Over the 100 years since its foundation in 1917, the Toyo Seikan Group has developed, and introduced to the market, packaging containers made of a wide range of materials such as metal, plastic, paper and glass, bringing out the unique characteristics of each material, in a strong effort to meet customer requirements in line with constantly changing lifestyle and society.
Under our new Management Philosophy established in April 2016, we have defined our mission toward the next 100 years as continuously creating new products and services, behaving with integrity and responsibility, and offering environmentally-friendly systems. With efforts to fulfill this mission, we will strive to improve our corporate value by driving business development in which our management strategies are fully integrated with Corporate Social Responsibility.
Business Results for the First Half of the Year Ending March 2020
As already announced, Toyo Seikan Group Holdings, Ltd. (the “Company”) and its consolidated subsidiary Toyo Seikan Co., Ltd. (“Toyo Seikan”) were subjected to on-site inspections in April 2017 and February 2018 by the Japan Fair Trade Commission (JFTC) for alleged violation of the Antimonopoly Act, and the two companies fully cooperated with the subsequent investigation by the JFTC. In September 2019, the commission issued to Toyo Seikan a cease and desist order and a surcharge payment order in relation to beverage can trading. We deeply apologize to our shareholders, customers, suppliers and all other related parties for having caused great concern over this issue. We, as a whole group, will enhance our ongoing efforts to prevent the recurrence of the violation and commit ourselves to complying with laws and regulations.
During the first half of fiscal 2019 (ending March 2020), Japan experienced a weakness in exports and production, while the overall economy was on a moderate recovery trend on the back of improvement in employment and income conditions. Its future prospects, however, remain uncertain with concerns over the potential impact of overseas trade disputes and financial and capital market conditions.
In such an environment, the Company recorded 405,585 million yen in net sales on a consolidated basis for the first half period, up 0.2% year on year. While sales of functional materials and packaging-related machinery declined, those of steel plates for electric and electronic components and plastic containers such as pouches increased. Operating income and ordinary income both fell from the year earlier, down 24.1% to 15,255 million yen and 33.2% to 15,714 million yen, respectively, due to declined margins resulting from product mix changes and increased depreciation and other expenses. Profit attributable to owners of parent for the period decreased 97.3% year on year to 314 million yen as the Company posted a provision for antitrust law-related loss for the first quarter of the year.
For the full-year fiscal 2019, the Company expects net sales of 785 billion yen (down 1.0% year on year), operating income of 25 billion yen (down 1.7%), ordinary income of 23.5 billion yen (down 15.4%) and profit attributable to owners of parent of 5.5 billion yen (down 72.9%). Unfortunately, both net sales and operating income are likely to fail to meet their target set in the Group’s fifth mid-term management plan (810 billion yen and 40 billion yen, respectively).
Progress of Toyo Seikan Group Fifth Mid-term Management Plan
The Toyo Seikan Group Fifth Mid-term Management Plan, which was launched in May 2018 for the years to fiscal 2020, provides the Group’s growth strategy and the measures to implement the strategy, including reforms of organizational structure and corporate culture as well as financial and capital management measures. Based on the strategy, the Group has been engaged in various activities to achieve its goals. The following is the progress of those activities.
With our proprietary aluminum can, aTULC, which has dramatically increased productivity and eco-consciousness, we have successfully offered a product that more than doubles shelf life without spoiling taste and flavor. We have also been making propositions of value-added containers for high-end markets, including high-quality designed glass bottles that convey the premium image of their contents to consumers.
To address the marine plastic pollution, the Group has been engaged in various efforts, including raising production capacity for increasingly demanded paper containers and refill pouches, expanding sales of easily-recyclable beverage caps that are kept attached to the bottle after opening, and increasing the use of biomass materials.
As for overseas markets, Bangkok Can Manufacturing, a subsidiary in Thailand, launched a new plant in November 2019 to tap into the growing demand for beverage cans in the country.
In other segments than packaging, we will seek to expand into growing markets through promoting the use of our material products for automotive rechargeable batteries and next-generation solar batteries.
As the environment surrounding the Group is likely to be more challenging, we will ensure the implementation of these measures and pursue a growth by offering new value.
Commitment to social issues
Avoiding the use of plastic with high environmental burden is now a growing global movement as the problem of marine plastic litter has been drawing more attention as a social issue. The Group has also committed itself to this issue through various efforts.
With respect to reducing plastic usage, Tokan Kogyo has expanded the capacity of Atsugi Plant, its production base for paper containers, in response to an increasing shift from plastic to paper for trays and cups served at convenience stores and other food service shops. Toyo Seikan is now expanding its Toyohashi Plant in order to meet growing needs for using less plastic bottles and switching to refill pouches. Its new facilities will successively start operation from April 2020. We are also aiming to reduce the weight of preforms, intermediate products that are blown into PET bottles, and to replace part of materials of plastic beverage bottle caps and food bottles with biomass materials.
In the recycling aspect, we are increasingly adopting materials with easily recyclable structures, including a mono-material structure, to our food and household product packages, in an effort to develop more environmentally-conscious packaging containers.
As plastic caps scattered around are also causing the plastic waste pollution, Nippon Closures has developed an easily-recyclable beverage cap that is kept attached to the bottle after opening and has been expanding its sales. Recently, the cap has been licensed to a foreign company.
Meanwhile, the Company has joined industry-wide activities, such as the Clean Ocean Material Alliance (CLOMA), to seek solutions to the marine plastic pollution through partnerships with a wide range of parties concerned.
In addition to marine plastic waste, coping with natural disasters is also a recent significant social issue. We have been responding to the needs related to emergency stock through the development of packaging that can preserve food at room temperature for extended periods of time and corrugated cardboard beds for emergency shelters. Recognizing these social issues as our own management issues, we will continue to seek their solutions with a unified effort across the group.
With a change in Japanese traditional era name from Heisei to Reiwa , we are experiencing the beginning of a new age. I believe the age of mass production and mass consumption is coming to an end and more diversified packaging solutions are required corresponding to consumer needs. The Toyo Seikan Group has handled and produced every kind of materials and packaging containers with technologies and know how it has accumulated over many years. We will combine all abilities across the group to deliver products and services that meet social needs in the new period, helping people all over the world enjoy fulfilling daily lives.
We would truly appreciate continued support and encouragement from our stakeholders.