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OAT Agrio

OAT Agrio 4979

OATアグリオ
Recent Updates
2022-05-12
Q1 FY12/22 flash update
2022-03-30
Full-year FY12/21 report update
2022-02-28
Dividend from surplus and a revision to the dividend forecast
Get in touch
8th Floor, NBF Ogawa-machi Bldg. 1-3-1 Kanda Ogawa-machi, Chiyoda-ku, Tokyo 101-0052, Japan
https://www.oat-agrio.co.jp/
03-5283-0251
Summary
OAT Agrio Co., Ltd. was formed on September 28, 2010 through a management buyout of the AgriTechno Business of Otsuka Chemical Co., Ltd. (unlisted). Since the buyout, the company has specialized in plant protection products (ppp) and fertilizers. OAT Agrio is an R&D-oriented company that develops its own active ingredients, applies for their registration as plant protection products, and manufactures and sells the products.
Chemicals
Key dates
2021-09-28
Coverage initiation
Full Report
2022-05-12
Q1 FY12/22 flash update
2022-05-12
Full-year FY12/21 flash update
2022-02-13
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Executive summary

Business overview

OAT Agrio Co., Ltd. (TSE1: 4979) was formed on September 28, 2010 through a management buyout of the AgriTechno Business of Otsuka Chemical Co., Ltd. (unlisted). Since the buyout, the company has specialized in plant protection products (ppp) and fertilizers. OAT Agrio is an R&D-oriented company that develops its own active ingredients, applies for their registration as plant protection products, and manufactures and sells the products. (R&D spending is around 10% of revenue.) The company generates revenue in two categories: agrichemicals (42.1% of revenue in FY12/21) and fertilizers and biostimulants* (57.9%). Within agrichemicals, the company is involved mainly in insecticides, fungicides, and herbicides. Demand for plant protection products (ppp) is seasonal (concentrated in spring), but demand for fertilizers and biostimulants is year-round.

*Biostimulants are materials and technologies that enhance plants’ immune strength by increasing resistance to cold, heat, and diseases and pests and stimulating growth. Their active ingredients are derived from natural extracts, such as seaweed, humic substances, sugar beet molasses, and iron. Although a familiar element of ancient Japanese agricultural methods, biostimulants are not accorded the same technological credence as agricultural chemicals and fertilizers. OAT Agrio entered the biostimulant field in earnest in December 2011 when it acquired Asahi Chemical Manufacturing Co., Ltd. as a subsidiary. Asahi Chemical Manufacturing’s mainstay product is Atonik, a plant growth regulator (chemical used to control the growth and development of crops and other useful plants to improve quality, increase yields, stabilize yields even under poor conditions, and reduce labor in production).

For Japan’s main agrichemical manufacturers, shipment volumes fell by around 1.8% per year during the 15 years to 2020. However, the shipment value of these plant protection products (ppp) remained generally flat at around JPY340.0bn or rose slightly (averaging an annual 0.2% rise), according to the Japan Crop Protection Association. As background, agricultural productivity in Japan has stayed flat due to the aging of the farming population, labor shortages, and a lack of successors. OAT Agrio’s domestic revenue fell from JPY9.0bn in FY12/13 (82.9% of total revenue) to JPY7.6bn in FY12/20 (37.4%). Over that same period, overseas revenue surged from JPY1.9bn (17.1%) to JPY12.7bn (62.6%).

Notably, from FY12/19, the year after the company acquired LIDA Plant Research S.L. of Spain (a major biostimulants manufacturer) and Blue Wave Holding B.V. (the holding company of Chrysal International B.V.) of the Netherlands (the world's leading manufacturer of flower foods and freshness-keeping treatments for plants), OAT Agrio’s ratio of consolidated revenue to parent-only revenue rose to 1.6x (up from 1.1x previously). In Europe, where environmental regulations on plant protection products (ppp) are relatively strict, a well-established market exists for biostimulants and flower foods and freshness-keeping treatments. To strengthen operations in this category, the company plans to continue with focused R&D efforts and product rollouts into overseas markets (developing and producing active ingredients, registering products in other countries).

As with pharmaceuticals, the development path for plant protection products (ppp) is long (10 years from exploratory research to market launch) and costly (billions of JPY), according to Japan’s Ministry of Agriculture, Forestry and Fisheries. As of 2021, its 11th year since establishment, the majority of OAT Agrio’s revenue comes from products developed and launched when it was part of Otsuka Chemical. OAT Agrio sells most of its products through Zen-noh (the National Federation of Agricultural Cooperative Associations) and wholesalers (affiliated with trading companies). After launching active ingredients in Japan, the company begins working on parallel efforts to expand their scope of application (registering them for use on as many crops as possible) and pursue registration in other countries. Overseas, the company has diversified its sales routes to include wholesale, retail, and direct-to-consumer. By region, Japan accounted for 35% of revenue (FY12/20), Europe and the Middle East for 20%, North America (including Mexico) for 16%, Central and South America for 15%, Asia and Oceania for 12%, and Africa for 2%. OAT Agrio’s operations span the world’s major regions, and the company is building its operations to benefit from springtime demand in both the northern and southern hemispheres.

OAT Agrio focuses on “green products" (formerly "green agrochemicals”), a term the company coined to refer to plant protection products (ppp) that are friendly to people and the environment. The company aims to increase revenue from these products by 60% by FY12/23. (Shared Research estimates that green products generated revenue of more than JPY1.0bn in FY12/20.) For plant protection products (ppp), the Ministry of Agriculture, Forestry and Fisheries prescribes usage criteria according to the Agricultural Chemicals Regulation Act. Product labels and explanatory documents must indicate the acceptable number of applications and period of use. Green products are registered as plant protection products (ppp). As they are derived from natural food additives or are JAS-compliant ppp*, green agrochemicals are considered environmentally safe, and no limit is placed on the number of times they can be applied. They are used to protect crops from pests and diseases and to eliminate unwanted plants (weeds).

*JAS-compliant plant protection products (ppp) are used to grow organic agricultural products that comply with the Act on Standardization and Proper Quality Labeling of Agricultural and Forestry Products (JAS Act).

The company sells the Drip Fertigation Cultivation System and fertilizers to farmers engaged in greenhouse farming. This form of agriculture uses glass and vinyl greenhouses to reduce the effects of weather and outside temperatures and allow for the relatively stable production of garden crops (vegetables, flowers, and fruit). The Drip Fertigation Cultivation System is composed of a liquid fertilizer mixer, drip tubes, and ancillary equipment. The system is designed to supply nutrients and water to plants as and when required, according to their growth stage. The market for liquid fertilizer is expanding, due to demand to reduce fertilizer use and the labor required for spraying.

The company has the top share of the hydroponics market. (Shared Research estimates its share at nearly 20%, with FY12/20 revenue of JPY1.0–2.0bn.) By bundling together its fertilizers for hydroponic soil cultivation, biostimulants, and the Drip Fertigation Cultivation System, the company aims to take a 40% share of the greenhouse agriculture market (JPY3.0bn of a JPY7.3bn market). The company’s differentiation strategy is to provide fertilizers containing the ingredients tailored to specific crop cultivation periods based on data accumulated in its own research farm.

OAT Agrio makes a companywide commitment to sustainability management. Its management philosophy states “We contribute to the people of the world with our agritechnology and sincerity,” which aligns with the concepts of SDGs. Through the cultivation of agritechnology, the company aims to work toward preserving the environment, improving resource efficiency, and eradicating hunger.

Earnings trends

In full-year FY12/21, revenue came to JPY22.7bn (+11.7% YoY), operating profit was JPY2.0bn (+31.1% YoY), recurring profit was JPY2.0bn (+46.3% YoY), and net income attributable to owners of the parent was JPY1.4bn (+72.4% YoY). Driven by higher revenue in the fertilizers and biostimulants field revenue and all levels of profit beginning with operating profit were above plan and reached new highs. The year-end dividend was JPY45.0 per share, in line with the previous forecast, and the dividend payout ratio was 16.8%.

For FY12/22, the company forecasts revenue of JPY24.7bn (+9.0% YoY), operating profit of JPY2.5bn (+26.6% YoY), recurring profit of JPY2.5bn (+26.4% YoY), and net income attributable to owners of the parent of JPY1.6bn (+13.0% YoY). EPS forecast is JPY154.7. The company, when it released Q1 FY12/22 results, raised its initial earnings forecast in light of the Q1 FY12/22 results and the external environment. It plans to pay an annual dividend of JPY30.0 per share, with a dividend payout ratio of 23.8%. OAT Agrio conducted a two-for-one stock split on March 1, 2022, and has factored this into its EPS forecast already. The annual dividend forecast of JPY30.0 per share is equivalent to JPY60.0 on an FY12/21 basis (JPY45.0 per share).

On February 10, 2022, the company released a new medium-term management plan covering FY12/22 through FY12/24. OAT Agrio met the earnings targets set in the medium-term plan announced in February 2021 (spanning the three years from FY12/21 through FY12/23) a year early, and accordingly decided to roll forward the plan's final year to FY12/24 and set completely new targets. The new plan calls for earnings expansion driven by new product launches and accompanying growth in revenue from green products and biostimulants, and efforts to maximize global synergies between group companies worldwide. For the plan's final year, FY12/24, the company targets revenue of JPY25.5bn, operating profit of JPY2.9bn (OPM of 11.3%), recurring profit of JPY2.8bn, net income attributable to owners of the parent of JPY1.9bn, and ROE of 16.6%. The company also plans to strengthen its foundation for future business expansion, including entry into smart agriculture.

Strengths and weaknesses

Strengths:

The ability to develop and introduce environmentally friendly plant protection products (ppp) derived from natural products, food additives, and organically compliant ppp

Top share of the hydroponics field, supported by cultivation data amassed on its research farm

Its capability to level out the effects of seasonality by using M&A to strengthen businesses other than ppp and developing the business globally

Weaknesses:

Lack of new methods introduced after becoming independent from a large company (Otsuka Chemical) as a specialized manufacturer of plant protection products (ppp) and fertilizers

Higher ratio of R&D expenditure to revenue than at other companies in the industry, putting pressure on short-term profits

Sluggish growth in revenue from ppp and the domestic market, particularly because of its struggle in the highly competitive market for rice paddy herbicides

Key financial data

Income statementFY12/13FY12/14FY12/15FY12/16FY12/17FY12/18FY12/19FY12/20FY12/21FY12/22
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Revenue10,85611,40512,12912,93814,11815,27821,90920,28822,65724,700
YoY5.9%5.1%6.3%6.7%9.1%8.2%43.4%-7.4%11.7%9.0%
Gross profit4,3564,6545,2255,7166,4556,9689,3899,46410,688
YoY-6.8%12.3%9.4%12.9%7.9%34.7%0.8%12.9%
Gross profit margin40.1%40.8%43.1%44.2%45.7%45.6%42.9%46.6%47.2%
Operating profit7096631,1131,6031,8821,7431,0771,5121,9822,509
YoY--6.5%67.9%44.0%17.4%-7.4%-38.2%40.4%31.1%26.6%
Operating profit margin6.5%5.8%9.2%12.4%13.3%11.4%4.9%7.5%8.7%10.2%
Recurring profit7436521,1051,5721,8901,7388371,3461,9692,488
YoY53.2%-12.2%69.5%42.3%20.2%-8.0%-51.8%60.8%46.3%26.4%
Recurring profit margin6.8%5.7%9.1%12.2%13.4%11.4%3.8%6.6%8.7%10.1%
Net income4663486789421,2981,26148371,4431,631
YoY131.8%-25.3%94.8%38.9%37.8%-2.9%-99.7%-72.4%13.0%
Net margin4.3%3.1%5.6%7.3%9.2%8.3%0.0%4.1%6.4%6.6%
Per-share data (split-adjusted; JPY)
Shares issued (year-end)('000 shares) 2,7682,7685,5365,5365,5365,5365,5365,5365,536
Treasury shares ('000)78156604124124124124265
EPS (JPY)41.832.463.191.6130.0116.60.477.4134.2154.7
EPS (fully diluted; JPY)-30.659.987.3123.7----
Dividend per share (JPY)-13.815.015.018.020.020.020.022.530.0
Book value per share (JPY)281345394442546624562636787
Balance sheet (JPYmn)
Cash and cash equivalents1,8861,4421,9012,7741,9582,4743,4143,7363,651
Total current assets7,4826,9837,8829,1009,47914,38114,43614,44114,495
Tangible fixed assets1,2991,5591,4361,7661,8223,9004,0473,6233,708
Investments and other assets6366695904405989741,0951,110920
Intangible assets63046230323919211,42810,1449,6729,193
Total assets10,0489,67510,21211,54712,09430,68429,72428,84828,321
Short-term debt2,9411,4121,6051,98778613,7907,1476,7014,728
Total current liabilities5,6894,0334,2025,1794,24718,46111,89910,80710,340
Long-term debt4151,1521,0711,0411,0142,8729,4928,9557,401
Total fixed liabilities1,0291,7891,6281,5811,5134,69011,01710,4088,859
Total liabilities6,7185,8225,8306,7615,76023,15222,91721,21519,199
Shareholders' equity3,3173,8084,3624,4815,9396,9916,7697,3908,339
Total net assets3,3303,8524,3924,7856,3337,5326,8077,6329,122
Total liabilities and net assets10,0489,67510,21211,54712,09430,68429,72428,84828,321
Total interest-bearing debt3,3582,5642,6763,0291,80016,66316,64215,65812,129
Cash flow statement(JPYmn)
Cash flows from operating activities6736658191,894457-4872,3921,9373,603
Cash flows from investing activities-625-453-391-770-250-9,933-464-258221
Cash flows from financing activities294-684-35-248-1,08711,093-893-1,339-3,936
Financial ratios
ROA (RP-based)7.8%6.6%11.1%14.4%16.0%8.1%2.8%4.6%6.9%
ROE15.8%10.1%17.1%21.9%25.3%19.9%0.1%12.9%19.0%15.0%
Equity ratio31.8%38.3%41.6%37.7%48.9%20.5%20.5%23.9%29.3%
Total asset turnover114.2%115.7%122.0%118.9%119.4%71.4%72.5%69.3%79.3%
Net margin4.3%3.1%5.6%7.3%9.2%8.3%0.0%4.1%6.4%
Capital expenditures, depreciation, R&D expenses
Capital expenditures351278186385239272375184288
Depreciation320311427358246306912842825
R&D expenses1,2391,4471,2141,2341,2991,4521,7302,010
R&D ratio10.9%11.9%9.4%8.7%8.5%6.6%8.5%8.9%
Number of employees
Number of employees175177161246281541556537556
Avg. number of temporary employees888994951001211129292
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: OAT Agrio conducted a 2-for-1 stock split with an effective date of March 1, 2022. Company forecast for FY12/22 is based on the number of shares issued following the split.

Recent updates

Dividend from surplus and a revision to the dividend forecast

2022-02-28

On February 25, 2022, OAT Agrio Co., Ltd. announced the dividend from surplus and a revision to its dividend forecast. 

The company announced a revision to its FY12/22 dividend forecast from JPY25.0 per share to JPY30.0 per share. The dividend forecast hike reflects a revision to its FY12/22 EPS forecast from JPY123.0 to JPY126.1, and the company's policy of maintaining a dividend payout ratio of at least 20%. Shared Research estimates that the new dividend forecast represents a dividend payout ratio of 23.8%.

The company will carry out a 2-for-1 stock split effective March 1, 2022, the new dividend forecast of JPY30.0 per share represents the dividend on the number of shares outstanding after the split. This translates into a pre-split dividend of JPY60.0 per share, up from JPY45.0 per share in FY12/21. The company pays dividends only at the end of the fiscal year and does pay an interim dividend.

Trends and outlook

Quarterly trends and results

Earnings (cumulative)FY12/21FY12/22FY12/22
(JPYmn)Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4% of Est.FY Est.
Revenue6,82412,95117,46522,6578,21633.3%24,700
YoY9.2%12.4%12.9%11.7%20.4%9.0%
Agrichemicals3,6866,3367,8899,5394,447
YoY4.5%2.5%4.8%-0.9%20.6%
% of revenue54.0%48.9%45.2%42.1%54.1%
Fertilizers and biostimulants3,1376,6149,57613,1183,768
YoY15.2%23.9%112.0%98.6%20.1%
% of revenue46.0%51.1%54.8%57.9%45.9%
Gross profit3,1876,1378,35610,6874,078
YoY9.7%12.5%13.9%12.9%28.0%
Gross profit margin46.7%47.4%47.8%47.2%49.6%
SG&A expenses2,2124,3066,2868,7052,312
YoY13.3%6.3%7.4%9.5%4.5%
SG&A ratio32.4%33.2%36.0%38.4%28.1%
Operating profit9741,8312,0691,9821,76570.3%2,509
YoY2.3%30.0%39.2%31.1%81.2%26.6%
Operating profit margin14.3%14.1%11.8%8.7%21.5%10.2%
Recurring profit1,0511,8952,0801,9691,85374.5%2,488
YoY18.4%46.0%55.9%46.3%76.3%26.4%
Recurring profit margin15.4%14.6%11.9%8.7%22.6%10.1%
Net income7451,3201,4181,4431,27678.2%1,631
YoY34.7%65.8%84.9%72.4%71.3%13.0%
Net margin10.9%10.2%8.1%6.4%15.5%6.6%
Earnings (quarterly)FY12/21FY12/22
(JPYmn)Q1Q2Q3Q4Q1Q2Q3Q4
Revenue6,8246,1274,5145,1928,216
YoY9.2%16.2%14.2%7.9%20.4%
Agrichemicals3,6862,6501,5531,6504,447
YoY4.5%-0.2%15.6%-21.3%20.6%
% of revenue54.0%43.3%34.4%31.8%54.1%
Fertilizers and biostimulants3,1373,4772,9623,5423,768
YoY15.2%32.9%-69.7%20.1%
% of revenue46.0%56.7%65.6%68.2%45.9%
Gross profit3,1872,9502,2192,3314,078
YoY9.7%15.6%17.9%9.7%28.0%
Gross profit margin46.7%48.1%49.2%44.9%49.6%
SG&A expenses2,2122,0941,9802,4192,312
YoY13.3%-0.1%9.8%15.2%4.5%
SG&A ratio32.4%34.2%43.9%46.6%28.1%
Operating profit974857238-871,765
YoY2.3%87.9%205.1%-81.2%
Operating profit margin14.3%14.0%5.3%-21.5%
Recurring profit1,051844185-1111,853
YoY18.4%105.9%413.9%-76.3%
Recurring profit margin15.4%13.8%4.1%-22.6%
Net income74557598251,276
YoY34.7%136.6%--64.3%71.3%
Net margin10.9%9.4%2.2%0.5%15.5%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Seasonality

The company’s revenue from plant protection products (ppp) is seasonal, focused on 1H (particuarly on Q1). This is because farmers in Japan and other countries in the northern hemisphere tend to purchase plant protection products ahead of the spring planting season. On the other hand, demand for fertilizers and biostimulants is stable year-round, so revenue is smoother. On the cost front, R&D expenditure tends to rise in 2H. As a result, the company’s profit structure is such that most of the year’s profit is earned in 1H.

Q1 FY12/22 results (out May 11, 2022)

Overview of Q1 FY12/22 (January-March) results

  • Revenue: JPY8.2bn (+20.4% YoY)
  • Operating profit: JPY1.8bn (+81.2% YoY)
    • OPM: 21.5% (+7.2pp YoY)
  • Recurring profit: JPY1.9bn (+76.3% YoY)
  • Net income attributable to owners of the parent: JPY1.3bn (+71.3% YoY)

Revenue in the agrichemicals field (54.1% of consolidated revenue in Q1 FY12/22) rose +20.6% YoY while revenue in the fertilizers and biostimulants field (45.9%) grew 20.1% YoY. In particular, the agrichemicals field, which had a revenue decline in FY12/21, drove the company’s 20.4% YoY consolidated revenue increase as sales of insecticides, acaricides, fungicides, and other products recovered in Japan and overseas. The fertilizers and biostimulants field also contributed to consolidated revenue as growth continued from FY12/21. Revenue, which totaled JPY8.2bn, was a record high for Q1.

Operating profit grew 81.2% YoY and OPM rose 7.2pp YoY to 21.5% thanks to the revenue increase and other factors. Operating profit, which totaled JPY1,765mn, was the second highest for Q1, topped only by the JPY1,809mn reached in Q1 FY12/18. On a quarterly (three-month) basis, revenue increased YoY for the fifth consecutive quarter and operating profit increased YoY for the first time in two quarters.

We will provide details following interviews with the company .

The company adopted the Accounting Standard for Revenue Recognition from FY12/22 and retroactively adjusted the FY12/21 figures. For this reason, YoY comparisons above differ from those released by the company. Shared Research has not retroactively adjusted the figures for FY12/21.

Company forecast for FY12/22 (out May 11, 2022)

FY12/21FY12/22YoY
(JPYmn)1H Act.2H Act.FY Act.FY Est.FY Est.
Revenue12,9519,70622,65724,7009.0%
Cost of revenue6,8135,15611,969
Gross profit6,1374,55010,687
Gross profit margin47.4%46.9%47.2%
SG&A expenses4,3064,3998,705
SG&A ratio33.2%45.3%38.4%
Operating profit1,8311511,9822,50926.6%
Operating profit margin14.1%1.6%8.7%10.2%
Recurring profit1,895741,9692,48826.4%
Recurring profit margin14.6%0.8%8.7%10.1%
Net income1,3201231,4431,63113.0%
Net margin10.2%1.3%6.4%6.6%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Overview of company forecast

Based on the Q1 FY12/22 results, the company raised its FY12/22 earnings forecast, as follows:

  • Revenue: JPY24.7bn (+9.0% YoY, previous forecast: JPY23.3bn)
  • Operating profit: JPY2.5bn (+26.6% YoY, JPY2.2bn)
    • OPM: 10.2% (+1.5pp YoY, 9.3%)
  • Recurring profit: JPY2.5bn (+26.4% YoY, JPY2.0bn)
  • Net income attributable to owners of the parent: JPY1.6bn (+13.0% YoY, JPY1.3bn)

EPS forecast is JPY154.7 (compared with the previous forecast of JPY126.1). The company left dividend forecast unchanged. The dividend payout ratio would be 19.4% (estimated by Shared Research based on the revised company forecast).

The company cited, as a reason for the upward forecast revision, better-than-expected revenue and profit in Q1 FY12/22 (January–March), a period when the company earns much of its profit. The company added that its overseas operations would also benefit from the yen’s weakness. The company has not changed a plan to achieve record revenue and profits (all profit categories from operating profit on down) for the second consecutive year. The company also seeks to raise OPM to more than 10% for the first time in four years since FY12/18, when the figure reached 11.4%.

The company adopted the Accounting Standard for Revenue Recognition from FY12/22 and retroactively adjusted the figures for FY12/21. For this reason, YoY comparisons above differ from those released by the company. Shared Research has not retroactively adjusted the figures for FY12/21.
The following comments were made by Shared Research after the company released its previous earnings forecast in February 2022. We will update details, including figures, after interviewing the company at a later date.

OAT Agrio announced a new forecast for FY12/22, as follows. 

  • Revenue: JPY23.3bn (+2.7% YoY)
  • Operating profit: JPY2.2bn (+8.7% YoY)
    • Operating profit margin: 9.3% (+0.6pp YoY)
  • Recurring profit: JPY2.0bn (+3.1% YoY)
  • Net income attributable to owners of the parent: JP1.3bn (-7.9% YoY) 

The EPS forecast is JPY126.1, and the annual dividend forecast is JPY30.0 per share. The dividend payout ratio is expected to be 23.8% based on the company's forecast. The company implemented a 2-for-1 stock split on March 1, 2022, which has already been taken into account in forecasting EPS and the annual dividend. The annual dividend of JPY30.0 per share is equivalent to JPY60.0 per share on a FY12/21 basis (JPY45.0 per share estimate).

When the company announced its financial results on February 10, it announced an EPS forecast of JPY123.0 and an annual dividend of JPY25.0 per share, but later revised them as mentioned above on February 25.

In its medium-term management plan released in February 2021 and covering the three years from FY12/21 through FY12/23, the company projected revenue of JPY22.1bn for FY12/22, the second year of the plan, as well as operating profit of JPY2.0bn, recurring profit of JPY1.8bn, and net income attributable to owners of the parent of JPY1.0bn. As a result of greater-than-expected earnings expansion in FY12/21, however, OAT Agrio pretty much achieved its initial FY12/22 targets a year ahead of plan, prompting a reevaluation and new announcement of the FY12/22 company forecast.

The company plans for continued growth in revenue and profit in FY12/22, but sees the rate of growth for both slowing relative to FY12/21. According to the company, this plan is based on conservative estimates of the various factors that will affect its performance.

Revenue forecast

Revenue forecast of JPY23.3bn consists of JPY10.3bn in agrichemicals (+9.6% YoY) and JPY12.9bn in fertilizers and biostimulants (-2.3% YoY). In the agrichemicals field, the launch of new fungicides and insecticides is expected to contribute, and sales of existing products introduced through FY12/21 are also expected to increase on the back of broad penetration. The company also thinks that the completion of customers' inventory adjustments in FY12/21 will be a contributing factor for revenue increase. On the other hand, the company expects revenue in the fertilizers and biostimulants field to decline. The main reason for this is that the company anticipates a reactionary decline to a certain extent in flower materials, which grew in FY12/21. The company expects demand for decorative plants to remain high overseas (especially in Europe), but does not anticipate an increase on par with that of FY12/21.

Another factor was the company's conservative assumptions regarding foreign exchange rates, which affect the company's overseas operations, particularly in the fertilizers and biostimulants field. The company has not disclosed specific exchange rate assumptions, but assumed a stronger yen than the rates (JPY116/USD and JPY132/EUR) as of February 2022, when it announced the financial results. The company states that the conservatively assumed rate pushes down revenue forecast significantly.

Profit and profit margin forecast

The company plans to increase R&D expenses due to the inclusion of additional testing costs incurred in new product development and existing product registration renewals. The company also expects a considerable increase in transportation costs, which were a factor of cost increase in FY12/21. However, it expects operating profit to rise 8.7% YoY as these increases will be offset by increased revenue and cost reductions. The company does not disclose profit forecast by segment (the agrichemicals and fertilizers/biostimulants fields).

The company projects record-high revenue, operating profit, and recurring profit, but expects a 7.9% decrease in net income attributable to owners of the parent. The main reason for this is that it does not expect to record extraordinary gains unlike FY12/21. The company recorded a gain on the transfer of business (JPY234mn) and a gain on sale of investment securities (JPY78mn) in FY12/21.

The company expects OPM to rise 0.6pp YoY to 9.3%. It projects OPM will continue to improve after bottoming out at 4.9% in FY12/19. However, it expects OPM to be lower than the 11.4% achieved in FY12/18, mainly due to higher R&D and other growth investment costs. The OPM was in double digits for three consecutive years—12.4% in FY12/16, 13.3% in FY12/17, and 11.4% in FY12/18.

Historical initial company forecasts vs. results

Results vs. Initial Est.FY12/13FY12/14FY12/15FY12/16FY12/17FY12/18FY12/19FY12/20FY12/21FY12/22
(JPYmn)Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Revenue (Initial Est.)11,76212,50013,49615,29022,99521,77921,78023,263
Revenue (Results)10,85611,40512,12912,93814,11815,27821,90920,28822,657
Results vs. Initial Est.3.1%3.5%4.6%-0.1%-4.7%-6.8%4.0%
Operating profit (Initial Est.)7001,2501,4301,9131,8691,4051,4062,155
Operating profit (Results)7096631,1131,6031,8821,7431,0771,5121,982
Results vs. Initial Est.59.0%28.2%31.6%-8.9%-42.4%7.6%41.0%
Recurring profit (Initial Est.)6731,2451,4091,8951,6761,2591,2602,031
Recurring profit (Results)7436521,1051,5721,8901,7388371,3461,969
Results vs. Initial Est.64.2%26.3%34.1%-8.3%-50.1%6.9%56.3%
Net income (Initial Est.)4337709581,3111,0076136141,329
Net income (Results)4663486789421,2981,26148371,443
Results vs. Initial Est.56.6%22.3%35.5%-3.8%-99.6%36.5%135.0%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods. 

Actual performance exceeded the company's initial forecast during the three years from FY12/15 to FY12/17. Conversely, results fell short of expectations in the following three years, from FY12/18 to FY12/20. In FY12/19, the acquisition of Chrysal International B.V. (Blue Wave Holding B.V.) substantially affected cost of revenue due to the reallocation of acquisition costs. This effect was absent in FY12/20, so revenue fell YoY, while profit increased. Excluding this extraordinary factor, both revenue and profit would have fallen YoY. In general, differences between forecasts and results tend to be significantly larger for profits than for revenue. However, in FY12/21, revenue from biostimulants exceeded the company's expectations, and the results again surpassed its initial plan.

Medium-term outlook

FY12/20FY12/21FY12/22FY12/23FY12/24Long-term
(JPYmn)Act.Act.Est.TargetTargettarget
Revenue20,28822,65723,26324,24025,49030,000
Agrichemicals9,6229,53910,33910,85111,399
% of revenue47.4%42.1%44.4%44.8%44.7%
Fertilizers and biostimulants10,66613,11812,92413,39414,092
% of revenue52.6%57.9%55.6%55.3%55.3%
Domestic7,585
% of revenue37.4%
Overseas12,703
Overseas ratio62.6%
Operating profit1,5121,9822,1552,4802,8903,000
Operating profit margin7.5%8.7%9.3%10.2%11.3%10.0%
Recurring profit1,3461,9692,0312,3602,790
Recurring profit margin6.6%8.7%8.7%9.7%10.9%
Net income attributable to owners of the parent8371,4431,3291,5601,900
Net margin4.1%6.4%5.7%6.4%7.5%
R&D expenses1,7302,0103,000
R&D ratio8.5%8.9%10.0%
ROE12.9%19.0%15.0%15.6%16.6%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods. 

Announcement of a new medium-term management plan (February 2022)

Overview of the new medium-term management plan

On February 10, 2022, the company released a new medium-term management plan covering the three years from FY12/22 through FY12/24. The company met the earnings targets set in the medium-term plan announced in February 2021 (spanning the three years from FY12/21 through FY12/23) a year early, and accordingly decided to extend the plan's final year to FY12/24 and set new targets overall. As the company positioned the new medium-term management plan as a revised version of its previous plan (covering the three-year period from FY12/21 to FY12/23), it basically aims to continue to increase corporate value by extending the previous plan.

During the three years of the new medium-term management plan, the company aims to enhance its performance by making increased revenue from green products and biostimulants growth driver through the introduction of new products, and by  maximizing global synergies with group companies. The company will also launch new business initiatives, including entry into smart agriculture, to lay the foundation for future growth.

Numerical targets for each fiscal year

The numerical targets for FY12/22, the first year of the new medium-term plan, are as follows.

  • Revenue: JPY23.3bn
    • Revenue breakdown: JPY10.3bn in the agrichemicals field and JPY12.9bn for the fertilizers and biostimulants field
  • Operating profit: JPY2.2bn
    • OPM: 9.3%
  • Recurring profit: JPY2.0bn
  • Net income attributable to owners of the parent: JPY1.3bn
  • ROE: 15.0% 
  • For details, please refer to the "Overview of company forecast" section.

Earnings targets for FY12/23, the second year of the new medium-term plan, are as follows. 

  • Revenue: JPY24.2bn
    • Revenue breakdown: JPY10.9bn in the agrichemicals field and JPY13.4bn in the  fertilizers and biostimulants field
  • Operating profit: JPY2.5bn
    • OPM: 10.2%
  • Recurring profit: JPY2.4bn
  • Net income attributable to owners of the parent: JPY1.6bn
  • ROE: 15.6%

Earnings targets for FY12/24, the final year of the new medium-term plan, are as follows. 

  • Revenue: JPY25.5bn
    • Revenue breakdown: JPY11.4bn in the agrichemicals field and JPY14.1bn in the fertilizers and biostimulants field
  • Operating profit: JPY2.9bn
    • OPM: 11.3%
  • Recurring profit: JPY2.8bn
  • Net income attributable to owners of the parent: JPY1.9bn
  • ROE: 16.6%

Clarification of financial targets

The company clarified not only performance targets but also financial targets in the new medium-term management plan. The financial targets for FY12/21, the final year of the plan, are as follows.

  • Equity ratio: 45% or higer (29.3% in FY12/21)
  • Consolidated ROE: 15% or higer (19.0%)
  • Net debt to equity ratio: 0.1
Long-term numerical targets

The company's long-term numerical targets are as shown below. The company has not provided a specific timeline for the long-term targets, but maintained the numerical targets it had indicated when formulating its previous medium-term management plan (covering FY12/21–FY12/23).

  • Revenue: JPY30.0bn
  • Operating profit: JPY3.0bn (OPM 10%)
  • R&D expenditure: JPY3.0bn (R&D expense-to-revenue ratio: 10%)

Key initiatives in the new medium-term management plan 

In its new medium-term management plan, OAT Agrio plans to focus on growth driver initiatives as the pillars of business growth: launching new products, entering the smart agriculture, and maximizing global synergies. The company also aims to build a corporate culture and to enhance its corporate value through management that contributes to sustainable agriculture that is friendly to people and the environment.

  • Growth driver initiatives
  • Maximization of global synergies
  • Formulation of corporate culture
  • Management that contributes to sustainable agriculture that is friendly to people and the environment
  • Enhancement of corporate value

Stepping up growth driver initiatives

“Green products,” which are friendly to people and the environment

The biostimulants business

Cultivating potential demand in the field of greenhouse agriculture

Rolling out products globally

The company changed the name from "green agrochemicals" in its previous medium-term management plan to "green products" in the new medium-term management plan.

Green products (formerly "green agrochemicals")

Numerical targets for FY12/24: 51% increase in revenue and 62% increase in gross profit compared with results in FY12/21

Definition of "green products"
  • Registered plant protection products that are derived from natural food additives or are JAS-compliant plant protection products 
  • Safe, secure, and environmentally friendly molluscicides that can be used without restriction on the number of usage
Reasons green products are in demand
  • They provide safe and reliable pest control using materials derived from natural food additives.
  • They can be used without restriction on the number of usage and provide peace of mind.
  • They are molluscicides to which pests have difficulty developing resistance.
  • They are molluscicides that are friendly to natural enemies and conform to integrated pest management (IPM: a comprehensive combination of all available technologies [including plant protection products] for the control of diseases and pests and weeds that are harmful to crops).
Green products
No.ProductActive ingredientsOrganic JAS compliantNumber of applications
1KaligreenPotassium bicarbonateYesUnlimited
2TomonolMachine oil 95%YesUnlimited
3Tomonol SMachine oil 97%YesUnlimited
4OleateSodium oleateUnlimited
5AcaritouchPropylene glycol mono fatty acid esterUnlimited
6SuffoilMixed oilYesUnlimited
7SuragoFerric phosphateYesUnlimited
8Sukumin bate 3Ferric phosphateYesUnlimited
9Toaro CTToxin produced by BT bacteriaYesUnlimited
10Toaro FlowableToxin produced by BT bacteriaYesUnlimited
11Iou FlowableSulfurYesUnlimited
12PoteguardBasic copper chlorideUnlimited
Source: Shared Research based on company data
Biostimulants business

Numerical targets for FY12/24: 24% increase in revenue and 28% increase in gross profit compared with results in FY12/21

Definition of "biostimulants"
  • Biostimulants are materials and technologies that enhance plants’ immune strength by increasing resistance to cold, heat, and pests and stimulating growth.
Reasons biostimulants are in demand
  • They improve immunity, leading to higher yields and better quality. 
  • They enhance stress tolerance of plants.
  • They improve fruit sugar content, color, and fruit quality.
  • They adjust and improve water balance in plants.
  • They improve the physical properties of land under cultivation.
Biostimulants 
No.ProductActive ingredientsExpected effectNumber of applications
1LidavitalSugar beet molasses, amino acidsReduce stress from light and temperatureUnlimited
2AlgamixSeaweed, saccharidesReduce stress from drought and salt damage, improve fruitingUnlimited
3FullbodyHumic substances (fulvic acid/humic acid), seaweedSubsurface cultivation and promotion, soil improvementUnlimited
4PotetoruPlant-derived substancesControl pore openingUnlimited
5Tetsu Riki TreplusTrehalose, ironPromote iron absorption from the soilUnlimited
6Samppi neoOrganic acids, saccharidesReduce climatic stress, nutrientUnlimited
7AtonikNitrophenolatesReduce biological and non-biological stresses
Source: Shared Research based on company data
Cultivating potential demand in the field of greenhouse farming

Greenhouse farming uses glass and vinyl greenhouses to reduce the effects of weather and outside temperatures and allow for the relatively stable production of garden crops (vegetables, flowers, and fruit). Looking to the past, the amount of land used for greenhouse agriculture grew from around 22,500ha in 1975 to approximately 53,500ha in 1999, but has continued to trend downward since then. In addition, the number of farmers engaged in greenhouse agriculture decreased significantly, from about 226,000 in 2000 to about 168,000 in 2015, while the actual area per farmer has remained essentially unchanged, at around 0.2ha.

Garden crops are so popular that they are the choice of 85% of new farmers as their main crop because there is a broad variety and much room for creativity, such as the potential for added value. Among garden crops, about 66% of all new farmers are primarily engaged in vegetables, and more than 40% of them, or about 29%, work mainly in greenhouse vegetables. The company has secured a 10% share in the "green products" market (formerly known as the "green agrochemical" market) and aims to capture a 40% share (approx. JPY3.0bn) in the greenhouse farming market (approx. JPY7.3bn) by offering drip fertigation fertilizers, biostimulants, and Drip Fertigation (Cultivation) System as a package.

Packaged offerings in the greenhouse farming market (JPY7.3bn)
Source: Shared Research based on company data
Maximization of global synergies

FY12/24 numerical targets for overseas business: 20% increase in revenue and 17% increase in gross profit compared with results in FY12/21

Agrichemicals field

The company plans to expand the number of countries in which its mainstay products are sold during the term of the new medium-term management plan as follows.

  • Cyflumetofen (acaricide): Seventeen new countries plan to be added to the existing 31 countries where they are already sold
  • Gatten (fungicide): 13 new countries plan to be added to the six existing countries where they are already sold
  • Kaligreen (fungicide): 14 new countries plan to be added to the 12 existing countries where they are already sold
Fertilizers and biostimulants field
  • Fertilizer products: Six new countries plan to be added to the 13 existing countries where they are already sold
  • Biostimulant products: Promote global sales expansion of products manufactured in Japan and Spain

As of FY12/21, the company sells its products (at least one of plant protection products (ppp), fertilizers, or biostimulants) in 89 countries around the world, and plans to increase this number of countries. In FY12/21, Japan accounted for 33% of the JPY22.7bn in revenue, Asia and Oceania 11%, Europe and the Middle East 21%, North America (including Mexico) 15%, Latin America 17%, and Africa 3%.

Reinforcement of global R&D structure

As of December 2021, the company was conducting research and development at five sites around the world, including Japan, from a global perspective. The company plans to further reinforce this structure. One specific measure is to increase R&D expenses to 10% of consolidated revenue to expand investment for future growth. The company's R&D expenditure-to-revenue ratio averaged 8.2% over the five-year period from FY12/17 to FY12/21, and 8.9% (JPY2.0bn) in FY12/21.

Based on the company's target ratio of 10% of consolidated revenue and the revenue targets in the new medium-term management plan, R&D expenses are expected to be JPY2.3bn in FY12/22, JPY2.4bn in FY12/23, and JPY2.5bn in FY12/24, the final year of the plan (Shared Research estimate). The company has not disclosed the specific amount targets of its R&D expenses, but rather states that it plans to spend 10% of revenue. However, since the company's priority is to expand revenue in its areas of expertise, it will also focus on improving R&D efficiency to achieve this goal.

Building the corporate culture and taking on new businesses

Cultivating demand among people staying at home amid COVID-19

Corporate philosophy: agritechnology and sincerity

Existing businesses: Increased revenue, stable production, improved quality 

Producers (agricultural work force: 1.7mn people, average age of 67)

Through its corporate philosophy and corporate culture, the company hopes to combine agritechnology and sincerity to make cultivation enjoyable, emphasizing the following elements. 

New direct-to-consumer businesses: Joy of growing, harvesting, good taste, and beauty

Home gardens and kitchen gardens (3.6mn people on farms and community gardens)

Entry into smart agriculture

The company will make a full-scale entry into smart agriculture. In January 2022, the company announced that it will work with the town of Shintomi in Miyazaki Prefecture to promote the following collaborative and cooperative matters:

  • Pilot testing and development of technologies to automate and save labor in cultivation and management operations through introduction of smart agriculture using ICT technology
  • Practice and dissemination of agricultural production that reduces environmental impact and chemical fertilizers through recycling-oriented cultivation such as hydroponic cultivation utilizing organic fertilizer (hydroponic cultivation using probioponics technology)
  • Matters related to the revitalization of local agriculture and development of human resources
  • Matters related to the promotion of local agriculture and creation of jobs through corporate participation
  • Other matters deemed necessary by both parties

Launch of Agrio Strawberry Master

Regarding the first item above, the company announced that it has started providing services as Agrio Strawberry Master, a comprehensive OAT cultivation solution service, by conducting strawberry demonstration cultivation in a field adjacent to its cultivation research center, as a practice of smart agriculture utilizing ICT technology developed by the company. The company has developed a growth diagnosis system that uses artificial intelligence (AI) to determine the growth status of strawberries. In addition to this system, the company plans to offer growers a new service that packages fertilizers, plant protection products (ppp), and cultivation know-how for a monthly fee.

Agrio Strawberry Master is a service that provides everything from materials to consulting for a monthly fee, and the company aims to capture demand from new farmers seeking peace of mind.

Business

Business model overview

Business description

Overview

Main products: plant protection products (ppp), fertilizers, and biostimulants

OAT Agrio Co., Ltd. was formed on September 28, 2010 through a management buyout of the AgriTechno Business of Otsuka Chemical Co., Ltd. The new company after the buyout has specialized in plant protection products (ppp) and fertilizers. OAT Agrio is an R&D-oriented company that develops its own active ingredients, applies for their registration as plant protection products, and manufactures and sells the products. (R&D spending is around 10% of revenue.) The company generates revenue in two categories: agrichemicals (42.1% of revenue in FY12/21) and fertilizers and biostimulants (57.9%). Within the agrichemicals field, the company is involved mainly in insecticides, fungicides, and herbicides.

Pipeline

As with pharmaceuticals, the development path for plant protection products (ppp) is long (10 years from exploratory research to market launch) and costly (billions of JPY), according to Japan’s Ministry of Agriculture, Forestry and Fisheries. As of 2021, its 11th year since establishment, the majority of OAT Agrio’s revenue still comes from products developed and launched when it was part of Otsuka Chemical. After launching active ingredients in Japan, the company begins working on parallel efforts to expand their scope of application (registering them for use on as many crops as possible) and pursue registration in other countries. The company has not disclosed details about its development pipeline (including number of products under development, fields, R&D expenditure).

Global management

OAT Agrio and its group companies conduct R&D on plant protection products (ppp) and fertilizers, explore cultivation techniques, and manufacture and sell products in Japan and other countries, under its management philosophy “We contribute to the people of the world with our agritechnology and sincerity.” The company has R&D bases in Japan (Naruto, Tokushima Prefecture), India, and Spain, and offers its products worldwide including Europe and the Americas, Brazil, Asia, and Oceania. Overseas sales account for around 62.6% of revenue.

R&D orientation

The company has an R&D focus, and R&D spending has accounted for around 9% of revenue. The company offers plant protection products (ppp) and fertilizers (particularly green agrochemicals), proprietary cultivation techniques (developed at company farms), and diverse support for producers and general consumers. It conducts R&D based on the needs and feedback it obtains through these channels.

M&A strategy

The OAT Agrio group comprises the company (OAT Agrio Co., Ltd.), 27 consolidated subsidiaries (Asahi Chemical Manufacturing Co., Ltd., Runhe (Zhoushan) Plant Science Co., Ltd., OAT & IIL India Laboratories Private Limited, Asahi Chemical Europe s.r.o., PT. OAT Mitoku Agrio, LIDA Plant Research, S.L., Inplanta Innovations Inc., and Blue Wave Holding B.V., among others), two non-consolidated subsidiaries, and three affiliated companies. The company acquired Chrysal International B.V. (Blue Wave Holding B.V.) in December 2018, boosting consolidated revenue from 1.1x parent revenue (FY12/18) to 1.6x (FY12/20).

Three technology/service categories

The company provides services in three technology categories, as defined below.

1. Control (prevention/extermination) technologies (plant protection product))

“Control technologies” typically includes technologies to protect crops from pests and diseases that have adverse effects on crops, as well as technologies to eliminate unwanted plants (weeds). The company provides such “pharmaceuticals for plants,” called plant protection products (ppp).

2. Fertilization and irrigation technologies (fertilizers, Drip Fertigation Cultivation System)

"Fertilization and irrigation technology" includes technologies to provide nutrients to agricultural crops in accordance with their growth stages, and technologies to reduce labor and improve efficiency in agricultural work. The company supplies nutrients for plants in the form of fertilizers and the Drip Fertigation Cultivation System that supplies them to crops.

3. Biostimulants

Biostimulants are materials and technologies that enhance plants’ immune strength by increasing resistance to cold, heat, and diseases and pests and stimulating growth. In the biostimulant category, the company provides fertilizers and stimulating agents.

Technologies to help increase food production and services the company offers
Source: Shared Research based on company data

The company explains that its strength lies in the ability to provide multifaceted solutions to increase food production by offering services for each of the above three technologies. The company targets farmers who face environmental problems and issues related to increasing food production, ascertaining their needs and concerns, and addressing them through R&D across plant protection products (ppp), fertilizers, and biostimulants. The company is also building a direct-to-consumer business, through which it plans to offer a variety of products to consumers without going through trading houses or retailers. To provide its main products (agricultural chemicals, fertilizers, and biostimulants), the company has established an R&D structure to develop active ingredients and various formulations in-house.

Control (prevention/extermination) technologies (provision of plant protection products)

The company conducts R&D and produces plant protection products (ppp), which it sells through Zen-noh (National Federation of Agricultural Cooperative Associations), trading companies, and manufacturers. Agricultural practice tends to focus on the cultivation of specific crops in artificial environments, making crops prone to pests and weeds, so ensuring constant yields and quality is problematic. Plant protection products (ppp) play an important role in maintaining crop yields, quality, and safety, contributing to domestic food self-sufficiency. Plant protection products are categorized by function: insecticides, fungicides, insecticide-fungicides, herbicides, rodenticides, plant growth regulators, auxiliary agents, and others.

Agrichemical categories 
CategoryFunction
i.InsecticidesChemicals to control pests that harm crops
ii.FungicidesChemicals to control diseases that damage crops
iii.Insecticide-fungicidesChemicals for simultaneous control of crop pests and diseases
iv.HerbicidesChemicals to control weeds
v.RodenticidesChemicals to control rats and other rodents that damage crops
vi.Plant growth regulatorsChemical that promote or inhibit growth of crops
vii.AttractantsAgents that attract pests, mainly by smell
viii.Spreading agentsAgents mixed in with other agrichemicals to increase adhesiveness
ix.Natural enemiesNatural enemies of pests that harm crops
x.MicrobicidesChemicals that use microorganisms to control insect pests and diseases that damage agricultural crops
Source: Ministry of Agriculture, Forestry and Fisheries

Otsuka Chemical’s AgriTechno Business (OAT Agrio’s origins) got its start in 1957, when Otsuka Chemical launched a sucker control agent (Maleic Hydrazide). Nowadays, OAT Agrio handles hundreds of plant protection products (ppp), with main categories being insecticides, fungicides, herbicides, and plant growth regulators. Most of the company’s major plant protection products were developed, patented, and registered while it was part of Otsuka Chemical. With the exception of Shochinosuke flowable (registered in December 2014), most of the plant protection products (ppp) the company has registered since establishment as an independent company have come through the acquisition of other companies.

Major agrichemical products 
CategoryActive ingredientProductPatent applicationRegistration obtainedCrop application
InsecticidesBenflacarbOncol Granule 5Jun 1981Oct 1986Paddy rice, sugar cane, persimmons, etc.
Sodium oleateOleate*Aug 1994Dec 1992Vegetables, fruit trees, etc.
AlanicalbOrion hydrating agent 40Nov 1982Nov 1993Pears, citrus fruit, peach, cabbages, etc.
TolfenpyradHachi-Hachi emulsionSep 1989Apr 2002Cabbages, Chinese cabbages, lettuce, etc.
CyflumetofenCyflumetofen flowableAug 2000Oct 2007Tea, strawberries, watermelons, etc.
Crystal toxin produced by Bacillus thuringiensisToaro CT*Obtained through acquisitionMar 2002Vegetables, strawberries, etc.
Propylene glycol mono fatty acid esterAcaritouch*Obtained through acquisitionApr 2001Vegetables, fruit trees, hops, etc.
Prepared oils (safflower oil, cottonseed oil)Suffoil*Obtained through acquisitionOct 2010Citrus fruits, strawberries, vegetables, tomatoes, mini tomatoes, etc.
FungicidesFlutianilShochinosukeDec 1999Dec 2014Strawberries, cantaloupes, watermelons, etc.
Oxypoconazole fumarateAlshine hydrating agentOct 1989Apr 2000Strawberries, pears, grapes, etc.
Potassium bicarbonateKaligreen*Obtained through acquisitionMay 2002Vegetables, tomatoes, etc.
HerbicidesBenzofenap and two other agentsKalude flowableObtained through acquisitionAug 2013Paddy rice
Benzofenap and two other agentsPirakuro Ace flowableObtained through acquisitionDec 2010Paddy rice
Benzofenap and two other agentsOAT Smart flowableObtained through acquisitionJan 2015Paddy rice
Benfuresate and two other agentsKiretsu 1kg granulesObtained through acquisitionSep 2014Paddy rice
Sodium cyanideCyanoteObtained through acquisitionDec 2003Cabbage, etc.
CyclosulfamuronKanetsugu 1kg granulesObtained through acquisitionSep 2013Paddy rice
Plant growth regulatorsDecyl alcoholContactObtained through acquisitionJul 1982Tobacco
5-nitroguaiacol nitrophenolAtonik**Obtained through acquisitionNot registered in JapanPaddy rice, strawberries, tomatoes, strawberries, rapeseed, etc.
Source: Shared Research based on company data
* These are “green agrochemicals” the company defines as “safe and environmentally friendly preventive agents that provide peace of mind and can be used without restriction such as those derived naturally or from food additives or organic JAS-compliant agrochemicals with agrochemical registrations.”
**In Japan, plant growth regulators are subject to regulation as plant protection products. However, the company categorizes Atonik as a biostimulant. 
Overseas rollout of Cyflumetofen (acaricide)
Mite damage to citrus (Brazil), Mite damage to almonds (US) 
Cyflumetofen’s characteristics: Outstanding effect on spider mites, but no effect on natural enemies
Source: Company data 
Gatten (fungicide): Squash damage from powdery mildew
Before and 25 days after spraying with Gatten (left: before; right: after)
Source: Company data
Sales structure 

In Japan, the company’s Agrochemical Division and Sales Support Section formulate marketing-based strategies to expand sales. Two domestic branches, one sales office, and one local office conduct sales activities (such as winning new customers and expanding sales routes) via Zen-noh (National Federation of Agricultural Cooperative Associations) and distributors affiliated with trading companies. The company is also stepping up sales efforts via a business alliance with Maruzen Chemicals Co., Ltd. OAT Agrio conducts marketing through plant protection products (ppp) sales groups located at branches, where it works to respond to customer needs. 

The Overseas Business Division spearheads overseas sales. The company has a two-pronged sales structure, operating via trading companies as well as selling directly to overseas customers in collaboration with group companies. The company is strengthening its sales structures in Asia, Central and South America, and Africa as it expects these markets to expand due to high rates of population growth. Specifically, the company is focusing on sales promotion activities, such as product briefings at meetings of farmers and technology briefings for partner companies. 

R&D structure

The company has R&D department within its research laboratories in Naruto, Tokushima Prefecture. There, the company conducts basic and applied research themed on “high levels of safety,” “world-class, original technology,” and “development in fields with high global needs.” To develop, manufacture, and sell plant protection products (ppp) in Japan, companies must obtain registration as stipulated in the Agricultural Chemicals Regulation Act. Obtaining such registration requires companies to follow strict procedures and perform various tests. The process typically takes about 10 years and requires several billions of JPY in R&D spending.

Generic plant protection products (ppp) also exist. Unlike generic pharmaceuticals, however, the time and costs involved in registering generic plant protection products are comparable to those for new ppp. Overseas, the company established OAT & IIL India Laboratories Private Limited to focus on the in-house development of new ppp and to strengthen and speed up R&D.

Fertilization and irrigation technologies (provision of fertilizer products)

The company sells the Drip Fertigation Cultivation System and fertilizers to farmers engaged in greenhouse agriculture. The Drip Fertigation Cultivation System is composed of a liquid fertilizer mixer, drip tubes, and ancillary equipment. The system is designed to supply nutrients and water to plants as and when required, according to their growth stage. With this system, the company seeks to help expand scope of business for famers and improve crop yields. Around 2,800 farms across Japan have adopted the system, using it to reduce farm labor and environmental impact, improve crop quality, and boost yields. The system is being used with a wide range of crops, including tomatoes, strawberries, cucumbers, bell peppers, grapes, and carnations.

In FY12/17, the company began selling the TT Series of liquid fertilizer mixers. (“TT” stands for “tractable” and “trustworthy.”) The company augmented this series with the TT3000, which is aimed at large-scale producers, in response to customer demand. The company also focuses on liquid fertilizer for greenhouse cultivation. The market for liquid fertilizer is expanding, due to demand to reduce fertilizer use and the labor required for spraying. The company has the top share of the hydroponics market, at nearly 20%. Anticipating further demand growth, the company is moving forward with the development of organic liquid fertilizers.

The company’s differentiation strategy is to provide fertilizer containing the ingredients tailored to specific crop cultivation periods based on data accumulated in its own research farm. The company owns and operates nine greenhouses (Naruto, Tokushima Prefecture), where it amasses cultivation data from using its own technologies. The company has obtained GLOBAL G.A.P. certification (a global farm certification) for its strawberries. The company also has a fertilizer plant in China’s Zhejiang Province and has built a production and supply structure overseas.

Major fertilizer products and characteristics of the Drip Fertigation Cultivation System
CategoryProductApplication
FertilizersOAT House fertilizer seriesHydroponic fertilizer fro tomatoes, strawberries, flowers, etc.
Granular phosphite fertilizerGranular fertilizer for fruit crops, leaf crops, root crops, fruit trees, turf, etc.
PhosplusLeaf spray fertilizer for fruit crops, leaf crops, root crops, fruit trees, turf, etc.
Fertilizer for hydroponic soil cultivationFertilizer for the Drip Fertigation Cultivation System
RootbeadsLiquid compound fertilizer for legumes, etc.
SystemDrip Fertigation Cultivation SystemLiquid fertilizer supply system, mainly for tomatoes, strawberries, cucumbers, bell peppers, grapes, carnations, etc.
Flower materialsChrysal seriesQuality preservatives for growers, transporters, retailers, and consumers of cut flowers
Source: Shared Research based on company data
Sales structure

The company’s Fertilizer & Biostimulant Division and Sales Support Section formulate marketing-based strategies to increase sales of fertilizers and systems. The company conducts sales activities aimed at winning new customers and expanding sales routes at four locations in Japan (two branches, one sales office, and one local office) and Drip Fertigation Research Co., Ltd. (a subsidiary), working via Zen-noh and distributors affiliated with trading companies. The company is also stepping up sales efforts via a business alliance with Maruzen Chemicals Co., Ltd. OAT Agrio conducts marketing through the Fertilizer & Biostimulant Group at branches, where it works to respond to customer needs.

The company operates the AGRIO website, through which it sells products incorporating the company’s fertilization and irrigation technologies, providing them more easily for use in kitchen gardens and on farms. On the website, the company sells Living Garden, a hydroponics kit that lets customers grow vegetables in their living room. Website products center on general-consumer offerings, such as Vegetable Life A (a specialized all-in-one fertilizer that contains all the components needed to grow farm crops), OAT Farm A (an agricultural material that uses stevia), and Misaki (a liquid that helps keep cut flowers fresh). The site also provides professional advice from gardeners and florists on how to use the products. Using the network of Netherlands-based Blue Wave Holding B.V. (Chrysal group), OAT Agrio actively markets the Chrysal series (quality preservatives for cut flowers) in Europe, Africa, the Americas, and Asian countries.

R&D structure

The company’s R&D structure includes Fertilizer & Biostimulant Development Group and Cultivation Research Center within the Naruto Research Laboratories, Tokushima Prefecture. These group and center develop fertilization and irrigation technologies for greenhouse crops and develops technology aimed at improving fertilizer quality and stability. Blue Wave Holding B.V. (Chrysal group) has laboratories that develop technologies and new products to improve the Chrysal series of flower foods and post-harvest treatments for cut flowers.

Biostimulants (provision of plant growth regulators)

Biostimulants are materials and technologies that enhance plants’ immune strength by increasing resistance to cold, heat, and diseases and pests and stimulating growth. Their active ingredients are derived from natural extracts, such as seaweed, humic substances, sugar beet molasses, and iron. Although a familiar element of ancient Japanese agricultural methods, biostimulants are not accorded the same technological credence as agricultural chemicals and fertilizers. OAT Agrio entered the biostimulant field in earnest in December 2011 when it acquired Asahi Chemical Manufacturing as a subsidiary. Asahi Chemical Manufacturing’s mainstay product is Atonik, a plant growth regulator.

Although biostimulants are still in the process of gaining recognition in Japan, in recent years they have become accepted in other parts of the world, mainly in Europe. There, biostimulants are gaining acceptance as a separate way to promote plant growth and health on a level akin to plant protection products (ppp) and fertilizers. By leveraging sales of Atonik, OAT Agrio aims to gain a foothold in the biostimulants business and put this business on the same footing as its control and fertilization/irrigation technologies. In Japan, the company also sells three products containing naturally derived materials developed by Spain’s LIDA Plant Research, S.L. OAT Agrio is also marketing and promoting Potetoru, which is designed to increase yields, promoting photosynthesis by controlling the opening of pores.

Main biostimulant products
CategoryProductApplication
Plant growth regulatorsAtonikPlant growth regulator for paddy rice, apples, tomatoes, strawberries, rapeseed, corn, sugar cane, etc.
FertilizersLidavitalFoliar fertilizer (provided by LIDA Plant Research S.L. of Spain)
AlgamixFoliar fertilizer (provided by LIDA Plant Research S.L. of Spain)
FullbodyFoliar fertilizer (provided by LIDA Plant Research S.L. of Spain)
PotetoruFoliar fertilizer for potatoes and sweet potatoes

Source: Shared Research based on company data
Growth comparison for Atonik (biostimulant) spray (Hungary): Reduction in stress from herbicides
Source: Company materials
Growth comparison with Lidavital (biostimulant) sprayed on tea (Japan)Before After