Merging the Ambic and Fujikoh nonwovens businesses (2023)

A wager on consolidation inside a shrinking market

The core of this decision is the idea of raising presence in niche fields by deliberately stacking up acquisitions in a shrinking, mature market rather than fighting for share in a growing one. As cheap Chinese nonwovens ate into the commodity market, Nikke aimed at highly specialised applications such as filters and secured scale by picking up the businesses other companies were withdrawing from or selling off. The roughly twenty-year accumulation — beginning with making Ambic a subsidiary in 2002, then the alliance with and full acquisition of Fujikoh, and finally the merger of the two — can be seen as giving the nonwovens business a depth that single acquisitions rarely produce.

How long share gains in a shrinking market can sustain profitability as a business, however, remains an open question. Revenue and profit in industrial materials have kept expanding these past several years, but that depends heavily on whether the company can keep choosing niches Chinese producers find hard to enter. Whether the discipline of “making effective use of assets after acquiring them,” as former president Tomita Kazuya put it, stays consistent with the “third earnings pillar” position set out by president Nagaoka Yutaka will largely decide the durability of this contrarian strategy.