Business Overview and Vision
Contributing to raising the standard of living by supplying safe and reliable food products and foodstuffs
The Food & Agriculture Business Division’s first priority is to deliver safe and reliable food products and foodstuffs. In Asia, in particular, where food demand is expanding and diets are diversifying, we aim to play a part in food supply, and to boost the standard of living by helping to expand agricultural production, transfer production technologies and improve the local dietary culture.
A unique characteristic of this division is that it has prime assets at key points in the food value chain, from upstream segments such as fertilizer production, agriculture, feed production and aquaculture, to midstream and downstream segments such as grain collection, food ingredients and food manufacturing. As such, we now have 24 operating companies in Asia. Among our major businesses, we have compound chemical fertilizer production and sales businesses in the ASEAN region and participate in an agriculture, grain collection and terminal business in Brazil, which is selling grain to China and via port facilities that we own in Vietnam.
Strengths That Drive Value Creation
Strong network of interlinked businesses in Asia
In this division, we have built a strong, stable network of operating companies firmly rooted in Southeast Asia.
Among them, our compound chemical fertilizer production and sales business holds the top market share in Thailand, Vietnam and the Philippines. The Sojitz Group’s overall production capacity of 1.8 million tons is one of the largest in the ASEAN region. The brand strength of each Group company is outstanding. Besides the high quality of our products, we attribute our position to our introduction of training programs for local farmers to educate them about fertilizers with respect to agricultural product type, when to fertilize and usage amounts, which we believe has effectively contributed to expanding production and revenues. Moreover, in Vietnam, Interflour Vietnam Limited (IFV), in which Sojitz has an investment stake, owns the largest special-purpose grain port in the ASEAN region and is also engaged in the import of food and feed as well as the flour milling business. This business also undertakes port infrastructure improvement and expansion projects, and has constructed grain silos and warehouses. As such, it has a strong reputation for supporting the country’s trade and distribution.
Operating Environment and Value Creation Strategy
In Southeast Asia, business opportunities for Sojitz are expanding further due to growth of the food market, increasing attention to food safety and reliability and rising demand for higher quality food. At the same time, however, the food-related businesses are exposed to the risks of weather fluctuations and government regulations in each country.
This division plans to establish a more stable earnings foundation for expanding revenue-generating businesses. To realize our target, we will continue to invest aggressively in order to improve existing businesses and create new businesses. In the year ended March 31, 2016, our profit for the year rose substantially year on year to ¥5 billion. However, we would like to become a division that can achieve ¥10 billion in the future. To do so, we will strive to boost revenues over the medium to long term by developing our core fertilizer business in neighboring countries, and in the grain and wheat business we will expand regionally and strengthen the value chain by acquiring new assets. As for marine product businesses, while making the most of the existing tuna farming and processing operations, we will endeavor to create new processing and sales businesses to capture growing demand in advanced countries that is being fueled by greater health consciousness.
Core Business: Fertilizer Business
Developments in the new markets of Myanmar and Indonesia
In fertilizer, we are striving to both improve our existing businesses and move into new regions. For existing businesses, we are strengthening marketing activities and boosting production capacity, and will continue to make capital investments and factory improvements to increase supply capacity and exports to surrounding countries.
We are also looking to expand business in the new regional markets of Southeast Asia, including Myanmar, Indonesia and other countries. Currently, we are exporting fertilizer from Thailand to Myanmar. However, in the face of expectations for growth in demand in Myanmar, we plan to establish a compound chemical fertilizer production business in this country as well. We also expect fertilizer demand to increase in Indonesia, which is a large market, so we are conducting market research toward the launch of sales and production businesses.
Core Business: Grain Business
Creating a value chain that connects evolving businesses in Asia with Central and South America
|Compound chemical fertilizer manufacturing and sales business in the Philippines (Atlas Fertilizer Corporation)
In Vietnam, which represents the core of the division’s grain business, we plan to expand the functions of IFV’s port facilities and participate in port and warehousing businesses in the northern regions of the country. Our aim is to thoroughly meet distribution needs in the ASEAN region while expanding sales opportunities for wheat, feed, soybeans, soy meal, corn and other products. Furthermore, in the flour milling business, in addition to advancing into Southeast Asia by setting up milling facilities, we are also considering investing in downstream businesses such as secondary processing and the bakery business by leveraging Japan’s product quality technologies.
In Brazil, meanwhile, the grain collection and terminal business and intermediary grain trading are facing difficult circumstances due to the local economic climate and other factors. But the business model of supplying grain from Brazil to the ASEAN region and the rest of Asia, including China, is very promising. We will look into measures to stabilize the business as soon as possible.
Expand opportunities to manage operating companies, accelerate training of personnel
We believe this division’s strength ultimately comes from its human resources. We nurture our personnel as managers of operating companies with ample understanding of ASEAN and other local cultures. Turning out such personnel in great numbers should contribute directly to our value creation efforts. Also, we encompass a large number of operating companies, so we believe we offer an excellent environment for nurturing personnel. The experience gained by staying in each place to understand local conditions and take part in managing local businesses is immeasurable. Going forward, while looking toward new business opportunities, we will build a more effective job rotation structure that includes young employees as well as middle management. By providing opportunities to experience business management in various regions and stages, and by accelerating training, we aim to earn the trust of our stakeholders.
||Increase in agricultural production is boosting volume of agricultural materials (fertilizers, etc.) and crops (grains, etc.) handled
||Growth of food needs in Asia due to dietary diversification
||Stronger attention to food safety and reliability
||Risk of price fluctuations and increased transportation cost burdens in the event of supply-demand imbalance due to factors including climate change or oversupply
||Pressure on margins due to changes in government policies, tightening of regulations and other factors