Asian Textile Industries, Part IV (Asian Textile Business, No. 648)

Toray’s ASEAN Business Strategy

12:00 AM, Thursday, Mar 31, 2011

A Global Network for Opening a New Horizon

Supported by ASEAN EPA, Asian economies are uniting rapidly. As Asia’s leading textile group, Toray is establishing a global network in the Asian region. In a number of countries and regions, and with cooperation and links among the regions, the Group is not only actively exporting to Japan, Europe and the U.S., but is also vigorously catering to local demands in Asia with an integrated production system ranging from fiber making to spinning, weaving, dyeing and finishing as well as apparel manufacturing. For Toray Group firms in the ASEAN region, it is opening a new horizon for business. The activities of Toray firms in Indonesia, Malaysia, Thailand and Hong Kong are introduced as follows.

Indonesia Toray Group: Operating Profits Double in Fiscal 2010

The Indonesia Toray Group increased its sales in 2010 by 20% over the previous year to US$350 million, and operating profits doubled to approximately US$18 million.

Hideyasu Okawara, the group’s Chief Executive Representative and President Director of P.T. Toray Industries Indonesia (TIN) and P.T. Century Textile Industry, Tbk (CENTEX), says, “As a result of the sharp rise in cotton prices, a shift occurred toward polyester staple fiber, and PSF prices rose and contributed to profits.” Earning also improved for polyester/cotton blended fabrics as unprofitable items were reduced and production variety was brought to a higher level.

CENTEX, which undertakes spinning, weaving and processing of polyester/cotton blended textiles, had deficits in fiscal 2009, but as a result of business reorganization and a reduction of unprofitable items, its business broke even. In the current fiscal year, the company will continue to bring its products to a higher level by strengthening fancy weave structures in shirt fabrics and sophisticated processing techniques such as antibacterial and water repellent finishing. At the same time, sales and product development with apparel firms and companies in the distribution sector are to be expanded.

P.T. Easterntex (ETEX), a spinner-weaver of polyester/cotton blended textiles, increased its sales by approximately 20% and operating profits by 25%. Formerly, the mainstay of production was commodity items such as 186-thread fabrics, but the production variety was brought to a higher level with an expansion to 208-thread fabrics and chief value cotton items. Such endeavors led to the increase in sales and profits.

P.T. Indonesia Synthetic Textile Mills (ISTEM), which carries out spinning, weaving and processing of polyester/rayon blended textiles, reported an increase in sales but a decrease in profits due to the sharp rise in rayon staple fiber prices. Since sales to the uniform sector are a major business, passing on the price increase was slow.

Meanwhile, P.T. Acryl Textile Mills (ACTEM), which spins and dyes acrylic yarn, increased its sales and profits. Despite a sharp rise in acrylic staple fiber prices, the company passed on the increase by virtue of shifting production to specialized items. Tsuyoshi Sumida, President Director of ISTEM and ACTEM, says, “In the current fiscal year, it is important that ISTEM and ACTEM both pass on the price increase. Since it is difficult for ISTEM to pass on the price increase with only uniform materials, we will expand applications to other sectors such as women’s wear. Application in sweaters and socks is the mainstay for ACTEM, but demands are recently shifting from China, and we intend to cater to such demands.”

P.T. Indonesia Toray Synthetics (ITS), a producer of synthetic staple fibers and yarn, had deficits up to fiscal 2009, but posted profits in fiscal 2010. Yasuo Fukuda, President Director of ITS, says, “As the only Japanese-affiliated synthetic fiber producer in Indonesia, ITS has become capable of gaining profits as all materials of PSF, nylon filament yarn and polyester filament yarn performed well.” Especially in the case of PSF, prices improved with the sharp rise in cotton prices. PFY and NFY became more specialized toward application in knits and special items.

In the current fiscal year, NFY will be particularly strengthened. President Director Fukuda says, “ITS is the only company in Indonesia producing NFY from the polymerization stage. This will be used to advantage, and specialized items including monofilament and separated single filament yarn will be strengthened.”

P.T. Toray Trading Indonesia (TRI) increased its turnover to over US$100 million in the current fiscal year, of which textiles account for 65%. The company exports Indonesian goods centering on Toray products. Spun yarn, staple fibers, fabrics, apparel and other finished goods are especially favorable. Kazuyoshi Tsuji, President Director of TRI, says, “TRI will strengthen its converting function in Indonesia, expand business in non-apparel sectors such as interior goods and industrial materials centering on exports to Japan, and construct business in apparel and sewn products linking Toray materials with Indonesia’s manufacturing.”

Okawara says, “The basic policy of Toray’s textile business is expanding demand in newly emerging economies and enlarging business in apparel and sewn products. As a group, all companies from fibers and yarn to processing are cooperating with one another, and each and every one has its own role to play in making profits independently. As the Indonesian economy is currently strong, the opportunities are great.”

Thai Toray Group: Business Shows Outstanding Recovery in Fiscal 2010

The three main textile companies of the Thai Toray Group {Luckytex (Thailand) Public Company Limited (LTX), Thai Toray Textile Mills Public Company Limited (TTTM) and Thai Toray Synthetics Co., Ltd. (TTS)} succeeded in increasing their sales and profits in fiscal 2010. Compared to the previous fiscal year, sales increased by 6.3%, and operating profits by 16%.

Together with a recovery of markets, the strategy of attaching greater importance to quality was successful as they withdrew from unprofitable products, and advancements were made in negotiations for hiking product prices. In the current fiscal year starting this January, plans target a further 17% increase in sales and a 28% increase in operating profits, and Yasuo Yamashita, Chairman and Managing Director of Toray Industries (Thailand) Co., Ltd. and Chairman of LTX, expressed his strong attitude and commitment, saying, “We are determined to achieve these goals”

His strong attitude is supported by the fact that price-hike negotiations due to soaring raw material costs are progressing well in general, the Thai currency is weaker than expected, cost-reducing endeavors are being made, and a shift is being made toward sophisticated products.

In fiscal 2010, TTTM posted a 10% increase in sales and a 30% growth in operating profits. Price-hikes were more difficult for polyester/rayon blended fabrics than for polyester/cotton blends due to strong resistance from users. But endeavors were made to break even. TTTM has customers in various countries and regions including South Africa and the Middle East, but the understanding of price-hikes greatly differs for each of them. Yuichi Manabe, President of TTTM, says, “We intend to make various offers without reducing the profit margin.”

Sports knitwear is moving vigorously with the advantage of the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP), and new business approaches are being made. Since knit trends are originating from Japan, the next target is the fashion sector.

Woven and knitted fabrics for car seats are heavily influenced by the popularity of the car model, so a shift is being made from expansion to quantity-oriented stability. Again, endeavors will be made to develop the fashion sector, such as with the use of raising equipment.

LTX’s spun polyester fabrics are enjoying favorable business supported by plentiful orders for exports to the major Dubai market. Prices have been raised, and the company is planning another 20% hike.

Polyester/cotton blended fabrics achieved high earnings as the company had enough cheap cotton in stock for up to March, and prices were hiked at an early stage. Since LTX will have to buy expensive cotton from now, the outlook for business is uncertain. The production volume has been reduced deliberately in recent years. With a strategy to attach greater importance to quality than quantity, business has also shifted from wholesales to apparel manufacturers, which has contributed to an improvement of earnings.

Polyester taffeta had been in the red for about three years, but prices were successfully raised last October, and endeavors are also being made to improve productivity, which have enabled polyester taffeta to gain profits once again. The development of sophisticated products including high-density taffeta has also been successful.

Due to the global retreat from denim, the operation rate for denim production is a low 70%. However, the degree of losses has been reduced significantly by virtue of enforcing export prices in the previous fiscal year. While endeavors are being to reduce cost and promote differentiation, the company is waiting for business to rise again.

The production of airbag fabrics has been strengthened as the weaving capacity was increased by 20% to 120 looms at the end of last year. Production continues to remain at full capacity, and there are plans to increase the looms to 200 three years from now.

Since its unification in 2003, TTS achieved record high operating profits in fiscal 2010. Sales also rose significantly. Nylon 66 for airbags made a remarkable recovery from the slump after the Lehman Brothers collapse. Polyester for apparel applications continued to move favorably even after the special demands for World Cup soccer games ended, and production remains at full capacity even now. As for favorable airbag fabrics, there are plans to increase production by April next year, by adding 170 tons to the current monthly output of 1,150 tons.

As far as nylon for apparel is concerned, exports of narrow-width fabrics to China are to be expanded. Kazuhiko Miyaishi, Managing Director of TTS, says, “Although competition is intensifying, there is demand for such fabrics.” Industrial polyester, of which seatbelts are the main application, are encountering difficulties (in terms of profits) in exports to Europe, so the company intends to improve the profit rate, such as by increasing the frequency of price revision negotiations.

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