Kurita Water Industries - Company History

Founding under the banner of the doctor of water, and the move to specialisation

In July 1949 Kurita Haruo (栗田春生) established Kurita Water Industries in Kobe with capital of $833 (¥300,000)[1][2][3], and began by manufacturing and selling a boiler compound that prevented scale from forming inside boilers. Later management described the founding as the act of a man who had seen ahead to the future of water. Two years after incorporation, in 1951, the company set up a Boiler Feedwater Research Laboratory in Nishinomiya, Hyogo prefecture[4], putting in place at an early stage a system for analysing water quality and prescribing the chemicals to suit it. In 1954 it moved into the manufacture and sale of water-treatment equipment as well[5], and in this period assembled the two pillars of treatment chemicals and treatment equipment. The idea of selling the technique of using water efficiently without fouling it led on to the self-definition the company would later adopt: the doctor of water.

Although the company was founded in Kobe, in 1956 it moved its head office to Osaka[6] and reorganised itself as it grew. In 1959 it separated the chemical-cleaning works division to form Suzuki Shokai[7], adopting a structure of separate companies by speciality. In October 1961 it listed its shares on the second sections of both the Tokyo and Osaka stock exchanges[8], and in August the following year was reassigned to the first section[9]. In 1962 it built and moved into a Central Research Laboratory in Yokohama[10], giving it a base dedicated to research on water treatment. A business that had started with one product, a boiler compound, had in little over a decade turned into a specialist water-treatment maker handling chemicals, equipment and chemical cleaning.

In 1965 Kurita entered into a business alliance with Itochu Corporation (伊藤忠商事)[11], building a relationship that lent it the strength of a general trading house in procurement and exports. That alliance would also become one of the supports that carried it through the management crisis to come. In water-treatment equipment it extended into environmental and sanitation facilities such as water supply, sewerage and refuse incineration, and in night-soil treatment it held a place as one of the big three alongside Kubota Iron Works and Ebara-Infilco[12]. A broad view of the business — that anywhere water is used, from the small laundry to the large steelworks, could become a customer — took shape in this period. Supporting a customer’s installations over the long run on the two wheels of treatment equipment and treatment chemicals became the foundation of the stable earnings base that followed.

The accounting fraud, and a rebuild that took six years

In the midst of what looked like steady growth, Kurita was struck in the late 1960s by the discovery of falsified accounts[13]. Looking back on the time, president Nakamura Sadao (中村貞夫) said in a lecture to the Securities Analysts Association of Japan that the announcement had been an event that shook the company[14]. It was a scandal that came not long after the shares had been listed, and restoring credit and repairing the balance sheet became urgent. The water-treatment chemicals business that had been the source of earnings since the founding was, however, not lost in the turmoil and was kept intact. Unlike equipment or chemical cleaning, chemicals are a product that continues to sell for as long as the customer’s plant keeps running, and they served to hold up the floor of the company even in the middle of the crisis.

The period of rebuilding coincided with a favourable moment in which the pollution-control boom overlapped with high-speed economic growth. The company won one large water-treatment plant order after another from the petrochemical complexes at Kashima and Oita and elsewhere[15], riding the tailwind of a growing market. Added to that, with help from Itochu Corporation and its banks, and with the whole workforce closing ranks behind the effort, Kurita completed its rebuild about six years after the fraud came to light and restored its dividend[16]. That the crisis left it conscious of the need to strengthen its financial constitution also runs through to the cautious funding policy it applied later when it directed large sums into the ultrapure water supply business. Having tasted managerial fragility once, the experience persisted for a long time as a corporate temperament that valued a solid balance sheet.

The pollution-control boom and the spread into environmental facilities

The pollution-control boom that began around 1970 brought heavy demand to Kurita as a water-treatment specialist. Anywhere with plant effluent or smoke-emitting equipment became a customer, and the treatment-equipment business widened from plants for general industry to environmental and sanitation facilities for national and local government. In night-soil treatment the company came to expect that it could secure a third of a market worth ¥50bn a year[17], and it had been handling municipal refuse incineration plants since around 1963[18]. As with the incineration plant completed on the former site of the Osaka Expo ’70 grounds, designs were now required that dispelled the old impression of such places as dirty facilities. Co-ordination with the authorities and with local residents also became an indispensable element in winning orders for environmental facilities.

Sites were built out to match the expansion of the business. In 1974 the company put up a Tokyo head office building in Shinjuku, Tokyo[19], and under a dual head-office system spanning Osaka and Tokyo it concentrated functions such as fund-raising in Tokyo. On the research side, the Central Research Laboratory in Yokohama was rebuilt and relocated in 1985 to Morinosato in Atsugi, Kanagawa prefecture, expanding the base dedicated to studying the pathology of water[20]. In the power sector the company was strong in effluent-treatment plant associated with flue-gas desulphurisation at coal-fired power stations, and its technique for removing constituents from effluent using a synthetic adsorbent won the Director-General’s Prize of the Agency of Industrial Science and Technology[21]. The combined capability of pairing treatment equipment with treatment chemicals was honed in this period. The company also accumulated technologies specific to the power field, such as decontamination to wash off the corrosion products that build up in nuclear power station piping.

Developing ultrapure water systems alongside the semiconductor industry

The growth of the semiconductor industry pushed Kurita’s technology to a new level. From the 1970s the company began supplying ultrapure water production systems to semiconductor makers, building the technique of producing water close to theoretical purity, with ions, organic matter and fine particles removed to the limit. By combining reverse-osmosis units — using the RO membranes it had long been researching — with deionised-water equipment, it covered the weaknesses of conventional filtration, and it took repeated ultrapure water orders from NEC, Toshiba, Sony, Hitachi and others[22]. As of 1981 it held a share of 40 to 45 per cent, dividing the market with its rival Organo[23]. The three-legged race with semiconductor makers, in which the customer’s required specification becomes the development target as it stands, began in this period.

In 1978 the company set up a chemicals manufacturing and sales subsidiary in Singapore[24], establishing a foothold abroad. In 1981 president Nakamura Sadao announced a medium-term plan aiming at sales of $453.4M (¥100bn) and ordinary profit of $22.7M (¥5bn) in fiscal 1985[25], sketching a design in which the chemicals division would earn about 30 per cent of the total. Overseas subsidiaries at the time, however, traditionally invested only within the funds they earned themselves, so growth was gradual. As the integration density of semiconductors rose, demands for ever purer water grew stronger, and the competition to push purity to its limit became a new main battleground for a company that held both equipment and chemicals. In treatment chemicals too it widened its applications, into agents for petroleum processes among others, working its way into fields closer to the upstream of industry.