■Fujibo Holdings＜3104＞ Company Overview

2. Business Overview

(1) Business structure reform

In the “business structure reform” that began in 2006, the textile business ratio was lowered, and the non-textile sector (abrasives, chemical industrial products, etc.) was expanded. The sales ratio of the textile business was 50% or more 18 years ago (2006), but in 2008, when the Lehman shock occurred, sales in the textile business sector and the non-textile business field were reversed, and in 2023, the textile business ratio reached less than 20%. As changes in the business structure progressed, all domestic yarn spinning (spinning) factories were closed and shifted to Thai factories.

(2) Business Overview

The main businesses are the abrasives business and the chemical industrial products business, and the lifestyle clothing (B.V.D., etc.) business is positioned as quasi-main business, and these three are the three core businesses. The sales structure ratio is about 40% for the abrasives business, about 30% for the industrial chemical products business, and about 20% for the lifestyle clothing business, and we are developing the chemical products (resin mold) business in other businesses to become the “fourth pillar.”

(a) Abrasive materials business

There are 2 types of polishing materials, soft pads and hard pads, and the company mainly supplies soft pads for semiconductors. The market is divided between hardware and software, and the company has gained top market share in the soft pad field.

As the miniaturization of semiconductors progresses, the level of difficulty of the polishing process increases, and since refinement technology is the key, the importance of soft pads increases, but the company's soft pads are highly praised by customers (semiconductor manufacturers & foundries). In the future, along with the progress of miniaturization and lamination of semiconductors, flatness is required for abrasives, and we see that this will be an increasingly tailwind for the company's soft pads.

The company's strength in this business is that it can respond in detail with integrated manufacturing and sales technology to meet high demands from semiconductor manufacturers, and that end users and research and development departments can jointly create it. Additionally, abrasive prototypes can be evaluated in-house, and sample products can be provided and reported in a timely manner along with evaluation data. Also, it is possible to strengthen production capacity and respond accurately to production risks with a 5-plant system (the main plants are the Mibugawa Plant, Oyama Plant, Kozakai Plant, Oita Plant (completed in 2020), and the Taiwan Plant (completed in 2017)), and that they have strategies (intellectual property office) for securing and utilizing patents related to polishing technology.

As for the application market and customers of this business, the semiconductor application market is currently dominated by the logic field. In the future, it is expected that demand for soft pads will become apparent due to lamination in the memory field, and customers will cover major semiconductor manufacturers (including foundries) around the world. Regarding competitive strategies, Western manufacturers, which are the largest competitors, have a large market share, and as top leaders, they have a rich product lineup with a de facto standard (standardization) strategy. Meanwhile, the company is deepening the niche market by developing and improving products customized to customer needs with a flexible edge. There are few players in the niche market, and since high value-added products are provided, it contributes to a high profit structure as a result.

(b) Chemical products business

Yanai Chemical Industries, a subsidiary of the company, manufactures functional materials, pesticides, and pharmaceutical intermediates* on contract from major chemical manufacturers, etc. It is an independent company that “has no color” due to contract production of intermediates and is top class in domestic specialization. Major chemical manufacturers produce large lot products in-house, but in the case of small lot products, it is common to outsource them. The company is highly regarded as a contract manufacturing enterprise that manufactures with QCD (high quality, low cost, short delivery time).

※ It indicates a compound that occurs during the target chemical reaction and a product of the stage leading up to the product in the chemical industry.

The company is a contract manufacturer of intermediate products, and it plays a role in the chemical enterprise industry, but requests for contract production to the company continue due to word of mouth from all over the country, and the 2 domestic plants (Yanai Plant, Takefu Plant) continue to operate at a high level.

The abrasives business stands out as a high-profit business in the company's business portfolio, but the chemical industrial products business is a hidden high-profit business. Since capital investment has been carried out continuously, the operating profit margin is in the 8% range, but when depreciation and amortization expenses are added on an EBITDA basis, an even higher level of profit has been secured. The company's strengths in the same business include “having intermediate products that can only be made by the company,” “building a full-scale production system from Lab to prototyping to mass production,” “strong trust from major domestic chemical manufacturers,” “a wide variety of products/market structures that are less susceptible to economic waves,” and “a two-plant system that can accurately respond to enhanced production capacity and production risks.”

(c) Lifestyle clothing business (formerly textile business)

We manufacture and sell high-quality underwear with a focus on B.V.D. The two brands, B.V.D. and Angle, account for 75% of lifestyle clothing business sales. By narrowing it down to highly profitable products, we have now achieved an operating margin of 9.1%. In particular, by strengthening e-commerce sales (internet sales), we are developing new customers and responding in detail to customer needs. E-commerce sales started in 2005, and we are focusing even more on our 2017 medium-term management plan.

The company's subsidiary Angle Co., Ltd. (formerly Angle Miyuki Co., Ltd.) was acquired from Toyobo ＜3101＞ in 2012. Originally, they sold luxury innerwear centered around department stores, but department store sales continued to be sluggish, and inventory was piled up, and it became impossible to make money. So it looks like department store sales were reduced and shifted to e-commerce sales. Fujibo Apparel Co., Ltd. and Angle merged in 2020 to accelerate e-commerce sales. As for angle products, high-quality products made in Japan have been evaluated, mainly “Asamery” and “Airmery,” which have a high-grade texture, and sales to overseas markets have been strong.

At its peak, sales of the same business were on the scale of tens of billion yen, but then it fell into a long-term textile recession, and steady rationalization activities such as shrinking/withdrawal of unprofitable products and inventory reduction were promoted, and profits came out. Although the scale of sales has now shrunk, high-efficiency sales and a low cost structure have been realized by converting the business model to e-commerce, and a high-profit business transformation has succeeded. Garment factories were consolidated into Thai factories, and domestic and Chinese garment factories all withdrew, making them lighter. Core competencies have also shifted from conventional manufacturing to marketing, product planning, branding, etc., and resources (people, goods, money, information) have also changed drastically.

(d) Other (chemical products) business

The company's chemical products business has developed a molding processing business using injection molding technology that is highly evaluated in the precision machinery and medical fields. In 2018, Tokyo Mold Co., Ltd., a resin mold company, became a subsidiary. Thus, a one-stop process between upstream (mold design/manufacture) and downstream (injection molding) has been realized, and options for customers have expanded. Tokyo Mold has transactions with automobile tier 1 (auto parts), contributing to the expansion of the company's new business partners. Also, IPM Co., Ltd. was acquired in 2022. It is now possible to strengthen proposals that combine a broad lineup of molds in the precision small mold field with molds and injection molded products, and it is responding to the diverse needs of customers.

The chemical mold market tends to be polarized between unprofitable mold companies and competitive high-profit mold companies, but Tokyo Mold and IPM are the latter high-profit mold companies. Incidentally, Tokyo Mold is competitive and well known for the automobile industry in terms of accuracy, price, delivery, and quality, and has gained strong trust from customers.

There is a strong business synergy between the injection molding business (conventional in-house business) and the resin mold business (Tokyo Mold, IPM acquisition business), and the idea is to position it as the company's strategic business and develop it as the “fourth pillar” in the future.

(Written by FISCO Visiting Analyst Keiji Shimizu)