At its inception as a manufacturer of electronic devices and functional materials in 1981, Almedio Inc. focused on the market for optical disc test media, seeing an opportunity to capture a large share of a niche market that was too small to attract competition from large companies. However, performance in optical disc-related business has been deteriorating since its peak in 2004–2005 as storage media technology has changed. The company was quick to spot a new business opportunity in a different area and moved into the Insulating Materials business in 2005 after seeing there was a lack of reliable suppliers of high quality insulating materials for industrial furnaces in China. The company has steady grown its Insulating Materials business over the years since and, as of FY03/22, this business accounts for 67.1% of total revenue versus 30.7% for its (optical disc-related) Archive business and 1.7% for its Industrial Solutions business.
As the bulk of its business started to shift away from electronic devices to functional materials, Almedio tried its hand in other areas. The company started its Web business in 2017, but it recognized this venture was not going to pan out and promptly exited this business only one year later, and redoubled its efforts on functional materials. Consequently, the company was able to combine existing technologies in such a way that it sped up the development of carbon nanofibers that were low-cost and had properties that carbon nanofibers made by others did not. Almedio is already test marketing these new carbon nanofibers to various manufacturers, including automobile and aircraft manufacturers in Japan and the US. Eyeing a move to mass production in late 2022 or later, the company plans to cover associated costs with profit from the Other Business segment and support from its de facto debt-free financial structure.
The carbon nanofibers the company is test marketing have a diameter of several hundred nanometers, which is smaller than carbon fibers (about 1/10 the size) but lager than carbon nanotubes (about 10x). At this size, its new carbon nanofibers effectively bring together the dispersive properties (meaning they are easily mixed in with other materials) of carbon fibers and the reinforcing effect of carbon nanotubes. Further, manufacturing costs are approximately 1/50 the cost of carbon nanotubes, making Almedio's new carbon nanofibers highly cost competitive. This attracted the attention of potential users across a wide range of industries, including automobiles, infrastructure, aircraft, and sporting goods, and Almedio is test marketing its carbon nanofibers to dozens of companies. The company plans to begin selling mass-produced carbon nanofibers in 2H 2022 or 2023. By FY03/24, it targets revenue of JPY615mn and operating profit of JPY296mn from the business before allocation of companywide expenses.
The impetus for Almedio's launch of its mainstay Insulating Materials business in 2005 was information—that there were no reliable suppliers in China of the high quality insulating materials that are used in industrial furnaces—from an acquaintance of President Takahashi who was familiar with the insulating materials business. President Takahashi was also familiar with China, as he lived in China and Hong Kong from 1986 to 1994, before joining Almedio, which also supported his decision.
Almedio established a subsidiary in Suzhou, a suburb of Shanghai, under the name Alcera. The company selected Suzhou because a location near Shanghai made it easier to attract good employees and import materials from nearby countries such as Japan and Taiwan. Alcera purchases ceramic fibers, handles secondary processing (such as shaping), and manufactures insulating materials (blankets, boards, and blocks). It also manufactures furnaces (electric and gas furnaces) and high-end kiln tools (shelves). Most of its output goes to Chinese companies. Alcera sells insulating materials to manufacturers of furnaces used in steelmaking, for heat-treating glass, and for firing solar cells. It sells furnaces and high-end kiln tools to manufacturers of semiconductors and ceramic capacitors. Alcera generates 70% of its revenue from insulating materials, 20% from furnaces, and 10% from high-end kiln tools. In the Insulating Materials business, operating profit margin before allocation of companywide expense was 12.8% (FY03/22).
According to the company, Alcera's insulating materials are superior to low-priced products made by local competitors, as neither they do not tend to shrink nor turn yellow with age as competing products do. By convention, most companies that manufacture insulating materials do not also make furnaces, as doing so would put them in competition with their own customers. This has not proven to be a problem for Alcera, however. Alcera has not faced hostility from furnace manufacturers about encroaching upon their field of business because at the time it was founded, the Chinese economy was booming and demand for industrial furnaces was running strong. As a result, Alcera was able to build a structure that allows it to improve the quality of insulating materials by responding to requirements and challenges of furnace manufacturers ahead of time, as well as provide furnace manufacturers with detailed suggestions of how to better attach insulating materials to their furnaces.
Supported by these differentiated product quality and services, the Insulating Materials business has continued to grow steadily over the years. As of FY03/21, the Suzhou Plant was operating at nearly full capacity. To address physical limitations (in terms of land and water access) that prevented it from expanding production capacity further, the company plans to respond to higher demand by increasing the number of suppliers in the vicinity that work for it on a consignment basis.
The company's 2005 start in the insulating materials business makes it a latecomer to the industry. To expand business with customers in steel and other long-established industries, Almedio has to take away market share from first-movers in the business. The company has been able to grow sales by making inroads to industries that have been around for many years with its differentiated product quality and services, and also by expanding business with new companies in South China that have been founded by entrepreneurs. Almedio has also been able to establish relations with China-based subsidiaries of Japanese companies, something that is hard for latecomers to do because Japanese companies in China are usually bound by long-standing relationships with existing suppliers. In Almedio's case, it was able to start business with large sttelmakers because plants that handle processing on consignment for large Japanese steelmakers are located near the Suzhou Plant. That relationship led to dealings with Japanese steelmakers, which eventually became buyers of insulating materials from Almedio for use on continuous galvanizing lines for steel panels used in automobile bodies. Sales to large steelmakers are linked to specific projects, so they vary by year, accounting for as much as 30% of revenue.
The company launched the Archive segment in the early 2010s. In this segment, the company sells optical drives and disks for long-term storage. It also sells optical drives for industrial equipment to manufacturers of medical devices and ATM machines. These drives make up the bulk of segment revenue and profit. In the medical field, the drives are used to store CT scans and other medical imaging data, and also medical records. In addition, the drives store data from ATMs at banks and convenience stores. Optical drives for industrial equipment sell for around 4x the price of drives for the general market. Almedio’s selling points are that it can customize the drives (having designed them itself) and has a 24-hour email response system in place. The company explains that this organization allows it to provide robust support, advising on how to connect the drives with other equipment or determining the cause of any possible malfunction.
The company has been involved in the manufacture and sale of test media since its establishment in 1981. Test media (including for magnetic tapes, and for CDs, DVDs, Blu-ray Discs, and other media that meet optical disk quality standards) accounted for 2.4% of revenue in FY03/21. Products include test disks for onboard automotive equipment, such as car audio and navigation systems. The company sells these products to manufacturers of consumer electronics and equipment mounted in automobiles. The company says it has a 75% share of the global market for test media, which allows it to control selling prices. When closing its CD and DVD plant in 2015, the company conducted a demand forecast and ensured it had enough master disks in inventory to meet this demand. For other media, the company purchases master disks, which it uses to produce test media.
Since the late 2000s, the Test Media business has fallen on hard times due to the rise of flash memory and other storage media that require no test media, as well as to the growth of cloud storage. For this reason, in 2005 the company built a plant in Suzhou, China, and entered the Insulating Materials business. It also conducted R&D on nanomaterials and developed new materials, which it began test marketing in FY03/20.
In FY03/22, Almedio generated revenue of JPY3.3bn (+21.8% YoY), operating profit of JPY75mn (operating loss of JPY11mn in FY03/21), recurring profit of JPY98mn (recurring loss of JPY4mn in FY03/21), and a net loss of JPY40mn (net loss of JPY136mn in FY03/21).
Revenue grew YoY in the Insulating Materials segment. At consolidated subsidiary Alcera (Suzhou) Co., Ltd., revenue increased YoY, driven by higher sales of industrial furnaces and irregularly shaped moldings. Revenue growth at Alcera was also attributed to the depreciation of the yen, which was weaker than the level assumed at the time of the initial earnings forecast. In the Archive segment, revenue rose YoY because sales of optical drives for industrial equipment grew in the
US and Europe, where customers continued to front-load orders in response to
concerns over disrupted logistics. Revenue declined in the Industrial Solutions segment due to the ongoing shift from optical disks to other media. In the nanomaterials business, sample evaluation by potential clients is ongoing. Revenue rose YoY in this business despite an extraordinary impairment loss to account for
a delay in the launch of full-scale sales.
For FY03/23, the company forecasts revenue of JPY3.0bn (-6.7% YoY), an operating loss of JPY90mn (operating profit of JPY75mn in FY03/22), a recurring loss of JPY97mn (recurring profit of JPY98mn in FY03/22), and a net loss of JPY130mn (net loss of JPY40mn in FY03/22). The company expects revenue of JPY2.0bn (-6.6% YoY) from the Insulating Materials segment, JPY820mn (-18.3% YoY) from the Archive segment, JPY55mn (+2.0% YoY) from the Industrial Solutions segment, and JPY121mn (+665.7% YoY) from the nanomaterials business.
May 2022, the company announced that it would implement its 2022 medium-term
management plan by extending the period covered by the 2021 plan in response to recent changes in economic
conditions and the business environment. Under the 2022 plan, the company will maintain its basic policy as it seeks to exit the optical disk business and transform itself into a manufacturer of functional materials (insulating materials and nanomaterials). The plan calls for a JPY541mn rise in revenue and a JPY409mn increase in operating profit between FY03/22 and FY03/25.
In the mainstay Insulating Materials segment, the company manufactures furnaces as well as insulating materials. This combination helps Almedio understand the issues and requirements of its customers (furnace manufacturers), so it can develop products accordingly.
The company is conducting R&D in the nanomaterials business, which it aims to turn into its next major business. Being a small company gives Almedio the freedom to search out such niche, unique product categories, which tend to be overlooked by larger companies.
The company is applying electricity-related expertise cultivated in its original test media business to the development of new materials. This expertise also makes client proposals more convincing.
The company has built up its businesses by meeting the needs of the times. However, by searching for technologies central to niche industries, it has not amassed more general-purpose technologies that would help development in peripheral areas.
The company is diversifying by moving into new areas of business rather than areas peripheral to existing fields. As a result, it does not benefit from synergies in cultivating customers or making use of existing facilities. New businesses generate losses as a result, and profitability was low on a consolidated basis as of FY03/21.
Expanding the company’s earnings in optical drives for industrial equipment is likely to be difficult, due to the emergence of other types of storage media and the relative ease of switching.
|Gross profit margin||22.4%||29.3%||30.9%||33.3%||30.3%||31.2%||32.7%||29.8%||28.1%|
|Operating profit margin||-||3.8%||4.5%||1.0%||-||-||2.0%||-||2.3%||-|
|Recurring profit margin||-||3.9%||3.9%||1.1%||-||-||1.7%||-||3.0%||-|
|Per-share data (split-adjusted; JPY)|
|Shares issued ('000 shares)||5,225||9,192||9,192||9,702||9,702||11,697||14,802||14,802||15,772|
|EPS (fully diluted; JPY)||-||-||12.9||6.5||-||-||-||-||-|
|Dividend per share (JPY)||5.0||2.5||2.5||2.5||-||-||-||-||-||-|
|Book value per share (JPY)||483||302||305||286||252||191||178||170||174|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||1,172||1,441||1,385||1,299||1,243||1,262||1,664||1,548||1,538|
|Total current assets||1,988||2,961||2,868||2,803||2,791||2,798||2,917||3,036||3,686|
|Tangible fixed assets||756||748||760||841||911||864||366||334||561|
|Investments and other assets||111||135||107||113||126||137||121||104||101|
|Total current liabilities||320||941||679||832||1,038||1,405||649||835||955|
|Total fixed liabilities||235||371||424||292||701||203||144||131||643|
|Total net assets||2,308||2,637||2,716||2,695||2,427||2,210||2,619||2,510||2,751|
|Total liabilities and net assets||2,863||3,949||3,819||3,818||4,165||3,818||3,413||3,475||4,349|
|Total interest-bearing debt||49||635||494||552||1,030||1,001||387||346||757|
|Cash flow statement(JPYmn)|
|Cash flows from operating activities||-331||-343||238||-59||50||-105||183||45||-281|
|Cash flows from investing activities||43||-353||-88||-107||-527||-228||423||-135||-347|
|Cash flows from financing activities||-25||971||-133||36||488||311||-182||-41||548|
|Total asset turnover||54.3%||106.5%||100.9%||81.8%||88.7%||77.9%||76.1%||77.9%||83.5%|
On May 13, 2022, Almedio Inc. announced the implementation of its 2022 medium-term management plan, reductions in capital stock and legal capital surplus, and disposition of accumulated deficit.
In May 2022, the company announced that it would roll out its 2022 medium-term management plan by extending the period covered by the 2021 plan in response to recent changes in economic conditions and the business environment.
|Operating profit margin||-||-3.0%||5.1%||12.7%|
The company decided to reduce its capital stock and legal capital surplus, and dispose of accumulated deficit. The purpose is to improve its financial position by covering a shortfall in retained earnings brought forward and to ensure flexibility of its future capital strategy.
The company will reduce its JPY1,607,379,130 capital stock (as of March 31, 2022) by JPY600,000,000 to JPY1,007,379,130. It will also reduce its JPY1,560,759,130 legal capital surplus by JPY600,000,000 to JPY960,759,130.
On May 6, 2022, Almedio Inc. announced an extraordinary loss and revisions to its full-year earnings forecast for FY03/22.
The company launched its nanomaterials business in 2019. Sample evaluation by potential clients is ongoing, but the company reassessed the expected sales volume and the likely timing of when sales to customers will get into full swing in light of the spread of COVID-19 in China and Ukraine situation. It decided to record an extraordinary impairment loss of approximately JPY73mn on headquarters fixed assets, including joint-use and business assets, in view of the timing of recovery on funds invested and recoverability.
The company increased its revenue forecast by JPY745mn from its initial forecast. This breaks down into Insulating Materials segment, +JPY517mn; Archive segment, +JPY287mn; Industrial Solutions segment, -JPY15mn; and Other Business segment, -JPY46mn.
In the Insulating Materials segment, sales of industrial furnaces and irregularly shaped moldings at consolidated subsidiary Alcera (Suzhou) Co., Ltd. grew more than expected and the yen was weaker than projected in the initial forecast. The impact of yen weakness accounted for JPY347mn of the JPY517mn increase.
In the Archive segment, sales of optical drives for industrial equipment grew in the US and Europe, where customers continued to front-load orders due to concerns over disrupted logistics.
Industrial Solutions segment revenue was affected by the shift from optical disks to other media.
Other Business segment revenue is likely to fall short of the initial forecast as the nanomaterials business is running behind schedule.
Variations in segment operating profit forecast break down into Insulating Materials segment, +JPY96mn; Archive segment, +JPY50mn; Industrial Solutions segment, -JPY10mn; and Other Business segment, -JPY43mn.
|Gross profit margin||29.8%||28.4%||29.7%||29.8%||26.6%||26.7%||27.6%||28.1%|
|Operating profit margin||-||-||-||-||-||-||-||2.3%|
|Recurring profit margin||-||-||-||-||-||-||0.4%||3.0%|
|Gross profit margin||29.8%||27.2%||31.7%||30.0%||26.6%||26.7%||29.4%||29.3%|
|Operating profit margin||-||-||4.2%||-||-||3.8%||2.3%||7.9%|
|Recurring profit margin||-||-||4.0%||1.5%||-||4.1%||3.5%||8.7%|
|By segment (cumulative)||FY03/21||FY03/22|
|By segment (quarterly)||FY03/21||FY03/22|
Revenue increased YoY, as higher revenue in the Insulating Materials, Archive, and Other Business segments offset a revenue decline in the Industrial Solutions segment.
The company adopted the Accounting Standard for Revenue Recognition, which had no impact on consolidated results.
Segment revenue was up YoY, both in Japan and for Alcera.
In Japan, revenue increased YoY on higher sales of irregularly
At Alcera, revenue grew YoY on increased sales of industrial furnaces, irregularly shaped moldings, and high-temperature kiln tools.
Segment revenue was up YoY, rising in both the archive and storage solutions categories.
In the archive category, the company sells optical drives and disks for long-term storage. Sales of optical drives for long-term storage were favorable, particularly for use in medical devices, due to positive responses to the company’s proposals meeting demands for the long-term storage of data on corporate activities and the need to reduce storage costs. Sales for machines at photo printing kiosks also increased. As a result, revenue in this category rose YoY.
In the storage solutions category, the company develops, manufactures, and sells optical drives for industrial and AV equipment. Sales grew in the US and Europe, where customers continued to place orders ahead of schedule due to concerns over disrupted logistics. As a result, revenue in the storage solutions category grew YoY.
Segment revenue fell YoY. Sales of products to key customers (manufacturers of car audio and navigation equipment) declined, owing to a decrease in the quantity of test media used. Sales were also down in AV equipment and PC markets, affected by the transition to media other than optical disks.
The main business in this segment is the R&D, manufacture, and sale of nanomaterials. In the nanomaterials business, the company offers carbon fiber in powdered form. Segment revenue was up YoY, although below plan. Revenue growth was attributed to increased shipment volumes of revenue-generating samples to a range of industries in Japan and overseas and an increase in corporate customers looking to use the company's nanomaterials for multiple applications. Sample assessments by potential clients are making progress, and the company is receiving many inquiries, especially from companies in the aerospace, automobile, and infrastructure industries. Recently, the company signed a joint development agreement with a major aerospace company and agreed to extend the terms of a nondisclosure agreement with a major automobile company.
On August 3, 2021, the company announced the opening of the Higashi Murayama Office (slated to open on August 16, 2021). Almedio is positioning this office as a location that will allow the company to handle more development projects in the nanomaterials business and strengthen its operations in preparation for mass production, as well as an integrated facility for medium-scale prototyping and production. The company says the new office will enable it to integrate equipment and put the sales and technology departments in the same location. Almedio expects the new arrangement to facilitate information sharing and accelerate response to customer needs. The company aims to grow faster as a result. The company expects the impact of opening the new office to have little impact on FY03/22 results.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||FY Est.|
|Cost of revenue||860||1,023||1,883||1,083||1,264||2,348|
|Gross profit margin||28.5%||30.8%||29.8%||26.7%||29.3%||28.1%|
|Operating profit margin||-3.2%||1.8%||-0.4%||-1.6%||5.5%||2.3%||-3.0%|
|Recurring profit margin||-3.7%||2.7%||-0.1%||-1.3%||6.5%||3.0%||-3.2%|
For FY03/23, the company forecasts revenue of JPY3.0bn (-6.7% YoY), an operating loss of JPY90mn (operating profit of JPY75mn in FY03/22), a recurring loss of JPY97mn (recurring profit of JPY98mn in FY03/22), and a net loss of JPY130mn (net loss of JPY40mn in FY03/22). The company expects revenue of JPY2.0bn (-6.6% YoY) from the Insulating Materials segment, JPY820mn (-18.3% YoY) from the Archive segment, JPY55mn (+2.0% YoY) from the Industrial Solutions segment, and JPY121mn (+665.7% YoY) from the nanomaterials business.
|Initial forecasts vs. results||FY03/16||FY03/17||FY03/18||FY03/19||FY03/20||FY03/21||FY03/22|
|(JPYmn)||Cons.||Vs. forecast||Cons.||Vs. forecast||Cons.||Vs. forecast||Cons.||Vs. forecast||Cons.||Vs. forecast||Cons.||Vs. forecast||Cons.||Vs. forecast|
|As of Q1||3,880||1.0%||3,500||-10.8%||3,750||-5.6%||4,055||-23.3%||3,190||-13.8%||2,457||9.1%||2,521||29.6%|
|As of Q2||3,880||1.0%||3,500||-10.8%||3,650||-3.0%||3,404||-8.7%||3,190||-13.8%||2,457||9.1%||2,521||29.6%|
|As of Q3||3,700||5.9%||3,200||-2.5%||3,650||-3.0%||3,038||2.3%||2,670||3.0%||2,457||9.1%||2,521||29.6%|
|Operating profit||Initial Est||176||0.6%||180||-83.3%||100||-||67||-||115||-52.2%||-43||-||-28||-366.7%|
|As of Q1||176||0.6%||180||-83.3%||100||-||67||-||115||-52.2%||-43||-||-28||-366.7%|
|As of Q2||176||0.6%||180||-83.3%||30||-||67||-||115||-52.2%||-43||-||-28||-366.7%|
|As of Q3||120||47.5%||30||0.0%||30||-||-83||-||15||266.7%||-43||-||-28||-366.7%|
|Recurring profit||Initial Est||164||-6.1%||170||-80.6%||85||-||52||-||111||-56.8%||-51||-||-36||-371.7%|
|As of Q1||164||-6.1%||170||-80.6%||85||-||52||-||111||-56.8%||-51||-||-36||-371.7%|
|As of Q2||164||-6.1%||170||-80.6%||15||-||52||-||111||-56.8%||-51||-||-36||-371.7%|
|As of Q3||116||32.8%||53||-37.7%||15||-||-75||-||12||300.0%||-51||-||-36||-371.7%|
|Net income attributable to owners of the parent||Initial Est||124||-2.4%||130||-53.8%||59||-||5||-||66||-||-68||-||-64||-37.8%|
|As of Q1||124||-2.4%||130||-53.8%||59||-||5||-||66||-||-68||-||-64||-37.8%|
|As of Q2||124||-2.4%||130||-53.8%||-25||-||-361||-||66||-||-68||-||-64||-37.8%|
|As of Q3||95||27.4%||86||-30.2%||-25||-||-433||-||-52||-||-68||-||-64||-37.8%|
In May 2022, the company announced that it would implement its 2022 medium-term management plan by extending the period covered by the 2021 plan in response to recent changes in economic conditions and the business environment.
|Operating profit margin||-||-3.0%||5.1%||12.7%|
|Operating profit margin||-||-||-||8.4%|
The following explanation is based on the medium-term management plan prior to recent revisions. Shared Research plans to update this content after interviews with the company.
On May 14, 2020, Almedio unveiled its 2020 medium-term management plan, which called for FY03/21 revenue of JPY2.5bn and an operating loss of JPY43mn (OPM of -1.8%). Actual results were higher than forecast, with revenue of JPY2.7bn and an operating loss of JPY11mn (OPM of -0.4%). A key reason for the better-than-anticipated performance was major project orders in the Insulating Materials segment (orders from large steelmakers related to continuous galvanizing lines).
On May 14, 2021, the company announced its 2021 medium-term management plan. The main thrust of the plan is to accelerate business restructuring and recast the company as a manufacturer of functional materials. The plan calls for the company to move out of the optical disk business and quickly transform itself into a manufacturer of functional materials (insulating materials and nanomaterials). The plan also sets an OPM target of 10% for FY03/24, to be achieved by optimizing the business portfolio and transforming the business structure. The 2020 medium-term management plan set an OPM target of 7% for FY03/23; the company has revised this target to account for higher sales in the nanomaterials business.
The plan calls for a JPY932mn rise in revenue between FY03/21 and FY03/24, with higher revenue from the Insulating Materials segment and nanomaterials business compensating for lower revenue from the Archive and Industrial Solutions segments. Specifically, the company expects additional revenue of JPY696mn from the Insulating Materials segment, JPY346mn less from the Archive segment, JPY26mn less from the Industrial Solutions segment, and JPY607mn more from the nanomaterials business.
Although the company does not disclose segment-specific profit targets, the 2021 medium-term plan does indicate the target for operating profit before allocation of companywide expenses each year in the nanomaterials business. The company expects the nanomaterials business to go from an operating loss of JPY131mn in FY03/21 to an operating loss of JPY98mn in FY03/22, an operating loss of JPY79mn in FY03/23, and operating profit of JPY296mn in FY03/24. The plan calls for a JPY417mn rise in operating profit between FY03/21 and FY03/24, with the nanomaterials business generating an additional JPY427mn.
|2020 plan||Act.||2020 plan||2021 plan||2020 plan||2021 plan||2021 plan|
|% of revenue||61.3%||64.3%||64.7%||66.4%||67.2%||72.2%||67.0%|
|% of revenue||35.0%||33.0%||25.1%||28.4%||18.4%||19.8%||14.9%|
|% of revenue||2.5%||2.4%||1.6%||2.7%||1.2%||1.5%||1.1%|
|% of revenue||1.2%||0.3%||8.6%||2.4%||13.2%||6.4%||17.0%|
|Operating profit margin||-1.8%||-0.4%||5.3%||-1.1%||7.0%||0.3%||11.2%|
|Operating profit margin||12.9%|
|Operating profit margin||12.4%|
|Operating profit margin||33.2%|
|Operating profit margin||-1,637.5%||-160.7%||-43.2%||48.1%|
The company expects segment revenue to increase, buoyed by infrastructure investment spurred by economic growth in China. The plant in Suzhou, China, was operating at nearly full capacity in FY03/21. The company plans to respond to higher demand by increasing the number of suppliers that work for it on a consignment basis.
The percentage of industrial equipment using optical drives is falling at an increasing rate. Even so, the company plans to maximize profit by making operations more efficient and reallocating resources.
The company sells test media for use with car audio, navigation, and other onboard devices, but believes the market for such media will continue to shrink. The growing popularity of smartphones and tablets is driving a shift away from the consumption of music and video on optical disks and toward the use of streaming services. Nevertheless, as Almedio retains a high share of this market globally (75%, according to the company), it plans to keep offering test media (a business it has maintained since establishment) as long as some demand persists.
The company’s nanomaterials (carbon nanofibers) have a diameter of several hundred nanometers, which is smaller than carbon fiber (about 1/10 the size) but larger than carbon nanotubes (about 10x). In addition to their unique size, carbon nanofibers offer good electrical and thermal conductivity and disperse well in resin. Adding carbon nanofiber significantly increases the mechanical strength of absorbent materials above that of resin compounds* without carbon nanofibers, and they can be used for reinforcement. Stronger resins can be used to make lighter parts and enables molding of large parts. The company also points out that parts containing carbon nanofibers are more easily recycled, so they can help customers meet their SDG targets.
*A compound is a mixture comprising raw resin and plasticizing, hardening, coloring, stabilizing, or other agents. Compounds are materials that can be used as is in molding processes.
Nanomaterials have a wide range of potential uses. The company thinks these materials’ characteristics suit them particularly well for use in advanced driver-assistance systems (ADASs) for self-driving cars. Almedio cites forecasts suggesting that by 2030, self-driving cars will account for 83.9mn of the 104.0mn vehicles produced. The company’s carbon nanofibers have five major characteristics: the ability to strengthen plastic base materials, electrical conductivity, radio wave absorption and shielding, thermal conductivity and thermal stability, and recyclability. The company uses data from performance evaluations in its sales proposals.
The addition of carbon nanofiber makes plastic stronger and more elastic, allowing car bumpers to be thinner and lighter.
Application of carbon nanofiber to front and engine splash shields raises electrical conductivity (rigidity, magnetic field strength, and permeability of parts), allowing for contactless charging of electric vehicles.
In May 2021, the company developed a composite resin compound by adding carbon nanofibers to the plastics used in vehicle bumpers and fenders. The company has provided samples to potential customers in the automotive industry, as it believes this substance can be used in radar wave control of self-driving cars. Self-driving cars are equipped with a number of sensors in the front and rear of the vehicle, recognizing positions of cars driving ahead and of obstacles around the car. Specifically, the company believes its materials can be used to make driving controls more precise by controlling side lobes (non-main, secondary signals) transmitted by a radar sensor and the reflected waves caused when radar beams reach the road surface. The company says it is receiving inquiries from automakers regarding parts molded from resin compounds containing carbon nanofiber that can suppress signal noise by 99% or more through absorption and shielding.
Adding carbon nanofiber to plastic near radar sensors can facilitate the melting of snow and ice in those areas by passing an electrical current through the plastic.
Parts containing carbon nanofibers are easily recycled, so they can help customers meet their SDG targets.
In FY03/22, Almedio plans to put a quality assurance system in place and begin small-scale annual production of 3–9 tons. Production will be mainly outsourced. In FY03/23, the company plans to ramp up factory operations (annual production of 6–16 tons) and ensure the effectiveness of its quality assurance system. It expects to operate at full plant capacity in FY03/24 (annual production of 12–36 tons) and augment its quality assurance system.
Almedio is a manufacturer with two main business segments: Insulating Materials (67.1% of FY03/22 revenue) and Archive (30.7%). From FY03/22, the company plans to turn nanomaterials into an engine of growth. Over the medium term, the company plans to evolve into a manufacturer of functional materials, with Insulating Materials and nanomaterials as its two main businesses.
The company listed its shares in August 2004. That year, FY03/05, revenue was JPY4.7bn, operating profit was JPY989mn, and OPM was 20.8%. The company got its start in test media (used as a quality measure for storage media; explained in more detail later) and says it has a 75% share of the global market in this area. However, performance in this business has been deteriorating since its peak in 2004–2005, as storage media technology has changed. The Archive and Insulating Materials segments became the company’s main businesses, and now Almedio is conducting R&D on nanomaterials. Yasushi Takahashi, the current president, has encouraged the company to move into new areas of business, such as Insulating Materials and nanomaterials.
|Operating profit margin||20.8%||14.8%||9.6%||12.1%||3.6%||-1.6%||3.2%||-13.0%||-15.1%|
|Operating profit margin||-14.9%||3.8%||4.5%||1.0%||-1.7%||-2.0%||2.0%||-0.4%||2.3%|
The company was established in 1981 to manufacture and sell test media for cassette tapes. Test media is a general term for storage media used as a quality standard.
Cassette tapes were invented by Philips, a Dutch manufacturer. Philips made this technology free to the public, charging no patent royalties. However, manufacturers of tape recorders had to ensure compatibility (so that cassette tapes could be played on any company’s tape players).
Test tapes are needed to verify that cassettes spin at a standard rate equivalent to 4.7625cm of tape per second. (Test tapes verify compatibility against a number of other standards, in addition to spin rate.) Test tapes are needed during the development of several hundred types of tape recorders. As they serve as the measurement standard, test tapes need to be more precise than the cassette tapes sold to the general public. Test tapes also differ from off-the-shelf tapes in that they contain a pre-recorded signal that is used for standard testing.
Originally, Philips also produced test tapes, but its main business was consumer electronics. Also, selling test tapes to competing manufacturers presented the risk of information leaks; Philips would need to learn about competitors’ production methods in order to sell test tapes to them. Given these conditions, it seemed preferable for a third party to manufacture test tapes, and Almedio was established for this purpose. Test media is a niche business, and too small to interest large manufacturers as a stand-alone business. Highly varied special-order items tend to be unprofitable, but such items present an opportunity for the company because margins are high. Another reason for Almedio’s high market share is its independence (not belonging to any major manufacturing group). Test tapes are often special-order items, and the company offers 2,000 to 3,000 varieties, allowing it to respond precisely and swiftly to demand in a way a larger manufacturer would find difficult to emulate.
In 1984, Almedio was commissioned to take charge of reference heads for measuring specific characteristics of magnetic tapes by the Japan Electronics and Information Technology Industries Association (JEITA). The reference heads were standardized by the International Electrotechnical Commission (IEC). IEC’s objective was to ensure that the electromechanical transfer characteristics of these tapes were internationally consistent. To promote international standardization, JEITA made Almedio’s products the standard.
Sony (TSE1: 6758) later created standards for compact disks (CDs), but like the situation with cassette tapes, competitors were reluctant to divulge their production processes to Sony. The painstaking, highly detailed business was not particularly attractive to Sony either. In 1985, JEITA asked Almedio to also handle business related to test CDs. The company says its share of the global market for test media is 75%.
In 1996, the company established a CD pressing plant in Hamura, Tokyo. Although test media command high prices, volumes are low. Boosting production volume through pressing enabled the company to launch the Creative Media business, selling CDs to music and visual content producing companies. (In May 2015, the company withdrew from this business, as conditions deteriorated amid a shrinking market for audiovisual media.)
The market for optical disks grew as it progressed from CDs to DVDs and Blu-ray Discs. More recently, the market has turned toward semiconductor storage media (USB memories, SD memory cards for various AV and PC devices, compact storage media for mobile phones) and high-capacity hard disks. Such storage media require no test media. Furthermore, the growing popularity of smartphones and tablets is driving a shift away from the consumption of music and video on optical disks and toward the use of streaming services.
CDs, DVDs, and Blu-ray Discs are optical disks. Optical drives are the devices that allow information to be written to and read from optical disks.
Almedio established Alcera in Suzhou, a suburb of Shanghai, in 2005. The company selected Suzhou because a location near Shanghai made it easier to attract good employees and import materials from nearby countries such as Japan and Taiwan. The impetus for Almedio's launch of the Insulating Materials business was information—that there were no reliable suppliers in China of the high quality insulating materials that are used in industrial furnaces—from an acquaintance of President Takahashi who was familiar with the insulating materials business. President Takahashi was also familiar with China, as he lived in China and Hong Kong from 1986 to 1994, before joining the company. At the Suzhou Pant, Alcera purchases ceramic fibers from China and Japan, handles secondary processing (such as shaping), and sells 80–90% of the resulting products to local Chinese manufacturers. Kaolin, the base material for ceramic fiber, is a porcelain clay that is also the base material for pottery. Kaolin turns to liquid at 2,200°C. Primary processing of kaolin involves evaporating this liquid to produce ceramic fibers. The Alcera plant does only secondary processing, which means it buys ceramic fibers and shapes them into insulating products. Alcera's insulating materials are superior to low-priced products made by local competitors, as neither they do not tend to shrink nor turn yellow with age as competing products do.
In the early 2010s, the company began manufacturing and selling furnaces, as well as insulating materials. By convention, most companies that manufacture insulating materials do not also make furnaces, as doing so would put them in competition with their own customers. This has not proven to be a problem for Almedio’s subsidiary Alcera, however. With the Chinese economy in a growth phase, Alcera has not faced hostility from furnace manufacturers about encroaching upon their field of business. Almedio notes that it is one of few companies in the world that produce and sell both furnaces and insulating materials. One problem that can arise when manufacturing furnaces is non-uniform internal temperatures. Almedio has developed technologies to resolve this issue. Being in the same business as its customers gives the company an inside look at the requirements and issues they face, and it takes advantage of this understanding when manufacturing insulating materials. The company also points to heat treatment technology, which is central to Japanese automobile manufacturing. Almedio hires as advisors veterans from Japanese furnace manufacturers who can assist with the development of furnace technologies that have evolved with heat treatment technology. In the mid-2010s, Almedio began manufacturing and selling high-end kiln tools (shelves), increasing the number of products it offered and helping to boost sales. Both customer numbers and the volume of products sold per customer increased as a result.
Almedio began doing business with large steelmakers because plants that handle processing on consignment for large Japanese steelmakers are located near the Suzhou Plant. Large steelmakers also moved into Mexico and Brazil, to meet demand for steel body panels by automakers who had shifted overseas production to those countries. Steel body panels are made in a secondary process, after crude steel has been produced in blast or electric furnaces. Almedio’s products are used in equipment on continuous galvanizing lines, which zinc-plate the steel body panels. The number of orders the company fills for large steelmakers varies by year, but this business can account for as much as 30% of revenue.
The company’s nanomaterials (carbon nanofibers) have a diameter of several hundred nanometers, which is smaller than carbon fiber (about 1/10 the size) but larger than carbon nanotubes (about 10x). Almedio has succeeded in manufacturing these new, small-diameter materials at low cost and is the only company marketing nanomaterials of this size. Carbon nanotubes are high in price and tend to disperse poorly (not scattering well throughout plastics). The company’s nanomaterials are approximately 1/50 the price of carbon nanotubes. The company does not disclose its production methods but says the larger size of its nanomaterials compared with carbon nanotubes facilitates dispersion. Almedio’s nanomaterials can be dispersed throughout a variety of plastics. This capability is key to meeting different customers’ needs.
Almedio is conducting test marketing at dozens of companies in a wide range of fields, such as automotive, infrastructure, aircraft, and sporting goods. The company describes customers who have wanted to use carbon fiber, which they considered a good product, but decided not to because of problems with dispersion and high prices. Almedio’s nanomaterials address these issues. The company says most test marketing is based on inquiries from potential clients, but it is also actively targeting clients in a variety of fields. The company plans to begin selling mass-produced products in 2H 2022 or 2023.
KPIs on which the company focuses are operating profit in existing businesses (Insulating Materials, Archive, Industrial Solutions) and revenue in new businesses. The company uses these KPIs when planning for the current fiscal year and for the medium term. It targets OPM of 6% (after allocation of companywide expenses) in individual businesses, as well as on a consolidated basis. However, when formulating plans the company refers to figures in previous fiscal years to come up with more realistic figures. As the Archive and Industrial Solutions markets are shrinking, the company is satisfied as long as operating profit (after allocation of companywide expenses) in these areas is positive. OPM is above the 6% target (after allocation of companywide expenses) only in Insulating Materials.
|% of total||23.3%||33.4%||29.4%||33.3%||40.9%||43.1%||47.7%||56.6%||64.3%||67.1%|
|% of total||37.1%||56.7%||50.6%||41.1%||42.8%||40.3%||33.0%||30.7%|
|% of total||8.5%||4.9%||4.2%||2.9%||2.4%||1.7%|
|% of total||11.0%||5.2%|
|Product Inspection business||319|
|% of total||8.1%|
|Creative Media business||1,004||701||754||73|
|% of total||49.0%||37.1%||20.8%||1.9%|
|Test Media business||540||539||458|
|% of total||26.4%||28.5%||12.6%|
|% of total||1.3%||1.1%||0.0%||0.0%||0.1%||0.3%||0.5%|
|Operating profit margin||-15.1%||-14.9%||3.8%||4.5%||1.0%||-1.7%||-2.0%||2.0%||-0.4%||2.3%|
|Operating profit margin||5.6%||-||9.3%||12.3%||12.8%||14.6%||13.2%||15.1%||12.9%||12.8%|
|% of total||132.1%||-62.4%||23.3%||30.3%||44.5%||85.3%||70.4%||76.1%||99.9%||94.9%|
|Operating profit margin||10.8%||10.7%||7.0%||5.7%||10.2%||12.8%||12.4%||12.3%|
|% of total||34.1%||44.9%||30.0%||31.7%||48.8%||46.0%||49.3%||41.8%|
|Operating profit margin||35.6%||49.4%||54.2%||35.4%||33.2%||62.3%|
|% of total||25.7%||32.5%||25.5%||9.1%||9.5%||11.4%|
|Operating profit margin||-||-|
|% of total||-44.4%||-24.1%|
|Product Inspection business||112|
|Operating profit margin||35.1%|
|% of total||21.2%|
|Creative Media business||-16||-53||-66||19|
|Operating profit margin||-||-||-||26.0%|
|% of total||-78.3%||-194.5%||-15.5%||3.6%|
|Test Media business||146||245||247|
|Operating profit margin||27.0%||45.5%||53.9%|
|% of total||714.6%||899.1%||58.1%|
|Operating profit margin||-||-||-||-||-||-||-|
|% of total||-670.5%||-543.1%||-5.0%||-20.8%||-31.1%||-58.7%||-48.0%|
In this segment, the company develops, manufactures, and sells insulating materials (furnace materials), furnaces, and high-end kiln tools (shelves). This involvement in both insulating materials and furnaces is unusual. The insulating materials Almedio produces are high-end and resistant to high temperatures, different from the insulating materials used in household appliances.
The company’s insulating materials are used on continuous galvanizing lines, which zinc-plate the steel panels used in automobile bodies. Almedio began doing business with large steelmakers because plants that handle processing on consignment for large Japanese steelmakers are located near the Suzhou Plant, but also sells products used in plants of large steelmakers in Mexico, Brazil, Thailand, and Japan. Building a new plant is a large-scale undertaking that often involves changes to original layouts and flow lines. As a result, the company receives frequent requests for design revisions. Almedio explains that it has remained successful due to its ability to resolve issues and meet such difficult requests. The number of orders the company fills for large steelmakers varies by year, but this business can account for as much as 30% of revenue.
Products are mainly developed, manufactured, and sold by Alcera, the company’s subsidiary in Suzhou, China. Alcera has three businesses: insulating materials (blankets, boards, and blocks), furnaces (electric and gas furnaces), and high-end kiln tools (shelves).
In the insulating materials business, Alcera produces products for manufacturers of furnaces used in steelmaking, for heat-treating glass, and for firing solar cells.
Alcera’s customers in the furnace business are manufacturers of semiconductors and ceramic capacitors.
Alcera provides high-end kiln tools to manufacturers of semiconductors and ceramic capacitors.
Alcera derives 70% of its revenue from insulating materials, 20% from furnaces, and 10% from high-end kiln tools. Revenue from furnaces and high-end kiln tools is growing.
Alcera’s fiscal year ends in December, so the posting of its earnings lags by three months.
In the insulating materials business, the company purchases fiber that it processes into furnace materials. These materials are required during regular furnace repairs, which occur once every few years. The company offers an array of standardized products, and also manufactures to order.
The company makes furnaces by fusing furnace materials and steel plates. Products are built to order, with sizes depending on customer needs.
High-end kiln tools refer to the shelves used inside furnaces. These shelves are made to various specifications. For example, shelves used when firing electronic components cannot affect those components’ characteristics. Shelves are consumable items that need to be replaced about twice each year. To allow for electronic components to be placed efficiently, shelves are sized to match the furnaces that house them, so must be made to order. Other companies in China do not have the expertise to make these high-end products, including knowledge of appropriate materials unavailable in the country and needing to be imported from overseas. The company sets prices slightly below those at which Chinese manufacturers would be able to import the products from overseas.
Cost of revenue is approximately 56% for raw materials, 18% for personnel costs, 12% for utilities and depreciation, and 15% for other items (such as leasing fees and repairs). Alumina fiber is one of the largest components of raw material costs. The company uses alumina fiber because it withstands a higher temperature than ceramics. Although prices do not fluctuate, sourcing this raw material can become problematic when automobile production levels are high, as alumina fiber is also used in the mats (absorbers) inside automotive exhaust gas converters. The company says it has been able to source the raw material nevertheless, thanks to its good relationships with suppliers.
The plant in Suzhou, China, has been operating at nearly full capacity. The company is considering future investment, but for now it plans to respond to higher orders by increasing the number of suppliers that work for it on a consignment basis. The company decides whether to manufacture in-house or outsource based on which choice delivers better profitability. The company manufactures in-house when margins and quality control requirements are high, and when water is not needed in great quantities. Production of some insulating materials requires large amounts of water, which China does not have in abundance, and total water consumption is regulated.
In Japan, the company mainly sells products it sources from Alcera. Products are sold to steel mills and for use in firing furnaces for electronic components. In addition to sourcing products from Alcera, the company maintains a trading company function, selling gas and electric heating furnaces made by other companies. In the Insulating Materials segment, the revenue the company generates through sales of non-Alcera products varies by year, reflecting demand for upgrades that take place every few years. The company says it would like to increase sales in the Japanese market, but would need to lower costs to undercut current suppliers. Almedio is satisfied with Alcera’s current profit margins but says that margins on sales in Japan are too low. Even so, the company is prioritizing efforts to bolster sales.
The word “archive” suggests a specialized repository of important information. The Archive segment is made up of two categories, archive and storage solutions. In the archive category, the company sells optical drives and disks for long-term storage. In the storage solutions category, the company develops, manufactures, and sells optical drives for industrial equipment.
In this category, the company sells bundled optical drives and disks for long-term storage. Certain disk/drive combinations are recommended for optimal long-term storage. For this reason, customers usually buy the drives initially. Later, they purchase disks periodically as the need for long-term storage arises. Customers include manufacturers of medical devices and machines at photo printing kiosks. The company itself has no facilities to manufacture optical drives and disks for long-term storage, so it outsources production. This business generates annual revenue of around JPY100mn and operating profit of a few millions of yen to around JPY10mn.
The company acquired this business (sales of optical drives for industrial equipment) from Teac (TSE1: 6803) in July 2014. In the medical field, these drives are used to store CT scans and other medical imaging data, as well as medical records. The drives also store data from the ATMs found at banks and convenience stores. Data from ATMs is communicated to financial institutions, but every ATM also has its own backup drive for recording data.
The company’s drives for industrial equipment are embedded in ATMs, servers, medical devices, and various other equipment, so activating them requires support, and customization is important. Industrial equipment tends to face harsh conditions, such as high internal temperatures and being subject to dust. Production quantities are low, and prices are high. Almedio’s selling points are that it can customize the drives (having designed them itself) and has a 24-hour email response system in place. The company explains that this organization allows it to provide robust support, advising on how to connect the drives with other equipment or determining the cause of any possible malfunction.
Optical drives made by competitors are sold at major electronics retailers. General-market optical drives, mainly oriented toward consumers, are not designed for use in harsh environments, and are mass-produced and so inexpensive. Support provided for general-market optical drivers covers only basic usage instructions.
Almedio designs its optical drives for industrial equipment, outsourcing production to manufacturers in China. Other than personnel costs for the 13 people attached to this segment who provide support, the majority of costs in this category go toward the purchase of parts. The company is working to maximize profits by making operations more efficient and reallocating resources.
In this segment, the company develops, manufactures, and sells test disks used for onboard automotive equipment, such as car audio and navigation systems.
Recording media (such as CDs, DVDs, Blu-ray Discs, and cassette tapes) are subject to various international standards to ensure their international compatibility. Hardware manufacturers use test media when designing, developing, manufacturing, and testing equipment, to ensure the equipment is compatible with the necessary standards and to maintain stable product quality. Test media are used in a variety of processes in equipment manufacture. Test disks sell for tens of thousands of yen each.
Nowadays, most computers do not have drives for recording media. At present, drives are used in onboard automotive equipment, such as car audio and navigation systems. Although many car navigation systems are not equipped with drives, they are often added as an after-market item so children seated in the back can access DVDs. While demand for standard car audio systems is limited, demand is steady from CD aficionados who wish to customize their systems. The majority of drives are sold to the Japanese market.
The company’s customers are manufacturers of consumer electronics and onboard automotive equipment. The company does not have the facilities to produce the various types of recording media that serve as master disks for its test media. When Almedio closed its CD and DVD plant in 2015, it conducted a demand forecast and ensured it had enough master disks in inventory to meet this demand. Although not large in number, the company does purchase master disks for Blu-ray Discs that it processes into test media.
Until FY03/20, the company conducted testing (tests of specific characteristics of various types of disks on a commission basis). Revenue from this business was low, so the company discontinued it in FY03/21.
The nanomaterials business, the main constituent of the Other Business segment, involves R&D, manufacture, and sale of nanomaterials (carbon nanofibers, carbon microfibers, and synthetic graphene powder). From FY03/18 to FY03/20, this segment included the cup-based beverage vending machine business in the Chinese market.
Almedio launched the nanomaterials business in April 2019. It is conducting test marketing at dozens of companies in a wide range of fields, such as automotive, infrastructure, aircraft, and sporting goods. The company’s carbon nanofibers have five major characteristics: the ability to strengthen plastic base materials, electrical conductivity, radio wave absorption and shielding, thermal conductivity and thermal stability, and recyclability. (See the “Medium-term business plans” section for details.)
In Japan, the company generates revenue in the Archive segment (sales of optical drives and disks for long-term storage and optical drives for industrial equipment) and from sales in the Insulating Materials segment. In East Asia, the bulk of revenue is generated in China and comes from the Insulating Materials segment. In North America and Europe, the company generates revenue through sales in the storage solutions category (optical drives for industrial equipment) within the Archive segment. The main reason for being affected by exchange rates is Alcera’s sales in CNY within China in the Insulating Materials segment.
|% of total||56.0%||43.8%||26.6%||26.0%||32.8%||28.6%||20.1%||17.2%|
|% of total||40.1%||35.2%||42.0%||48.7%||46.9%||50.8%||58.6%||64.9%|
|Of which, China||562||1,002||1,461||1,389||1,485||1,458||1,518||1,654|
|% of total||29.7%||27.6%||37.3%||44.5%||41.9%||46.9%||55.2%||61.7%|
|% of total||3.1%||2.0%||1.4%||1.4%||1.1%||0.9%||1.0%||0.6%|
|% of total||0.2%||14.3%||21.7%||17.7%||12.8%||14.4%||14.2%||12.3%|
|Of which, the US||4||519||852||554||453||449||390||331|
|% of total||0.2%||14.3%||21.7%||17.8%||12.8%||14.4%||14.2%||12.3%|
|% of total||0.4%||4.4%||8.2%||6.1%||6.4%||5.3%||5.9%||4.7%|
|% of total||0.2%||0.2%||0.0%||0.0%||0.0%||0.0%||0.1%||0.1%|
The largest SG&A expense is salaries and allowances. From FY03/13 to FY03/15, the company offered early retirement to volunteers. Otherwise, the decline in employee numbers has been due to people leaving for personal reasons. Some 80% of employees belong to the Insulating Materials segment. Of these, about half are in the manufacturing division.
|% of revenue||41.0%||42.0%||37.3%||25.5%||26.4%||32.3%||32.0%||33.2%||30.6%||30.2%|
|% of revenue||3.4%||2.8%||3.4%||1.8%||2.4%||3.4%||2.5%||2.3%||2.8%||3.0%|
|Salaries and allowances||350||304||277||310||350||360||345||289||238||208|
|% of revenue||15.5%||14.9%||14.7%||8.5%||8.9%||11.5%||9.7%||9.3%||8.6%||7.8%|
|Retirement benefit expenses||16||18||17||14||19||21||16||11||11||11|
|% of revenue||0.7%||0.9%||0.9%||0.4%||0.5%||0.7%||0.5%||0.3%||0.4%||0.4%|
|Provision for employee bonuses||18||15||14||26||37||23||30||18||19||20|
|% of revenue||0.8%||0.7%||0.8%||0.7%||0.9%||0.7%||0.8%||0.6%||0.7%||0.7%|
|% of revenue||0.5%||1.3%||0.4%||0.2%||0.2%||0.3%||0.7%||1.0%||0.7%||0.9%|
|% of revenue||2.1%||1.5%||0.1%||0.0%||0.0%||0.3%||1.2%||3.3%||2.9%||4.0%|
|Amortization of goodwill||106||106||15||22||22||108||40|
|% of revenue||4.7%||5.2%||0.0%||0.4%||0.6%||0.7%||3.1%||1.3%||0.0%||0.0%|
|Provision for doubtful accounts||2||-0||2||-0||1||6||2||2||-0||10|
|% of revenue||0.1%||0.0%||0.1%||0.0%||0.0%||0.2%||0.1%||0.1%||0.0%||0.4%|
|% of revenue||13.2%||14.7%||17.1%||13.5%||12.9%||14.4%||13.4%||15.1%||14.5%||13.0%|
|Employees by segment|
|Product Inspection business||13|
|Creative Media business||61||39||34||18|
|Test Media business||25||19||17||13|
In insulating materials, Shared Research understands that capex-related demand for industrial furnaces results from new investment, renovations, and repairs. The company generates around 90% of revenue in the Insulating Materials segment in China, so we looked at capex demand there. According to the National Bureau of Statistics of China, non-agricultural investment in fixed assets totaled CNY51.9tn in 2020 (+2.9% YoY).
|Non-agricultural investment in fixed assets||3,000||3,549||4,439||5,548||6,851||8,283||10,121||12,443||15,693||18,996|
|Non-agricultural investment in fixed assets||22,969||27,184||43,575||36,288||39,552||42,440||45,173||47,846||50,421||51,891|
Sales volumes of local Chinese automakers were increasing in 2021 supported by recovery from the COVID-19 pandemic and the growing need to construct a domestic supply chain in response to US–China conflict. Sales volumes of private automakers, which can relatively easily have transactions with non-Chinese companies, were growing, leading to increased orders to overseas furnace manufacturers for honeycomb furnaces used in automotive manufacturing.
|Great Wall Motor||1,043,707||1,058,648||1,115,872||1,280,993|
In China, the need to establish domestic supply chains also extended to the semiconductor industry, resulting in a substantial increase in sales of Chinese semiconductor manufacturers in 2021. Sales of private semiconductor manufacturers—which are better positioned to more easily have transactions with non-Chinese companies—have been also growing. As a result, orders to overseas companies for furnaces used to manufacture semiconductors for sensors are on the rise.
|Hua Hong Semiconductor||102,737||101,676||102,626||159,880|
|Note: Sales in 2021 is calculated by multiplying sales for the nine months by 4/3.|
|Note: Converted to JPY using the average exchange rate for each year|
The company’s chief competitor, both in China and Japan, is Isolite Insulating Products (TSE1: 5358), a consolidated subsidiary of Shinagawa Refractories (TSE1: 5351). Isolite got its start in bricks but shifted its focus early on to ceramic fibers, establishing a plant in Suzhou in 1997. In addition to having a plant in the same city as Almedio, Isolite’s products are competitive pricewise. We do not count Chinese manufacturers of insulating materials as competitors; their product prices are low, but quality is inferior. As of March 2021, Shinagawa Refractories owned 55.33% of Isolite’s shares. Also as of March 2021, Shinagawa Refractories itself was 33.74% owned by JFE Steel (TSE1: 5411; the core company of JFE Holdings) and 3.73% owned by Kobe Steel (TSE1: 5406). Among Japanese steelmakers, JFE Holdings ranks second and Kobe Steel third.
Shinagawa Refractories (TSE1: 5351) and Krosaki Harima (TSE1: 5352) manufacture and sell bricks as insulating materials, so they do not compete directly with Almedio.
Optical disks are the main products in both the Archive and Industrial Solutions segments.
According to the Ministry of Economy, Trade and Industry’s industrial statistics (by item), the value of car audio shipments in Japan remained above JPY400bn through 2004, but has shrunk rapidly since then, reaching JPY38.2bn in 2018.
The main reason for this trend has been the Apple (NASDAQ: AAPL) iPod. The iPod’s surge in popularity following its launch in 2001 caused demand to fall for cassette tapes and CDs. Meanwhile, smartphones have recently eclipsed the iPod as music players.
According to the Recording Industry Association of Japan, CD production value peaked in 1998 at JPY587.9bn. This value had fallen to JPY359.8bn by 2005, when data on music streaming began being collected. As of 2020, CD production value was JPY126.9bn, down a further 64.7%.
|CD production value||47,931||97,912||139,016||205,248||286,761||323,349||399,796||438,531||480,464||492,241||551,169||562,582||567,078||587,878||551,295|
|CD production value||523,878||489,578||431,806||387,987||368,610||359,800||344,518||327,174||291,265||245,971||222,034||208,500||224,631||196,186||184,088|
|Revenue from music streaming||34,283||53,478||75,487||90,547||90,982||85,990||71,961||54,298||41,661||43,699|
|CD production value||180,110||174,873||170,654||154,199||149,548||126,937|
|Revenue from music streaming||47,073||52,886||57,297||64,466||70,628||78,255|
Meanwhile, in recent years, faster computer processing speeds have led to a surge in the quantity of digital data (voice, image, and video). Demand for the longer-term storage of digital data has accompanied this growth. Optical disks for long-term storage are one option. In May 2020, Panasonic began mass producing optical disks that enable long-term storage of large quantities of data. Just one of these disks provides 500 gigabytes of storage (60% more than conventional disks), the current world record. Panasonic provides these disks to data centers in Japan and overseas as demand rises due to the proliferation of the Internet of Things and social media.
Different from optical disks for the general market, these optical disks are in the memory domain and are developed specifically to store important data. General-market optical disks can typically be replayed for around five years. Optical disks for long-term storage provide stable data storage for 50 years or more. These optical disks are all write-once; they cannot be overwritten. Special drives are used for recording optical disks for long-term storage, but the disks can be replayed on general-market drives.
Optical disks for long-term storage use a special type of recording film that is suited for long-term storage. Also, these optical disks all undergo lifetime measurement, and their surfaces are all inspected for defects. Recording drives are designed to optimize recording conditions on optical disks for long-term storage. General-market recording drives are designed to record as quickly as possible, and typically record at many multiples of the playback speed. By contrast, recording quality is paramount for recording drives used for long-term storage, so recording is typically conducted at 4x playback speed.
Optical disks for long-term storage are used in a wide range of fields, as the accompanying table illustrates.
|National Institutes for Cultural Heritage||Tokyo National Museum, Kyushu National Museum, Nara National Research Institute for Cultural Properties, Shosoin Repository, centers for buried cultural properties|
|Libraries||National Diet Library, Tokyo Metropolitan Central Library, National Archives of Japan, Tokyo Metropolitan Archives|
|Government offices||Government offices, administrative corporations, universities|
|Pharmaceutical-, healthcare-related applications||Storage of data from clinical trials, storage of data from medical imaging (X-rays, CT scans)|
|Finance||Bank of Japan, other banks and credit unions (shinkin banks)|
|Electric utilities||Document storage|
|Construction||Storage of as-built drawings and building certification applications|
|Studios||As master disks|
|Other||Storage of data pertaining to corporate intellectual property, R&D experiments|
These drives, which are typically connected via USB cables, are low-cost, high-capacity, and offer high read/write speeds, making them an effective way to archive photographic data. However, the disks inside the HDDs rotate at high speeds. When the disk is rotating, the magnetic head floats only a few nanometers above the disk surface. Spindle motors, which cause the high-speed rotation, are filled with oil between the axle and bearing. The motors use fluid dynamic bearings, so as the axle spins, lubricant oil generates dynamic pressure. If the HDD is dropped or subjected to a strong impact, its seal can be damaged, causing bearing oil to leak outside the motor. As in this instance, HDDs tend to be easily damaged by vibrations and impact due to their structure. Because of the large number of electronic components they contain, HDDs are also susceptible to water damage.
Flash memories, which include USB memories, SD cards, and SSDs, are highly portable and store large quantities of data. However, flash memories are typically considered to store data effectively for only five to 10 years due to their structure. The reason is that the floating gates within flash memories’ memory cells (the parts that retain charge) lose electrons due to the tunneling effect* even when not energized. This leads to the risk of data loss over long periods of time.
*Tunneling effect (also called the quantum tunneling effect): In quantum physics, this effect refers to the phenomenon sometimes exhibited by particles that succeed in passing from one side of a potential barrier to another (like tunneling through a mountain) without having sufficient kinetic energy to do so. This quantum physics phenomenon is due to the wavelike nature of particles.
Once files are uploaded, cloud storage offers the convenience of being able to access data from any location and share files across devices. However, this type of storage presents the risk of data leaks. Information leaks have become a frequent problem in recent years. Rather than being a problem on the part of cloud service providers, leaks are typically a result of fraudulent access stemming from phishing scams or computer viruses. Once data has been leaked onto the internet, it can never be completely eliminated. Also, users are advised to pay due attention to terms of service when using cloud services, and they may face the risk of service interruption if the provider goes out of business.
General-market optical disks come in two varieties: write once and write multiple times. Write-once disks can be used for storage, as their data cannot be overwritten or erased. The other type allows data to be written to them multiple times, but as with flash memories the number of iterations is finite. Optical disks have a number of advantages. First, like flash memories they are highly portable. Second, they are resistant to damage, and data can typically be read from the disks even if they get wet or dirty; they just need to be washed and dried off first. Third, data safety is high, as write-once optical disks cannot be intentionally erased or overwritten. Optical disks also have a number of disadvantages. Their storage capacity is low, and data transfer is slower than for HDDs or flash memories. Optical disks typically have a lifetime of five to 10 years, depending on the manufacturer and individual characteristics.
The company’s nanomaterials (carbon nanofibers) are a new carbon fiber material that has a diameter of several hundred nanometers, which is smaller than carbon fiber (about 1/10 the size) but larger than carbon nanotubes (about 10x). When used to reinforce plastics, carbon fibers disperse*1 well, but their reinforcing effect*2 is low. Carbon nanotubes can provide a substantially larger number of fibers, but agglutination is common. By comparison, carbon nanofibers offer good dispersion and have a high reinforcing effect.
*1 Dispersion refers to the ability to scatter as fine particles within another material without aggregating.
*2 The reinforcing effect means the increase in resistance to a change in shape or destruction compared with plastics without reinforcements.
|Diameter (nm)||Length (nm)||Recommended price (JPY/kg)||Major applications||Companies|
|Carbon fibers||5,000–10,000||3,000–1,000,000||Aerospace, industrial products||Toray, Mitsubishi Chemical, Teijin|
|Almedio’s carbon nanofibers||500–900||2,000–5,000||10,000–50,000||Additive to carbon fiber reinforced plastic, auxiliary agents to aid conduction of electricity and heat||Almedio|
|Other companies’ carbon nanofibers||15–300||3,000–10,000||50,000–300,000||Additive to carbon fiber reinforced plastic, auxiliary agent to aid electrical conductivity||Teijin, Showa Denko|
|Multiwalled carbon nanotubes||15–150||3–10||10,000–1,000,000||Transparent conductive films, auxiliary agent to aid electrical conductivity, high-strength filler||Zeon, Toray, Meijo Nano Carbon|
|Single-walled carbon nanotubes||0.8–1.4||5–19|
The company is developing masterbatches (resin filler compounds), which contain high-density mixtures of powder carbon nanofiber within the resin that will be used in the final product, solidified for ease of processing by the customer. In general, reinforcing fillers can be combined to only around 30% at the masterbatch stage. Almedio’s technology increases that percentage. Using high-density dispersal technology, the company has developed liquid pigment bases (or liquid containing suspended nanomaterials) that contain nanomaterials at concentrations of 50% or higher.
In October 2019, Almedio commissioned Tomohiro Yokozeki, an associate professor at the University of Tokyo’s Graduate School of Engineering who specializes in aerospace structural mechanics, to validate the impact the company’s carbon nanomaterials had on the properties of composite materials. This validation appeared in a paper published in Applied Nanoscience, an academic journal, in December 2020. The paper found that the addition of the company’s nanomaterials was stable to a high filling factor, that they increased thermal and electrical conductivity, and that they boosted elasticity and strength. Validated using polypropylene, the nanomaterials caused elasticity and strength to more than double. Polypropylene is used in vehicle bumpers, and making the material more elastic would allow bumpers to be thinner and lighter. The validation of electrical conductivity showed that when introduced in concentrations of around 20%, the carbon nanofiber caused conductivity to rise sharply, also allowing electromagnetic shielding. Radar sensors used to determine the location of self-driving vehicles typically operate in the gigahertz band. Reflections from the road surface and onto the bottom of a vehicle can cause false images to appear, reducing operating precision. For this reason, absorbent and shielding materials are currently being used, but this issue could be resolved by adding the company’s carbon nanofiber to polypropylene. The material was also shown to exhibit thermal stability. Temperatures of vehicles at parking lots in the desert can climb as high as 100°C, and polypropylene softens slightly at around 80°C. Adding the company’s carbon nanofibers to polypropylene increases its elasticity, even at temperatures of around 80°C. The paper thus demonstrated that the company’s materials fulfilled several functions at the same time. The company believes that, in addition to automobiles, its carbon nanofibers may have applications for aircraft and various other fields.
|Ticker||Company||Fiscal year||Most recent full-year performance|
|Revenue (JPYmn)||3-year CAGR||Operating profit||Net income||DOE||ROA|
|5358||Isolite Insulating Products||2021/03||13,693||-9.6%||2,151||1,599||11.2%||7.8%|
Isolite Insulating Products manufactures and sells ceramic fibers and insulating refractory bricks. Between FY03/12 and FY03/21, the company had a CAGR of 0.1% for revenue and 9.3% for operating profit. Shared Research understands that the main reasons for the improved profitability have been a shift to overseas production bases and the curtailment of SG&A expenses. Sales by region in FY03/21 were 68.8% in Japan, 19.8% in other parts of Asia, and 11.4% in other locations.
|Gross profit margin||30.9%||29.8%||29.5%||29.3%||33.5%||37.1%||39.2%||38.2%||39.0%||39.7%|
|Operating profit margin||7.1%||5.2%||6.3%||6.9%||11.7%||14.6%||18.8%||17.0%||17.6%||15.7%|
|Revenue by region (JPYmn)||FY03/12||FY03/13||FY03/14||FY03/15||FY03/16||FY03/17||FY03/18||FY03/19||FY03/20||FY03/21|
|Asia (excluding Japan)||2,884||3,754||3,037||2,960||3,107||3,732||3,380||2,711|
In the early 2010s, the company began manufacturing and selling furnaces, as well as insulating materials. By convention, most companies that manufacture insulating materials do not also make furnaces, as doing so would put them in competition with their own customers. This has not proven to be a problem for Almedio, however. With the Chinese economy in a growth phase, the company has not faced hostility from furnace manufacturers about encroaching upon their field of business. Almedio notes that it is one of few companies in the world that produce and sell both furnaces and insulating materials.
One problem that can arise when manufacturing furnaces is non-uniform internal temperatures. Almedio has developed technologies to resolve this issue. Being in the same business as its customers gives the company an inside look at the requirements and issues they face, and it takes advantage of this understanding when manufacturing insulating materials. The company also points to heat treatment technology, which is central to Japanese automobile manufacturing. Almedio hires as advisors veterans from Japanese furnace manufacturers who can assist with the development of furnace technologies that have evolved with heat treatment technology. In the Insulating Materials segment, CAGR for revenue was 5.7% between FY03/16 and FY03/21, compared with -2.2% in Asia for Isolite Insulating Products, a competitor.
Recognizing that involvement in the materials business would allow Almedio to approach companies in a number of industries, in 2013 President Takahashi invited Tokitaro Hoshijima, an executive officer at Mitsubishi Chemical, to advise Almedio. (Mr. Hoshijima is now a director of Almedio, as well as executive officer in charge of the nanomaterials business and new businesses.) This move was instrumental to the company’s success in developing carbon nanofibers, which are of a different size than similar materials (diameter of several hundred nanometers, making them about 1/10 the diameter of carbon fiber and 10x that of carbon nanotubes), and offer the materials at low cost (approximately 1/50 the price of carbon nanotubes). At large chemical manufacturers, budgets for employee-level proposals tend to be limited, and even if an employee is successful in a new area of R&D, the idea may be dismissed by superiors who say, “That’s not the sort of business our company handles.” By contrast, at Almedio the R&D team reports directly to the president. This arrangement encourages the team to look carefully at other companies’ research and patents and develop altogether new products.
The company explains that its carbon nanofibers differ from other companies’ materials in terms of size, but also because they offer superior electrical and thermal conductivity and disperse well within resins. Accordingly, Almedio is conducting test marketing at dozens of companies in a wide range of fields, such as automotive, infrastructure, aircraft, and sporting goods. Rather than as a result of proactive marketing, all test marketing arises from inquiries from potential clients.
The company explains that the electricity-related expertise it has built up in the business of optical drives for industrial equipment allows it to make client proposals that differ from those of other materials manufacturers. For instance, the company notes that application of carbon nanofiber to front and engine splash shields raises electrical conductivity, allowing for the contactless charging of electric vehicles. Adding this material to vehicle bumpers and fenders can also help suppress signal noise, increasing the level of precision possible when controlling self-driving vehicles. Proposals such as these require an understanding of electrici