Regaining your trust
by revitalizing our business
and sharing the results
Minoru Fujii
Representative Director and President,
Chief Executive Officer
Transferring businesses as we withdraw and rebuilding confidence in those remaining with full commitment
In the 38 years since I joined Unitika, I have spent 22 years, more than half of my career, in the Fibers & Textiles business. I gained experience in development and manufacturing before being put in charge of the Glass Fibers Division. For the past two years, my role has been to oversee corporate technology development and production technology. In 2009, I was responsible for leading the withdrawal from in-house manufacturing of nylon filament. After the withdrawal decision was announced, I held a series of discussions at the worksite that helped keep employee motivation high until the end. Thanks to everyone’s efforts, we were able to get through the final year of manufacturing without accidents or quality issues. In truth, I should have been able to use this experience to prevent us from falling into our current predicament. Reflecting on my inability to do so has reinforced my commitment to implementing the revitalization plan.
We are keenly aware that this business revitalization plan has placed huge burdens on all our stakeholders, both inside and outside of the Company. When the plan was announced on November 28 last year, it caused a great shock within the Group. Our first response has been to address concerns and regain trust. To this end, we held a series of in-depth dialogues with our employees as we tried to rebuild our systems. For the departments we are withdrawing from, our highest priority is to transfer the businesses in good order and ensure that employment continues. To ensure that the business transfers were conducted smoothly, the cooperation of the employees was crucial to maintain and increase the business value.
It is essential to have a shared awareness of the tough business conditions. In terms of sales, we must pay close attention to profitability and identify our competitive advantages by analyzing our target markets and improving the accuracy of our competitive analysis. From the perspective of production technology, I communicated to employees that if they can manufacture high-quality products efficiently, it will result in solid sales. It is very important that manufacturing staff themselves are at the forefront of improving production technology. I also visited various business partners and clients to explain that we will continue to offer strong support as a supplier.
This is the first fiscal year of the business revitalization plan. All of us need to keep our eyes forward and stay aligned in the same direction, working hard so that, in the end, we can report results that meet or exceed the plan.
Becoming a first-mover company that leverages the unique technical capabilities and ability to identify needs that we have cultivated since our founding
Although we are withdrawing from the Fibers & Textiles business, one of our founding businesses, fibers will remain the source of the Group’s core technologies. Nylon and polyester fibers are made by melting the raw material chips and then extruding the polymer to form the yarn. Similarly, glass is melted to make glass fiber yarn. For activated carbon fibers as well, the raw material is melted and extruded through a nozzle to make the fiber. The process differs according to the product, but they all involve melting and extruding raw material and forming it into a surface. This fiber technology is the DNA that we have inherited. After polymerizing or compounding resin, making the polymer into chips and producing a film is also a melting and extrusion process. These are all common elements in technologies used to make fibers.
The value of these core technologies that originate in fibers remains unchanged. We will leverage the technologies we have developed over the years to deliver products that help ensure lives that are safe and secure, convenient and comfortable, and in harmony with the environment.
Another key part of the Group’s DNA is our corporate culture that integrates manufacturing, sales, and development. The combination of these three elements, along with an open environment, are things we have cultivated over many years. One example of this is the opportunities the Group provides for engineers to work together with the sales team to support customers. After listening to customer needs, we assess whether we can make a high value-added proposal that will solve their issues using our technologies. Having an engineer on the spot to make a quick judgment allows us to do this efficiently.
Over the medium- to long-term, even the core products in our continuing businesses will become commoditized as times change, and their value is sure to drop. We must strive to continuously improve our products in any way we can, no matter how small. We will focus on refining and marketing our technologies with a sense of urgency, recognizing that business revitalization will be impossible unless development and production work well together.
The Group’s most profitable segment is food packaging films, and our first priority is to defend this at all costs. Rather than being satisfied by this segment alone, we aim to become a company that is always thinking about the next move by strengthening electrical and electronic materials, including the semiconductor field, and construction and civil engineering materials, whose demand is increasing due to aging infrastructure.
We have a wide variety of investment options available, but our management resources are limited, so objective judgments are necessary. We must also prepare alternative plans in case difficulties impede the main thrust of progress in the main plan. In these matters, we will receive support from a four-member management team from the Regional Economy Vitalization Corporation of Japan (REVIC), who will help us make highly accurate and timely judgments.
Concentrating capital in businesses with competitive advantages and targeting an operating profit margin of approximately 10% as the ultimate goal of the revitalization plan
Broadly speaking, there are four core technologies at the Unitika Group: plastic production technology, yarn production technology, fabric production technology,and film production technology. Products based on these core technologies are the source of the Group’s earning power. In other words, they are our competitive advantages. These include unique materials that only Unitika offers. Enhancing these products will lead to the revitalization of the Group. We will take a variety of approaches at our Research & Development Center, not limited to material melting and extrusion, but including processes such as synthesis of new materials. However, as large-scale investments in research and development are not possible at the moment, we will focus on selected themes with good future potential.
For our competitive advantages in the area of human resources, let’s consider the example of the glass fiber business. This field has a distinctive manufacturing process and established manufacturing technologies, so it tends to be conservative. However, we have experienced many cases where questioning a process leads to introducing something new that radically changes the worksite. A positive chain reaction occurs in which increased productivity raises equipment utilization, which in turn improves yields. Anyone who has experienced this will be motivated to effect further change. One of the Group’s strengths is our ability to nurture highly perceptive employees at worksites who can make breakthroughs without being bound by past practices.
Development within the Group comes in two patterns: development by a development team within a business division, and development conducted as a corporate project by the Research & Development Center. In the case of development by a development team, the team has a deep understanding of customer needs, so they can quickly produce results in projects that are likely to be profitable. In contrast, in the case of development by the Research & Development Center, it is rare for results to be achieved in short periods of time. Their projects may span five years or more, starting from the initial theme setting before producing a sample workpiece for customer evaluation. If the project moves to the next stage, the Center will earn development expenses. Development expenses are the lifeblood of the Research & Development Center, based on a competitive principle where the Center brings in projects, implements various ideas, and makes appeals to customers. This is the strength of the Research & Development Center.
The Group is particularly proud of its intellectual property activities. Intellectual property is a strong foundation for business development and provides us with information we can use to cultivate new markets and inspire new applications. This is another of our competitive advantages. To maintain and improve these competitive advantages over the next five to ten years, we need to strengthen our earning power outside our core products to build up our revenue base. Since our core product of food packaging films is associated with the food industry, it’s unlikely to experience huge fluctuations in profits. Even so, we need to develop supplementary businesses just in case.
Growth in the Japanese market is expected to be slow, so we must also look to overseas markets. In the glass fiber business, the overseas ratio for electronic materials is particularly high, but I think there is still room for growth both overseas and in Japan. “Emblem HG” is our highly profitable strategic material in the film business, and a key task is to further expand overseas markets for this product. If we can operate production facilities at full capacity, we can improve cost efficiency. In each business segment, we will identify the most appropriate investment destinations based on perspectives such as competitive advantages, market size, market growth potential, and the advantages of our technologies.
Recently, the Group is facing the issue of declining earning power. The businesses that will remain under the revitalization plan are profitable businesses, but even though they will receive various types of financial assistance such as debt forgiveness, investments, and loans, they must be more profitable than average to repay their remaining debts. Generating cash is also important. To achieve this, we need to both generate profits through sales and implement cost reductions and efficiencies. The Group has set operating profit margin as a key financial indicator in order to further improve our earning power going forward. In the fifth and final year of the revitalization plan, we are aiming for operating profit margin of approximately 10%. Other targets are net sales of 70 billion yen and operating profit of 6.5 billion yen.
Improving product competitiveness to respond to changes in the external environment
The first challenge we face in our external environment is price competition with China. This has had a huge impact on our subsidiary in Indonesia, which is involved in the film business. We no longer intend to compete on price. Rather, we will concentrate our management resources on our competitive advantages and shift to competing based on high value-added products.
The next challenge we face is the exchange rate. If the yen stayed at a fixed level, whether weak or strong, we could take certain countermeasures even if the risk of fluctuation remained. However, if exchange rates fluctuate wildly, we may miss our chance to pass on costs, resulting in drastic drops in profit margins. To address this issue, we make sure to pay close attention to exchange rate fluctuations and take appropriate measures.
Similarly, the prices of raw materials are vulnerable to volatility due to geopolitical factors. Although we do not like high prices, as long as our products remain competitive even at a high level, we should be able to minimize this problem by reflecting costs in our prices.
On the topic of environmental issues, we are closely observing trends in decarbonization and chemical substance regulations. Particularly in response to the issue of PFAS (organic fluorine compounds), we are leveraging Unitika’s intellectual property information to develop new applications.
Fundamental structural reform with a new management system that includes REVIC
The Okazaki Plant is the production site for the polyester business, one of the businesses that we are withdrawing from. The size of this plant grew in step with increases in sales, but as competition with overseas products intensified, profits worsened, and narrowing down production to general-purpose products increased costs and made it difficult to continue the business.
After the structural reform in 2014, there was a period when the Fibers & Textiles business became profitable. However, when the COVID-19 pandemic worsened the situation, it was unable to recover. The trigger was price competition with China in the film business and overinvestment in facilities. When combined with low sales prices, we could not stop the decline in our cash on hand. We believe these factors led to the business revitalization plan.
Looking back at recent results, in FY 2023 (the fiscal year ended March 31, 2024), we fell into an operating loss for the first time since the start of consolidated financial statements. Even though net sales were largely unchanged from the previous fiscal year, the production amount declined and manufacturing costs increased in FY 2022. A large number of products made at our in-house plants where costs are high were carried over as inventory into FY 2023.
In FY 2024 (the fiscal year ended March 31, 2025), we optimized inventory throughout the year and sales recovered. To tackle costs, we recorded impairment of fixed assets, reduced depreciation burdens, and also brought labor costs under control. Looking at sales, the cycle of customer inventory adjustments for food packaging films was completed, and Group shipments returned to normal. Plastics sales also recovered, and price revisions improved profitability. Although the semiconductor market itself has not completely recovered, the glass fiber business saw a strong rebound in sales of highly functional glass fabrics, mainly for mobile device high-end memory. A new management system was needed to implement the revitalization plan, and this was formed by a management department that included a management team from REVIC. I am confident that this system will bring effective governance. REVIC is a public-private fund that excels in providing support that fits the situation of each company or business, and we have built a good relationship with them.
Four directors from REVIC have been appointed. There are two directors from Unitika. In addition to myself, the other director is a former banker who has been with Unitika for a long time and is responsible for operations such as general accounting, information systems, and legal compliance. The Vice President is in charge of structural reform and the nonwoven fabric and industrial fabric businesses that we are withdrawing from. Other directors will oversee the Fibers & Textiles business and the remaining businesses, as well as the administrative departments. We need to transfer businesses and sell assets, and REVIC has the expertise in handling such matters.
I am hopeful that we will avoid any problems and everything will go according to plan. Even if something should occur, REVIC managers can give valuable advice on corrective measures, which provides us with a great deal of peace of mind. In the business departments that we will retain, REVIC managers can take part in in-depth discussions on structural cost issues, so the system will be very useful there as well. For human resources at worksites, I want to appoint experts to key positions. However, I also believe it is necessary to rebuild the entire Company using methods such as DX to ensure that we are not reliant on individuals. I mentioned earlier the need to focus on developing highly perceptive employees who can make breakthroughs without being bound by past practices, who have expert skills, and who can also create strategies based on a clear vision. For these core human resources, we will ask for candidates from each department and develop them company-wide using a skill map. If we are successful, personnel with high levels of awareness will emerge. The Company will continue to focus on the steady development of human resources so that we can lead our employees to even greater excellence.
Developing strong governance for business revitalization: Stricter environmental regulations as an opportunity to expand sustainable materials
Strengthening governance is extremely important for business revitalization. We have reexamined all authorities specified at the Company and clarified the areas of responsibility of each director. Management related meetings are composed of three phases: first, the management liaison committee determines issues for discussion; these issues are discussed at a management meeting joined by the outside directors to deepen understanding; and finally, the issues are deliberated on by the Board of Directors. This environment ensures that it is easy for anyone to share their opinions, discussions are lively, and participants can candidly state their agreement or disagreement, so I don’t think there are any problems in terms of governance.
A key prerequisite of a business revitalization plan is maintaining the conditions under which investments are received. To achieve this, comprehensive dialogue within the Company is vital. The outside directors who are continuing in their roles provide advice from a managerial viewpoint, taking the current progress into account and also offer psychological encouragement. Combined with careful monitoring by individuals experienced in structural reforms while working as representatives of major corporations and guidance from sustainability experts, we are receiving significant support.
In the sustainability field, we will further explore plant-based materials and the long-standing theme of recycling, while continuing to focus on initiatives such as reducing the energy used by manufacturing. The Group will take advantage of the global trend toward stricter environmental regulations as an opportunity to expand our range of sustainable materials, one of our core competencies, and we intend to invest management resources in this area. Our basic stance of promoting sustainability will continue unchanged. Sustainability from a global perspective is very important as a competitive strategy. As I mentioned earlier regarding PFAS, we should proactively communicate our actions to address this issue overseas.
To all stakeholders
I believe there is a reason why I have remained at Unitika and was appointed President. Why? Well, to answer my own question, it’s because I know Unitika well. While keeping this in mind, I will first focus on rebuilding the Unitika Group internally, working from the same point of view as REVIC and our employees. Fortunately, our financial performance for the third quarter of FY 2025 has been exceeding our targets, so creating a positive atmosphere where employees can take steps toward revitalization with confidence.
We will do our best to produce good results so that we can report to the public that the revitalization is proceeding according to plan. To achieve this, I am determined to carry out my duties as President with unwavering commitment. I hope to receive the continued understanding and support for the activities of the Unitika Group.
Representative Director and President, Chief Executive Officer
Minoru Fujii