Sumitomo Forestry - Company History

A lineage of splitting and staged reassembly: back to one company in seven years

Sumitomo Forestry’s forest management began as a self-supply operation for the Besshi copper mine in Ehime prefecture, which the Sumitomo family opened in 1691: the forests existed to furnish the mine’s pit props and the firewood and charcoal burned in smelting[1]. The move into forestry proper came after the Meiji Restoration, when the managed area was widened to some 20,000 chobu (one chobu is roughly one hectare)[2] and large-scale planting by modern forestry technique began. In 1894 the Sumitomo head office established a forestry office, and its director, Iba Teigo (伊庭貞剛), pressed forward with the systematic replanting of the Besshi mountains, which smelter fumes from the mine had reduced to waste ground. From around 1917 the company bought and directly managed woodland in Kyushu, Hokkaido and Korea as well; a forestry office was set up at the same moment Sumitomo Goshi was founded, afforestation plans were laid, and the managed area passed 120,000 chobu[3]. Including land held under management contract, the prewar total reached 140,000 chobu[4], and during the Pacific War the business extended to Java, Sumatra and Borneo — though the Korean and southern operations were all lost when the war ended[5].

In February 1948 the Holding Company Liquidation Commission designated Sumitomo Honsha for dissolution[6], and the forest management it had held was separated into six regional companies: Shikoku Ringyo, Kyushu Norin, Hokkai Norin, Fuso Ringyo, Hyogo Ringyo and Tokai Norin[7]. Succeeding to Sumitomo Honsha’s forestry division under the Enterprise Reconstruction and Reorganisation Law, each of the six began managing the forests it now owned[8]. In December of the same year Fuso Ringyo, Hyogo Ringyo and Tokai Norin merged to establish Fuso Norin[9] — the first reassembly, only ten months after the split. In February 1951 Fuso Norin, Kyushu Norin and Hokkai Norin merged into Toho Norin[10], gathering the forest holdings of Honshu, Kyushu and Hokkaido into a single legal entity. Toho Norin was capitalised at $37,500 (¥14m)[11], later raised to ¥60 million.

In February 1955 Shikoku Ringyo and Toho Norin merged, and Sumitomo Forestry Co., Ltd. began business with its head office in Osaka[12]. Capital at the merger was $583,333 (¥210m)[13], of which Shikoku Ringyo brought $416,667 (¥150m) after a rights issue. Seven years after the zaibatsu dissolution had separated them, by way of two intermediate regional mergers, six companies had returned to one[14]. The new company started out with forest management and the collection and sale of domestic timber as its principal business, holding 14,000 chobu in Hokkaido, 19,000 in Shikoku and 8,000 in Kyushu — more than 41,000 chobu in all, carrying standing stock of 11 million koku (the koku is the traditional Japanese unit of timber volume)[15]. After the war it had also moved into timber trading, and it held a collection-and-sales organisation covering almost the whole country: five branches in Osaka, Shikoku, Kyushu, Tokai and Hokkaido, with sales offices and sub-branches besides[16]. Annual timber handled came to about one million koku and total sales to some $5.6M (¥2bn)[17].

From a forestry company to twin pillars of timber-and-materials and housing

Immediately after the reassembly Sumitomo Forestry set out on forest management and the purchase and sale of domestic timber, but in October 1956 it took up the importing of foreign timber[18], sourcing from the United States, the Philippines and Indonesia[19]. As new building materials — plywood, processed plywood, ceramic materials, plastic materials and metal materials — began to circulate, the company created a building-materials section in March 1961[20] and started dealing in materials in February 1962[21]. In March 1964 it established Sumirin Plywood Industries Co., Ltd. and entered the manufacture of housing materials[22], laying a making function on top of the trading function of buying and selling. The materials division would later widen to cover every building material used in a house: plasterboard, aluminium sashes, sinks, washbasins and bathtubs[23].

In September of that same 1964, Sumitomo Forestry established Sumirin Land Co., Ltd. (today Sumitomo Forestry Home Service) and entered the built-for-sale housing business[24], raising here the second pillar alongside timber and building materials. New housing starts were expanding more than fourfold, from 420,000 units in 1960 to 1.86 million in 1972, and the aim was to secure inside the company, in the form of houses, an outlet for the timber and materials it handled. In May 1970 the shares were listed on the second section of the Osaka Securities Exchange[25], and in February 1972 they moved up to the first section[26]. In November 1990 the company listed on the first section of the Tokyo Stock Exchange[27][28].

Earning on price per house, not volume, as growth in units came to a halt

In September 1970, to open up timber resources, Sumitomo Forestry established PT. Kutai Timber Indonesia in Indonesia[29] (a 65% stake)[30] as a joint venture with the local capital Kartimex Jaya, and began preparing a plywood manufacturing business. The company knew the ground, having been asked by the Japanese army during the war to manage Indonesian forests, and the move came a little before Japan as a whole rushed to secure resources[31]. The venture began manufacturing and selling plywood in December 1974[32], and although local demand had been all but non-existent at the start, it followed local ethnic-Chinese capital into plywood plant construction and switched to a domestic-demand focus, so that by the year ended March 1976 100% of its output went to the Indonesian market[33]. Sales that year exceeded 4 billion rupiah in total — 1.4 billion from forest development and 2.6 billion from plywood production[34]. In the same September 1970 the company acquired a majority of the issued shares of Hamada Sangyo Co., Ltd. (today Sumitomo Forestry Crest)[35], and in August 1975 it acquired all the shares of Osaka Shokurin Co., Ltd.[36]

In October 1975 it established Sumirin Housing Sales Co., Ltd. at two bases, Tokyo and Osaka, and began the custom-built housing business[37]. The launch rested on a conviction that the wooden house suits Japan’s climate best of all[38], but it came immediately after the first oil crisis and the start was hard going[39]. In the housing industry Sekisui House (founded 1960) and Daiwa House Industry (founded 1955) had gone ahead with steel-frame prefabrication; Sumitomo Forestry entered with the wooden post-and-beam method, backed by its own group’s forests, sawmills and building materials[40]. Annual supply reached 2,000 houses only in the mid-1980s[41]. In July 1980 the two Sumirin Housing Sales companies were renamed Sumitomo Forestry Home (Tokyo) and Sumitomo Forestry Housing (Osaka), unifying the brand.

New housing starts peaked at 1.91 million units in 1973, then fell to 1.49 million in 1979 and 1.13 million in 1983. As growth in volume came to a halt, the road Sumitomo Forestry took was to earn on the price of each house rather than compete on the number of them[42]. Against Sekisui House and Daiwa House Industry, each aiming at 50,000 to 60,000 units, Sumitomo Forestry supplied only 8,100 houses in the year ended March 1991[43]. On the other hand the best sellers among Sumitomo Forestry Homes ran at ¥570,000–580,000 per tsubo (a tsubo is about 3.3 square metres), a higher band than the prefabricated houses selling at around ¥500,000[44], and the national average price per house reached about $208,163 (¥28m)[45]. In the year ended March 1992 the housing division sold roughly 7,700 houses for about $1.8B (¥230bn), six-tenths of it replacement demand[46]. In the year ended March 1990 sales broke down as 29% timber, 34% building materials and 37% housing[47] — three divisions splitting the company almost equally.