Sojitz — Company History

Sojitz began as an arrangement between creditors. In April 2003 two mid-sized trading houses, Nichimen and Nissho Iwai, transferred their shares into a joint holding company and listed it in Tokyo and Osaka. What pushed them together was not overlapping business but the predicament of UFJ Bank, main lender to both: every over-indebted second-tier trading house in Japan sat on UFJ’s books, and with a Financial Services Agency special inspection approaching, the bank needed its problem borrowers restructured without the provisioning that a failure would have forced. When the plan was announced in December 2002, the share-exchange ratio, the holding company’s name and its leadership were all still blank.

The size of the rescue was set by what the lenders could be asked for rather than by what the businesses needed. A ¥200 billion capital increase was billed as the cushion for cutting ¥80 billion of costs, 4,000 staff and 130 subsidiaries; pressed at the press conference on where the figure came from, neither president gave an answer. In May 2003 the holding company issued $2.3B (¥266bn) of preferred shares to six banks and to Lehman Brothers — against a common-equity market capitalisation of roughly ¥50 billion. Crucially it was new money rather than a debt-for-equity swap, which meant no lender would countenance writing down the same assets a year later.

The two operating companies merged in April 2004 to form Sojitz Corporation. Within weeks UFJ downgraded its own classification of the borrower, rumours of a state-backed turnaround body circulated, and the share price fell from the ¥600s to ¥336. On 23 July 2004 president Nishimura Hidetoshi announced a plan to absorb some ¥250 billion of losses — calling the number, in his own words, an “estimate” — and put even aircraft finance, the old Nissho Iwai’s point of pride, on the list of candidates for withdrawal.

The deferred losses arrived at once. In the year ended March 2005 Sojitz booked ¥453.4 billion of extraordinary losses and a net loss of ¥412.4 billion, after UFJ’s absorption into Bank of Tokyo-Mitsubishi forced another round of write-downs. To avoid running short of equity the company issued a further ¥360 billion of preferred shares in October 2004, taking the outstanding balance to ¥616 billion — in substance a debt-for-equity swap. Because each tranche converts into common stock as it matures, Sojitz carried the resulting dilution overhang all the way to 2024.

The rebuilding fell to Dobashi Akio, an unusual head for a Japanese trading house: a property-development specialist from the old Nichimen who had never served abroad. He led some 17,000 employees at a company that had already taken two rounds of financial support, and said plainly that he never felt at ease. The targets — ¥75 billion of recurring profit and net debt at about three times equity — were met a year early, but buying back preferred shares consumed the cash flow that would otherwise have funded investment.

Under Kase Yutaka, president from April 2007, Sojitz pushed into what it called the 3A regions — Asia, Africa and Arabia — and coal and metal prices lifted net profit to ¥62.7 billion in the year to March 2008. The 2008 financial crisis ended that: by the year to March 2010 operating profit had fallen 69% to ¥16.1 billion and net profit to ¥8.8 billion. The ¥101 billion of recurring profit promised at the time of the merger remained out of reach seven years on.

A second loss followed. Sojitz reported a net loss of ¥3.6 billion for the year to March 2012 — its first as a merged company — and Sato Yoji, a finance man from the old Nissho Iwai, took over as president. He sold every asset the market worried about, moved the head office to Uchisaiwaicho in Tokyo, and returned the company to profit the following year. By the tenth year, to March 2014, net profit was ¥27.2 billion and both the debt reduction and the merging of the two organisations had run their course.

The numbers showed what the retreat had bought. Interest-bearing debt fell to ¥922.7 billion by March 2016 and equity rose to ¥520.4 billion — roughly half the debt Sojitz had carried a decade earlier. Sato said the company had lost the market’s confidence entirely in 2005 and had since secured its financial footing. Even so, Toyota Tsusho earned ¥67.5 billion in the same year against Sojitz’s ¥33.0 billion, and the gap to the five resource-rich majors stayed an order of magnitude wide.

The retreat had a cost that never appeared on the balance sheet. Steel products had been spun into Metal One and LNG into LNG Japan; resources fell from six or seven tenths of investment to two or three. Sato was blunt about what went with them: able people had left through the restructurings, and with those businesses gone the company’s own capacity to build good assets had weakened. Good people, in his view, are what make good assets accumulate — so the disposals lightened the balance sheet by thinning the bench that would have to invest next.

Fujimoto Masayoshi, president from June 2017, declined to fight the big five head-on and steered investment toward non-resource businesses where function mattered more than scale. He called the principle “Sojitz-ness” — there being no point, as he put it, in doing what everyone else does. Sojitz was early among trading houses to allow outside work, back internal start-ups and adopt job-based employment, and in February 2016 it had bought half of a Singapore used-aircraft dealer, the first sizeable move in a decade by the aircraft division that had once been its flagship.

The non-resource base compounded: food and retail in Vietnam, energy-saving services, fisheries, and in November 2023 the outright purchase of DaiTanViet, Vietnam’s largest food-service wholesaler. Net profit climbed from ¥56.8 billion in the year to March 2018 to ¥111.2 billion in the year to March 2023, the highest since the company was formed, helped by a commodity upswing. In April 2022 Sojitz moved to the Tokyo exchange’s Prime market.

Uemura Kosuke, president from April 2024, describes the next step as gathering scattered businesses from lines into surfaces and then into clusters. His mid-term plan targets an average net profit above ¥120 billion and ¥600 billion of growth investment — half in existing businesses, half in digital — and, by 2030, a doubling of corporate value to ¥200 billion of profit and a ¥2 trillion market capitalisation. He is candid about the gap: all five majors trade above one times book while Sojitz does not, and its price-earnings ratio has to move from around eight to the high nines before that changes. Revenue in the year to March 2026 was ¥2.76 trillion against ¥4.68 trillion just after the merger — a smaller company, and a steadier one.