Edited from: “To our shareholders” 2009 annual report and “2010 Strategic advances for growth”, company website
Asahi Kasei states that its strategic investment is being advanced in fiscal 2009/2010 in a bid to lay the foundation for expansion and growth to achieve its “Growth Action – 2010” strategy initiative. Strategic pillars of the plan are the expansion of businesses characterised by global competitiveness and the enhancement of businesses focused on the domestic Japanese market.
“Through our previous strategic management initiatives, we established a solid foundation for a new phase of growth for Asahi Kasei. In the Growth Action – 2010 initiative, we are expanding global businesses and enhancing domestic businesses with strategic investment for growth to bring greater corporate value and brand strength,” says chairman, Nobuo Yamaguchi.
With its previous strategic initiatives, the company implemented business portfolio realignments to transform its operational structure for cash flow creation, and adopted a holding company to increase management speed and autonomy. The result was rising profitability, greater financial strength, and a robust cash flow.
However, the company states that it remains highly dependent on the Japanese economy, and to outpace Japan’s gross domestic product (GDP) growth over the long term it needs to take bigger strides in the expansion of globally competitive businesses and the creation and development of new businesses.
At the same time the company states that it needs to enhance its domestic businesses to obtain greater added value and adapt to the changing industrial structure in Japan.
Pillars of the Growth Action - 2010 strategy includes:
(1) disposal of negative legacies;
(2) expansion of global operations;
(3) reinforcement of strong businesses and expansion of business areas;
(4) development of new businesses with global potential;
(5) expansions focused on global businesses whose growth is unimpeded by the limits of the mature Japanese economy;
(6) extending the geographical cover of businesses with established presence in overseas markets; and
(7) the creation of new businesses with potential for development on a global scale.
It will enhance domestic operations through:
(1) higher added value;
(2) development of services peripheral to established businesses;
(3) growth and greater earnings in domestic businesses achieved by expanding into services peripheral to established businesses;
(4) cultivating new demand by dynamic response to emerging market trends; and
(5) pursuing higher added value throughout.
For fiscal 2010, the company is targeting net sales of Yen1,350-1,500bn and an operating profit of Yen60-80bn. The plan provides for investment over the five years totalling Yen670bn.
Strategic investment is largely to be directed to the four product categories of monomers: chemical-based; specialised-function products; electronics products; and medical devices. This includes both business expansion and new business creation.
Chemicals strategy
Asahi Kasei states that each part of its chemicals business is classified either as a strategic expansion business, with management resources focused on achieving growth and high earnings, or as a stable growth, stable earnings business, with efforts focused on strengthening and enhancement to heighten profitability.
Strategic expansion businesses, characterised by the potential to attain greater earnings and stronger market position through expansion of scale, includes acrylonitrile (ACN), methyl methacrylate (MMA), and synthetic rubber and elastomers. Those characterised by the potential to attain growth through linkage with growing market segments, building on established strengths, and extension into peripheral fields, include water treatment systems and ion-exchange membrane systems.
Stable earnings businesses, characterised by the potential to attain greater added value and stable earnings growth through a leading position in growing market segments, includes polymers/compounds and performance chemicals.
Those characterised by the potential to maintain stable earnings through a strengthened operational base and structure includes petrochemicals, basic chemicals, and ethylene centre derivatives with the exception of those marked for strategic expansion.
Chemical outlook
Asahi Kasei says that the severe operating climate which began in the second half of fiscal 2008 is expected to continue, with weak product demand and a strong Yen. For volume products, it is forecasting falling prices for naphtha and other feedstocks, some extent of recovery in sales volumes, and lower inventory valuation losses.
In specialty products operations, it is forecasting falling feedstock prices and recovering sales volumes.