Struggling Fiber & Textile Business
According to the consolidated business results of Japanese fiber producers during the fiscal year ending on March 31, 2020, the spread of the coronavirus in the latter half of the fiscal year resulted in decreases in net sales and operating profits for four of the producers.
Toyobo Co., Ltd. turned its net losses in the previous fiscal year to net profits thanks to insurance income totaling 10.6 billion yen from a fire accident last year. Unitika Ltd. posted net losses due to extraordinary losses amounting to nearly 5 billion yen. Because the coronavirus made it difficult to give an outlook of business in the current fiscal year, four of the producers excluding Toray Industries, Inc. and Teijin Limited postponed the announcement of their full-year business outlook.
Toray’s Fibers and Textiles segment posted a decrease in sales and a drop in segment profits, as sales and profits decreased both domestically and overseas. The shipment of goods in Japan remained flat for apparel and industrial applications, while the sales of materials for uniforms grew in Japan, along with those for sports applications in the U.S. and Europe.
The Carbon Fiber Composite Materials segment increased its profits by more than 80%. Demand for aircraft applications and the performance of industrial applications in environment- and energy-related sectors, such as compressed natural gas tanks and wind turbine blades, remained robust, and demand for sports applications showed a recovery. The improvement of supply-demand balance also helped the prices of general-purpose products to recover.
Asahi Kasei Corporation achieved its second largest sales in history thanks to increased sales in the Home and Health Care segments. The Material segment posted a decrease in sales and a drop in profits due to the slowdown of business in China and the automotive market. Although the consolidation of Sage Automotive Interiors, Inc., which was acquired in 2018, made a positive contribution, the Performance Products segment suffered a sharp decline in profits due to lower operation rates, shipment decreases and deteriorated terms of trade for synthetic rubber, along with a decrease in shipments of fiber products and engineering plastics, as well as an increase in fixed costs in each of these businesses.
Teijin reported a sharp decrease in net profits, mainly due to recording one-time expenses associated with the transfer of subsidiaries in its Films business, and an impairment related to a subsidiary in the Polyester Fibers & Trading and Retail Business Group. In Materials business, the sales volume of aramid fiber decreased due to a decline in automotive demand, but the product mix and pricing efforts contributed positively to profits.
In the Polyester Fibers & Trading and Retail Business Group, domestic production of sportswear textiles and sales of men’s heavy clothing struggled, because of stagnant market conditions in Japan, and globally mainly due to trade friction between the U.S. and China and unseasonable weather. In Industrial Textiles and Materials, sales of automotive materials were affected by sluggish automobile sales in Europe and China. However, sales remained favorable for infrastructure reinforcement materials, and polyester staple fiber for application in water treatment filters and synthetic leather.
Toyobo suffered setbacks in the segments of Industrial Materials and Textiles and Trading. Meanwhile, the segments of Films and Functional Polymers and Health Care sharply increased their profits, which resulted in a slight increase in overall net sales and an increase in operating profits. The airbag fabric business of the Industrial Materials segment faced challenges as a fire slowed down production. In the high-performance fiber business, sales of Izanas ultra-high strength polyethylene fiber grew primarily for use in ropes, and sales of Zylon PBO fiber also expanded for use in bicycle tires, etc. In the Textiles and Trading segment, sales of thobe fabrics to the Middle East improved, and sales of materials for business uniforms also grew steadily.
Unitika’s gross profit margin improved, but operating profits declined due to lower sales as well as higher selling, general and administrative expenses. As for its Fibers and Textiles business, business was stagnant in materials for sportswear, women’s wear and beddings as well as polyester staple fibers, resulting in segment losses. In its nonwovens business, business was sluggish both for spunbonded and spunlaced fabrics.
Kuraray Co., Ltd., whose fiscal year ends in December, announced its business results for January-March 2020. Net sales decreased by 3.3% compared to the first quarter of the previous fiscal year to 136,927 million yen, and operating profits dropped 18.2% to 11,971 million yen, but net profits increased by 10.2% to 6,705 million yen, with the disappearance of the impairment losses of 3.3 billion yen in the previous fiscal year.
Cotton Textile Makers
Severely Slumping Textile Business
According to the consolidated business performance of Japanese cotton textile manufacturers during the fiscal year ending on March 31, 2020, Daiwabo Holdings Co., Ltd. achieved record high figures on a corporate-wide basis thanks to robust IT infrastructure distribution business. Fujibo Holdings, Inc, also increased its net sales and profits up to the ordinary profit stage driven by its Polishing Pad and Chemical Industrial Products businesses. However, the textile business of all of the manufacturers posted sales decreases, and four of them had operating losses, making the slump of business even worse. During the fourth quarter of the fiscal year (January-March 2020), the stagnation of economic activities caused by the spread of coronavirus was also a blow to business.
The Fibers and Textiles business of Daiwabo Holdings posted decreases in sales and profits, but the decreases can be said to have been relatively slighter. In the synthetic fiber/rayon division, sales for application in cosmetics were sluggish, but those for disinfectant- and antiperspirant-related products increased. In industrial materials, functional materials such as for buildings were strong, but tents and heavyweight cloths were stagnant. Apparel business suffered from a decline in inbound demand and a warm winter.
Despite the fact that the Textiles business of Fujibo Holdings maintained profitability, sales and profits fell significantly. Although its main innerwear business showed an expansion of online sales, business was affected by the reduction of apparel sales areas at department stores and mass merchandisers and intensifying competition with private brands. In the sales of yarns and fabrics, the company made efforts to withdraw from products having low profitability. The impact of the coronavirus toward the end of the fiscal year also made the slump in demand even worse.
At Kurabo Industries Ltd., the Textiles segment posted an increase in operating losses. Yarns for application in uniforms and casual wear suffered from weak market conditions. Its subsidiaries in Thailand and China suffered from stagnant orders due to foreign exchange factors, etc.
The Textiles business of Shikibo Ltd. also increased its operating losses. The sales of fabrics for Middle East traditional garments were favorable thanks to a recovery of market conditions, and sales of yarns produced in Vietnam and Indonesia were also firm. However, uniform fabrics suffered from an increase in distribution inventories. Sales of knitted products also suffered from the sluggish sales of business partners. Business from February was hit by delays in overseas production and a drop in demand caused by the coronavirus.
At Omikenshi Co., Ltd., the Textiles business fell into the red. The company was slow in passing on the increases in material and fuel costs, and sales also declined due to the slumping apparel market.
The Textiles business of Nittobo Boseki Co., Ltd. also posted operating losses, but the losses were smaller than the previous fiscal year. In its main interlining business, profitability improved due to the sale of its Chinese subsidiary and the transfer of production to Japan.
Overall, as the slump in their textile business became more serious, the companies are compelled to undertake drastic reforms in the current fiscal year. In addition, the impact of the economic downturn caused by the coronavirus is expected to appear in full scale and make the business environment even more severe. The companies will be required to steer their business through these difficulties in the current fiscal year.
Dyeing & Processing Companies
Only One Company Increases Sales
The consolidated business performance of Japanese dyeing and processing companies during the fiscal year ending on March 31, 2020 was affected by the coronavirus pandemic in addition to sluggish apparel consumption due to a warm winter and slumping automobile market caused by trade friction between the U.S. and China. Net sales decreased for five companies. Net profits declined for four companies, among which Tokai Senko K.K., Sotoh Corporation and Soko Seiren Co., Ltd. fell into the red.
Seiren Co., Ltd. reported decreases in operating and ordinary profits, but its net profits reached an all-time high thanks to decreases in extraordinary losses and tax-related expenditures compared to the previous fiscal year.
The Automotive Interior segment posted decreases in sales and profits in Japan, and a decrease in sales but an increase in profits overseas. The overseas environment was severe as the number of automobiles sold decreased in several Asian countries. However, the Mexican plant, which the company worked on expanding its production capacity in the previous year, turned profitable from the first quarter. In the High Fashion segment, sales and profits declined, and attention was focused on the Viscotecs system, which manufactures sophisticated products without stocks, and differentiated sportswear materials were also vigorous.
Komatsu Matere Co., Ltd. posted its first decrease in net sales in three fiscal years, and the first decrease in operating profits in six fiscal years. The coronavirus affected its sales by 2,000 million yen and operating profits by 600 million yen, as the company voluntarily suspended business for two weeks to prevent the spread of infection.
In its Textiles segment, sales of apparel fabrics decreased by 2.1% from the previous fiscal year. Although sales of fabrics for traditional garments were strong, overseas sales of sportswear and uniform fabrics decreased. Sales of fashion fabrics were firm in the Japanese market and toward European luxury brands, but decreased for the European upper middle zone. Sales of industrial materials declined by 4.6%; building materials grew and medical care and welfare applications were almost as planned, but sales of vehicle and home-related materials declined.
Sakai Ovex Co., Ltd. reported a sales increase; although its Dyeing and Processing business posted a sales decrease, sales of textiles increased, and business in control equipment also expanded. Operating profits increased thanks to lower manufacturing costs. Ordinary profits declined due to a decrease in investment income with the equity method, but net profits exceeded the previous fiscal year.
The Dyeing and Processing business was strong for sportswear and automotive-related materials, but was weak for uniforms and overseas women’s wear. The Textile Sales segment achieved increases in sales and profits. In textiles, applications in uniforms were strong. In apparel, main OEM operations toward mass merchandisers were severe, so the company made efforts to develop ODM operations and new sales channels.
Tokai Senko reported that its net sales decreased for the fourth consecutive fiscal year and a decline in profits for the third consecutive fiscal year. The decrease in profits was mainly attributable to the decrease in sales and profits at the main unit in Japan and dyeing subsidiary in Indonesia. The Thai dyeing subsidiary achieved higher sales and reduced losses.
In its Dyeing and Processing business, the company endeavored for the revision of processing charges, improvement of trading conditions, development of new products and cost reductions, but sales and profits decreased as worsening market conditions reduced orders along with the impact of the coronavirus. As orders for the processing of knitted goods continued to decrease, impairment losses of 670 million yen were recorded for the fixed assets of the Gifu plant, and early retirement was promoted with the consolidation of knitted fabric printing business in Hamamatsu.
Sotoh reported a slight decrease in net sales, and profits decreased in all stages. Its Dyeing and Processing business was greatly affected by the warm winter, and sales from dyeing and processing woven fabrics decreased by 4.5% compared to the previous fiscal year to 3,735 million yen, and those for knitted fabrics declined by 3.7% to 3,273 million yen. The Textiles segment succeeded in reducing its losses by increasing sales. New businesses contributed to its business performance, despite a decrease in orders due to the adjustment of inventories of fall/winter goods and higher material costs.
Soko Seiren reduced its operating losses and ordinary losses, but net profits amounted to 130 million yen, as compared with net profits of 290 million yen in the previous fiscal year. Its Textiles business posted a sales decrease, but segment losses were reduced. In apparel applications, composite products and synthetic fiber outerwear were strong, and in industrial materials, high-performance textile product-related business was also vigorous. Vehicle material-related business posted a decrease in sales due to the transfer of its Mexican subsidiary.
(See Statistics section for fiscal business results.)