quality. Challenges remain, of course, and we can always improve. But I am convinced that our efforts in fiscal 2018 were a major factor in establishing a safer work environment, in reducing our environmental impact, and in contributing to our strong financial performance.

Our objectives for fiscal 2019 include strengthening our chlor-alkali operations to maintain our position as one of Asia’s top chlor-alkali manufacturers; furthering the efficiency of our petrochemical operations and developing differentiated, high-value-added products; and rapidly commercializing next-generation specialty products. We expect continued challenges, such as the constant battle with fluctuations in raw material costs and shifting market conditions. Yet, as always, we will monitor changes and trends in the political and economic landscapes, regionally and globally. We will also continue our efforts to innovate products to meet society’s changing needs and to transform our corporate culture to a global outlook on expanding into new markets.

We are a proud company with a rich history of achievements. The energy, inspiration, and devotion of our employees—along with the enduring support of our customers and shareholders—will be invaluable as we move forward.

Toshinori Yamamoto

President

Copyright © 2018 Tosoh Corporation