Japan's largest aluminum roller, UACJ, is betting heavily on the Southeast Asian market to offset limited growth prospects at home. Central to the plan is a struggling Thai unit that President Miyuki Ishihara believes will soon turn a profit, despite a flood of Chinese products unleashed by the trade war with the U.S.
In a recent interview with Nikkei, Ishihara pinned the Thai unit's difficulties on a race to meet greater-than-expected demand. "The investment is temporarily weighing on the unit's earnings," he said, while also pointing to "high transport and energy costs."
"But the turnover rate of local employees is declining, and we expect to turn a profit by the end of 2019."
UACJ intends to invest a total of 90 billion yen ($796 million) to boost capacity in Thailand, and the president said the construction is in the final stage. A 37 billion yen investment will "increase our annual production of aluminum products from the current 180,000 tons to 320,000 tons by June 2019," Ishihara said.
UACJ built a new research and development facility in Thailand. And to further boost the operations there, Ishihara said the company will focus on training personnel.
The group is determined to expand abroad and aims to increase pretax profit by 130% from 2018 to 45 billion yen in the fiscal year through March 2023. "To that end," Ishihara said, "it would be important for us to meet strong aluminum demand in Thailand and other Southeast Asian countries."
The trade war is a worry. "I'm concerned about the influx of Chinese products into Southeast Asia and other regions," Ishihara said. "The effects have already started to be felt and I think they will continue for some time."
Still, he said the company will "deal with the situation by cutting other costs," adding that UACJ can capitalize on "strengths" such as "stable quality and prices."
UACJ was formed in October 2013 through a merger of Furukawa-Sky Aluminum and Sumitomo Light Metal Industries. Ishihara suggested the new entity is still evolving into a cohesive operation. "I think there is a lot to do in terms of nurturing personnel and building an organization," he said. "It is also important for us to improve quality assurance and work efficiency. And we have to catch up when it comes to the use of artificial intelligence."
Ishihara noted that consolidating locations pushed up pretax profit by 11 billion yen. "But the direct effect was smaller than our initial projection of 13 billion yen, as we maintained previous operations at some locations."
Signs of internal friction emerged in February, when Furukawa Electric, UACJ's top shareholder, opposed executive appointment proposals. But Ishihara said new appointments "were accepted by all shareholders."
"Our relations with Furukawa have improved, and we thoroughly explain investments and other matters to them." - Nikkei -