Nine Japanese Chemical Companies – Areas of Expertise

 

In my last blog, I provided performance data for nine Japanese chemical companies.  (Click here to read that blog.)  These companies represent many of the largest publicly-traded chemical companies headquartered in Japan. 

In this blog, I am providing the reporting segments, those areas of expertise, that these companies perform in.  These reporting segments are based on what the companies state in their 2019 annual reports to be their general areas of expertise, and upon which their businesses are depended.   The first table below provides, alphabetically, the reporting segments, along with the company associated with each reporting segment technology.  The second table provides an alphabetical listing of the companies along with their stated reporting segments. 

 

table 1 company	segment technologies
toray	carbon fiber composite materials
toray	chemicals - performance
shin-etsu	chemicals - special
tosoh	chlor-alkali group
shin-etsu	electronics and functional materials
sumitomo	energy & functional materials
tosoh	engineering
toray	environmental & engineering
toray	fibers & textiles
mitsui	food & packing
nitto denko	functional base products
sumitomo	health & crop sciences
asahi kasei	health care
mitsubishi	health care
mitsui	health care
sekisui	high performance - plastics
asahi kasei	housing
sekisui	housing
sumitomo	IT-related chemicals
nitto denko	life science
sekisui	life science
toray	life science
asahi kasei	material
mitsui	material - basic
sekisui	materials
mitsubishi	materials - chemicals
mitsubishi	materials - gases
mitsui	mobility
nitto denko	optoelectrics
mitsubishi	performance products
tosoh	petrochemicals
sumitomo	petrochemicals & plastics
sumitomo	pharmaceuticals
shin-etsu	pvc/chlor - alkali
shin-etsu	semiconductor silicon
shin-etsu	silicones
tosoh	specialty

  

table 2 company	segment technologies
asahi kasei	health care
asahi kasei	housing
asahi kasei	material
mitsubishi	health care
mitsubishi	materials - chemicals
mitsubishi	materials - gases
mitsubishi	performance products
mitsui	food & packing
mitsui	health care
mitsui	material - basic
mitsui	mobility
nitto denko	functional base products
nitto denko	life science
nitto denko	optoelectrics
sekisui	high performance - plastics
sekisui	housing
sekisui	life science
sekisui	materials
shin-etsu	chemicals - special
shin-etsu	electronics and functional materials
shin-etsu	pvc/chlor - alkali
shin-etsu	semiconductor silicon
shin-etsu	silicones
sumitomo	energy & functional materials
sumitomo	health & crop sciences
sumitomo	IT-related chemicals
sumitomo	petrochemicals & plastics
sumitomo	pharmaceuticals
toray	carbon fiber composite materials
toray	chemicals - performance
toray	environmental & engineering
toray	fibers & textiles
toray	life science
tosoh	chlor-alkali group
tosoh	engineering
tosoh	petrochemicals
tosoh	specialty

 In a previous blog I provided the reporting segments for 15 European Union (EU) chemical companies (click here to read that blog).  Here are some comparisons between how the EU and Japanese companies identify their reporting segments: 

• 1.      Both areas identify, on average for all companies, four reporting segments (EU: 66 segments/15 companies = 4.4 reporting segments per company; Japan: 37 segments/9 companies = 4.1 segments per company).
• 2.      Whereas the 15 EU companies have 23 separate segment topics (e.g., additives, adhesives, etc.), the 9 Japanese companies have 26 (e.g., carbon fiber composite materials, chemicals, etc.).  This implies that the Japanese companies have a much broader range of technologies they use to describe their businesses compared to the EU companies (26 separate segments for 9 Japanese companies versus 23 separate segments for 15 EU companies).
• 3.      The EU list of technology segments are much more chemical-technology specific (e.g., additives, adhesives, intermediates, pigments, etc.). than the Japanese companies.  For example, the Japanese companies identify segments such as housing, performance products, mobility, life science, energy and functional materials, environmental and engineering, optoelectrics, and IT-related chemicals.  These Japanese segments are broad, not specific in what might be included.  
• 4.      In a previous blog I compared the performances of the 15 EU companies to the 9 Japanese companies and concluded that the EU companies’ financial performance, on average, seem better than the Japanese companies (click here to read that blog).  The much broader Japanese business interests (as implied by the conclusions in 2. and 3. above) might imply a difference in management perspectives that could account for the financial performance differences. 

Follow-up blogs to this and the previous ones will provide such data and analysis on chemical companies in the United States.

Performance Data for Nine Japanese Chemical Companies/Comparison to EU Chemical Companies

The table below shows eleven sets of 2019 performance data for nine Japanese chemical companies.  These companies represent many of the largest publicly-traded chemical companies headquartered in Japan. 

Share price is a recent share price in dollars.  p/e is share price divided by earnings per share.  % yield is the dividend yield.  The price/cash column shows how much an investor is paying for an additional dollar of cash flow.   Lower values are better for the investor.  Roe, gpm, and npm stand for return on equity (roe), gross profit margin (gpm), and net profit margin (npm).  LT debt/eqty% is the company’s long term (LT) debt as percentage of the company equity.  This measurement reflects debt burden – the higher the value, the higher the debt burden.  Sales/empl is the sales revenue per employee (in millions of $).  This value can indicate companies operating more efficiently when values are higher.  Shares are the number of companies shares (in billions).  And revs is the company’s sales revenues (in billions of $).

 

company	share price	p/e	% yield	price/ cash	roe	gpm	npm	LT debt /eqty %	sales/ empl in million $	shares in billion	revs in billion $
asahi kasei	10.95	21.48	2.85	7.02	5.25	31.45	3.63	33	0.474	1.4	20.7
mitsubishi	31	88.7	3.63	13.9	4.2	28	5.7	180	0.458	1.5	33.3
mitsui	25	15.9	3.42	6.1	7	22.2	3.5	58	0.621	0.205	12.9
nitto denko	91.25	29.03	2.65	15.3	7.1	30.52	6.75	3	0.26	0.159	7.1
sekisui	93.35	76.5	3.47	-	9.7	32.12	5.4	22	0.384	0.459	10.5
shin-etsu	182.5	27.24	1.72	17.6	10.99	35.31	19.99	1	0.599	0.417	14.8
sumitomo	20.6	121.2	2.75	9.7	3.2	31.8	1.4	94	0.607	1.7	20.7
toray	6.52	70.46	1.91	5.7	1.3	19.88	0.97	61	0.377	1.6	21.3
tosoh	16.85	13.82	3.18	5.93	7.24	24.44	6.04	4	0.501	0.325	7.6
average	53.1	51.6	2.8	10.2	6.2	28.4	5.9	51	0.476	0.863	16.544

 

In a previous blog, I presented 2019 performance data for fifteen European Union (EU) chemical companies using the same eleven metrices.   Click here to see that data. 

In both the Japanese and EU performance data tables, an average of all companies is shown for each of the eleven sets of performance data.   These averages are provided in the following table.  Also shown in the table are the percentage differences between the Japanese and EU companies for each of  the eleven data sets.

2019 data metric	averages for all japanese companies	averages for all eu companies	% difference
share price	53.1	79.6	33%
p/e	51.6	28.0	-85%
% yield	2.8	3.6	20%
price/cash	10.2	15.8	36%
roe	6.2	9.2	32%
gpm	28.4	28.0	-1%
npm	5.9	5.7	-5%
LT debt /eqty %	50.6	78.9	36%
sales/ empl in million $	0.5	1.0	51%
shares in billion	0.9	0.5	-79%
revs in billion $	16.5	17.4	5%

 

The percentage differences between the Japanese and EU companies for each of  the eleven data sets, I believe, can show some general differences between Japanese and EU chemical company performance.   For example, using % yield (dividend yield) and roe (return on equity) as proxies for owner benefits, the higher average values for the EU companies compared to the Japanese companies suggest better owner benefits provided by EU companies in 2019.  This may help explain a greater average 2019 share price for the EU companies compared to the Japanese companies ($79.60 per share compared to $53.10 per share for the Japanese companies). 

In 2019, Japanese companies had much greater shares outstanding, e.g., about 900 million shares on average compared to 500 million shares outstanding for EU companies.  This could also account for a lower Japanese share price (Japanese share supply is much greater than EU share supply). 

The average price to earnings (p/e) ratio for Japanese companies is much higher compared to EU companies ($51.60 compared to $28.00).  This might suggest that investors are anticipating greater profitability growth for the Japanese companies, perhaps because, in general, greater economic growth is anticipated in Asia. 

The lower long-term debt as a percentage of equity (LT debt/eqty %) for Japanese companies compared to EU companies (50.6% compared to 78.9%) might suggest more conservatism by Japanese company managers compared to EU company managers - the Japanese managers are more concerned about high debt levels.  Lower debt levels for Japanese companies might also be related to the lower  price to cash ratio (price/cash in the table) for Japanese companies.   This ratio (price per share divided by free cash flow per share) might be used to indicate better free cash flow; good free cash flow could reduced the need for long-term debt. 

European companies are getting much higher sales per employee ($1 million per employee compared to $500 thousand).  Various explanations might account for this, e.g., the Japanese society has different approaches and polices towards employment; EU workers are more productive; more automaton is used in the EU; etc. 

And finally, little difference exists for gross profit margins (gpm), net income margins (npm), and average revenues per company.  In these regards, the Japanese and EU chemical companies are similar.