Company history

Toray began in January 1926 as Toyo Rayon, a subsidiary of the trading house Mitsui & Co., which was hunting for somewhere to put the profits swollen by the First World War. Rayon — artificial silk, first imported to Japan in 1905 — was a cheap substitute for natural fibre whose demand kept climbing, and Mitsui resolved to make it itself. After surveying water quality at more than twenty sites nationwide, it chose the water of the Lake Biwa system as best suited to the process and put the plant at Otsu, in Shiga. The venture was risky enough that Mitsui prefixed the name with “Toyo” (“the Orient”) so that a failure would not embarrass the Mitsui family — in effect, an early venture business.

The Otsu works spun its first rayon in 1927 and reached full mass production the next year; by 1931 Toyo Rayon held one of the largest domestic shares. Rayon stayed steady even through the Depression and wartime controls, and became not only the company’s early earnings base but the reservoir of retained profit it would later pour into synthetic fibre.

The decision that set its structure came in June 1951, when Toyo Rayon signed a nylon technology tie-up with DuPont of the United States — paying a prepayment of $3M (¥1bn) ($3 million), more than its own capital, for the patent licence alone. No manufacturing know-how came with it, so the company had to raise nylon production by its own trial and error at Nagoya. In 1957 it added polyester technology from Britain’s ICI and sold it with Teijin under the Tetoron brand; with nylon and polyester it turned from a rayon maker into one of postwar Japan’s leading synthetic-fibre makers, and in 1962 it built a basic research laboratory that made long-horizon technology development a permanent habit.

In the 1970s a rising yen and cheap Asian competitors turned commodity fibre into a structurally unprofitable business, and the big Japanese fibre houses fled — Kanebo into cosmetics, Teijin into pharmaceuticals, Toyobo into film. Once the model pupil of the Mitsui group, Toray had lost so much prestige that Toyo Keizai in 1975 ran a feature titled “The Fallen Star of Mitsui.” Against that tide, in December 1975 president Fujiyoshi Tsuguhide refused the fashionable call to “exit fibre,” arguing that fibre was a necessity underpinning clothing, food and shelter, and that competitiveness lay not in the field of business but in the depth of technology in the material itself.

In August 1971 Toray had begun selling the carbon fibre Torayca, at first only for fishing rods and golf shafts; costs stayed high, demand stayed narrow, and the business ran at a loss for years. Rather than pull out, Toray kept investing while carrying the losses — the same instinct that had it derive resins and films from its fibre research (ABS resin, PP and PE films from 1970) instead of leaping into unrelated fields.

The patience had a price. Maeda Katsunosuke, president from 1987, diagnosed the malaise as self-inflicted — a “big-company disease” compounded, around 1985, by an “acute pneumonia” of scattered non-fibre ventures that left the core fibre division deep in the red, and he cut hard. Yet the carbon-fibre bet began to pay: Boeing designated Torayca for the 767 in 1982 and widened it to the 777 by 1990 — the first market proof that decades of loss-making technology could become an aerospace franchise.

Under a run of long-range visions (AP-G2000 from 1991, NT21 from 2002) Toray steered capital into carbon fibre, electronic materials and film. It mass-produced LCD colour filters from 1993 and began production in China in 1994; the profit centre moved from traditional fibre toward advanced materials even as the fibre commitment held.

The carbon-fibre bet matured into a franchise. Boeing widened its use from the 777 to full primary-structure adoption on the 787 in 2006, where composites reached roughly half the airframe weight and Toray signed a long-term exclusive supply deal — some forty years of tolerated losses finally realised as a market position, and, by 2012, cited as a model of a sunset business revived.

In 2006 Toray also tied itself to Fast Retailing, co-developing HeatTech and binding an upstream material maker directly to downstream demand — the reward for staying in fibre. But the ride was not straight: Toray booked net losses for the years to March 2000 and March 2010, exposing that fibre earnings alone could not steady the whole. By the 2000s its character had quietly changed from a fibre maker into an advanced-materials one.

In February 2014 Toray made its first large M&A, buying America’s Zoltek for $862.6M (¥91bn) to push carbon fibre beyond aircraft into large-tow, wind-blade and industrial uses; in 2018 it added the Netherlands’ TenCate Advanced Composites for about $1.1B (¥117bn). The two cross-border deals loaded roughly ¥90 billion of goodwill onto the balance sheet.

Wind-power demand did not grow as hoped and industrial monetisation stalled, so the question of whether carbon fibre could earn its capital moved to the centre of management, with goodwill impairment a constant shadow. More broadly, large sales stopped translating into returns: a price-to-book stuck below 1 became normal, and a business-by-business ROIC analysis showed for the first time that units run for volume and utilisation were dragging down the whole company’s capital efficiency.

In 2024, under president Oya Mitsuo, Toray launched the “D-Pro” restructuring — testing whether each low-return business (PP spunbond, Western film subsidiaries, polyester staple, Zoltek) could clear an ROIC hurdle and shrinking or exiting those that could not — and began selling down its cross-shareholdings, disposing of $724.8M (¥110bn) in a single year and putting the proceeds toward a share buyback capped at $660.1M (¥100bn). Keeping Fujiyoshi’s creed of staying in fibre and growing materials by technology, the Oya regime imposed a new discipline: return the capital it earns to shareholders, or pull it out of low-return businesses.