The Toyo Ink group (61 domestic and overseas consolidated subsidiaries under the holding company Toyo Ink SC Holdings Co., Ltd. and seven equity-method affiliates) is a specialty chemical manufacturer focusing on multifunctional printing inks. Its fine chemicals business accounts for roughly three-quarters of its profit.

Established in 1896, the company has the largest market share in printing inks in Japan and the fifth largest globally (the largest is DIC [TSE PRM: 4631] and the second largest is Flint Group [Luxemburg]). In Japan, Toyo Ink is the largest manufacturer of colorants for PET bottle caps and can coatings, and the second largest manufacturer of electronics films.

Toyo Ink has allocated business resources in areas that leverage its strengths in end-to-end production of inks from pigments and resins (raw materials) and processing technology in synthesis, dispersion, and deposition. It plans to create new businesses in new fields: next-generation display materials, image sensor materials, electromagnetic shields for high-speed communications, medicated patches, inkjet inks for digital printing, flexo inks for flexible packaging, and electron beam curing ink.

Toyo Ink is an equity-method affiliate of Toppan Printing Co., Ltd. (TSE PRM: 7911), with which it has a strong business relationship that it has developed since its early days. These two companies have worked together to expand into the North American and Chinese markets and develop resist inks. Toyo Ink also has a capital alliance with Sakata INX Corporation (TSE PRM: 4633), the third largest player in the Japanese printing ink market. The company and Sakata INX cooperate in business, distribution, and production.

In fine chemicals, which is a growth area but still subject to sharp price fluctuations, the company's Colorants & Functional Materials segment generated 25.7% of consolidated sales (excludes impact from adjustments and includes impact from the Other segment) in FY12/21 (versus 24.8% in FY12/20), while the Polymers & Coatings segment accounted for 24.2% (versus 23.8% in FY12/20). In the mature printing ink market, the company’s Packaging Materials segment generated 25.2% of consolidated sales (versus 25.4% in FY12/20) and the Printing & Information segment 22.9% (versus 23.7% in FY12/20).

In terms of profitability, on the fine chemical side we find a FY12/21 consolidated operating profit margin of 7.2% in the Colorants & Functional Materials segment (versus 3.5% in FY12/20) and 5.0% in the Polymers & Coatings segment (versus 9.5% in FY12/20), and on the printing ink side an operating profit margin of 2.5% in the Packaging Materials segment (versus 5.8% in FY12/20) and 2.6% in the Printing & Information segment (versus 1.0% in FY12/20). The company's overall OPM was 4.5% (versus 5.0% in FY12/20). Despite differences in profitability, these two domains complement each other in terms of raw material procurement, production, and R&D, which has enabled the company to maintain a consolidated OPM of about 4.5–7.2% over the past 10 years.

The main printing ink customers are printing companies and packaging specialists, such as converters and cardboard manufacturers. In the fine chemicals domain, the company serves a broad range of client companies that make semiconductors, electronic parts, liquid crystals, and automotive components. It also competes with some chemical and electronic parts manufacturers. Toyo Ink has supplied solutions beyond printing with support from its stable, long-term, and direct business relationships with key customers (80% of sales are direct).

In FY12/21, 49.9% of sales came from overseas (versus 46.4% in FY12/20). While printing ink markets are shrinking in advanced countries as information becomes digitalized, growth in emerging markets is promising. Packaging inks for food packaging and labels is growing worldwide, and the company is receiving many inquiries for value-added UV-curable inks and eco-friendly biomass inks in China, Europe, and the US.

Earnings trends

For full-year FY12/21, the company reported consolidated sales of JPY288.0bn (+11.8% YoY), operating profit of JPY13.0bn (+0.7% YoY), recurring profit of JPY15.4bn (+23.1% YoY), and net income attributable to owners of the parent of JPY9.5bn (+57.7% YoY). The Colorants & Functional Materials segment reported sales up 15.3% YoY and operating profit up 138.6% YoY. In the Polymers & Coatings segment, sales were up 13.5% and operating profit down 39.9% YoY. In the Packaging Materials segment, sales were up 10.6% YoY and operating profit down 53.3% YoY. In the Printing & Information segment, sales were up 7.2% and operating profit up 189.8% YoY. In the Others segment, sales were down 7.7% and operating profit was up 126.2% YoY. Affected by the sharp rise in raw material prices, GPM declined 1.8pp YoY to 20.4%. Meanwhile, the company reported a 1.3pp improvement in its SG&A expense ratio, and its operating profit margin came to 4.5%, down 0.5pp YoY.

In May 2022, the company revised its FY12/22 forecast. The company now projects sales of JPY310.0bn (+7.6% YoY), operating profit of JPY13.0bn (level YoY), recurring profit of JPY14.0bn (-9.3% YoY), and net income attributable to owners of the parent of JPY12.5bn (+31.7% YoY). The company has made no changes to its existing dividend forecast (JPY90.0 per share; unchanged YoY). Compared to its previous forecast, the company raised its sales projection by JPY1.5bn and lowered its projections for operating profit, recurring profit, and net income attributable to owners of the parent by JPY1.5bn, JPY1.0bn, and JPY2.5bn, respectively. In connection with its decision to sell all common shares held in Sakata Inx Corporation back to Sakata Inx in an effort to eliminate cross-shareholdings, the company expects to record an extraordinary gain (gain on sale of investment securities) of approximately JPY4.5bn in Q2 FY12/22.

Strengths and weaknesses

Shared Research thinks the company’s strengths include 1) its status as a niche leader leveraging advanced proprietary core materials and technologies (pigments and resins with synthesis, dispersion, and deposition), 2) long-term, stable collaborative relationships with major customers (e.g. Toppan Printing) and problem-solving capabilities, and 3) leadership in growth areas such as eco-friendly inks, and materials for sensors and smartphones.

In our view, its weaknesses include 1) reliance on Japan and Asia and delayed move into European and US markets through acquisitions, 2) vulnerability to environmental regulations and rising raw material prices, due to slow shift to local production and consumption internationally and supplier diversification, and 3) lack of boost to companywide earnings base despite adoption of a holding company structure.

Note: Refer to Glossary at the end of the report for technical terms.

The following are representative examples:

Pigments, pigment dispersions: “Pigment” is a generic term for powder insoluble in water and oil that is used for coloring. Soluble coloring powder is known as dye. Organic pigments have a wide variety of applications, and are used as or in colorants for printing inks, coatings, plastics, cosmetics, color copier toners, inkjet printer inks, and synthetic resins and textiles.

Pigments

Source: Company data

Color filter paste: Color filter paste is the raw materials for color resists. The Toyo Ink group works to improve functions and capabilities, leveraging its strengths in development and production across the entire process from high-performance pigments through the end-product color resists (resist inks).

Electromagnetic shielding materials: These are used to attenuate electromagnetic energy by reflection, absorption, and multipath reflection to avoid damage to human bodies or sensitive equipment. The Toyo Ink group has created a highly effective electromagnetic shielding film by using a urethane resin it developed as a heat resistant adhesive and dispersing conductive filler (a substance added to make resins conductive to electricity).

Key financial data

Income statement			FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY12/17	FY12/17	FY12/18	FY12/19	FY12/20	FY12/21	FY12/22
(JPYmn)			Cons.	Cons.	Cons.	Cons.	Cons.	Cons.((9mo))	(12mo)	Cons.	Cons.	Cons.	Cons.	Est.
Sales			248,689	279,557	286,684	283,208	268,484	240,344	280,066	290,208	279,892	257,675	287,989	310,000
	YoY		1.4%	12.4%	2.5%	-1.2%	-5.2%	-	-	3.6%	-3.6%	-7.9%	11.8%	7.6%
Gross profit			58,019	64,156	63,739	64,882	65,388	55,910	-	62,293	60,333	57,196	58,704
	YoY		8.4%	10.6%	-0.6%	1.8%	0.8%	-	-	-	-3.1%	-5.2%	2.6%
	Gross profit margin		23.3%	22.9%	22.2%	22.9%	24.4%	23.3%	-	21.5%	21.6%	22.2%	20.4%
Operating profit			17,547	19,728	18,210	18,236	19,231	16,774	20,524	15,276	13,174	12,909	13,005	13,000
	YoY		28.6%	12.4%	-7.7%	0.1%	5.5%	-	-	-25.6%	-13.8%	-2.0%	0.7%	0.0%
	Operating profit margin		7.1%	7.1%	6.4%	6.4%	7.2%	7.0%	7.3%	5.3%	4.7%	5.0%	4.5%	4.2%
Recurring profit			18,468	20,553	19,411	18,466	19,262	17,473	21,324	15,429	13,847	12,543	15,442	14,000
	YoY		37.4%	11.3%	-5.6%	-4.9%	4.3%	-	-	-27.6%	-10.3%	-9.4%	23.1%	-9.3%
	Recurring profit margin		7.4%	7.4%	6.8%	6.5%	7.2%	7.3%	7.6%	5.3%	4.9%	4.9%	5.4%	4.5%
Net income			8,714	12,260	13,304	11,818	12,702	10,376	14,762	11,847	8,509	6,019	9,492	12,500
	YoY		20.4%	40.7%	8.5%	-11.2%	7.5%	-	-	-19.7%	-28.2%	-29.3%	57.7%	31.7%
	Net margin		3.5%	4.4%	4.6%	4.2%	4.7%	4.3%	5.3%	4.1%	3.0%	2.3%	3.3%	4.0%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000 shares )			303,109	303,109	303,109	303,109	303,109	60,622	-	60,622	60,622	60,622	60,622
EPS (JPY)			146.0	205.5	223.0	198.1	215.0	177.7	-	202.9	145.7	103.1	169.4	223.8
EPS (fully diluted; JPY)			-	-	-	198.1	214.9	177.5	-	202.6	145.4	102.9	169.1
Dividend per share (JPY)			60.0	65.0	72.5	77.5	80.0	80.0	-	85.0	90.0	90.0	90.0	90.0
Book value per share (JPY)			2,628	3,032	3,473	3,443	3,608	3,793	-	3,668	3,757	3,589	3,912
Balance sheet (JPYmn)
		Cash and cash equivalent	33,996	31,894	39,620	44,470	44,903	50,260	-	52,706	56,691	76,469	64,816
Total current assets			161,963	176,609	187,727	183,422	181,214	195,606	-	203,063	199,969	214,097	223,589
Tangible fixed assets			87,124	96,306	101,865	100,209	101,398	97,081	-	94,013	99,577	102,616	111,716
Investment and other assets			49,747	58,973	71,873	70,080	76,964	81,463	-	69,883	72,381	60,399	69,364
Intangible assets			736	4,713	2,796	5,683	4,487	4,307	-	4,649	4,202	3,113	2,225
Total assets			299,571	336,601	364,262	359,395	364,066	378,459	-	371,610	376,130	380,227	406,896
		Short-term debt	34,822	33,369	20,931	20,401	29,364	22,507	-	20,593	30,315	19,379	24,042
Total current liabilities			98,000	101,612	90,742	87,369	97,513	94,808	-	100,839	106,747	91,411	112,125
		Long-term debt	35,383	40,051	44,895	46,037	33,262	38,409	-	38,845	27,460	60,492	55,415
Total fixed liabilities			40,248	48,380	59,763	60,166	49,573	55,267	-	49,679	42,490	71,491	67,823
Total liabilities			138,249	149,993	150,506	147,536	147,087	150,075	-	150,518	149,237	162,902	179,948
		Shareholders' equity	156,835	180,914	207,220	205,399	210,682	221,450	-	214,170	219,440	209,706	218,450
Total net assets			161,322	186,608	213,756	211,859	216,979	228,384	-	221,091	226,892	217,325	226,947
Total interest-bearing debt			71,059	74,442	66,923	67,303	63,464	60,454	-	58,825	57,775	79,871	79,457
Cash flow statement(JPYmn)
Cash flows from operating activities			17,460	17,603	25,702	25,727	23,370	18,663	-	19,197	19,673	16,743	15,760
Cash flows from investing activities			-14,363	-13,249	-6,198	-17,457	-10,611	-5,912	-	-10,828	-10,404	-13,294	-17,576
Cash flows from financing activities			-1,465	-7,305	-13,585	-5,817	-11,231	-8,355	-	-5,695	-6,247	16,221	-11,988
Financial indicators
ROA (RP-based)			6.3%	6.5%	5.5%	5.1%	5.3%	4.7%	-	4.2%	3.7%	3.3%	3.9%
ROE			5.8%	7.3%	6.9%	5.8%	6.1%	4.8%	6.8%	5.5%	3.9%	2.8%	4.4%
		Equity ratio	52.4%	53.7%	56.9%	57.2%	57.9%	58.5%	ー	57.6%	58.3%	55.2%	53.7%
		Total asset turnover	85.4%	87.9%	81.8%	78.3%	74.2%	64.7%	ー	77.4%	74.9%	68.5%	74.3%
		Net margin	3.5%	4.4%	4.6%	4.2%	4.7%	4.3%	ー	4.1%	3.0%	2.3%	3.3%
Equity ratio			52.4%	53.7%	56.9%	57.2%	57.9%	58.5%	-	57.6%	58.3%	55.2%	53.7%

Source: Shared Research based on company data
Note: On July 1, 2018, the company executed a 5:1 share consolidation. All figures except for the number of shares issued have been retrospectively adjusted.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company started applying the Accounting Standard for Revenue Recognition in FY12/22. Impacts from this application, however, are minimal and therefore figures for FY12/21 including YoY changes are based on the previous accounting standard without any retroactive adjustments.

Segment results

Sales (JPYmn)			FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY12/17 (12mo)	FY12/18	FY12/19	FY12/20	2021/12
Fine Chemicals			117,856	133,156	137,960	132,772	124,260	135,376	140,759	133,287	127,377	145,731
		% of total	46.2%	46.5%	46.9%	45.7%	45.2%	47.3%	47.6%	46.7%	48.5%	49.9%
		YoY	2.3%	13.0%	3.6%	-3.8%	-6.4%	-	4.0%	-5.3%	-4.4%	14.4%
	Colorants and Functional Materials		66,846	76,414	78,465	71,878	65,935	71,875	74,660	67,400	65,049	74,995
		% of total	26.2%	26.7%	26.7%	24.7%	24.0%	25.1%	25.3%	23.6%	24.8%	25.7%
		YoY	6.7%	14.3%	2.7%	-8.4%	-8.3%	-	3.9%	-9.7%	-3.5%	15.3%
	Polymers and Coatings		51,010	56,742	59,495	60,894	58,325	63,501	66,099	65,887	62,328	70,736
		% of total	20.0%	19.8%	20.2%	20.9%	21.2%	22.2%	22.4%	23.1%	23.8%	24.2%
		YoY	-2.9%	11.2%	4.9%	2.4%	-4.2%	-	4.1%	-0.3%	-5.4%	13.5%
Printing Ink			131,291	148,057	150,582	152,062	144,616	143,981	147,425	144,751	128,777	140,340
		% of total	51.5%	51.7%	51.2%	52.3%	52.6%	50.4%	49.9%	50.7%	49.1%	48.1%
		YoY	-0.3%	12.8%	1.7%	1.0%	-4.9%	-	2.4%	-1.8%	-11.0%	9.0%
	Packaging		56,160	62,530	63,114	64,623	62,965	63,490	68,047	68,071	66,589	73,645
		% of total	22.0%	21.8%	21.4%	22.2%	22.9%	22.2%	23.0%	23.9%	25.4%	25.2%
		YoY	1.1%	11.3%	0.9%	2.4%	-2.6%	-	7.2%	0.0%	-2.2%	10.6%
	Printing and Information		75,131	85,527	87,468	87,439	81,651	80,491	79,378	76,680	62,188	66,695
		% of total	29.5%	29.8%	29.7%	30.1%	29.7%	28.1%	26.9%	26.9%	23.7%	22.9%
		YoY	-1.3%	13.8%	2.3%	0.0%	-6.6%	-	-1.4%	-3.4%	-18.9%	7.2%
Other			5,895	5,403	5,704	5,980	6,115	6,591	7,228	7,291	6,229	5,746
		% of total	2.3%	1.9%	1.9%	2.1%	2.2%	2.3%	2.4%	2.6%	2.4%	2.0%
		YoY	-2.9%	-8.3%	5.6%	4.8%	2.3%	-	9.7%	0.9%	-14.6%	-7.8%
Eliminations			-6,355	-7,061	-7,564	-7,608	-6,509	-5,883	-5,205	-5,439	-4,708	-3,831
Cons.			248,689	279,557	286,684	283,208	268,484	280,066	290,208	279,892	257,675	287,989
		YoY	1.4%	12.4%	2.5%	-1.2%	-5.2%	-	3.6%	-3.6%	-7.9%	11.8%
Operating profit (JPYmn)			FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY12/17 (12mo)	FY12/18	FY12/19	FY12/20	2021/12
Fine Chemicals			11,030	11,568	10,936	9,774	11,245	14,386	11,364	9,399	8,196	8,961
		Operating profit margin	9.4%	8.7%	7.9%	7.4%	9.0%	10.6%	8.1%	7.1%	6.4%	6.1%
		% of total	63.1%	58.7%	60.2%	53.6%	58.5%	70.1%	74.4%	71.2%	63.5%	68.7%
		YoY	22.5%	4.9%	-5.5%	-10.6%	15.1%	-	-21.0%	-17.3%	-12.8%	9.3%
	Colorants and Functional Materials		7,630	8,140	7,290	4,227	4,604	6,514	5,329	3,386	2,259	5,391
		Operating profit margin	11.4%	10.7%	9.3%	5.9%	7.0%	9.1%	7.1%	5.0%	3.5%	7.2%
		% of total	43.6%	41.3%	40.1%	23.2%	24.0%	31.8%	34.9%	25.7%	17.5%	41.4%
		YoY	22.9%	6.7%	-10.4%	-42.0%	8.9%	-	-18.2%	-36.5%	-33.3%	138.6%
	Polymers and Coatings		3,400	3,428	3,646	5,547	6,641	7,872	6,035	6,013	5,937	3,570
		Operating profit margin	6.7%	6.0%	6.1%	9.1%	11.4%	12.4%	9.1%	9.1%	9.5%	5.0%
		% of total	19.4%	17.4%	20.1%	30.4%	34.6%	38.4%	39.5%	45.6%	46.0%	27.4%
		YoY	21.8%	0.8%	6.4%	52.1%	19.7%	-	-23.3%	-0.4%	-1.3%	-39.9%
Printing Ink			5,503	6,245	4,407	5,700	6,188	4,996	2,422	3,372	4,482	3,543
		Operating profit margin	4.2%	4.2%	2.9%	3.7%	4.3%	3.5%	1.6%	2.3%	3.5%	2.5%
		% of total	31.5%	31.7%	24.2%	31.3%	32.2%	24.4%	15.9%	25.6%	34.7%	27.2%
		YoY	77.4%	13.5%	-29.4%	29.3%	8.6%	-	-51.5%	39.2%	32.9%	-21.0%
	Packaging		2,174	1,982	1,768	2,723	2,871	2,422	1,491	3,058	3,885	1,813
		Operating profit margin	3.9%	3.2%	2.8%	4.2%	4.6%	3.8%	2.2%	4.5%	5.8%	2.5%
		% of total	12.4%	10.1%	9.7%	14.9%	14.9%	11.8%	9.8%	23.2%	30.1%	13.9%
		YoY	25.3%	-8.8%	-10.8%	54.0%	5.4%	-	-38.4%	105.1%	27.0%	-53.3%
	Printing and Information		3,329	4,263	2,639	2,977	3,317	2,574	931	314	597	1,730
		Operating profit margin	4.4%	5.0%	3.0%	3.4%	4.1%	3.2%	1.2%	0.4%	1.0%	2.6%
		% of total	19.0%	21.6%	14.5%	16.3%	17.3%	12.5%	6.1%	2.4%	4.6%	13.3%
		YoY	143.5%	28.1%	-38.1%	12.8%	11.4%	-	-63.8%	-66.3%	90.1%	189.8%
Other			948	1,890	2,833	2,754	1,777	1,131	1,481	424	234	531
		Operating profit margin	16.1%	35.0%	49.7%	46.1%	29.1%	17.2%	20.5%	5.8%	3.8%	9.2%
		% of total	5.4%	9.6%	15.6%	15.1%	9.3%	5.5%	9.7%	3.2%	1.8%	4.1%
		YoY	-34.0%	99.4%	49.9%	-2.8%	-35.5%	-	30.9%	-71.4%	-44.8%	126.9%
Eliminations			63	23	33	5	18	8	6	-23	-7	-30
Cons.			17,547	19,728	18,210	18,236	19,231	20,524	15,276	13,174	12,909	13,005
		YoY	28.6%	12.4%	-7.7%	0.1%	5.5%	-	-25.6%	-13.8%	-2.0%	0.7%

Source: Shared Research based on company data
Note: On July 1, 2018, the company executed a 5:1 share consolidation. All figures except for number of shares issued have been retrospectively adjusted.
Note: FY12/19, company forecast figures for Others are after elimination of intersegment transactions.
Note: From FY12/18, a portion of business involving coating materials transferred from the Printing & Information segment to the Polymers & Coatings segment.
Note: Figures may differ from company materials due to differences in rounding methods.

Recent updates

Revision to the FY12/22 earnings forecast, share buyback through ToSTNeT-3, termination of capital alliance and continuation of business alliance with Sakata Inx Corporation, and recording of extraordinary gains

2022-05-16

On May 13, 2022, Toyo Ink SC Holdings Co., Ltd. announced revisions to its full-year projections for FY12/22.

Revised full-year earnings forecast for FY12/22

Sales: JPY310.0bn (previous forecast: JPY295.0bn)
Operating profit: JPY13.0bn (previous forecast: JPY14.5bn)
Recurring profit: JPY14.0bn (previous forecast: JPY15.0bn)
Net income attributable to owners of the parent: JPY12.5bn (previous forecast: JPY10.0bn)
EPS: JPY223.8 (previous forecast: JPY179.1)

Reasons for revisions

Sales in the company group exceeded its previous projections due to strengthened efforts aimed at securing raw materials and ensuring a stable supply of products for customers and upward foreign exchange impact stemming from depreciation in the Japanese yen and appreciation in foreign currencies. Meanwhile, impact from growth in prices of raw materials, energy, and other commodities has exceeded impact that the company has been able to generate through cost reduction and price revisions, and the company anticipates that this trend will continue in Q1 FY12/22 onward.

In addition, the company expects to record an extraordinary gain (gain on sale of investment securities) of approximately JPY4.5bn in Q2 FY12/22 from the sale of all common shares it holds in Sakata Inx Corporation back to Sakata Inx.

Additionally, on the same day, the company announced that it will conduct a share buyback through the Off-Auction Own Share Repurchase Trading System (ToSTNeT-3).

Details of share buyback

Type of shares to be acquired: Common shares of the company
Total number of shares to be acquired: Maximum of 2,335,200 shares (4.18% of total shares issued [excluding treasury shares])
Total value of shares to be acquired: Maximum of JPY4,628,366,400

On the same day, the company also announced that it will dissolve its capital alliance with Sakata Inx Corporation while continuing its business alliance with the latter and record extraordinary gains.

At a meeting held on May 13, 2022, the company's Board of Directors reached the decision to dissolve the company's capital alliance with Sakata Inx Corporation. This decision was made because in light of recent specifications added to the fundamental principles of Japan’s Corporate Governance Code that call for reductions in cross-shareholdings, the two companies determined that selling their mutually held cross-shareholdings would help increase their corporate values. The two companies have also agreed to continue their business alliance, which has improved logistical efficiency, created opportunities for outsourced manufacturing that enhances systems aimed at ensuring product supply for customers, and led to emergency supplementary production strategies based on business continuity planning (BCP) countermeasures.

In connection with this dissolution, the company will sell the common shares it holds in Sakata Inx back to Sakata Inx and accordingly expects to record a gain on sale of investment securities (extraordinary gain) of approximately JPY4.5bn in Q2 FY12/22.

Disposal of treasury shares in connection with restricted stock compensation program

2022-04-11

On April 8, 2022, Toyo Ink SC Holdings Co., Ltd. announced disposal of treasury shares in connection with restricted stock compensation program.

Its board of directors, at a meeting held that same day, had voted to approve disposal of treasury shares in connection with its restricted stock compensation program.

Overview of disposal of treasury shares

Payment date: April 26, 2022
Class and number of shares to be disposed: 21,916 common shares of the company
Disposal price: JPY1,908 per share
Total value of treasury shares to be disposed: JPY41,815,728
Intended recipient of disposal: Total 6,165 shares to be allocated among four directors (excluding Audit & Supervisory Committee members and outside directors), 11,870 shares to be split among 21 executive officers, and 3,881 shares to be split among six company advisors serving as directors of subsidiaries

Trends and outlook

Quarterly trends and results

Cumulative		FY12/20				FY12/21				FY12/22	FY12/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	% of Est.	FY Est.
Sales		63,424	123,290	187,418	257,675	68,359	139,356	210,965	287,989	74,245	24.0%	310,000
	YoY	-8.2%	-11.5%	-10.5%	-7.9%	7.8%	13.0%	12.6%	11.8%	8.6%		7.6%
Gross profit		14,303	27,388	41,176	57,196	14,915	29,918	43,759	58,704	14,154
	YoY	-3.8%	-9.6%	-7.8%	-5.2%	4.3%	9.2%	6.3%	2.6%	-5.1%
	Gross profit margin	22.6%	22.2%	22.0%	22.2%	21.8%	21.5%	20.7%	20.4%	19.1%
SG&A expenses		11,299	21,838	32,740	44,286	11,387	22,688	34,012	45,699	11,337
	YoY	-6.5%	-9.8%	-6.8%	-6.1%	0.8%	3.9%	3.9%	3.2%	-0.4%
	SG&A ratio	17.8%	17.7%	17.5%	17.2%	16.7%	16.3%	16.1%	15.9%	15.3%
Operating profit		3,004	5,549	8,435	12,909	3,527	7,230	9,746	13,005	2,817	21.7%	13,000
	YoY	7.8%	-9.2%	-11.2%	-2.0%	17.4%	30.3%	15.5%	0.7%	-20.1%		0.0%
	Operating profit margin	4.7%	4.5%	4.5%	5.0%	5.2%	5.2%	4.6%	4.5%	3.8%		4.2%
Recurring profit		1,989	4,933	7,466	12,543	4,222	8,662	11,159	15,442	3,906	27.9%	14,000
	YoY	-34.7%	-22.3%	-22.3%	-9.4%	112.3%	75.6%	49.5%	23.1%	-7.5%		-9.3%
	Recurring profit margin	3.1%	4.0%	4.0%	4.9%	6.2%	6.2%	5.3%	5.4%	5.3%		4.5%
Net income		1,161	2,646	4,215	6,019	3,159	6,319	6,985	9,492	3,161	25.3%	12,500
	YoY	-51.5%	-4.5%	-22.1%	-29.3%	172.1%	138.8%	65.7%	57.7%	0.1%		31.7%
	Net margin	1.8%	2.1%	2.2%	2.3%	4.6%	4.5%	3.3%	3.3%	4.3%		4.0%
Quarterly		FY12/20				FY12/21				FY12/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
Sales		63,424	59,866	64,128	70,257	68,359	70,997	71,609	77,024	74,245
	YoY	-8.2%	-14.8%	-8.5%	-0.3%	7.8%	18.6%	11.7%	9.6%	8.6%
Gross profit		14,303	13,085	13,788	16,020	14,915	15,003	13,841	14,945	14,154
	YoY	-3.8%	-15.2%	-3.8%	2.1%	4.3%	14.7%	0.4%	-6.7%	-5.1%
	Gross profit margin	22.6%	21.9%	21.5%	22.8%	21.8%	21.1%	19.3%	19.4%	19.1%
SG&A expenses		11,299	10,539	10,902	11,546	11,387	11,301	11,324	11,687	11,337
	YoY	-6.5%	-13.0%	-0.4%	-3.9%	0.8%	7.2%	3.9%	1.2%	-0.4%
	SG&A ratio	17.8%	17.6%	17.0%	16.4%	16.7%	15.9%	15.8%	15.2%	15.3%
Operating profit		3,004	2,545	2,886	4,474	3,527	3,703	2,516	3,259	2,817
	YoY	7.8%	-23.5%	-14.7%	21.6%	17.4%	45.5%	-12.8%	-27.2%	-20.1%
	Operating profit margin	4.7%	4.3%	4.5%	6.4%	5.2%	5.2%	3.5%	4.2%	3.8%
Recurring profit		1,989	2,944	2,533	5,077	4,222	4,440	2,497	4,283	3,906
	YoY	-34.7%	-10.9%	-22.3%	19.8%	112.3%	50.8%	-1.4%	-15.6%	-7.5%
	Recurring profit margin	3.1%	4.9%	3.9%	7.2%	6.2%	6.3%	3.5%	5.6%	5.3%
Net income		1,161	1,485	1,569	1,804	3,159	3,160	666	2,507	3,161
	YoY	-51.5%	293.9%	-40.6%	-41.8%	172.1%	112.8%	-57.6%	39.0%	0.1%
	Net margin	1.8%	2.5%	2.4%	2.6%	4.6%	4.5%	0.9%	3.3%	4.3%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

By segment (cumulative)			FY12/20				FY12/21				FY12/22	FY12/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	% of Est.	FY Est.
Sales			63,424	123,290	187,418	257,675	68,359	139,356	210,965	287,989	74,245	24.0%	310,000
	YoY		-8.2%	-11.5%	-10.5%	-7.9%	7.8%	13.0%	12.6%	11.8%	8.6%		20.3%
	Colorants and Functional Materials		15,873	30,272	46,695	65,049	18,516	36,796	55,508	74,995	19,105
		YoY	-5.6%	-12.6%	-8.6%	-3.5%	16.7%	21.6%	18.9%	15.3%	3.2%
	Polymers and Coatings		14,847	29,931	45,598	62,328	16,285	33,614	51,676	70,736	18,334
		YoY	-5.8%	-8.5%	-7.2%	-5.4%	9.7%	12.3%	13.3%	13.5%	12.6%
	Packaging		16,321	32,910	49,177	66,589	17,047	35,406	53,558	73,645	18,878
		YoY	-0.7%	-1.6%	-2.6%	-2.2%	4.4%	7.6%	8.9%	10.6%	10.7%
	Printing and Information		16,071	29,298	44,808	65,595	16,156	32,633	48,847	66,695	17,488
		YoY	-17.8%	-22.1%	-21.8%	-14.5%	0.5%	11.4%	9.0%	1.7%	8.2%
Operating profit			3,004	5,549	8,435	12,909	3,527	7,230	9,746	13,005	2,817	21.7%	13,000
	YoY		7.8%	-9.2%	-11.2%	-2.0%	17.4%	30.3%	15.5%	0.7%	-20.1%		0.7%
	Colorants and Functional Materials		689	1,007	1,325	2,259	1,176	2,723	4,036	5,391	996
		YoY	-25.8%	-48.3%	-51.4%	-33.3%	70.7%	170.4%	204.6%	138.6%	-15.3%
	Polymers and Coatings		1,169	2,449	4,106	5,937	1,196	1,989	2,687	3,570	795
		YoY	-0.4%	-12.2%	-6.1%	-1.3%	2.3%	-18.8%	-34.6%	-39.9%	-33.5%
	Packaging		854	1,916	2,723	3,885	717	1,271	1,476	1,813	287
		YoY	78.7%	66.9%	35.0%	27.0%	-16.0%	-33.7%	-45.8%	-53.3%	-60.0%
	Printing and Information		234	37	50	597	263	858	996	1,730	359
		YoY	207.9%	0.0%	-63.0%	90.1%	12.4%	2,218.9%	1,892.0%	189.8%	36.5%
By segment (quarterly)			FY12/20				FY12/21				FY12/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
Sales			63,424	59,866	64,128	70,257	68,359	70,997	71,609	77,024	74,245
	YoY		-8.2%	-14.8%	-8.5%	-0.3%	7.8%	18.6%	11.7%	9.6%	8.6%
	Colorants and Functional Materials		15,873	14,399	16,423	18,354	18,516	18,280	18,712	19,487	19,105
		YoY	-5.6%	-19.2%	-0.4%	12.7%	16.7%	27.0%	13.9%	6.2%	3.2%
	Polymers and Coatings		14,847	15,084	15,667	16,730	16,285	17,329	18,062	19,060	18,334
		YoY	-5.8%	-11.0%	-4.7%	-0.1%	9.7%	14.9%	15.3%	13.9%	12.6%
	Packaging		16,321	16,589	16,267	17,412	17,047	18,359	18,152	20,087	18,878
		YoY	-0.7%	-2.4%	-4.7%	-0.9%	4.4%	10.7%	11.6%	15.4%	10.7%
	Printing and Information		16,071	13,227	15,510	20,787	16,156	16,477	16,214	17,848	17,488
		YoY	-17.8%	-26.8%	-21.1%	7.2%	0.5%	24.6%	4.5%	-14.1%	8.2%
Operating profit			3,004	2,545	2,886	4,474	3,527	3,703	2,516	3,259	2,817
	YoY		7.8%	-23.5%	-14.7%	21.6%	17.4%	45.5%	-12.8%	-27.2%	-20.1%
	Colorants and Functional Materials		689	318	318	934	1,176	1,547	1,313	1,355	996
		YoY	-25.8%	-68.9%	-59.0%	41.3%	70.7%	386.5%	312.9%	45.1%	-15.3%
	Polymers and Coatings		1,169	1,280	1,657	1,831	1,196	793	698	883	795
		YoY	-0.4%	-20.7%	4.7%	11.5%	2.3%	-38.0%	-57.9%	-51.8%	-33.5%
	Packaging		854	1,062	807	1,162	717	554	205	337	287
		YoY	78.7%	58.5%	-7.1%	11.6%	-16.0%	-47.8%	-74.6%	-71.0%	-60.0%
	Printing and Information		234	-197	13	547	263	595	138	734	359
		YoY	207.9%	-	-86.7%	205.6%	12.4%	-	961.5%	34.2%	36.5%

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding.
In FY12/18, a portion of businesses involving coating materials transferred from the Printing & Information segment to the Polymers & Coatings segment.
In FY12/21, the inkjet ink business was transferred from the Printing & Information segment to the Colorants & Functional Materials segment. Q1–Q3 FY12/20 figures are based on the post-revision reporting segments.

Q1 FY12/22 results (out May 13, 2022)

Results summary

Consolidated results for the 3-month period of FY12/22

In Q1 FY12/22, the company reported sales of JPY74.2bn (+8.6% YoY), operating profit of JPY2.8bn (-20.1% YoY), recurring profit of JPY3.9bn (-7.5% YoY), and net income attributable to owners of the parent of JPY3.2bn (+0.1% YoY).

At the conclusion of Q1, sales had reached 24.0% of the company's revised full-year FY12/22 forecast (released on May 13, 2022), while operating profit had achieved 21.7%, recurring profit 27.9%, and net income attributable to owners of the parent 25.3%.

The global economy has continued to pick up as impact from the COVID-19 pandemic eases. At the same time, amid uncertainty due to the factors including the current situation in Ukraine, the company projects that the economy will continue to incur impact from adverse circumstances such as rising raw material prices, fluctuations in financial and capital markets, and supply-related constraints. Faced with these conditions, the Toyo Ink group continued working to execute the core elements of its business plan (FY12/22), which calls for taking further steps to improve the profitability of its individual businesses, creating and growing new businesses in strategic areas, and enhancing the value of its management resources for sustainable growth in the future.

Sales up 8.6% YoY: The Colorants & Functional Materials reported sales up 3.2% YoY, the Polymers & Coatings segment reported sales up 12.6% YoY, the Packaging Materials segment reported sales up 10.7% YoY, and the Printing & Information segment reporting sales up 8.2% YoY, and the Others segment reporting sales down 20.7% YoY.

Operating profit down 20.1% YoY: The Colorants & Functional Materials segment reported operating profit down 15.3% YoY, the Polymers & Coatings segment reported operating profit down 33.5% YoY, the Packaging Materials segment reported operating profit down 60.0% YoY, the Printing & Information segment reported operating profit up 36.5% YoY, and the Others segment reported operating profit up 108.8% YoY. The company reported a gross profit margin of 19.1%, down 2.7pp YoY, but with a 1.4pp improvement in its SG&A expense ratio (15.3%) managed to bring the operating profit margin in at 3.8%, down 1.4pp YoY.

Breakdown of full-year results by segment

Colorants & Functional Materials segment

Sales were JPY19.1bn (+3.2% YoY), and operating profit was JPY996mn (-15.3% YoY).

Demand associated with materials for use in LCD color filters for PC and tablet displays remained strong despite some production cutbacks in the LCD panel market. In addition, the company achieved sales expansion in Taiwan and China.

Sales of plastic colorants for containers were firm, especially in the category of food containers, but sales of plastic colorants for automobiles and office equipment were sluggish due to production cutbacks caused by shortages of semiconductors and other components.

Performance from inkjet inks was strong as the company captured demand associated with digital printing. Meanwhile, the company has begun supplying automotive lithium battery materials in the US and Europe and achieved progress in its establishment of operational bases, which is aimed at achieving business expansion.

Polymers & Coatings segment

The Polymers & Coatings segment reported sales of JPY18.3bn (+12.6% YoY) and operating profit of JPY795mn (-33.5% YoY).

In the category of coating materials, sales of conductive adhesive sheets and electromagnetic shielding films were sluggish due primarily to production cutbacks implemented in response to semiconductor shortages. Sales of heat resistant, low-adhesion films for applications associated with electronic components and automobiles were strong.

Performance from adhesives for applications related to packaging (for domestic snacks, pet food products) was solid.

Sales of adhesive compounds for labels and displays was sluggish. Overseas, sales of adhesive compounds grew thanks to facility expansion in the US and India, and the company also reported an increase in sales of adhesives for applications related to packaging for food and pharmaceutical products.

Domestic sales of can coatings (finishes) for beverage cans were strong due to demand from Japanese households, and the company reported additional expansion in sales of new products with added functionality. Overseas, sales of can coatings (finishes) for beverage cans increased, primarily in the category of alcoholic beverage cans.

Packaging Materials segment

The Packaging Materials segment reported sales of JPY18.9bn (+10.7% YoY) and operating profit of JPY287mn (-60.0% YoY).

In Japan, performance in the core category of liquid inks for packaging was favorable in part because demand associated with liquid inks for frozen foods and other household food products was strong and in part because customers moved to build up inventories in anticipation of future price increases and difficulty procuring various materials. Results generated through liquid inks for cardboard used in association with mail-order-related applications were also favorable.

Overseas, segment sales were strong in India, the US, and other countries where COVID-19-related impact has eased, but growth was sluggish in China and Southeast Asia in part because impact from the pandemic has expanded in these areas, placing restrictions on operations at customers' plants. In its gravure cylinder platemaking business, the company reported strong results from precision platemaking associated with electronics-related applications, but performance from platemaking for packaging-related applications was sluggish due to a lack of new plate demand.

Printing & Information

Sales were JPY17.5bn (+8.2% YoY), and operating profit was JPY359mn (+36.5% YoY).

Amid structural contraction within the information printing product market, the company reported weak domestic performance from products with applications related to flyers, advertising, and publishing due to COVID-19-related impact. However, domestic performance from products with applications related to metal printing for beverage cans was strong. Profit incurred downward impact from difficulty procuring raw materials, general price increases, and rises in costs associated with energy and other necessary elements of business. However, the company achieved progress with its cost reduction efforts through collaboration with other companies in the industry and structural business reforms.

Overseas, results in Europe and the US were robust as COVID-19-related impact eased, and the company moved ahead with sales price revisions. In China and other parts of Asia, market conditions were sluggish in some areas due to impact from the pandemic, but performance was solid, especially in the category of products for paper containers with applications related to food products and medical supplies.

Others segment

The Others segment reported full-year sales of JPY1.2bn (-20.7% YoY) and operating profit of JPY378mn (+8.8% YoY).

The Others segment includes the provision of services from the holding company and all other business not counted under the above-named segments.

Company forecast for FY12/22

		FY12/20			FY12/21			FY12/22	YoY
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	FY Est.	FY Est.
Sales		123,290	134,385	257,675	139,356	148,633	287,989	310,000	7.6%
Cost of sales		95,901	104,578	200,479	109,437	119,847	229,284
Gross profit		27,388	29,808	57,196	29,918	28,786	58,704
	Gross profit margin	22.2%	22.2%	22.2%	21.5%	19.4%	20.4%
SG&A expenses		21,838	22,448	44,286	22,688	23,011	45,699
	SG&A ratio	17.7%	16.7%	17.2%	16.3%	15.5%	15.9%
Operating profit		5,549	7,360	12,909	7,230	5,775	13,005	13,000	0.0%
	Operating profit margin	4.5%	5.5%	5.0%	5.2%	3.9%	4.5%	4.2%	-
Recurring profit		4,933	7,610	12,543	8,662	6,780	15,442	14,000	-9.3%
	Recurring profit margin	4.0%	5.7%	4.9%	6.2%	4.6%	5.4%	4.5%	-
Net income		2,646	3,373	6,019	6,319	3,173	9,492	12,500	31.7%
	Net margin	2.1%	2.5%	2.3%	4.5%	2.1%	3.3%	4.0%	-

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Company forecast for FY12/22

Reasons for revisions

*Although the company moved to the new ASBJ accounting standard for revenue recognition in FY12/22, the resulting change in sales is expected to be immaterial, and thus the YoY change forecast has been calculated without any retroactive adjustments to FY12/21 figures.

The following commentary is based on the company's previous forecast.

The company's forecast assumes that the operating environment will remain difficult in the year ahead, including supply chain problems, transportation/distribution-related difficulties, rising materials prices, and other challenges. Even so, the company plans to undertake the various growth initiatives outlined below.

Colorants & Functional Materials segment: Accelerate the establishment of earnings pillars in growth markets
Polymers & Coatings segment: Expand leading global product lines and reform earnings structures
Packaging Materials segment: Lead the development of environmentally friendly products and accelerate growth investment in overseas regional markets
Printing & Information segment: Implement reforms targeting a profitable business structure that conforms to market environments

Sales

The company projects sales of JPY295.0bn (+JPY7.0bn, or 2.4%, YoY) in FY12/22. By segment, it projects JPY77.0bn (+2.7% YoY) in the Colorants & Functional Materials segment, JPY74.0bn (+4.6% YoY) in the Polymers & Coatings segment, JPY76.0bn (+3.2% YoY) in the Packaging Materials segment, JPY66.0bn (-1.0% YoY) in the Printing & Information segment, and JPY2.0bn in the Others segment and adjustments.

Operating profit

The company forecasts operating profit of JPY14.5bn (+JPY1.5bn, or 11.5%, YoY) for FY12/22. By segment, it projects JPY5.5bn (+2.0% YoY) in the Colorants & Functional Materials segment, JPY4.8bn (+34.5% YoY) in the Polymers & Coatings segment, JPY2.5bn (+37.9% YoY) in the Packaging Materials segment, and JPY1.7bn (-1.7% YoY) in the Printing & Information segment. The company anticipates recovery in both the Polymers & Coatings segment and the Packaging Materials segment , where operating profit declined by a double-digit YoY rate in FY12/21, due primarily to upward impact from price revisions.

Response to surge in raw material prices

The steep rise in raw material prices had a particularly large impact on the Polymers & Coatings and Packaging Materials segments in FY12/21. Accordingly, the company plans to move quickly to implement further price revisions in FY12/22.

Polymers & Coatings segment

Impact of raw material price increases on operating profit: -JPY4.5bn in FY12/21 and -JPY1.5bn (projected) in FY12/22
Impact of price revisions: +JPY1.6bn in FY12/21 and +JPY2.0bn(projected) in FY12/22
Other impact*: +JPY1.1bn(projected) in FY12/22

Packaging Materials segment

Impact of raw material price increases on operating profit: -JPY3.0bn in FY12/21 and -JPY1.8bn (projected) in FY12/22
Impact of price revisions: +JPY1.3bn in FY12/21 and +JPY2.1bn (projected) in FY12/22
Other impact*: +JPY1.0bn (projected) in FY12/22

*Other impact: Sales expansion, higher sales, shift toward high-function products, solutions for unprofitable products, fixed cost control, improvement in supply chain management

Factors influencing change in operating profit

Upward impact

Sales expansion: JPY2.6bn (growth in overall sales caused by expansion in overseas demand, general sales expansion, and increased sales of high value-added products such as electronics)
Price revisions: JPY6.2bn (from price revisions already implemented in Japan and overseas during FY12/21 and further revisions targeting more appropriate prices planned for FY12/22)

Downward impact

Raw material price increases: -JPY5.0bn (the company expects raw material prices to continue rising in 1H)
Cost increases: -JPY2.0bn (the company expects an increase in expenses due to sales volume expansion and higher logistics costs)
Decline in prices: -JPY300mn (mainly in prices of media materials; change in sales mix caused by sales expansion in China)

Projections by segment

Colorants & Functional Materials segment

Sales: JPY77.0bn (+2.7% YoY)
Operating profit: JPY5.5bn (+2.0% YoY)

The company is looking to grow its market share in China with the help of alliance-building with local companies and additional cost-cutting measures. In the area of automotive lithium battery materials, its plans call for ramping up production at its plants in North America and Europe, with the aim of further expanding its market share in the world's four largest automobile markets (Europe, the US, China, and Japan).

Polymers & Coatings segment

Sales: JPY74.0bn (+4.6% YoY)
Operating profit: JPY4.8bn (+34.5% YoY)

The company's plans call for boosting overall margins by increasing the proportion of segment sales derived from adhesives and adhesive compounds and ramping up production new manufacturing facilities around the world. The company is also looking to roll out new products and solutions to meet the needs of growing markets for 5G and optics-related applications, and also response to the growing demand under the sustainability banner by developing and rolling out more eco-friendly products such as solvent-free hotmelt adhesives, and bio-mass and bio-degradable products.

Packaging Materials segment

Sales: JPY76.0bn (+3.2% YoY)
Operating profit: JPY2.5bn (+37.9% YoY)

Its plans call for speeding up the rollout of eco-friendly products such as high-grade biomass inks, water soluble printing solutions, and materials to help reduce plastic waste and boosting contributions to earnings from overseas operations with the help of more stable production levels at new plants in China and India, the startup of a new plant in Turkey, and the expansion of sales of strategic products in Southeast Asia and India, where the company is looking to increase its market share.

Printing & Information segment

Sales: JPY66.0bn (-1.0% YoY)
Operating profit: JPY1.7bn (-1.7% YoY)

The company plans to continue working to strengthen its underlying business structure with the help of further restructuring and better supply chain management, while at the same time enhancing its competitive position in the label/packaging market with the help of new product launches of eco-friendly UV inks.

Medium-term outlook

Medium-term management plan SIC-II (FY12/21–FY12/23)

SIC-ll medium-term management plan (laying the foundation for SIC27, the company’s long-term vision)

In 2008, the company set forth a long-term vision dubbed “SCC 2017” (Science Company Change 2017) and has regularly released medium-term management plans since then. Its SIC-I medium-term plan (FY12/18–FY12/20) was the first stage in its new long-term vision, “SIC27” (Scientific Innovation Chain 2027), which ends in 2027. The company updates its medium-term plan every three years, so with SIC-I having finished at end-December 2020, SIC-II (FY21/21–FY12/23) has now begun and will be followed by SIC-III (FY12/24–FY12/26).

Numerical targets and results of SIC-I

For FY12/20, the final year of the SIC-I medium-term plan, Toyo Ink set high numerical targets: sales of JPY350.0bn (+30.3% versus FY03/17), operating profit of JPY28.0bn (+45.6% versus FY03/17), and operating profit margin of 8.0% (+4.7pp versus FY03/17). The basic strategy of SIC-I was to create the foundation for realizing the SIC27 long-term vision, and the company focused on addressing various challenges. In addition to its usual capital investment budget of JPY40.0bn, it also set aside more than JPY20.0bn for strategic investments to expand its key domains and create new businesses. Since it would be difficult to achieve the numerical targets for FY12/20 through organic growth alone, the company considered a range of growth strategies, including large-scale M&A in new domains.

However, in the midst of the COVID-19 pandemic, FY12/20 earnings results fell short of the targets, with the company reporting sales of JPY257.7bn, operating profit of JPY12.9bn, and operating profit margin of 5.0%. However, it did achieve a shift in earnings to the priority domains of Polymers & Coatings and Packaging Materials, and it rolled out new eco-friendly products and promoted expansion in overseas areas. Nevertheless, it still faces challenges, including speeding up structural reforms to cope with drastic changes in the business environment, creating new products and businesses to serve as earnings pillars, and responding to rapid changes in market structure triggered by the pandemic.

Numerical targets of SIC-II 2

The SIC-II medium-term management plan (FY12/21–FY12/23) targets FY12/23 sales of JPY300.0bn (+16.4% versus FY12/20), operating profit of JPY22.0bn (+70.4% versus FY12/20), operating profit margin of 7% or higher (+2pp or more versus FY12/20), and ROE of 7% or higher. The Toyo Ink group will strive to continue providing value that is truly necessary to meet the new needs of a society that is changing due to the effects of the pandemic, and has set out a vision of being “a company that contributes to a new era through the enrichment of life and culture.” It will work to achieve this by strengthening the profitability of businesses, creating and expanding priority development domains, and enhancing the value of management resources for sustainable growth.

In terms of strengthening the profitability of businesses, the group aims to build a business portfolio that makes sustainable growth possible by forming an array of profitable businesses and reorganizing and reforming less profitable businesses. In addition to expanding profit-generating businesses through the rollout of eco-friendly inks and adhesives for the global packaging market and increasing sales of parts and materials related to the 5G and IoT markets, the group will establish new earnings pillars through measures such as promoting the development of medicated patches and cultivating the lithium-ion battery materials business. Meanwhile, in the business of inks and pigments for the publishing and commercial printing markets, which continue to suffer structural contraction, the group will continue reforms to further strengthen profitability.

As for creating and expanding priority development domains, the group aims to reorganize its R&D functions and focus its management resources on priority domains to create and expand new businesses. In the sustainable science domain, it will roll out eco-friendly products and recycling systems and provide new materials and systems for the realization of a sustainable green society. In the communication science domain, it aims to contribute to 5G and IoT markets with key solutions and materials, including sensor materials and conductive materials. In the life science domain, the group intends to create products and solutions in the medical and next-generation printing fields that will help people live fuller, healthier lives.

The group aims to boost the value of its management resources for sustainable growth by promoting digital transformation and enhancing its environmental, social, and governance initiatives.

Initiatives under SIC-Il to improve earnings in each business

Colorants & Functional Materials

Strategic plans under SIC-ll call for the expansion of market share in materials for LCD color filters (resist inks), especially in China, by leveraging products that set the company apart from the competition. In the area of resist inks for image sensor use, the company is looking to build up sales with the help of the development of new proprietary products and additional quality assurance measures. In the area of materials for lithium-ion batteries used in automobiles, plans call for continued steady efforts toward establishing a presence in the US, Europe, and other markets. In other areas, plans call for the restructuring of its ink jet ink business. The aim is to increase the company’s competitiveness by having in place an end-to-end product development structure beginning with pigment synthesis. It aims to organize its manufacturing locations for plastic colorants and expand its line of high-value-added products.

Polymers & Coatings

In the areas of packaging and industrial materials, following the merger of subsidiaries Toyochem and Toyo ADL in January 2021, plans call for enhancing and expanding new product development efforts by combining the technical expertise of the two subsidiaries in eco-friendly adhesive products, solvent-free hotmelt adhesives, and other areas as part of an overall effort to provide innovative new products and services to environmental businesses and other markets including the electronics and healthcare markets. Plans also call for expanding production capacity both in Japan and overseas in countries including India, the US, and China.

In the 5G-related markets, plans call for building sales and strengthening the company’s market position through product differentiation showcasing its low dielectric and conductive materials.

The company also intends to enter the semiconductor-related market.

Packaging Materials

Plans call for the further expansion of its supply capacity to meet growing demand, including the early startup of a new plant in China and the construction of a new factory in Turkey. Geographically, the company is planning to devote most of its resources to the growing markets in Southeast Asia and India in anticipation for further growth in sales in these markets. To meet the growing demand for eco-friendly and healthcare-related products, the company plans to expand its product lines of eco-friendly inks and anti-bacterial and anti-viral products, and also commercialize environmental systems for package recycling.

Printing & Information

Strategic plans under SIC-ll call for ongoing efforts to reduce raw materials costs for UV inks, and expanded efforts to develop new business in the packaging market, including seal labels and paper containers. Plans also call for strengthening the business foundation by making further progress in structural reforms to address the shrinking market and by promoting the launch of the color communications business.

Meanwhile, on the business processing front, plans call for the continuation of its digital transformation efforts.

Creating and expanding priority development domains

Sustainable science (green): To realize a sustainable society. Products for priority development include eco-friendly packaging and lithium-ion battery materials. Targeting FY12/23 sales of JPY59.0bn (FY12/20 sales were about JPY34.0bn).

Communication science (digital): To contribute to 5G and IoT society with key materials. Products for priority development include optical control materials, low dielectric materials, and functional films. Targeting FY12/23 sales of JPY13.0bn (FY12/20 sales were about JPY5.4bn).

Life science (health): To enrich people’s lives and make them healthier. Products for priority development include medicated patches and inkjet inks. Targeting FY12/23 sales of JPY7.5bn (FY12/20 sales were about JPY4.5bn).

Enhancing R&D systems for priority development domains

The company will establish new research laboratories to be operated by companies responsible for respective segments and accelerate the creation of products and businesses by divisions dedicated to carrying out medium-term development strategies. It will establish an advanced materials research laboratory in the Colorants & Functional Materials segment, a polymer materials research laboratory in the Polymers & Coatings segment, and a research laboratory for functional materials development in the Packaging Materials and Printing & Information segments.

In addition, the company plans to address long-term development themes at Toyo Ink SC Holdings R&D laboratories and its production technology research laboratory.

Concentrating investment on growth businesses

Under SIC-II, the company plans to invest a total of JPY40.0bn, by segment putting 29% into Colorants & Functional Materials, 31% into Polymers & Coatings, 25% into Packaging Materials, 11% into Printing & Information, 4% into Others.

Main investments under SIC-II and SIC-III

Over the course of both plans, in the Packaging Materials segment, the company will invest some JPY40.0bn in Turkey, India, China, and Indonesia. In the Colorants & Functional Materials segment, it will invest about JPY20.0bn in Japan, China, the US, and Europe, primarily in connection with EV-related materials. In the Polymers & Coatings segment, it plans to invest a further JPY30.0bn. The company also plans to invest in manufacturing facilities for pharmaceuticals at the Moriyama Factory, for new polymer synthesis at the Kawagoe Factory, and for adhesives and adhesive compounds in the US, China, and India.

Medium-term management plan numerical targets

Medium-term management plan				SIC-I			SIC-II	SIC-I
SIC27: Scientific Innovation Chain				Frequent challenges			Accumulation of new achievements	Growth
(JPYmn)			FY12/17	FY12/18	FY12/19	FY12/20	FY12/23	change	CAGR
(JPYmn)			(12mo)	Cons.	Cons.	Cons.	Target	(FY2017–FY2020)
Sales			280,066	290,208	279,892	257,675	300,000	-22,391	-2.7%
	Colorants and Functional Materials		71,875	74,660	67,400	61,642	81,500	-10,233	-5.0%
		% of total	25.7%	25.7%	24.1%	23.9%	27.2%
	Polymers and Coatings		63,501	66,099	65,887	62,328	75,500	-1,173	-0.6%
		% of total	22.7%	22.8%	23.5%	24.2%	25.2%
	Packaging		63,490	68,047	68,071	66,589	80,000	3,099	1.6%
		% of total	22.7%	23.4%	24.3%	25.8%	26.7%
	Printing and Information		80,491	79,378	76,680	65,595	64,500	-14,896	-6.6%
		% of total	28.7%	27.4%	27.4%	25.5%	21.5%
	Other, adjustments		709	2,024	1,854	1,521	-1,500	812	-
		% of total	0.3%	0.7%	0.7%	0.6%	-0.5%
	Japan		156,277	155,568	151,174	138,062		-18,215	-4.0%
		% of total	55.8%	53.6%	54.0%	53.6%
	Overseas		123,789	134,640	128,718	119,613		-4,176	-1.1%
		Overseas ratio	44.2%	46.4%	46.0%	46.4%
Operating profit			20,524	15,276	13,174	12,909	22,000	-7,615	-14.3%
	Operating profit margin		7.3%	5.3%	4.7%	5.0%	7.3%
	Colorants and Functional Materials		6,514	5,329	3,386	2,610	6,900		-26.3%
		% of total	31.7%	34.9%	25.7%	20.2%	31.4%
		Operating profit margin	9.1%	7.1%	5.0%	4.2%	8.5%
	Polymers and Coatings		7,872	6,035	6,013	5,937	8,500		-9.0%
		% of total	38.4%	39.5%	45.6%	46.0%	38.6%
		Operating profit margin	12.4%	9.1%	9.1%	9.5%	11.3%
	Packaging		2,422	1,491	3,058	3,885	5,600		17.1%
		% of total	11.8%	9.8%	23.2%	30.1%	25.5%
		Operating profit margin	3.8%	2.2%	4.5%	5.8%	7.0%
	Printing and Information		2,574	931	314	247	1,300		-54.2%
		% of total	12.5%	6.1%	2.4%	1.9%	5.9%
		Operating profit margin	3.2%	1.2%	0.4%	0.4%	2.0%
	Other, adjustments		1,142	1,490	403	230	-300		-
		% of total	5.6%	9.8%	3.1%	1.8%	-1.4%
		Operating profit margin	161.1%	73.6%	21.7%	15.1%	20.0%
ROE			6.8%	5.5%	3.9%	2.8%	7% or higher

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Reform of work styles and personnel systems

The company intends to enhance its performance-linked evaluation systems. It will declare support for active participation by women, aiming to raise the ratio of female managers in Japan from 4% in 2020 to 8% in 2023. It will expand hiring throughout the year and strive to maintain a proper workforce size within the group and suitable deployment of employees. It also aims to enhance remote office options as part of work style innovation and office reform.

Promotion of digital transformation

In the area of sales, Toyo Ink will give special attention to digital marketing. In technology development, it will promote the use of materials informatics and seek to move development forward at a faster rate, and in production, it will promote the use of smart factories and conduct IoT-based process innovation. In corporate administration, it will promote robotic process automation (RPA) and provide training to facilitate digital transformation.

Reform of governance systems

Toyo Ink aims to increase the independence of directors and Audit & Supervisory Board members, adopt a highly transparent performance-linked compensation system, enhance risk management, and reduce cross-shareholdings.

Promotion of environmental management

The company intends to develop and expand its lineup of eco-friendly products, contributing to the creation of a sustainable society by providing products and services with a reduced environmental footprint. It will develop highly sensitive UV curable inks and electron beam curing inks that will be effective in saving energy. It will work to make its materials water-based and solvent-free as a VOC countermeasure and to develop biomass inks as a CO2 reduction measure. In terms of food loss reduction, it plans to develop products that can be used in films for retort pouches to preserve freshness. It will also develop biodegradable inks and create a recycling system to deal with waste plastic.

The company’s Kawagoe Factory received the 2020 Chairman’s Prize from the Energy Conservation Center of Japan.

Cash flow policy

Toyo Ink’s policy is to emphasize financial soundness and balance between investment and shareholder returns. The company will secure on-hand liquidity with an awareness of its equity ratio to ensure financial soundness. Targeting growth, it will actively invest in plants, equipment, technologies, and human resources, while also searching for M&A opportunities. In terms of shareholder returns, it will maintain stable dividends. In February 2021, it acquired treasury shares for some JPY5.0bn.

Business

Business description

The company’s true face as a specialty chemical manufacturer

The Toyo Ink group (61 domestic and overseas consolidated subsidiaries under holding company Toyo Ink SC Holdings Co., Ltd. and seven equity-method affiliates) is a specialty chemical manufacturer. It makes a wide variety of printing inks, adhesives, pastes for liquid crystal color filters, and media materials. Its fine chemicals business currently accounts for roughly three-quarters of its profit. The company’s sales are small compared with diversified chemical manufacturers that are involved in end-to-end production starting from their ethylene centers, but it is a major global specialty chemicals manufacturer.

Focus on original core materials (pigments and resins) and technologies (synthesis, dispersion, and deposition)

Established in 1896, Toyo Ink has a history of over 120 years, and is the top company by market share in Japan in printing inks, its founding business, and the fifth globally (the first is DIC and the second is Flint Group [ Luxemburg]). Toyo Ink has allocated business resources to areas where it could leverage its strengths. These include the end-to-end production of inks, starting from raw materials such as pigments and resins, and processing technology in synthesis, dispersion, and deposition. Through these efforts, the company developed into a specialty chemicals manufacturer.

Two pillars of business areas: Fine chemicals and printing inks

The company has two broad domains: The first is fine chemicals (a growth sector but subject to sharp price fluctuations), whose sales share in FY12/21 broke down into the Colorants & Functional Materials segment 25.7% and the Polymers & Coatings segment 24.2%. The second is printing inks, which is a mature market. Its sales share in FY12/21 broke down into the Packaging Materials segment 25.2% and the Printing & Information segment 22.9%. Operating profit margins for fine chemicals were 7.2% in the Colorants & Functional Materials segment and 5.0% in the Polymers & Coatings segment, and for printing inks, 2.5% in the Packaging Materials segment and 2.6% in the Printing & Information segment. These two complementary areas have enabled the company to maintain a steady consolidated OPM of around 5–7% over the past 10 years.

Niche leading products

Outside of the ink business, Toyo Ink is the top manufacturer of colorants for PET bottle caps and can coatings, and the second largest manufacturer of electronics films in Japan. It aims to leverage its core materials (pigments and resins) and technologies (synthesis, dispersion, and deposition) to create new businesses in new fields: next-generation display materials, image sensor materials, electromagnetic shields for high-speed communications, medicated patches, inkjet inks for digital printing, flexo inks for flexible packaging, and electron beam curing inks.

Key products with high market shares

Segment	Main products with high market share	Market share ranking		Description
Segment	Main products with high market share	Japan	Worldwide	Description
Colorants and Functional Materials	Colorants for PET bottle caps	1	-	Enjoys extremely high market share
	Color resist for image sensors	2	3	Fujifilm Electronic Materials boasts extremely high market share for image sensor use
	Color resist for displays	1	3	Main customer is Sakai Display Products (former Sharp Display Products)
Polymers and Coatings	Paint for cans	1	-	Main customer is Toyo Seikan
	Conductive adhesive sheets	2	2	Enjoys extremely high market share
	Electromagnetic shield film for high speed telecommunication	2	2	Tatsuta Electric Wire and Cable has extremely high market share, while China-based companies are emerging; Toyo Ink aims to recoup on 5G leveraging high product performance
	Laminating adhesives	1	-	Overseas sales expanding rapidly, following dissolution of a JV partner, US-based Rohm and Haas
	Adhesive compounds for displays	-	-	Highly profitable; competes with Nitto Denko
Packaging Printing and Information	Printing inks (offset, gravure, other)	1	5	Global market share rankings: 1 - DIC, 2 - Flint Group, 3 - Sakata Inx, 4 - Siegwerk Group
	Metal ink	1	5	Toyo Ink enjoys an extremely high market share in Japan, while Sakata Inx is overwhelmingly strong overseas
	High sensitivity UV ink	1	1	Demand expanding since printing UV ink on thin paper became possible; Toyo Ink has extremely high market share globally

Source: Shared Research based on the interviews with the company

Business model

Features

Development in new markets and areas using core materials and technologies

The Toyo Ink group manufactures products by processing materials with desired characteristics, such as pigments and resins. The company’s wide-ranging technology platform enables it to develop unique products from the material stage all the way to the processing stage, meeting customer needs in fields such as printing, coating, and deposition. The core technologies of synthesis, dispersion, and deposition underpinned the company’s business development into the specialty chemical manufacturer that it is today and are the key to developing promising new markets and businesses. In its medium-term management plan, Toyo Ink has specified areas where it would use these technologies to enter various fields: lithium-ion battery materials, image sensors, electronics materials, medical and healthcare, natural extract inkjet inks, power-saving UV inks, and electron beam inks.

The Toyo Ink group deals in many products, targeting markets with a size of around JPY5.0bn, in the Polymers & Coatings segment in particular. It focuses on fields where it can leverage its core synthesis, dispersion, and deposition technologies to add value as a specialty chemical manufacturer in line with its strategy of becoming a niche leader in fragmented markets.

Proprietary core technologies and new markets and areas

Source: Company data

Businesses using printing ink raw materials with growth potential

Source: Company data

Core technologies (synthesis, dispersion, and deposition) and product development

Synthesis technology uses chemical reactions to polymerize petroleum-derived raw materials and synthesize organic pigments. As Toyo Ink built up its resin synthesis technology, development progressed to polymers and adhesives. Technology for dispersing pigments evenly within resins was used with advanced miniaturization technology to make display materials such as resist inks, lithium-ion battery materials, and carbon nanotube dispersants. Deposition technology had its origins in technology that applied inks with high degrees of precision, and eventually was used for resist inks and films used in electronics, which require accuracy at the micron level. The company hopes that these core technologies will open up new markets and new businesses in the current medium-term management plan, SCI-I.

Technologies and products developed from founding printing ink business

Source: Shared Research based on company data and Japan Printing Ink Makers Association

Synthesis technology

In the context of ink production, synthesis refers to technology using chemical reactions such as coupling to synthesize pigments from petroleum-derived raw chemical materials. Toyo Ink was able to expand its product range beyond inks with adhesive and resin technology obtained from Interchemical Corporation (currently BASF). Synthetic technology is not just for pigments and colorants; It is used in functional resin synthesis technology. Polymer synthesis technology is used in adhesives, coatings, and special coating materials.
Synthesis technology started with the chemical synthesis of organic pigments and is now generally used in products in Polymers & Coatings, including laminate adhesives, in which the company has a leading market share, and electromagnetic shielding materials that are expected to benefit from demand for 5G smartphones. The company is using its core polymer synthesis and coating technologies in the medical area, which may be a future growth driver. Toyo Ink handles a variety of medicated patches, which have many percutaneous absorption applications.

Dispersion technology

Dispersion refers to breaking powders down into single particles as much as possible, and then distributing these throughout liquids or other components either uniformly or while forming structures. Pigment is a powder colorant and does not mix at the molecular level or dissolve in water or oil. When processing printing inks or colored plastics, the pigment particles are mixed uniformly in liquid or solid resins and must avoid settling and cohesion to reach a stable state. Dispersion technology encompasses the fine technology and processes vital to pigment processing. This has a major influence on stable application quality, preventing uneven product color, quality of color development, and light transparency.
Resist inks for liquid crystal color filters used for clear color expression at the sub-pixel level for each of the RGB colors at the micron level are based on dispersion technology. Second-generation carbon nanotube dispersants for lithium-ion batteries are candidates as growth drivers. In addition to the Toyo Ink group’s own dispersion technologies, the dispersants and carbon nanotubes themselves are carefully chosen by the company.

Deposition technology

Deposition refers to forming a thin film on a substrate of glass, resin, or metal. For the Toyo Ink group, it stems from technology used to coat ink with high precision. Applying resist ink quantitatively to individual cells in micron units on a black matrix of a glass color filter substrate is an advanced deposition technology. Deposition applications go beyond printing, and can imbue the original substrate with new capabilities such as light control and heat generation. Deposition technology is also used in laminate adhesives where the company has a leading market share. In addition to other applications, it is also used in the formation of electronic circuits and in film deposition by applying inkjet methodologies.

Consulting and solutions capabilities based on group capabilities and long-term relationships of trust

Another strength of the Toyo Ink group is collaboration among unique group companies that specialize in printing, packaging, functional materials, and polymers. Each business has a core company driving development, manufacturing, and often sales directly to customers. These are Toyo Ink Co., Ltd. in the company’s original business of Printing & Information and in Packaging Materials; Toyocolor Co., Ltd., which handles Colorants & Functional Materials in the fine chemicals array; and Toyochem Co., Ltd., in Polymers & Coatings. The company established Toyo Visual Solutions Co., Ltd. in September 2017, to strengthen its display materials business and handle the manufacture and sale of related products. Toyo Ink is able to combine its internal technologies in printing inks, color management, design and platemaking, and adhesives to offer not only packaging solutions, but a wide range of comprehensive solutions in areas such as electronic display and mobile technology, energy related materials for batteries, and areas related to automotive components.

Long-term relationships with customers

The Toyo Ink group has fostered long-term relationships of trust for over a century with many client printing and newspaper companies, including Toppan Printing. Most of the group’s sales are direct, and it offers consulting and solutions to respond to issues raised by its customers. Some 80% of its domestic sales are direct to customers, with the remainder handled by group distributors.

The company’s key printing company customers are not just looking for ink supply, but total solutions. Examples include front-end processes for printing (planning, design, prepress, and color proof) and back-end processes (press processing, gloss processing, and bookbinding). For packaging solutions, the Toyo Ink group is involved in processes ranging from quality design for the customer through printing and post-processing. At the packaging materials design stage, it recommends combinations of base materials, inks, and adhesives suited to the purpose. In the design and platemaking process, it also proposes inks and coating materials in response to environmental demand. Finally, in back-end processes, it offers laminate processing and hot-melt processing (to enhance adhesion).

Top customers

Ranking	Company
1	Toppan Printing
2	Toyo Seikan
3	Miyako Kagaku
4	Rengo
5	Dai Nippon Printing
6	Lintec
7	SK Kaken

Source: Shared Research based on the interviews on the company

Raw materials procurement, production, and sales

Raw materials sources

In-house production and sourcing from chemical manufacturers: high proportion of in-house pigment manufacture

The Toyo Ink group produces organic pigments synthesized from petroleum-derived raw materials in-house. It procures inorganic pigments and resins, and solvents produced by chemical reactions with natural ores and metals from chemical manufacturers.

About 75% of the organic pigments produced in-house are used as raw materials for inks and colorants internally. The company has a global principle of local production and consumption. While it does have some external organic pigment suppliers, primarily overseas, the high proportion of in-house procurement sets it apart from other ink manufacturers. Inorganic pigments are procured externally, and some organic intermediates are obtained from China. The company is affected by continuously high prices. It supplies some pigment dispersions to coating manufacturers. Meanwhile, although Toyo Ink is involved in upstream processes, in display materials for example, it prefers higher value-added downstream processes, such as color filter pastes and resist inks, rather than pigments.

Raw materials procurement, manufacture, sales flows