Tosoh Report 2020

To achieve the objectives of our medium-term business plan and thereby fortify our competitiveness, we are engaging in various initiatives. These include raising the operational efficiency of the naphtha cracker that is the backbone of our olefin business.

We are also furthering the initiative begun during our previous medium-term business plan to differentiate and add value to our derivative polymer products. Under our present medium-term business plan, we have positioned functional polymers as specialty products to increase revenues from our polymer business.

In undertaking these initiatives, we have set targets for all product categories within our olefins and polymers businesses through the collaborative efforts of our sales, R&D, and manufacturing operations. We will continue to emphasize collaboration in the way of heightened information sharing to foster team spirit among our employees and therewith ensure a workplace environment where employees can exercise their capabilities without reservation.

Etsuya Ikeda
President, Petrochemical Group
Director, Executive Vice President
Tosoh Corporation

The Petrochemical Group plays a critical role in Tosoh’s dual operational strategy by producing stable-demand, revenue-generating commodity products and more-profitable high-performance specialty products.

Olefins

The olefins business centers on the naphtha cracker at the Yokkaichi Complex. Olefins are used as a basic raw material in petrochemical products, such as ethylene and propylene. 

Polymers

Tosoh supplies polymers to meet a wide range of needs. It also integrates its polyethylene and functional polymer operations to produce an array of distinctive products.

To learn more about the Petrochemical business group, click here. 

Fiscal Year 2019 Results

Petrochemical Group net sales rose ¥‎ 9.2 billion, or 5.2%, to ¥‎ 183.9 billion (US$1.6 billion), compared with fiscal 2018. The group’s operating income, meanwhile, fell ¥‎ 9.1 billion, or 40.5%, to ¥‎ 13.4 billion (US$121 million). This decrease was mainly due to worsening trade conditions.

Shipments of ethylene and polypropylene declined because of lower production volumes. But prices for these products increased in line with increases in the cost of naphtha and other raw materials.

Polyethylene resin prices likewise rose to reflect the increase in naphtha prices. Chloroprene rubber export prices, too, increased, driven by strong demand overseas. 

Fiscal Year 2020 Forecast

The forecast for Petrochemical Group net sales for fiscal 2020 is ¥‎ 170.4 billion, a decline of ¥‎ 13.5 billion from fiscal 2019. Prices for olefins and polyethylene resins are projected to drop owing to a decrease in prices for naphtha and other raw materials and worsening market conditions overseas.

Operating income is expected to be ¥‎ 13.2 billion, also a decline, albeit slight, compared with fiscal 2019. A projected decline in earnings from cumene due to the worsening of market conditions overseas is the principal reason for this dip. Operating income per net sales, however, is anticipated to increase compared with fiscal 2019.

Olefins

■ Business Strategy
- Increase the competitiveness of naphtha cracker operations and maintain high operating rates

■ Business Assumptions
- Leverage ethylene purchasing position to achieve high naphtha cracker operating rate
- Export shale-derived ethylene, including derivative products, from the United States

■ Key Measures
- Maintain high cracker operating rates by diversifying customer base
- Add value to unused fractions; Aromatize unused fractions using Tosoh catalysts
- Secure stable profits through the appropriate spread

Two aims of our previous medium-term business plan were to install a gas turbine for our naphtha cracking furnace and to optimize the efficiency of our naphtha cracker. The gas turbine began operating in February 2019. Construction to increase cracking furnace efficiency is ongoing and will be completed in calendar year 2020. The investments involved in attaining these objectives will enhance the cost-competitiveness of our Yokkaichi Complex.

Polymers

■ Business Strategy
- Increase revenues by differentiating and adding value to polymers

■ Business Assumptions
- Anticipate weak supply and demand in Asia for polyethylene resin because of an inflow of shale products
- Expect the supply-demand balance of chloroprene rubber to remain tight

■Key Measures

Polyethylene
- Continue research to promote product differentiation utilizing application lab at new research facility
- Take ultrahigh molecular weight polyethylene to market

Functional Polymers
- Debottleneck chloroprene rubber plant further, and consider additional lines
- Launch new high-performance PPS compound in market, and consider additional lines
- Expand sales of PVC paste and of advanced vinyl acetate products for automobiles