Edited from: “To our shareholders” and “Outlook” annual report 2009
Japan Synthetic Rubber (JSR) will enter the third year of its fiscal 2008 to fiscal 2011 mid-term business plan “Jump 2010”. The company believes that under this plan it will place it on the path for “growth acceleration”. In addition, JSR states that its corporate philosophy “materials innovation” will aim the company at becoming an advanced chemical company by 2015.
However due to what it states as being currently in a business environment that has “rapidly deteriorated since October 2008 due to the severe recession caused by the global financial crisis” the company will focus on increasing its business size and profitability in the year ahead.
“In this situation, JSR would like to re-emphasise the importance of a business management style that gives precedence to rapid decision making which enables us to overcome the tough and unpredictable business environment and start on a new growth path upon an economic upturn,” says president, Mitsunobu Koshiba.
In addition, JSR has put its efforts to align its business costs and build a business structure which can respond to lower demand. It has focused on variable cost reductions such as process improvements under its cost-reduction plan “E-100 Projects”.
Its initial cost reduction target was Yen28bn, but as a result of recalculating its assumed sales conditions in line with the business environment, it expects a cost reduction of Yen8bn, resulting in cumulative cost reduction results of Yen21bn through fiscal 2011 comparing to fiscal 2007.
Also, as new earnings countermeasures, it will execute fixed cost reductions such as streamlining manufacturing staff, cutting R&D costs for existing products, and holding down other manageable costs, to cut Yen8bn in total. Therefore, these will total over Yen16bn of cost reductions. It will also give thoughts to merging production bases and reorganising production lines as measures to build long term competitiveness.
In its petrochemical business, JSR will keep its basic strategy of strengthening its competitiveness by supplying technically differentiated and high-value-added products, such as solution styrene butadiene rubber (SBR) for high performance energy efficient tyres.
“The whole petrochemical industry map may be changed due to the restructuring of the ethylene production plants in complex and many start-ups in Middle East, causing the tight supply and demand balance of butadiene. JSR needs to be ready for these changes,” says Koshiba.
“In order for us to maximise and maintain stable earnings without having raw material concerns, we will work to diversify raw material sources by establishing procurement routes from Asia or securing local source through overseas production arrangement, such as the capacity right arrangement with Dow Europe,” continues Koshiba.
In fine chemicals and other products, global demand contraction and slow growth JSR states have “become remarkable”, indicated by the downward revisions in market forecasts for electronics, especially the semiconductor markets. Also, progressive commoditisation and competition with expansion in the markets for display panels for flat screen TV accelerates decline in unit prices of products.
Focussing on next-stage growth businesses, JSR will concentrate on precision processing, the environment and energy, and medical care as areas that it sees as being “great growth potential in the 21st century”. With a strategy focussed on creating new businesses that will develop into the “pillar of growth in the future” through the synergy effect of its competitive materials and processing technologies, it aims for net sales of at least Yen20bn in fiscal 2011.
In JSR’s R&D strategy, it will invest a total of over Yen85bn in the four years from fiscal 2008 to fiscal 2011. It will also speed up the expansion of business operations by prioritising the allocation of resources. The company will speed up development and commercialisation by increasing the amount of resource allocation as well as its ratio to the strategic business.
Outlook
JSR states that the Japanese economy in fiscal 2010 is likely to remain “challenging” following fiscal 2009. Demand, particularly in its main customers, namely, the automobile, tyres, paper, semiconductors, and flat panel display industries, will remain sluggish, and recovery is expected to take time.
Under these circumstances, based on the results of the two years in the first half of “Jump 2010,” JSR has revised its numeric targets and action plan for the last two years starting from fiscal 2010. There is no change in its basic strategy of “creating a group of next-stage growth businesses, and increase in earnings in the fine chemicals and other products business as well the petrochemical products business.”
In the petrochemicals sector and in the fine chemicals and other products sector, especially, the semiconductor materials business and flat panel display (FPD) materials business, JSR will work on thorough cost reductions and rebuilding business competitiveness.
For next-stage growth businesses, JSR will strengthen its promotion system and resource allocation to accelerate its commercialisation. By expediting these measures, JSR will put all its efforts towards achieving targets on a growth path again when the market environment recovers.
For fiscal 2010, it is projecting consolidated net sales of Yen290bn (down 17.7% from the previous year), operating income of Yen15bn (down 50.5%), ordinary income of Yen16bn (down 48.6%), and net income of Yen10bn (down 28.5%).
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|
|
2009 |
2008 |
2007 |
2006 |
2005 |
|
Sales (Yen m) |
352,503 |
406,967 |
365,831 |
338,160 |
305,368 |
|
Operating Profit (Yen m) |
30,347 |
60,010 |
55,242 |
53,357 |
45,333 |
|
Net Profit (Yen m) |
13,981 |
36,994 |
33,654 |
30,555 |
27,564 |
|
Total Assets (Yen m) |
339,497 |
416,950 |
408,949 |
381,097 |
325,031 |
|
Diluted earnings per share (Yen) |
56.36 |
147.26 |
133.10 |
119.63 |
107.54 |
|
Number of Employees |
5,256 |
5,122 |
4,693 |
4,576 |
-- |
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JSR Corporation
Company Structure
Japan Synthetic Rubber (JSR) is a manufacture of synthetic rubbers and elastomers, emulsions and plastics. It is headquartered in Tokyo, Japan, with around 5,000 employees. It is split into four segments: elastomers; emulsions; plastics; and fine chemicals and other products.
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