Sakai Chemical Industry Co., Ltd. (TSE1: 4078) comprises two segments: Chemicals (90.4% of revenue of JPY84.9bn in FY03/21; operating profit margin of 7.3% [5.0% after deducting head office expenses]) and Medical (9.6% of revenue; OPM of 5.5%). In the Chemicals business, the company mainly manufactures inorganic powders (titanium dioxide, barium salts, others) and sells them for various applications (see below) through consolidated subsidiary Sakai Trading (TSE2: 9967) and other subsidiaries. In the Medical business, the company manufactures and sells X-ray contrast media (barium sulfate), pharmaceuticals, and medical devices, mainly through consolidated subsidiary Kaigen Pharma. The company’s manufacturing facilities in Japan are concentrated in Osaka Prefecture and Iwaki, Fukushima Prefecture. It also has manufacturing bases in ASEAN countries including Vietnam, Thailand, and Indonesia.
The company’s mainstay products are used in a wide range of applications in industrial products (electronic materials, paints and inks, PVC and other plastic additives, plastic lenses, catalysts) and general consumer goods (cosmetics, hygienic products, pharmaceuticals). Domestic customers account for around 80% of revenue. This diversity of applications and heavy weighting toward the domestic market mean that the company’s revenue correlates closely with domestic macroeconomic indicators (such as industrial production index and consumer price index). Around 20% of end customers are in automotive industries (tires, wiring harnesses, paints, electronic components), slightly under 20% are in telecommunications equipment, a little under 20% are in construction, just under 10% are in medical fields, and a little over 30% are in other industries.
In FY03/21, the company’s main business areas were electronic materials (11.4% of total revenue), titanium dioxide and zinc products (16.0%), plastic additives (13.6%), hygienic products (10.9%), organic chemicals (8.1%), catalysts (3.8%), contract processing (7.7%), other (18.9%), and medical (9.6%). The mainstay products in electronic materials are barium titanate (dielectrics) and high-purity barium carbonate (dielectric materials). These are the main materials in multilayer ceramic capacitors (MLCCs), which are indispensable components in electronics such as smartphones, telecommunications infrastructure, and electronic components in automobiles. Titanium dioxide is a white pigment characterized by its brightness, the ability to cover up or color surfaces, and chemical stability. It is used in a wide range of industrial applications such as in paints, printing inks, and paper manufacturing. Fine titanium dioxide and zinc oxide are also used in cosmetics as sunscreen agents.
In FY03/21, operating profit margins for the company’s main business areas (after deducting head office expenses) were 21.4% for organic chemicals, 9.6% for contract processing, and 5.5% for medical, with all others below 5%. The top products in terms of market share in Japan are organic chemical β-Mercaptopropionic acid (for high-refractive-index plastic lenses for eyeglasses) at 100% (produced by only two companies worldwide), X-ray contrast media (barium sulfate) in the Medical business at approximately 50% (produced by only three companies in Japan), high-purity barium carbonate for electronic materials (dielectric materials) at over 50%, and PVC stabilizer (a type of plastic additive) at 30–40%.
Sakai Chemical Industry’s inorganic powder technology allows it to synthesize particles of various shapes and sizes. It is thus able to adjust particle sizes and size distributions to maximize the attributes of raw materials based on the performance requirements of specific markets. The company says it mainly procures manufacturing equipment from external suppliers. However, it notes that it has accumulated unique expertise in core technologies such that it would be difficult for competitors to produce products of the same quality given the same equipment. The manufacturing process for the main inorganic products is fully automated and based on continuous production, allowing the company to operate 24 hours a day, 365 days a year (except for during periodic inspections which occupy roughly two weeks of the year). The company’s newest plant, which produces products for electronic materials and cosmetic materials and was constructed as a strategic investment, has not been operating at full capacity due in part to the impact of the COVID-19 pandemic. Annual production volumes of the company’s mainstay products are approximately 24,000 tons of titanium dioxide and 10,000 tons of electronic materials (dielectrics and dielectric materials).
According to the company, its cost structure is characterized by a high variable cost ratio and a marginal profit ratio of 35–40%. The company relies on imports of LNG fuel and key raw materials such as ores and metal materials (ilmenite and titanium slag, the raw materials for titanium dioxide; barite, the raw material for barium salts; zinc metal). These are susceptible to price fluctuations due to the global economic climate and changes in forex rates. In principle, the company tries to pass on changes in raw material and fuel prices to customers by revising selling prices for its products. It also places importance on stable relationships with its customers and negotiates prices carefully. Recently, the price of titanium ore has been trending upward as China started to increase its production of titanium dioxide. In fact, the company, like its competitors, has raised its titanium dioxide prices by several percent. However, it seems that none have been able to keep up with the rising price of titanium ore (source: Nihon Keizai Shimbun and other media reports).
The company’s accident investigation committee and the relevant authorities are looking into the cause of an explosion that occurred on May 11, 2021 at the company’s Yumoto Plant (a zinc powder manufacturing facility completed in May 1969) and formulating measures to prevent a recurrence. The company estimates the impact of the withdrawal from the zinc powder business and costs related to the May 11 accident such as the removal of facilities and equipment, including the impact on sales, to be about JPY300mn on a pre-tax profit basis (downward pressure on revenue and operating profit of JPY1.3bn and JPY200mn, respectively, and extraordinary loss of JPY100mn).
The company’s earnings have trended within a boxed range for the past 30 years (revenue of JPY80.0–90.0bn, operating profit of JPY3.0–7.0bn) and profit margins have been low and flat (GPM: over 20%, OPM: around 5%). The company is an upstream player when considering the economy as a whole, but is positioned within the midstream of upstream industries, and is therefore vulnerable to price competition and increases in inventory costs, which factors into its low profitability. ROE has remained low at around 3% and the three indicators that make up ROE (equity ratio: around 65% [inverse of leverage], total asset turnover: around 70%, and net margin: around 3%) are stable but stagnant.
Note: This section was written in June 2021. As noted later in this report, earnings have recovered markedly since that time.
In light of the recovery in earnings, the company expects operating profit in FY03/22 to break out of the boxed range of about JPY4.0bn–JPY4.5bn in which it has trended over the past ten years. Profitability is also improving, with the company forecasting FY03/22 OPM of 8.8%. Management is now targeting operating profit of JPY8.9bn achieved in FY03/07, prior to the collapse of Lehman Brothers and the onset of the global financial crisis.
In FY03/22, revenue amounted to JPY80.1bn (-5.6% YoY), operating profit JPY7.5bn (+74.1% YoY), recurring profit JPY8.8bn (about 2.2× its level in FY03/21), and net income attributable to owners of parent JPY6.7bn (versus net loss of JPY2.8bn in FY03/21). The decrease in sales was primarily due to adjustments made to the company's revenue recognition standards. Expansion in revenue generated through electronic materials, titanium oxide and zinc products, and resin additives drove performance growth, and recurring profit and net income attributable to owners of parent reached record highs thanks to temporary upward impact associated with non-operating income. Meanwhile, the company reported EPS of JPY407.1. Sakai Chemical Industry plans to pay a year-end dividend of JPY35.0 per share, bringing its annual dividends to JPY70.0 per share (versus JPY15.0 per share in FY03/21). In accordance with its targets, the company anticipates a dividend payout ratio of 17.2%.
For FY03/23, the company projects revenue of JPY85.0bn (+6.1% YoY), operating profit of JPY7.0bn (-6.6% YoY), recurring profit of JPY7.1bn (-19.7% YoY), and net income attributable to owners of parent of JPY5.0bn (-25.9% YoY). The company anticipates decrease in profits because it believes that its price adjustments will not fully absorb impact from cost increases stemming from raw material and fuel prices and ongoing depreciation of the Japanese yen. Sakai Chemical Industry also expects its OPM to decline to 8.2%, down 1.2pp compared to FY03/22. Meanwhile, the company projects EPS of JPY301.7. It plans to pay annual dividends of JPY90.0 per share (versus a projected JPY70.0 per share in FY03/22). In accordance with its targets, the company projects a FY03/23 dividend payout ratio of 29.8% (versus a projected 17.2% in FY03/22).
In April 2019, the company formulated its medium-term management plan, SAKAINNOVATION 2023, covering FY03/19 to FY03/23. Under the plan, the company aims to improve profitability by focusing on six business areas. It targets operating profit of JPY8.0bn or above and ROE of 6% or above (it has not set a revenue target due to the change in revenue recognition standards). The company reduced the total capex of JPY40.0bn initially called for in the plan to JPY31.0bn, postponing its plans for restructuring investments (it has already made strategic investments of JPY19.0bn, including impairment losses, over the past two terms).
Shared Research sees the company’s strengths as:
Inorganic fine powder processing technology, which makes it the leader in several niche markets
Product development capabilities and a contract processing system underpinned by extensive manufacturing facilities and expertise
Ability to create environmentally friendly and health-conscious products: technological capabilities that enable the company to develop lead-free products, catalysts that contribute to recycling, and microplastic bead substitutes
We see its weaknesses as:
Delayed shift from commodity products, which limit the company’s ability to add value, to high-value-added functional chemicals
Position as a midstream player in upstream industries and resulting low profitability
A late start in expanding overseas in response to economic development in China and the ASEAN region
|Gross profit margin||18.7%||19.6%||21.2%||22.0%||21.7%||20.8%||20.8%||20.3%||26.3%|
|Operating profit margin||4.1%||4.8%||5.4%||5.4%||5.4%||4.9%||4.6%||5.1%||9.4%||8.2%|
|Recurring profit margin||3.8%||4.8%||5.2%||5.1%||4.9%||5.1%||4.8%||4.7%||11.0%||8.4%|
|Net income attributable to owners of parent||1,340||2,275||2,340||2,037||2,329||3,606||2,535||-2,803||6,747||5,000|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end; '000)||20,988||20,988||20,988||20,988||20,988||17,000||17,000||17,000||17,000||-|
|EPS (fully diluted; JPY)||-||-||-||-||-||-||-||-||-||-|
|Dividend per share (JPY)||40.0||40.0||40.0||40.0||40.0||50.0||40.0||15.0||70.0||90.0|
|Book value per share (JPY)||3,783||4,066||4,075||4,451||4,329||4,599||4,657||4,502||4,876||-|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||17,273||16,590||13,989||14,824||14,091||11,195||9,110||11,093||10,800|
|Total current assets||62,872||62,658||59,509||59,885||61,785||61,318||58,760||60,260||65,496|
|Tangible fixed assets||35,028||36,646||42,130||42,097||39,807||44,048||49,446||48,621||48,134|
|Investments and other assets||12,223||15,550||13,132||15,540||14,154||12,640||11,539||12,418||8,769|
|Total current liabilities||25,516||26,307||27,630||26,936||27,977||23,994||25,438||26,178||26,771|
|Total fixed liabilities||9,340||10,194||10,493||11,444||9,212||15,796||14,717||17,564||14,439|
|Total net assets||77,618||81,449||79,610||81,938||80,763||80,291||81,492||79,264||82,708|
|Total interest-bearing debt||12,225||12,672||15,899||16,602||14,576||17,528||18,156||20,438||16,958|
|Cash flow statement(JPYmn)|
|Cash flows from operating activities||4,026||5,324||3,572||6,722||3,941||2,755||6,454||7,826||6,567|
|Cash flows from investing activities||-2,390||-4,676||-7,550||-4,824||-487||-5,458||-8,424||-7,422||-1,654|
|Cash flows from financing activities||-2,029||-1,487||1,445||-1,003||-4,209||64||-68||1,667||-5,654|
|Total asset turnover||77.0%||75.5%||72.6%||70.5%||73.2%||75.2%||72.1%||69.4%||64.9%|
|Number of employees||1,615||1,705||1,796||1,870||1,875||1,964||2,003||2,009|
|Average number of temporary workers||211||178||317||286||248||275||264||243|
|Capital expenditures, other (JPYmn)|
|Capex (as per company briefings)||2,876||4,510||7,988||4,636||3,771||6,891||8,403||9,567|
|Capex (as per financial reports)||2,876||4,510||7,988||3,939||4,013||7,844||9,142||10,625|
|R&D as % of revenue||2.9%||3.0%||3.2%||3.5%||3.7%||3.3%||3.3%||2.9%|
On April 20, 2022, Sakai Chemical Industry Co., Ltd. announced that its was revising the prices for its barium product lineup, as detailed below.
The price hikes, ranging from JPY20 to JPY100/kg, are scheduled to take effect from the delivery of June 1, 2022. The company explained the factors behind this price hike, including (1) ongoing increases in the cost of its primary raw materials (ores and intermediates) due to rise in environmental expenses as well as cost in energy, labor and transportation in China, the company's main supplier of ores as raw material; (2) the rise in its own energy cost; and (3) having reached the limitation to offset rising cost just by internal cost-cutting efforts due to the sharp depreciation of yen from March. The company judged it needed to stem the deterioration of profit to maintain stable supply to customers.
The company's barium product lineup includes barium sulfate, barium carbonate, strontium carbonate, and strontium sulfate. The company's barium products have a broad range of uses, but are primarily used in the manufacture of electronic materials. Among the products for elctronic materials, it was the sales increase in barium carbonate, high-purity barium carbonate, high-purity strontium carbonate, and barium titanate for multilayer ceramic capacitors (MLCCs) that was the primary driver behind the rebound in the company's earnings in FY03/22(the company's forecast). Shared Research believes that the price revisions just announced for barium products is aimed at maintaining the current level of profitability at the company's main growth driver, its electronic materials business (under the Chemicals segment), and anticipates that the company will provide additional details in this regard at upcoming results presentation meeting in May.
On April 11, 2022, Sakai Chemical Industry Co., Ltd. also announced that it was revising the prices of titanium dioxide.
The price hike of JPY50/kg is scheduled to take effect from the delivery of June 1, 2022. Uses of titanium dioxide have been expanding, especially for gravure printing inks used for food packaging, and the company's sales of titanium dioxide is also increasing. However, the ongoing rise in worldwide demand for titanium dioxide had already been driving up the price of ores from which titanium dioxide is derived, and the Russia–Ukraine war drove up ore prices even further (the countries of Eastern Europe are a major source of the world's ores). The company noted that it had already announced two price hikes for its titanium dioxide prior to this, announcing a price hike of JPY40/kg on April 22, 2021, followed by another price hike of JPY45/kg announced on November 19, 2021.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||% of Est.||1H Est.|
|Gross profit margin||20.4%||19.7%||20.4%||20.3%||28.2%||27.5%||27.0%||26.3%|
|Operating profit margin||4.8%||4.0%||5.0%||5.1%||10.9%||10.9%||10.1%||9.4%||9.2%|
|Recurring profit margin||5.0%||3.0%||4.3%||4.7%||12.0%||11.5%||10.9%||11.0%||9.4%|
|(JPYmn)||Q1||Q2||Q3||Q4||Q1||Q2||Q3||Q4||% of Est.||FY Est.|
|Gross profit margin||20.4%||19.0%||21.6%||20.0%||28.2%||26.8%||26.0%||24.2%|
|Operating profit margin||4.8%||3.1%||6.9%||5.2%||10.9%||10.9%||8.5%||7.1%||8.8%|
|Recurring profit margin||5.0%||1.0%||6.7%||5.8%||12.0%||11.0%||9.7%||11.4%||9.9%|
|Titanium dioxide, zinc products||3,332||2,897||3,517||3,817||3,928||3,563||3,920||4,307|
|Organic chemical products||2,162||1,300||1,584||1,837||2,250||2,171||1,090||1,810|
|By segment (cumulative)||FY03/21||FY03/22||FY03/22|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||% of Est.||FY Est.|
|Revenue from external customers||20,459||40,244||62,600||84,918||19,577||39,905||59,623||80,135||100.2%||80,000|
|Operating profit margin||4.8%||4.0%||5.0%||5.1%||10.9%||10.9%||10.1%||9.4%||8.8%|
|Operating profit margin||7.9%||6.3%||7.1%||7.5%||14.9%||14.2%||13.3%||12.7%||12.0%|
|Operating profit margin||0.8%||6.1%||8.1%||5.6%||1.4%||5.7%||7.2%||5.3%||4.8%|
|Chemicals OP (after adjustments)||967||1,354||2,621||3,851||2,111||4,124||5,576||7,076|
|Chemicals OPM (after adjustments)||5.1%||3.7%||4.7%||5.0%||11.9%||11.5%||10.5%||9.8%|
|By segment (quarterly)||FY03/21||FY03/22|
|Revenue from external customers||20,459||19,785||22,356||22,318||19,577||20,328||19,718||20,512|
|Operating profit margin||4.8%||3.1%||6.9%||5.2%||10.9%||10.9%||8.5%||7.1%|
|Operating profit margin||7.9%||4.6%||8.6%||8.4%||14.9%||13.6%||11.3%||11.2%|
|Operating profit margin||0.8%||9.7%||11.1%||-3.7%||1.4%||9.3%||10.2%||-2.2%|
|Chemicals OP (after adjustments)||967||387||1,267||1,230||2,111||2,013||1,452||1,500|
|Chemicals OPM (after adjustments)||5.1%||2.2%||6.4%||6.0%||11.9%||11.1%||8.3%||7.9%|
FY03/22 results can be found below.
EPS amounted to JPY407.1. The company plans to pay a year-end dividend of JPY35.0 per share, bringing its annual dividends to JPY70.0 per share (versus JPY15.0 per share in FY03/22). In accordance with its targets, the company anticipates a dividend payout ratio of 17.2%.
Revenue and profits exceeded the company's previous projections due primarily to expansion in revenue generated through products such as electronic materials, titanium oxide and zinc products, and resin additives. Revenue declined YoY due to the company's adoption of new revenue recognition standards effective from the beginning of FY03/22, which had a downward impact of JPY16.3bn. However, when leaving aside this impact, revenue effectively grew to a near record high (second to the JPY98.8bn the company generated in FY03/08).
Meanwhile, operating profit reached its highest level in 14 years (previously recorded JPY7.6bn in FY03/08) but fell short of the company's standing record (JPY10.1bn in FY03/01). Regardless, recurring profit and net income attributable to owners of parent achieved record highs due primarily to improvement in non-operating income (foreign exchange gains and subsidy income) and the recording of a gain on sale of investment securities. The OPM of 9.4% was the highest the company had generated since FY03/07 (9.6%), but this figure should only be used for reference purposes due to the aforementioned decrease in sales in FY03/22. The company's adoption of new revenue recognition standards had only a negligible impact on all profit categories.
In FY03/21, the company reported net loss due mainly to an impairment loss of JPY7.0bn that was recorded as extraordinary loss.
Results for Q4 (January–March 2022) can be found below.
Quarterly operating profit rose YoY for the sixth consecutive quarter. In Q4 FY03/21, the company reported net loss due primarily to impairment loss of JPY7.0bn that was recorded as extraordinary loss.
Details will be updated following the company's earnings presentation and a future interview concerning financial results.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Est.||2H Est.||FY Est.|
|Cost of revenue||32,307||35,389||67,696||28,942||30,148||59,090|
|Gross profit margin||19.7%||20.8%||20.3%||27.5%||25.1%||0|
|Operating profit margin||4.0%||6.1%||5.1%||10.9%||7.8%||9.4%||8.7%||7.8%||8.2%|
|Recurring profit margin||3.0%||6.3%||4.7%||11.5%||10.5%||11.0%||8.7%||8.0%||8.4%|
The company has announced a new forecast for FY03/23. Its projections can be found below.
Sakai Chemical Industry projects EPS of JPY301.7. It plans to pay annual dividends of JPY90.0 per share, up from a projected JPY70.0 per share in FY03/22. In accordance with its targets, the company anticipates a dividend payout ratio of 29.8% (versus a projected 17.2% in FY03/22).
The company expects a rise in overall revenue thanks to expansion in revenue generated through electronic materials and other products provided through its Chemicals segment. However, it also projects a decline in all profit categories, including operating profit. The company expects this decline in operating profit because it anticipates that its upward price adjustments will not fully absorb impact from cost increases stemming from soaring raw material and fuel prices and ongoing depreciation of the Japanese yen. Sakai Chemical Industry forecasts that recurring profit and net income attributable to owners of parent will decline by a wider margin than operating profit and attributes this prediction to an anticipated absence of impact associated with subsidy income (non-operating income) and a gain on sale of investment securities (extraordinary income) booked in FY03/22.
Details will be updated following the company's earnings presentation and a future interview concerning financial results.
As one way of offsetting the effects from skyrocketing raw material prices, the company intends to pass on those costs to consumers through price hikes. In addition to price revisions on some electronic materials, the company in 1H enacted the following price adjustments.
While these price hikes contributed somewhat to cumulative Q3 results, particularly starting from Q2, the increase in raw material prices has intensified since the revisions were made. The company accordingly enacted the following secondary price hikes.
Shared Research understands that the effects from these secondary price hikes are likely to be felt in full from FY03/23. The company has made it clear that it will move to reflect in its prices any further cost increases as a result of higher raw material prices that it is unable to absorb on its own. In reality, negotiations with those receiving deliveries regarding the price revisions announced by the company begin after the announcement, though the company appears to be taking a hardline stance, including by describing some of the revisions as "price corrections."
The company's price revision notwithstanding, prices of raw materials have since continued to climb. The company will consider further price revisions if this trend continues.
The company lifted its full-year operating profit forecast to JPY7.0bn, and attainment of this forecasts would mark the strongest operating profit since FY03/11, when it hit JPY7.3bn. In the ten years since FY03/12, operating profit at the company has trended in a boxed range of about JPY4.0bn–4.5bn (average annual operating profit during that term was JPY4.1bn). The company expects a substantial improvement in profitability in FY03/22 on the back of an improved operating environment, mainly in electronic materials, and a strengthened earnings structure (enhanced productivity and reduced costs) as a result of the effects of the COVID-19 pandemic.
The company expects earnings to break out of the boxed range in which they have languished for the past ten years and approach past highs. It expects the bottom line (net income attributable to owners of the parent) to reach a record high in FY03/22 due in part to the booking of extraordinary income. Operating profit, however, will fall short of the all-time record high (JPY10.5bn in FY03/01). In the near term, the company is aiming to surpass the FY03/07 level of JPY8.9bn and the FY03/08 level of JPY7.6bn in operating profit, recorded just prior to the global financial crisis.
The company’s accident investigation committee and the relevant authorities are looking into the cause of an explosion at the company’s Yumoto Plant (a zinc powder manufacturing facility completed in May 1969) that occurred on May 11, 2021 and formulating measures to prevent a recurrence. The company estimates the impact of the withdrawal from the zinc powder business and costs related to the May 11 accident such as the removal of facilities and equipment, including the impact on sales, to be about JPY300mn on a pre-tax profit basis (negative impacts on revenue and operating profit of JPY1.3bn and JPY200mn, respectively, and extraordinary loss of JPY100mn). The company has not revised this estimate.
The company announced a secondary offering on October 12, 2021. In line with the submission of its application be listed on the Prime Market, one of the new TSE market segments to be launched in April 2022, the company decided to enact the secondary offering to increase share circulation and allow a wider range of investors to hold those shares. The company also noted that the new shares would be issued to the market in line with the elimination of operating company and financial institution cross-shareholdings.
Since the number of shares to be issued in the secondary offering (1.973mn) is equal to about 11.7% of outstanding shares, the company at the same time announced a share buyback of up to 900,000 shares (at a maximum cost of JPY1.5bn). The company believes this will mitigate the impact on the stock price from the secondary offering. It subsequently bought back shares, completing the operation on December 22, 2021. Altogether, the company bought back 682,000 shares of treasury stock at a cost of JPY1.5bn. The number of shares repurchased and the cost have been rounded off to, respectively, the nearest one thousand shares and nearest hundred million yen.
The company revised its full-year FY03/22 forecast at the end of Q3. The revision to the bottom line was due to gains on the sale of investment securities, arising from the divestment of cross-shareholdings. In line with its corporate governance policy on cross-shareholdings, the company will carefully examine the purpose and risks of such holdings, evaluating market value, dividend yield, and other factors for each type of holding to ascertain the reasonableness of continuing to hold the shares. The company says it intends to continue divesting such cross-shareholdings in FY03/23 and beyond, but that the peak of divestment is past. From FY03/23, therefore, the company does not expect any events, such as sizable extraordinary gains or losses, that will have a significant impact on results.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Act.||2H Est.||FY Est.||change||rate of change|
|Revenue from external customers||43,995||43,182||87,177||40,244||44,674||84,918||39,905||40,095||80,000||-4,918||-5.8%|
|Adjustments (corporate expenses; Chemical)||-1,077||-1,116||-2,193||-936||-944||-1,880||-977|
|Operating profit margin||4.2%||5.0%||4.6%||4.0%||6.1%||5.1%||10.9%||6.6%||8.8%|
|After corporate expenses||3.5%||5.2%||4.4%||3.7%||6.2%||5.0%||11.5%|
|By major product and business||FY03/20||FY03/21||FY03/22|
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||FY Est. (old st'd)|
|Electronic materials||Revenue||4,398||4,101||8,499||4,525||5,198||9,723||Up 30%|
|Operating profit||185||-68||117||-117||140||23||Up significantly|
|Operating profit margin||4.2%||-1.7%||1.4%||-2.6%||2.7%||0.2%|
|Titanium dioxide, zinc products||Revenue||7,641||7,664||15,305||6,229||7,334||13,563||Flat|
|Operating profit margin||1.8%||6.1%||4.0%||3.8%||3.8%||3.8%|
|Plastic additives||Revenue||6,299||6,284||12,583||5,315||6,228||11,543||Up 5%|
|Operating profit margin||0.5%||2.2%||1.3%||0.5%||5.9%||3.4%|
|Operating profit margin||2.1%||2.2%||2.2%||4.5%||5.1%||4.8%|
|Organic chemical products||Revenue||2,891||3,281||6,172||3,461||3,421||6,882||Up slightly|
|Operating profit margin||20.5%||20.7%||20.6%||21.4%||21.5%||21.4%|
|Operating profit margin||-0.5%||1.7%||0.7%||-4.5%||-0.9%||-2.6%|
|Contract processing||Revenue||3,484||3,327||6,811||2,942||3,608||6,550||Up 10%|
|Operating profit margin||13.0%||7.4%||10.2%||8.5%||10.6%||9.6%|
|Operating profit margin||0.0%||4.1%||2.0%||0.0%||5.3%||2.8%|
|Operating profit margin||10.0%||3.3%||6.9%||6.1%||5.1%||5.6%||4.7%|
|Operating profit margin||4.2%||5.0%||4.6%||4.0%||6.1%||5.1%||6.7%|
The company tends to formulate a conservative initial forecast (lower revenue and profits) for the subsequent fiscal year if it fails to meet its initial forecast for two or three consecutive terms. This is because the company’s earnings have trended in a boxed range for the past 30 years (revenue of JPY80.0–90.0bn, operating profit of JPY3.0–7.0bn), and every few years it sets aggressive targets in its medium-term management plan to try to break out of this range.
|Results vs. Initial Est.||FY03/14||FY03/15||FY03/16||FY03/17||FY03/18||FY03/19||FY03/20||FY03/21||FY03/22||FY03/23|
|Revenue (Initial Est.)||81,000||91,000||91,000||87,000||86,000||90,000||93,000||80,900||76,300||85,000|
|Results vs. Initial Est.||6.3%||-4.4%||-6.0%||-3.5%||1.4%||-0.5%||-6.3%||5.0%||5.0%|
|Operating profit (Initial Est.)||3,000||4,200||4,600||4,700||3,900||5,400||6,000||1,400||4,700||7,000|
|Operating profit (Results)||3,556||4,164||4,615||4,551||4,690||4,404||4,015||4,304||7,494|
|Results vs. Initial Est.||18.5%||-0.9%||0.3%||-3.2%||20.3%||-18.4%||-33.1%||207.4%||59.4%|
|Recurring profit (Initial Est.)||3,000||3,800||4,500||4,500||3,300||5,000||6,000||900||5,100||7,100|
|Recurring profit (Results)||3,311||4,217||4,422||4,290||4,279||4,553||4,208||4,012||8,840|
|Results vs. Initial Est.||10.4%||11.0%||-1.7%||-4.7%||29.7%||-8.9%||-29.9%||345.8%||73.3%|
|Net income (Initial Est.)||1,800||2,100||2,600||2,500||1,700||3,300||4,000||1,400||4,300||5,000|
|Net income (Results)||1,340||2,275||2,340||2,037||2,329||3,606||2,535||-2,803||6,747|
|Results vs. Initial Est.||-25.6%||8.3%||-10.0%||-18.5%||37.0%||9.3%||-36.6%||-300.2%||56.9%|
In April 2019, Sakai Chemical Industry formulated its medium-term management plan (FY2019–2023), SAKAINNOVATION 2023. Under the plan, the company aims to focus on improving profitability in six business areas. It targets operating profit of JPY8.0bn or above and ROE of 6% or above (it has not set revenue targets due to changes in revenue recognition standards).
|New MTP SAKAINNOVATION 2023||FY03/19||FY03/20||FY03/21||FY03/22||FY03/24||Growth (x)||Strategic investment|
|Operating profit||4,404||4,015||4,304||6,000||8,000 or higher||1.8 or higher|
|Operating profit margin||4.9%||4.6%||5.1%||7.8%||-|
|ROE||4.6%||3.3%||-3.6%||6% or higher|
|Revenue by product/business|
|Operating profit margin||7.3%||1.4%||0.2%||9.4%|
|Titanium dioxide, zinc products||16,341||15,305||13,563||19,000||1.2||5,500|
|Operating profit margin||1.9%||4.0%||3.8%||6.3%|
|Operating profit margin||1.9%||1.3%||3.4%||6.3%|
|Operating profit margin||3.1%||2.2%||4.8%||3.0%|
|Organic chemical products||5,919||6,172||6,882||7,000||1.2|
|Operating profit margin||14.0%||20.6%||21.4%||14.3%|
|Operating profit margin||6.8%||0.7%||-2.6%||10.0%|
|Operating profit margin||14.7%||10.2%||9.6%||13.8%|
|Operating profit margin||2.4%||2.0%||2.8%||5.0%|
|Operating profit margin||4.5%||6.9%||5.6%||6.7%|
|Operating profit margin||4.9%||4.6%||5.1%||7.8%||7.4%|
|R&D as % of revenue||3.3%||3.3%||2.9%||3.2%|
SAKAINNOVATION 2023, the company’s medium-term management plan announced in April 2019, calls for total capex of JPY40.0bn (JPY19.0bn in strategic investments to improve profitability, JPY9.0bn in restructuring investments, and JPY12.0bn to update facilities). The strategic investments are mainly in existing businesses such as electronic materials (for MLCCs) and cosmetic materials, and are mainly aimed at achieving numerical targets for the next five years. Restructuring investments include investments to build people-friendly and disaster-resistant factories and offices, and investments to develop infrastructure for future businesses and products. The company has identified the abovementioned six business areas as key areas for strategic investment.
Capex (including construction in progress) in the Chemicals segment hovered around JPY3.0bn from FY03/12 to FY03/18 (except in FY03/16, when it reached JPY7.6bn). However, it rose to much higher levels once the medium-term plan started, reaching JPY7.6bn in FY03/19, JPY8.7bn in FY03/20, and JPY9.5bn in FY03/21. Due to the decline in demand caused by the COVID-19 pandemic, the company recorded an impairment loss of JPY7.0bn (JPY3.6bn for electronic materials, JPY3.1bn for cosmetic materials, JPY302mn for other materials, and JPY38mn for medical-related) in FY03/21, prompting it to reduce the JPY40.0bn of total capex originally called for in the medium-term plan to JPY31.0bn (postponing the restructuring investment plan. The JPY19.0bn [including impairment] in strategic investment has already been executed over the past two years). The impairment loss the company incurred due to the pandemic hit especially hard as the company had just implemented major capex to start up a new plant in line with its medium-term plan. The company plans to taper off its capex over the last three years of the plan, to JPY5.0bn in FY03/22, JPY4.0bn in FY03/23, and JPY3.5bn in FY03/24. Depreciation expenses have also increased in tandem with the higher capex, but the company expects them to fall in FY03/22 as it reduces capex. The R&D expense to revenue ratio in the Chemicals segment has remained constant at around 3.5%.
Target: Dielectrics (barium titanate), dielectric materials (high-purity barium carbonate)
Market trends: Continued growth in automotive applications due to advances in CASE (connected cars, autonomous/automated driving, sharing/subscription, and electrification). Growth in demand due to the spread of 5G and IoT.
Company strategy: Stabilize quality (improve customer-side yield and reliability), pursue rapid development of new products (micro dielectrics), respond quickly to customer demand (increase production)
Specific measures: Improve profitability of dielectrics by getting the development of high-end fine dielectrics on track. Build a system to increase production of dielectric materials to boost revenue.
Capex: JPY5.7bn (targeting a 90% increase in revenue in FY03/24 versus FY03/19)
Target: Cosmetic materials
Market trends: Change in European guidelines to allow use of zinc oxide. Ban on the sale of sunscreens containing certain organic ingredients in Hawaii from 2021. A trend toward regulation of microplastics due to impacts on ecosystems and human health (in the UK, US, and other countries). Expansion of Asian markets, especially China.
Company strategy: Accelerate overseas expansion in line with global regulatory trends. Differentiate through unique products such as heteromorphic zinc oxide and plate-shaped barium sulfate
Specific measures: Increase production capacity in response to strong demand and grow industry presence, leveraging the ability to develop and manufacture a wide range of cosmetic materials.
Capex: JPY5.5bn (targeting a 68% increase in revenue in FY03/24 versus FY03/19)
Target: PVC stabilizer, hydrotalcite
Market trends: While PVC demand in Japan is expected to remain flat, demand in Southeast Asia is expected to continue to grow due to infrastructure and urban area development. Lead regulations are progressing due to the impact on the environment and human health.
Company strategy: Develop the manufacturing and sales system for PVC stabilizers in Japan, Vietnam, and Thailand to expand sales to Southeast Asian countries and strengthen the customer follow-up system. Capture demand related to the switch from lead to lead-free stabilizers. Improve profitability by leveraging the domestic production system.
Specific measures: Capitalize on the trend toward lead-free products as early as possible. Accelerate overseas expansion by strengthening the supply of raw materials, technical support, and stable production systems in Japan, Vietnam, and Thailand (targeting an overseas ratio of 50% or more).
Capex: JPY600mn (targeting a 26% increase in revenue in FY03/24 versus FY03/19)
Target: Nickel catalysts, PET polymerization catalysts, copper catalysts
Market trends: Expected growth in hygienic products and displays. A trend toward environmental friendliness.
Company strategy: Aim to improve capital efficiency by integrating production bases for nickel catalysts, while simultaneously expanding sales to improve profitability. Contribute to society by strengthening environmentally friendly catalysts, namely PET polymerization catalysts, which are antimony-free catalysts that contribute to production of safer bottles and fibers, and copper catalysts, which will help pave the way for shift to the use of chromium-free catalysts.
Specific measures: Expand nickel catalyst sales and improve production efficiency. Grow environmentally friendly catalysts into a new earnings pillar.
Capex: JPY1.3bn (targeting a 100% increase in revenue in FY03/24 versus FY03/19)
Target: High-refractive-index materials
Market trends: Expected growth in high-refractive-index lenses in the plastic lenses market. Expected growth in large-screen smartphones, which are set to become mainstream in the near future.
Company strategy: Use fine particles to achieve high transparency and a high refractive index. Highlight ease-of-use by offering a broad lineup. Start operation at a new plant. Contribute to earnings with high-value-added products.
Specific measures: Start operation at a new plant to increase production and contribute to earnings, based on the expectation that high-end models with large screens will take the lead in the smartphone market in the future.
Capex: JPY2.1bn (targeting a 267% increase in revenue in FY03/24 versus FY03/19)
Target: Medical devices (submucosal injection material, bone void filler), products for aesthetic medical providers
Market trends: Uptrend in the incidence and prevalence of cancer due to the aging of the population. Growing awareness of beauty and health.
Company strategy: Promote new businesses while maintaining existing ones (barium, Alloid G, household drugs, endoscope cleaning and disinfection equipment).
(1) Submucosal injection material: Sales launched in June 2019. Aim to increase revenue by expanding application to different treatment methods.
(2) Products for aesthetic medical providers: Sell exclusively at medical institutions to appeal to buyers with a high awareness of beauty.
(3) ReBOSSIS bone void filler: An artificial bone filler resembling cotton. Contract manufacture for the startup that developed the material. Responding to plans to expand sales in Japan and overseas.
Specific measures: Aggressively grow new businesses, aiming to expand mainly in medical devices (submucosal injection material, bone void filler), products for aesthetic medical providers, and products for cancer screenings.
Capex: JPY1.2bn (targeting a 40% increase in revenue in FY03/24 versus FY03/19)
In April 1988, the 70th anniversary of Sakai Chemical Industry’s founding, the company announced a three-year medium-term management plan. This was the bubble economy era, and the company moved forward with aggressive investments and its stock price reached a record high. However, the collapse of the bubble economy plunged the company into the red in FY03/92. In response to this crisis, it formulated a three-year action plan, the “SST Plan,” in September 1993. The plan called for “improving and strengthening the earnings base” by promoting rationalization and taking emergency measures to restructure the entire company. Based on the results of those efforts, the company formulated its next plan, Bright Future 21, which it announced in April 1996. After achieving the numerical targets for FY03/00, the company targeted revenue of JPY100.0bn and recurring profit of JPY8.0–10.0bn in a series of new plans drawn up every three to five years, but has to this day been stuck in a box range (with revenue of JPY80.0–90.0bn and recurring profit of JPY3.0–7.0bn) and unable to reach those targets (though it met the recurring profit target in FY03/07 with a recurring profit of JPY8.7bn). The current medium-term management plan covers five years and does not specify a numerical target for revenue due to changes in the accounting standard, having only targets for operating profit and ROE.
|Fiscal years||Medium-term management plan||Targets|
|FY03/89–FY03/91||Three-Year Medium Term Management Plan||Parent revenue: JPY48.0bn, recurring profit: JPY4.8bn, equity ratio: 36.5–48.0% or more|
|FY03/95–FY03/97||SST Plan||Strengthen the earnings base|
|FY03/98–FY03/01||Bright Future 21||Revenue: JPY74.0bn, recurring profit margin: 8% (operating profit margin: 12%) or higher|
|FY03/02–FY03/04||SGP21||Revenue: JPY100.0bn, recurring profit JPY8.5bn、ROE: 7–8%|
|FY03/05–FY03/07||SGP21ｰII||Revenue: JPY100.0bn, recurring profit margin: 8%, ROE: 8%|
|FY03/08–FY03/10||Forward! Advance to the Next||Revenue: JPY120.0bn, recurring profit: JPY10.0bn, ROE: 8%|
|FY03/11–FY03/13||Challenge the Next||Revenue: JPY110.0bn, recurring profit: JPY8.0bn|
|FY03/14–FY03/16||Rapid Progress! over 1000||Revenue: JPY100.0bn, recurring profit: JPY10.0bn|
|FY03/17–FY03/19||Create Together 2018||Revenue: JPY100.0bn, operating profit: JPY6.0bn|
|FY03/20–FY03/24||SAKAINNOVATION 2023||Operating profit: JPY8.0bn or more, ROE: 6％ or higher|
|President (term)||Medium-term management plan||FY||Parent (JPYmn)||Consolidated (JPYmn)|
|Revenue||Operating profit||Recurring profit||NI||Revenue||Operating profit||Recurring profit||NI|
|Hiroshi Matsumoto (Jun 1987 to Jun 1993)||1987||38,426||3,439||2,843||1,123||59,351||4,153||3,234||1,399|
|Three-Year Medium Term Management Plan||1988||40,960||3,551||3,245||1,303||67,018||5,612||5,046||1,943|
|Kiyoshi Shinozuka (Jun 1993 to Jun 2003)||1993||38,911||1,555||515||290||71,747||3,566||2,281||654|
|Bright Future 21||1997||40,929||4,031||3,026||654||77,565||5,965||4,690||1,127|
|Kazunobu Abe (Jun 2003 to Jun 2008)||2003||39,143||4,004||3,166||1,832||80,540||6,683||5,140||2,467|
|Forward! Advance to the Next||2007||52,680||4,341||4,383||2,602||98,781||7,635||7,320||3,758|
|Iwao Yabunaka (Jun 2008 to Jun 2014)||2008||41,977||986||1,214||405||85,115||3,047||3,000||915|
|Challenge the Next||2010||46,443||4,798||4,271||1,580||87,221||7,288||7,055||3,144|
|Rapid Progress! over 1000||2013||35,333||317||3,820||3,147||86,141||3,556||3,310||1,340|
|Masaaki Yabe (Jun 2014 to current)||2014||35,509||480||1,848||1,076||86,973||4,164||4,218||2,275|
|Create Together 2018||2016||36,384||1,697||2,766||1,677||83,938||4,551||4,290||2,037|
The company mainly manufactures and sells inorganic powders, which are upstream intermediate goods. It operates in two segments: Chemicals (90.4% of revenue, OPM of 7.3% [5.0% after deduction of head office expenses] in FY03/21) and Medical (9.6%, 5.5%). The company’s mainstay products, including titanium dioxide and zinc products as well as barium products, have a wide range of applications (paints, pigments, colorants, cosmetics, electronic materials such as multilayer ceramic capacitors [MLCCs], polyvinyl chloride [PVC] stabilizers, diapers, high-index plastic lenses for eyeglasses, pharmaceuticals, medical devices, others). The company is focusing on ESG management and the SDGs to protect the global environment, including by promoting the switch to lead-free PVC stabilizers, providing microplastic bead substitutes, and reducing industrial waste.
|Business category||Main products and main companies|
|Electronic materials||Dielectrics (barium titanate), dielectric material (high-purity barium carbonate)|
|Titanium dioxide, zinc products||Titanium dioxide, zinc oxide, cosmetic materials (ultra-fine particle titanium dioxide, ultra-fine particle zinc oxide)|
|Plastic additives||Lead-free stabilizers, lead stabilizers, hydrotalcite, metallic soaps|
|Hygienic products||Breathable films, non-woven fabrics|
|Organic chemical products||SC Organic Chemical: organosulfur compounds, organophosphate compounds|
|Katayama Seiyakusyo: active pharmaceutical ingredients and intermediates|
|Catalysts||De-NOx catalysts, dioxin decomposition catalysts, nickel catalysts, catalysts for polyester polymerization|
|Contract processing||Resino Color Industry Co., Ltd. and Nihon Color Ind. Co., Ltd.|
|Other||Barium products (except electronic materials applications), strontium products, road marking materials, Sakai Shoji (except for hygienic materials and some catalyst products)|
|Medical||Prescription drugs: barium contrast agents, Alloid G (peptic ulcer treatment)|
|Medical devices Endoscope cleaning and disinfection equipment, Liftal K (submucosal injection material for endoscopic treatment) and Liftein Needle (a needle for injections)|
|OTC drugs such as cold remedy Kaigen and the SolPro series of anti-UV supplements|
Sakai Chemical Industry’s core technologies are in the following three areas: 1) inorganic fine powder processing, 2) organic synthesis, and 3) pharmaceutical manufacturing. The company identifies three main fields of application for these core technologies: electronic devices, medical and healthcare, and lifestyle and environmental infrastructure. Its medium-term management plan (SAKAINNOVATION 2023) indicates the following priority investment areas: 1) electronic materials (dielectrics and dielectric materials for MLCCs), 2) titanium dioxide and zinc products (cosmetic materials), 3) high-refractive-index materials (plastic lenses and film coatings), 4) catalysts (hygiene products, displays, and environmental), 5) medical (beauty, health, and treatment), and 6) plastic additives (PVC, promoting the switch to lead-free stabilizers).
|Electronic devices||Medical/healthcare||Lifestyle/Environmental infrastructure|
|1. Products||1. Products||1. Products|
|- Raw materials for electronic materials||- Cosmetics materials||- De-NOx catalysts, process catalysts|
|- Dielectrics, high-refractive-index materials, photoresists||- Contrast agents, OTC drugs||- Catalyst materials|
|- APIs and intermediates||- Automotive materials, construction materials|
|2. R&D focus||2. R&D focus||2. R&D focus|
|- Electrode materials for fuel cells (conductive titanium dioxide)||- UV-blocking materials, infrared-blocking materials||- Photocatalytic materials|
|- (for polymer electrolyte fuel cells [PEFCs], others)||- Antibacterial and antiviral materials|
|- Materials for rechargeable batteries|
The company’s inorganic powder processing technology allows it to synthesize materials of various shapes and sizes. It is thus able to adjust particle sizes and size distributions to maximize the attributes of raw materials based on the performance requirements of specific markets. In recent years, marine pollution by microplastic beads (MPBs) has become a global issue. MPBs are used in rinseable cosmetics and personal care products as exfoliators and texture enhancers. There is concern that wastewater treatment facilities are unable to remove MPBs that wash down the sink, meaning that they flow into the ocean and affect the ecosystem. The company is able to synthesize materials that can be used in cosmetics (calcium carbonate, barium sulfate, others) with an optimal particle size for texture enhancement (one micron). By making the particle size smaller (ultrafine) and increasing particle uniformity so that there are fewer coarse particles, the company offers spherical particle alternatives to standard MPBs that can be used in a wide range of fields without carrying the same environmental risks.
In FY03/21, the mainstay products in electronic materials were dielectric materials (high-purity barium carbonate; 40% of revenue for the category), dielectrics (barium titanate; 25%), and others (35%). Dielectrics and dielectric materials are the main materials in multilayer ceramic capacitors (MLCCs), which are indispensable parts of electronic devices such as smartphones. Dielectrics are characterized by their electricity storage capacity. MLCCs are electronic components made of hundreds of alternating layers of dielectric and nickel sintered together. They are used in different applications, with their dimensions ranging from as small as 0.25mm x 0.125mm to as large as 5.7mm x 5.0mm. The company uses its proprietary method of hydrothermal synthesis to produce an assortment of ultrafine, high-purity, highly crystalline perovskite dielectric powders (fine spherical dielectrics in uniform shape), which contribute to improved performance and miniaturization of capacitors. Spherical amorphous silica is highly rated for its very narrow particle-size distribution and low moisture absorption.
Major MLCC manufacturers (including Murata Manufacturing [TSE1: 6981] and Taiyo Yuden [TSE1: 6976]) manufacture dielectrics in-house, mainly in the volume zone, but the company offers special-grade products, new products, and products with large fluctuations in demand that are difficult for customers to handle. The company is the largest producer of high-purity barium carbonate, a material used in dielectrics, with a share of over 50%. The company’s annual production volume of electronic materials is over 10,000 tons, and has been increasing every year in recent years. The company produces a much greater volume of dielectric materials than it does dielectrics. These dielectric materials have a lower unit price than dielectrics, which have higher value-added. Nevertheless, the company considers dielectric materials to be a value-added product since there are only a few manufacturers capable of producing them in the world (less than five) and quality is constantly improving.
There was a period between FY03/16 and FY03/18 when electronic materials was a seller’s market and OPM trended at or above 10%. However, OPM has fallen to around 1% in recent years (FY03/20 and FY03/21) due to delays in the plans of major clients and an increase in fixed costs caused by a decline in the utilization rate of expanded facilities. The company has been working to improve production efficiency considering the demand for increasingly high performance and quality, in addition to the difficulty it has in passing on costs to clients. However, some customers require the company to hold inventory of raw materials for almost a year.
As of FY03/21, titanium dioxide accounted for just under 64% of revenue for the category, zinc products for just under 24% (zinc oxide: 14%, zinc powder*: 10%), and cosmetics for just under 13%. The company’s annual production of titanium dioxide is about 24,000 tons (third largest in Japan after Ishihara Sangyo [TSE1: 4028] and Tayca [TSE1: 4027]). With the entry of Chinese companies into the market, titanium dioxide is undergoing commodification such that there is no benefit in chasing market share. The company is thus reducing production while improving efficiency.
*On June 11, 2021 the company announced its intention to discontinue zinc powders.
Titanium dioxide is formed through a reaction of an ore called ilmenite with sulfuric acid. Titanium dioxide particles have a high refractive index and reflect a wide range of wavelengths, from ultraviolet to infrared, giving them a white appearance. White pigment is not only used to produce whiteness, but also to adjust color, as white pigment is a component of all colors. In addition to its superior whiteness, titanium dioxide is highly chemically stable and has characteristics that make it useful for concealing (such as making pages opaquer in printing applications) or adding coloring. These features have led to it being dubbed the “king of white pigments” and adopted in many fields, including paints, printing inks, papermaking (for its opacity and ability to hide reverse-page text), plastics, synthetic fibers, rubber, borax, white lines on roads (for crosswalks and other indicators). It is also used for its optical properties, including in glass and capacitors. Both titanium dioxide and zinc oxide are also used in sunscreens and foundation, since their high refractive index (when in tiny particles) helps to reflect UV rays. Cosmetic material applications accounted for 13% of the category revenue in FY03/19, just under 17% in FY03/20, and just under 13% in FY03/21.
Zinc oxide was the company’s original product at its founding. In fact, it was Sakai Chemical Industry that promoted production of zinc oxide in Japan as a replacement for lead-containing white powder used by women and theater performers of the time. Today, zinc oxide plays a greater role as a sunscreen to protect the skin from UV rays than it does as a white powder. The finer the particles of zinc oxide, the more evenly it can cover the skin, and the more effective it is as a sunscreen component. In addition, the finer the particles are, the more transparent they become, which prevents leaving a white cast on the wearer’s skin.
Zinc powder (discontinued; see note above) is made by evaporating and cooling metallic zinc, and zinc oxide is made by burning (oxidizing) zinc gas in the air. Zinc powder is mainly used as a corrosion inhibitor in rust-preventive primer paints. Steel frames in buildings under construction are coated with this primer material which is then overlaid with successive layers of paint to increase weatherability. In addition to cosmetic applications, zinc oxide is also used as a vulcanization accelerator for rubber products. In this function, it serves as an additive to harden the liquid extracted from rubber trees and increase its durability. The hardened rubber is then used to make products such as automobile tires.
・ Titanium dioxide: White pigment with excellent weatherability and chemical stability, in addition to coloring and concealing characteristics
・ Zinc oxide: Vulcanization accelerator for rubber products
・ Zinc powder (discontinued; see note above): Used in rust-proof coatings for buildings and bridges
・ Cosmetic materials (titanium dioxide, zinc oxide): Used in sunscreens and foundation products with high UV protection and a smooth feel on the skin
Resin materials such as plastics and polyvinyl chloride (PVC) have a tendency to deteriorate and discolor due to exposure to heat, light, and oxygen. Plastic additives are used to control and inhibit this degradation and to enhance functionality by increasing strength and modifying the surface. Plastic additives are used in pipes, fittings, electric wiring, extrusions, agricultural films, flexible wrap films, and wallpaper.
PVC stabilizers are added to improve the processability of and inhibit the deterioration of PVC pipe resins. Currently, the switch to lead-free PVC stabilizers worldwide is accelerating. The company’s Vietnamese subsidiary manufactures lead-free stabilizers and hydrotalcite, a key raw material in their manufacture. Its Thai subsidiary manufactures both lead-containing and lead-free stabilizers. Sales of all these products are growing, mainly in Southeast Asia. The company has the largest share of the PVC stabilizer market in Japan at 30–40%.
The impetus for the development of plastic additives came in 1949, when the company succeeded in synthesizing zinc stearate after having success with the application of zinc oxide and zinc sulfate. As a stabilizer, zinc stearate grew rapidly in the 1950s, riding the wave of the expanding market for agricultural greenhouses.
Plastic additive applications: Pipes, fittings, window frames, wallpaper, wiring harnesses
Polyvinyl chloride (PVC) stabilizers
Hydrotalcite: Used as a lead-free PVC stabilizer and in agricultural films due to its high heat retention and transparency.
Demand for hygienic products (diapers and feminine hygiene products) is growing overseas. The company’s Indonesian subsidiary is manufacturing breathable films.
Hygienic products applications: Diapers, feminine hygiene products
Breathable films: Retain moisture while allowing air to pass through
This category covers organic chemicals—mainly organic compounds containing sulfur and phosphorus (organosulfur and organophosphate compounds)—and contract manufacture of active pharmaceutical ingredients (APIs) and intermediates. These products are used in electronics, plastics, pharmaceuticals and healthcare, lubricants, and water treatment materials. Main applications include thin (high-refractive-index) plastic lenses, concrete, lubricants, and pharmaceuticals. The company provides high-performance, high-quality materials for construction and civil engineering as well as cutting-edge optical and electronic materials. Its business in this area centers on β-Mercaptopropionic acid, a raw material in high-refractive-index plastic lenses. In fact, it is the only manufacturer of the compound in Japan and one of only two in the world.
Organic chemicals are handled by group company SC Organic Chemical Co., Ltd. Organophosphate products leverage the characteristics of phosphorus for applications mainly in the automobile industry (but also in a wide range of other fields). They are used as extreme pressure additives for lubricants, antioxidants for resins, dispersants, and catalysts. Katayama Seiyakusyo Co., Ltd. meanwhile handles the development and production of active pharmaceutical ingredients (APIs) and intermediates. In the contract manufacturing of APIs and intermediates, the company sometimes participates from the development stage. The business can count on stable earnings once a drug is launched on the market. According to Sakai Chemical Industry, it is the exclusive supplier of APIs and intermediates used in a very successful pharmaceutical sold by a certain undisclosed company.
・ Organosulfur compounds: The company is the only producer of β-Mercaptopropionic acid (BMPA) in Japan. The compound is used to improve the refractive index of eyeglass lenses and as a concrete admixture.
・ Organophosphorus compounds: Lubricant additives
・ Active pharmaceutical ingredients (APIs) and intermediates
De-NOx catalysts and dioxin decomposition catalysts are used in equipment that removes and decomposes nitrogen oxides (NOx) and dioxins generated from thermal power stations and waste incineration plants. De-NOx catalysts are square prisms with 15 to 45 honeycomb-patterned holes on either side. They remove NOx when flue gas passes through them to produce clean air. De-NOx catalysts accounted for 32% of the category revenue in FY03/19, 25% in FY03/20, and 28% in FY03/21.
Hydrogenation catalysts (nickel and copper-based catalysts) are one type of process catalyst that causes fats and oils to react with hydrogen to form solids. They are used to produce raw materials for margarine, shampoo, adhesives, optical films, and other products. Polyester polymerization catalysts are used to produce raw materials for polyester fiber, PET bottles, and PET films. The company aims to expand its nickel catalyst business in tandem with increasing demand for optical films and diaper adhesives.
De-NOx catalysts: Removal of nitrogen oxides (NOx)
Dioxin decomposition catalysts: Decomposition of dioxins
Hydrogenation catalysts (nickel and copper-based catalysts): Polyester polymerization catalysts, hydrogenation of fats, resins, and other materials.
The company conducts contract manufacturing in the field of inorganic and organic chemical products (pigments, colorants, functional inks, catalysts, plastic additives, and others) based on its proprietary inorganic powder processing technology. The company has a variety of manufacturing equipment to meet a wide range of customer needs. Almost all raw materials are supplied by customers, so revenue is a function of the processing fees the company charges.
Contract manufacturing of inorganic and organic chemical products: Uses various machinery to meet needs in a wide range of fields, including pigments, colorants, functional inks, catalysts, and plastic additives.
This category includes products handled by Sakai Trading and barium products (excluding those for electronic materials), road marking materials, colored paving and coating materials, and others. Barium carbonate was used as an electromagnetic deflection material in cathode-ray tube televisions. It is now used in modern LCD TVs as a material in anti-reflective films and glass substrates to prevent glare. It is also used as a glazing material to protect and add aesthetic value to ceramics. Ultrafine barium sulfate (under the brand “Barifine”) has the effect of making surfaces shiny and colors brighter. Barium sulfate is also used as a raw material in green-colored fireworks because it produces a green flame when burned.
The company has the largest share (approx. 50%) of the Japanese market for X-ray contrast media (barium sulfate) for use in gastrointestinal radiography (there are two other Japanese competitors). Radiography using barium sulfate is commonly used in Japan for regular checkups of the digestive tract, but the company also exports its products overseas. Barium sulfate is a type of barium salt and is known for its application as a white liquid contrast medium used in gastric X-ray examinations. Since Barium sulfate does not easily let X-rays through, it is used to clearly show stomach tissues that are otherwise difficult to see.
The company develops, manufactures, and sells a variety of pharmaceutical products based on its barium sulfate manufacturing technology. One of these is Alloid G, a proprietary peptic ulcer treatment made from sodium alginate. It is effective for hemostasis and mucosal protection in gastric and duodenal ulcers, and for improving subjective symptoms in reflux esophagitis. Another is Etoxisclerol, a drug used for transendoscopic sclerotherapy of esophageal varices. The company is focusing on the development of endoscope cleaning and disinfection equipment to support the shift from barium to gastroscopy screening.
As for over-the-counter (OTC) drugs, the company offers a wide range of products, including Kaigen cold medicine, Kaigen tablets, Kaigen cold capsules, rhinitis treatments, antitussive expectorants, oral medicines, antipyretic analgesics, nourishing tonics, gastrointestinal medicines, laxatives, and ophthalmic medicines. The company has started to sell its products in the Taiwanese market, appealing to perceptions that Japanese-made drugs are of high quality.
Alloid G: A proprietary peptic ulcer drug made from sodium alginate. It stops bleeding and protects the mucous membrane to treat gastric and duodenal ulcers, and improves subjective symptoms in reflux esophagitis.
Etoxiscrelor: An agent use in endoscopic injection sclerotherapy
Endoscope cleaning and disinfection equipment: The company is focusing on development in this area in response to the shift from barium to gastroscopy screening and because the business is not subject to NHI price revisions.
Over-the-counter (OTC) drugs: Kaigen series, Kaigen granules, Kaigen Pack IB Granules. Entry into the Taiwanese market by appealing to perceptions that Japanese-made drugs are of high quality.
Sakai Chemical Industry’s basic R&D policy is to advance its three core technologies: 1) inorganic powder processing, 2) organic synthesis, and 3) pharmaceutical manufacturing. According to the company, it mainly procures manufacturing equipment from external suppliers. However, it says it has accumulated unique expertise in core technologies such that it would be difficult for competitors to produce products of the same quality given the same equipment. The company plans to actively pursue technological tie-ups and M&A to gain access to innovative technologies that it does not currently possess.
The company is contributing to the miniaturization of multilayer ceramic capacitors with its ultrafine particle processing technology using hydrothermal synthesis. Hydrothermal synthesis refers to using water at high temperatures and high pressures to trigger the synthesis or crystal growth of certain compounds. The high-temperature, high-pressure environment makes it possible for substances that are insoluble in water at normal temperatures and pressures to be easily dissolved, thus making it possible to synthesize or facilitate crystal growth of a broader range of substances. In the field of cosmetics, zinc oxide particles can be made into hexagonal plates, resulting in quality products such as foundations that are easily blended into the skin and have good spreadability. The surface of titanium dioxide particles, which are used as a pigment in paints, is coated with an inorganic substance to enhance the stability of paints. The company also has technology that allows it to achieve purities of 99.9% or higher in the manufacture of inorganic powers. Additionally, it produces a unique stress-stimulated luminescent material (a powder) that emits light when subjected to force.