Kuraray: long-term performance & turning pointsSales (revenue) and profit-margin ratio
Sales (¥ bn)Net margin (%)
1926A rayon company out of Kurashiki
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
1926Kurashiki Kenshoku founded to industrialize rayon; Ohara Magosaburo president
1928Commercial rayon production begins at the Kurashiki plant
1936Four-plant network completed
1949Renamed Kurashiki Rayon
Kuraray began as a subsidiary. In 1926 Ohara Magosaburo, president of the cotton spinner Kurashiki Boseki, judged that the man-made fibre rayon had a future, put up ¥10 million of capital to found Kurashiki Kenshoku, and took the presidency of it himself. Technology came from France, research from a joint programme with Kyoto Imperial University, and commercial rayon production started at the Kurashiki mill in 1928. By 1936 the company ran four plants, Saijo and Okayama among them, and was established as a rayon specialist.
The Pacific War turned the mills over to munitions; after it the company restarted man-made fibre quickly and, in 1949, renamed itself Kurashiki Rayon. What it carried out of these first two decades was less a product line than a disposition: the industrial base the Ohara family had built in Kurashiki, and a founding creed of creation that would harden, within a year of the renaming, into an insistence on technology of its own making.
The act that defined the postwar company was industrializing the synthetic fibre vinylon on wholly Japanese technology. The chemistry came from Sakurada Ichiro at Kyoto University; the feedstocks were limestone, coal and water — all domestic, in a country with almost no foreign currency to spend on imported processes. The Ministry of Commerce and Industry designated Kurashiki Rayon as the concentrated producer in 1949, and production began at the Okayama plant in 1950, the first synthetic fibre in Japan built on home-grown technology. A company capitalized at $694,444 (¥250m) borrowed $3.9M (¥1bn) from fifteen banks to do it.
The fibre itself was a poor bet. Its handle and dyeing behaviour kept it out of ordinary clothing, and it stayed penned into school uniforms and workwear while later entrants abandoned trial production. What rescued the venture was a second earner — rayon profits, poured in year after year — and then a change of target: the high-tenacity grade developed in 1954 found industrial uses in fishing nets, ropes and cement reinforcement, where the fibre’s strength mattered and its hand did not. Kuraray had learned the pattern it would repeat for seventy years: open a narrow market with your own technology, and be first in it.
From the early 1960s the company deliberately stepped outside fibre. A poval plant using natural gas as feedstock started up at Nakajo in Niigata in 1962, giving it a chemicals base; in 1964 it began making Clarino, a man-made leather of its own design that came close to the hand of the real thing at a fraction of the weight. DuPont and others rushed the same market, but Kuraray held the lead on quality and marketing and took a commanding share in uses such as Japanese school satchels. Poval plus Clarino was the first real foothold off the fibre business.
In 1970 Kurashiki Rayon became Kuraray. Shedding “rayon” from the name was a declaration rather than a formality: the company intended to be a functional-materials maker, not a fibre maker. Two years later the intent had products behind it. EVAL, a gas-barrier resin derived from poval technology, went into production at Okayama in 1972 and would in time become the single largest source of profit in the company; polyisoprene rubber started at Kashima the same year, opening the isoprene chemicals business.
That spread of businesses is what carried Kuraray through the two oil shocks that broke much of the Japanese fibre industry. Isoprene derivatives fed fragrance and pharmaceutical and agrochemical intermediates; medical products such as the artificial kidney were commercialized. The company also decided, explicitly, not to chase scale: it accepted that it could not out-build Toray or Teijin in commodity fibre and concentrated instead on proprietary, high-value products less exposed to market cycles — rhizome management, branching derivatives out of a few base technologies. When the bubble burst, Kuraray’s earnings fell by less than any of its peers.
Internationalization followed the products. EVAL Company of America was set up in 1983 and its plant came onstream in 1986; a European headquarters was established in Germany in 1991, and EVAL Europe was built in Belgium in 1997 and started up in 1999. With Japan, North America and Europe all producing, EVAL held the world’s largest share and moved from food packaging into automotive fuel tanks. Meanwhile the second mid-term plan of 1988 had ordered the rationalization of fibre and the expansion of everything else — the founding business had begun, quietly, to be wound down.
2001Quitting the founding business, buying the poval chain
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY2001 · consolidated
Revenue$2.6B
Net income$33M
Net margin1.3%
→
FY2017 · consolidated
Revenue$4.6B
Net income$485M
Net margin10.5%
2001Rayon production halted (Feb); Clariant poval and PVB acquired (Dec)
2004HT Troplast PVB film business acquired
2012MonoSol acquired — world leader in water-soluble film
2014DuPont vinyl acetate businesses acquired for $612.2M (¥65bn)
2017Record year: 14.5% operating margin; vinyl acetate is 80% of profit
In February 2001 Kuraray stopped making rayon. Seventy-five years after the company had been founded to do exactly that, the exit completed the passage from fibre maker to functional-materials maker. The reasoning was a standard the previous president had set out in 1998 — do not fight in markets where you cannot be among the world’s top three — applied, unsentimentally, to the company’s own origin. In December of the same year Kuraray bought Clariant’s poval and polyvinyl butyral businesses, acquiring a European chemicals base including German plants in one move, and in 2004 added HT Troplast’s PVB film business, extending the poval value chain into interlayers for automotive laminated glass.
From the 2010s, M&A became the main axis of growth. In 2012 Kuraray paid about $395 million for MonoSol Holdings of the United States and took the leading position in water-soluble poval film — the material of detergent pods — completing a vertical chain from its own resin to the finished film, a barrier competitors found hard to cross. In June 2014 it acquired DuPont’s vinyl acetate businesses for $612.2M (¥65bn), gaining VAM, PVA and PVB sheet operations with over $500 million of annual sales and production in Texas, and making its world lead in poval unassailable.
The integration paid off quickly. In the year to December 2017 the vinyl acetate segment turned over ¥234.7bn with segment profit of ¥61.3bn, and group sales reached ¥518.4bn on operating profit of ¥75.1bn — a 14.5% margin, the best in the company’s history. It was also a warning. That one segment earned more than 80% of group operating profit; the portfolio assembled over a decade of buying and exiting had settled back onto a single leg, and the search for a third pillar became the defining management problem.
2018Calgon Carbon acquired for $1.1B (¥123bn); EVAL plant fire in the US
2019Litigation losses; first net loss in decades
2020COVID year — operating margin holds at 8.2%
2022Record sales of ¥756.4bn; PASSION 2026 target raised
In January 2018 Kuraray bought Calgon Carbon, the largest activated-carbon producer in the United States, for $1.1B (¥123bn), and named environmental solutions its new growth pillar. Merging Calgon with its domestic carbon-materials business gave it a chain running from raw coal to reactivation, and the functional materials segment more than doubled, from ¥49.7bn of sales in 2017 to ¥112.0bn in 2018. Group sales reached ¥603.0bn. The cost was financial: most of the purchase was borrowed, interest-bearing debt jumped from ¥60.0bn to ¥216.6bn, and the equity ratio fell from 71.7% to 58.6%.
Four months later, in May 2018, the EVAL plant of Kuraray America exploded and burned. During a turnaround an ethylene pressurization step was mishandled, ethylene was released and ignited, and 266 people were injured, contractors among them. Kuraray booked litigation-related losses of $464.2M (¥51bn) in the year to December 2019 and $216.3M (¥23bn) again the following year, and fell to a net loss of ¥2.0bn in 2019. The damage came not from the newly acquired business but from a plant it had run for decades — and it landed just after the borrowing had used up its financial slack.
The recovery was faster than the shock. COVID cut 2020 sales by only 6%, to ¥541.8bn, with the operating margin holding at 8.2%, because packaging, automotive and water-treatment demand move on different cycles. A weak yen and normalizing demand then took sales to ¥629.4bn in 2021 and ¥756.4bn in 2022, with operating profit of ¥87.1bn and an 11.5% margin, and the company raised its PASSION 2026 operating-profit target to ¥110bn. Underneath, the trading segment’s sales function was folded into the operating segments and the isoprene business began absorbing idling costs as Chinese elastomer capacity and feedstock prices turned against it — the next round of restructuring, already visible inside a record year.
A company capitalized at $694,444 (¥250m) borrowed $3.9M (¥1bn) from fifteen banks and staked it all on one fibre. That single fact shows how far outside the conventional wisdom of the day President Ohara Soichiro’s judgement stood. It was an age when imported technology was celebrated and domestic technology counted for nothing. That he could nonetheless choose his own appears to be because he read the feedstock mix — limestone, water and electricity, and little else — as a condition no rival could copy in a country starved of foreign exchange. His maxim, begin when one or two people in ten agree, was less a brave slogan than something close to a cold calculation: by the time agreement has gathered, the business is no longer yours alone.
The object of the bet, however, was wrong. Vinylon never became a mainstay of clothing; it stayed confined to school uniforms, monpe work trousers and workwear, while the later entrants — Nippon Gosei Sen’i, Toyobo and Kanegafuchi Boseki — all dropped out of trial production. Kurashiki Rayon survived only because it had another earner, the profits of its rayon division, and could keep pouring them in. And what finally bore fruit was not the fibre but poval, the feedstock made for the fibre, which took fifty years to flower as the base material for LCD polarizing film. A decision to go with your own technology is graded over a long span of time — misses included.
The strength of a company that does not chase scale
The heart of this shift was that Kuraray stopped competing for scale on the same ground as the majors. A cool reading of itself — that it could not win by matching Toray and Teijin capacity for capacity in commodity fibre — produced the decision to concentrate resources on high-value, proprietary products less exposed to swings in the market. Rhizome management, branching derivative products out of a few base technologies, was also a mechanism for spreading limited R&D across several markets without waste. That Kuraray’s profits fell least of all its peers in the slump after the bubble can be read as years of choosing quality over scale converting into resistance to recession.
The pattern is not universal, though. As the repeated withdrawals from parachute ventures far from its core technology showed, stepping outside the rhizome came with failure. An insistence on originality is, turned around, a choice to keep avoiding the large main battlefields, and there is a natural ceiling on the speed of growth that follows. How to remain a big carp in a small pond and still go out into a larger sea for growth — that was the question Kuraray faced next, having built a constitution strong enough to survive recessions.
We do not fight in markets where we cannot be in the world’s top three — the measure Matsuo Hiroto stated in 1998 is, in itself, the kind of thing many companies say. What made Kuraray different is that it turned the measure on the business it had run since 1926, and then carried it out. Wakui Yasuaki was a president who had spent thirty-five years in personnel, the man in the building who best knew the human reality of the fibre shop floor. That production could nonetheless be stopped in February 2001 appears to be because the logic of exit had already become settled company language under his predecessor, so the judgement could be executed as the application of a corporate standard rather than as one man’s decision.
The decision also created the next problem. Having wound up the founding business and concentrated on chemicals, by 2012 poval-related products were earning 90% of operating profit. A field where difficulty of manufacture forms the barrier to entry is, by the same token, a field whose market never grows large. Taking world number one in a niche is strong in a downturn, but once the earners cluster into one lineage, the next pillar can no longer come from the company’s own rhizome and has to be bought from outside. The acquisitions that followed — HT Troplast in 2004, Celanese in 2005 — can be seen as the entrance to that.
Our own technology alone will not carry us, so a little M&A is needed — a half step into a new technical field while keeping hold of the core. The price of that half step, as President Ito Masaaki described it in 2015, came to $1.1B (¥123bn) and thirteen points of equity ratio. For a man who had approached DuPont from 2002 and only closed that deal in 2014, the Calgon Carbon decision looks remarkably fast: in January 2017 he absorbed Kuraray Chemical and stood up a carbon-materials division, and by September of the same year he was buying the world’s largest player. That a batter who preaches swinging only at good pitches reached for a high one at an EV/EBITDA multiple of 22 suggests impatience with a structure in which vinyl acetate earned 80% of group operating profit.
The miscalculation came not from the business bought but from the business already owned. What caught fire in May 2018 was not the newly acquired activated-carbon plant but the EVAL plant in the United States the company had operated for years. Litigation-related losses reached $691.1M (¥74bn) over two fiscal years — a sum on the scale of the acquisition itself, flowing out for reasons that had nothing to do with it. That this arrived immediately after borrowing had consumed the company’s financial slack is the most painful part of the decision. Activated carbon did take root in North America as an environmental-solutions business, and it did stand up as a pillar. Even so, what stayed with Kuraray longer was the experience of meeting the unforeseen with no room to absorb it.
Each heading links to the full Japanese analysis — background, decision and outcome, with sources.
This is a condensed English edition. The full, source-by-source history — with the detailed narrative, financial tables, shareholders and executives — is maintained in Japanese: 日本語版（詳細）— Kuraray full history in Japanese →
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