Mr. Yuji Fukuyama, President of Honshu Chemical, discusses his company’s specialized materials, which have applications in areas such as automotives, IT and healthcare; and how R&D and innovation make the Japanese chemical industry far superior to its regional competitors
Shortly after your foundation in 1914, your company built Japan’s first benzene-distillation plant in order to industrialize the production of aniline. Some 103 years later, your company has acquired the major market share in niche industries. Can you give our readers a short overview of your core activities today?
Our company motto is: "As a specialist of fine chemicals we commit ourselves to continuously getting challenges and creating new values to our customers satisfaction."
Honshu Chemicals has 353 employees; approximately 300 employees work here in Japan at our Wakayama plant and the remaining 53 employees work in our joint venture in Germany. We are a publicly traded company with our equity structure feature that our two biggest Japan-based shareholders: Mitsui & Co., Ltd. and Mitsui Chemicals Inc. Mitsui & Co.,Ltd. is a large trading company and Mitsui Chemicals Inc. is a giant petrochemical and performance chemical manufacturer.
The key word in the philosophy of Honshu Chemical is reliable growth. We want to be a reliable company at all times in various ways for the stakeholders including customers, shareholders, the local communities and of course our employees who are very important to us. Our corporate target is to be a global fine chemical specialist.
According to Japan Chemical Association, the particularity of the Japanese chemical industry lies in its multitude of smaller specialty chemical firms producing with very high levels of product quality and innovation. In 2013, Japan’s chemical R&D expenditures stood at a strong $25 billion, accounting for 22 percent of R&D spending of total manufacturing in the country. How would you define the competitive advantages of Japan’s chemical industry when compared to regional rivals?
The advantage of Japan's chemical industry is its shift to higher value-added products; products with higher added value than our regional competitors in Korea, Taiwan and China. In this respect, I believe we are twenty to thirty years ahead of these countries.
With regards to technology driven cultures, at Honshu Chemical we have innovative spirits which we inherited from our founder, Mr. Yura . We have pride in our original technology and we are committed to 100% in-house production and 100% in-house technology. We are a very original firm who does not borrow someone else’s technology, nor do we ask somebody else to make our components.
Our confidence in our core production is such that we diversify the business, but do not repeat what we did in the petrochemical era. We have ceased our synthetic fibre side of business and do not enter sectors which we are not fitted to. Honshu Chemical is committed to phenol and cresol derivatives, so these are two major areas that we have extensive experience and technology in and we know the direction in which we should go.
How does your company implement environmentally friendly processes?
One of the environmental concerns that we are successfully addressing is in the field of energy saving. Our results show that the energy we use to make one tonne of product per year has been continuously declining since 2012.
Our core generation system enables us to make and supply our own electricity. We concentrate on reducing such things as air consumption, waste water, waste disposal and gas and we have excellent control on water temperature. The software system that we use enables us to plan production and energy use so usage is kept to a minimum and high levels of production efficiency are maintained.
Your products are used in the IT, telecoms and automotive industries, all of which are experiencing rapid technological advances. In order to keep up, your company has made R&D capability and adaptability core focuses of its corporate strategy.
We have a couple of strategies to expand and increase business, with R&D being one of them. A lot depends on customer requests; we listen to their feedback, and if, for example, customers request a product with higher heat resistance, we try to create a product more suitable for them.
Today our biggest sector is mobility (meaning automobiles, airplanes and other things in motion, mainly the automobile sector), our second one is IT and the third is the medical health sector, which is currently very small but this may very well be different in ten years’ time. As a company, we excel in the mobility sector and we are pursuing the expansion of that sector. We remain flexible to changes in the times and our customer requirements. A key point in this is agility and how quickly we can adapt to these changes.
You are one of the only three companies that produces a certain type of Biphenol. With the U.S. in mind, only about 3% of your sales come from the U.S. Looking towards the future, do you have a strategy for the American market?
Our current operations in the U.S. are on a relatively small scale. We have received enquiries from a couple of potential customers and we are looking to see if we can solve their problems. We do not have plans to open a plant in the U.S. as of today. However, this decision is based on volume and profitability and should opportunities arise to make expansion a viable option, then we are always open to new ventures.
Your net sales slightly diminished, from 18.4 yen in FY2016 to 17.3 billion yen in FY2017. However, your operating income increased by 2.9%. What are the reasons behind these results? Are you currently on track to meet your 2019 targets? What will be your mid-term strategy to trigger sales growth?
We saw the sales from our German affiliate decline in terms of Yen during this time, due to the valuation of the yen. Our operating income increased by 2.9% due to favourable sales in biphenol and automotive materials. Also, sales related to the core material for ICT were good from the second half of the last year.
Our expected revenue target is 27 billion Japanese yen by the end of the fiscal year 2019, with a 4-billion-yen operating income.
The sustainable growth model is a difficult thing to explain. I previously spoke about the four business domains of Honshu Chemical. These domains will remain actively focused during the mid-term plan and, maybe, up to even a few years after the mid-term plan. However, beyond the period 2020-25, we are not necessarily thinking of our present business domains. It is possible we may develop a new business domain X, or maybe a new product Y or a new business model Z. We are making efforts to expand the products in the new business domains as well as the business models.
In the future, you also plan to “strengthen and expend global business.” Are you seeking new partners or clients?
We have accumulated some very good experiences over 100 years. We need to combine new technologies such as innovation platforms, big data and IOT technologies, in the aim to interact the old things with the new, thereby strengthening our core technologies for cultivating new demands, technologies and products to make our customers happy, make ourselves happy and to increase our contribution to society.
In respect to the partnership we have with Hi-Bis, we believe the joint venture will remain with us in the long term, because all partners are mutually respecting each other. Future partnerships, if any, should also respect the idea of sharing profits between partners in a fair and appropriate manner, avoiding the situation for Honshu, an intermediate player in the value chain to fall into the bottom of so called 'smile curve'.
Today, your company operates in two business segments: First, highly functional resin materials, with products such as the Biphenol series; and second in highly functional chemicals, with products such as Trisphenol, Trimethyiphenol and more. The applications of these products be found in our daily lives, from our IT devices to our automobiles. Is there one particular product that you feel proudest of?
I have great pride in our camera lens innovation which enables high density pictures to be taken. With such a lens, it is even possible to see the moons craters. This is the most concentrated effort that has made in the production of an item and has quality, transparency, high heat resistance and high optical features.
We are half way through our midterm plan which started in the fiscal year of 2016 and covers a four-year period, finishing in the fiscal year of 2019. The plan defines the business domains that we are active in today. The first section is regarding mobility. Speciality bisphenol is used in the engineering of plastics which are extremely hard, similar to the hardness of metal or iron. However, unlike these metals they are lightweight – leading to high fuel efficiency – and have a higher heat resistance.
The plastic is much easier to use than metal and so it is possible to make very unique car- door designs. Looking towards the future industry there are many new concepts in car manufacturing. We contribute to the future field of automomous driving with our optical lenses that will be used in these autonomous vehicles. Our products can be found in the IT products, including smart phones and PCs. Our features in this category are characterized by clear vision, quality and transparency, which is very important in producing perfect plastic for optical features. It is also imperative for plastic to be perfect in the manufacturing of products connected to your safety in automobiles. They must be strong and durable.
You became the president of Honshu Chemical in July 2017. Have you set yourself a target for your presidency that you would like to achieve?
I joined the company two months ago and I am already positive that the mid-term plan will be met. Honshu Chemical possesses superb technologies which are unique. I believe we can expand the business and be more prosperous by making special efforts to expand those technologies and introduce them to wider areas.
IoT is expanding rapidly and attracting people’s interest especially in our industry. So I believe that our strong point of introducing technologies, especially in ICT, will be lead us to increase sales.
With the introduction of eco-cars and driverless cars, the next step will be to introduce high-performance lenses and cameras that will be used in these types of vehicles. We would like the overall target of our companies to be capable of providing more reliable and efficient products for the customer.
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