Teijin to create optimal global production of polyester fibers biz
In our Basic Management Policy for the Teijin Group, announced April 27, 2009, we identified our polyester fibers, polyethylene terephthalate (PET) film and polycarbonate resin businesses as “poorly performing businesses” and have since explored a variety of structural reforms based on two key challenges, which are to create optimal global production configurations for these businesses and drastically reorganize loss-making components thereof. As a consequence, at this time we have resolved to execute a number of specific structural reforms for our polyester fibers business.
In addition to the reforms described herein, we will continue to implement a variety of measures in our polyester fibers business. We currently expect the business to return to profitability at the net income level in the fiscal year ending March 31, 2011.
1. Background to Current Reforms
(i) To date, we have implemented a variety of measures aimed at restoring our polyester fibers business to profitability, including (a) withdrawing from loss-making components of the business and shifting our focus to high-value-added products, (b) passing on the impact of high raw materials prices and fuel costs by raising product prices, and (c) lowering production costs and shifting production of certain items overseas. In fiscal 2006 and 2007, these measures yielded a degree of success, particularly for subsidiary Teijin Fibers Limited, the principal company in the business.
(ii) Nevertheless, in fiscal 2008 violent fluctuations in raw materials prices and fuel costs, together with a sharp decline in demand triggered by global recessionary conditions beginning in the second half of the period, provoked a significant operating loss for the business.
(iii) Given the current harsh environment, we have explored a variety of potential measures aimed at lifting the business out of the red and ensuring stable profitability, in line with our Basic Management Policy for the Teijin Group. As a result of this process, we have resolved to implement the reforms outlined below.
2. Planned Reforms
(1) Create an Optimal Global Production and Sales
Configuration In light of the persistent, significant surfeit of products in the global polyester fibers market, we will step up efforts to increase the weight of overseas production with the aim of slashing production costs and increasing competitiveness in terms of product quality, thereby creating an optimal global production and sales configuration. To date, production and sales of polyester products have been the responsibility of the individual production facilities. We will now establish an integrated global production and sales system. Group companies in Thailand will serve as our main production base for raw yarn and raw staple fiber, while a network of other plants in the People's Republic of China (PRC) and Southeast Asia will also conduct subsequent processing and finishing. This will position us well to supply Japan, the principal market for these products; the PRC, an important growth market; and Europe and the Americas.