Interview with the presidentwith emerging rivals and attract investors. I was confident in our experience and technical expertise, but those things are not enough to succeed in the industry going forward.Kuroda: So, you decided that scaling up globally was essential for medium- and long-term growth as a materials manufacturer. Nagasaka: Yes, that’s right. Nevertheless, if a company expands suddenly but cannot continue to grow, it will be like a house built on sand. Therefore, before expanding, we took serious steps to restructure and streamline operations in 2016, and then ventured on a path to growth. I thought it would be ideal if we could create value from research and development, but I realized that would not be fast enough in practice given how the operating environment was shifting so quickly. For that reason, we decided that mergers and acquisitions would be our best path forward. The goals of M&A, however, are not just to expand in scale, but also to diversify the business portfolio, boost sales, generate stable profits and secure solid market shares in each business. Kuroda: Four companies have been added to the Tokai Carbon Group in less than four years. How has that worked out?Nagasaka: Overall, everything has gone according to plan. We not only expanded in scale, but also established a solid corporate structure that is resilient to changes in the operating environment. We raised the competitiveness of our Graphite Electrodes business by expanding operations to three regions of the world—Asia, North America, and Europe. Our Carbon Black business, which manufactures products for local consumption, has secured the number-one market share in North America, the world’s second largest market. In the Fine Carbon business, Tokai Carbon Korea was made a consolidated subsidiary. It is a leading niche company in the solid silicon carbide focus ring market, which is projected to grow in the future. Likewise, with the addition of Tokai COBEX, we now have a business in the aluminum industry, which is forecast to grow larger than the steel industry. As a result of acquiring the four companies, Tokai Carbon has expanded to a scale capable of consistently generating over 300 billion yen in net sales.Kuroda: Those acquisitions, however, added up to somewhere between 160 and 170 billion yen. Some people have expressed doubts about a few of the investments. With that in mind, I would like to know about your future plans for business expansion.Nagasaka: Some people questioned the acquisition of COBEX HoldCo, in particular, saying it operated a different kind of business, but its products can be applied in automobiles, and Tokai Carbon actually operated the same kind of business before. Indeed, I made the decision that we would not become involved in a different type of business. When considering whether to acquire a firm, we use the following criteria: it must operate a very compatible business, have stable operations, and be able to post a profit in its first year even if goodwill is amortized. These criteria will be used in the future, as well. Now we are moving ahead with the acquisition of Carbone Savoie International SAS, a French manufacturer of carbon graphite products. Its main products are cathodes for aluminum smelters, just like Tokai COBEX. Tokai Carbon had to borrow funds to make all of these acquisitions, so restoring financial health is a key priority, along with successfully implementing post-merger integrations of the acquired companies.Challenges for attaining sustainable growthKuroda: Securing and training human resources is important for post-merger integrations. As the Tokai Carbon Group continues to expand both its locations and businesses, organizations and systems for preventing it from segregating along these lines will be essential. In this regard, what measures have you initiated? Nagasaka: One of the basic policies of our medium-term management plan is to raise the global capabilities of our human resources. As our organization rapidly becomes more global in scale, we are now moving quickly to secure such human resources at the management and administrative levels. Hiring of mid-career personnel has increased since 2016, and many managers and various types of specialists have been receiving training. Our senior management team, myself included, frequently travels abroad to visit the company’s subsidiaries. Our engineers and other technical personnel have also been meeting their counterparts from overseas. Managers in each business also visit the company’s production plants and actively discuss technologies, manufacturing processes, and costs.In Japan, we have been rotating personnel between business divisions since 2016. By having managers, from supervisors up to department heads, gain experience in several businesses, we are working to generate synergies and improve the quality of our Global-minded initiatives for human resources, the environment, and corporate governance32TOKAI CARBON ANNUAL REPORT 2019
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