Overview and Strategies by Business Segment

Overview

Fibers, Textiles, and Garments BusinessGroup Structure
Fibers, Textiles, andGarments Business:
12 companies

CHORI CO., LTD.

Chemicals Business:
8 companies(As of March 31, 2023)

Major Subsidiaries

Main Business

STX Co., Ltd.
ASADA U CO., LTD.

Sale of textile-related products (including clothing and fabric materials)
Sale of automotive interior and packaging materials

Miyako Kagaku Co., Ltd.

Sale of chemical products, industrial materials, pharmaceuticals,
and food-related ingredients
Sale of lubricating oil additives and various other chemicals
Import sales of chemical products, construction materials, andindustrial products

KOZAKURA SHOKAI CO., LTD.
CHORI GLEX CO., LTD.

Machinery Business:
1 company

Chori Machinery Co., Ltd.

Sale of transportation equipment and other products

Other: 1 company

Business Anchor Corporation

Outsourcing of administrative work

CHORI AMERICA, INC.

Import and export sales, overseas transactions, and domestic saleof various products in the U.S.
Import and export sales, overseas transactions, and domestic saleof various products in China
Import and export sales, overseas transactions, and domestic saleof various products in Thailand

Overseas subsidiaries: 20 companies

CHORI (CHINA) CO., LTD.
THAI CHORI CO., LTD.

Fiscal 2022 Net Sales by Segment

Net Sales in Fiscal 2022 by Region
Middle East

Machinery

Other (incl. corporate
adjustments)¥4.4 billion¥0.1 billion(1.4%)(0.0%)

Europe, the U.S.,
and Others¥6.9 billion¥11.6 billion(2.1%)(3.5%)

Central andSouth America

Japan(Domestic Sales)¥4.5

billion(1.4%)Net Sales¥329.4 billion
Asia

Domestic sales:
Amount ofdomestic sales¥180.0 billion(54.7%)

Fibers, Textiles,
and Garments¥144.8 billion(44.0%)(16.3%)(15.7%)

Japan (Imports)¥98.8 billion(30.0%)

Overseas Transactions 69.0%
Import sales: Amount of net sales from overseas to Japan
Export sales: Amount of net sales from Japan to overseas
Overseas sales: Amount of net sales from overseas transactions* Includes China, Taiwan, and Hong Kong

115.5
120.0
90.1
90.0
6.0

CHORI CO., LTD.

3.0

3.0
0

2020

2021

2022

（FY）

Ordinary profit

Chemicals BusinessDespite the effects of deteriorating market
conditions in the fourth quarter, sales
increased 9.7% from the previous year to¥180.0 billion and ordinary profit climbed
18.4% to ¥8.8 billion, due mainly to anincrease in overseas transactions as well as
brisk results overall led by the performance oforganic chemicals, agrochemical intermediates,
and industrial chemicals.

(Billions of yen)

135.0

180.0

164.2

180.0
123.3

8.8

7.4

9.0
4.5
0

(0.3)

– 4.5

2020

Net sales

Sales improved 2.9% from the previous yearto ¥4.4 billion due to the recovery of theautomobile market in Europe and Central
America, our core sales regions. On the profit
side, however, the business posted an ordinary
loss of ¥1.3 billion as the delay in collecting
receivables from business partners in the
United Arab Emirates (UAE) resulted in an
additional recording of provision of allowancefor doubtful accounts.

2021

2022

（FY）

Ordinary profit (loss)(Billions of yen)

6.0
4.5
3.0
1.5

– 1.5

4.4

4.3
2.7
0.7
(0.0)

0

Net sales

23

5.1

3.9

Machinery Businessbillion¥51.7 billion

144.8
150.0

Net sales¥102.2 billion

Overseastransactions

Greater China*(Billions of yen)(31.0%)¥53.6

Chemicals

The business achieved profit growth as it
accurately captured customer needs
stemming from the recovery of demand in theapparel market in Japan, transactions
increased due to the strong demand for SDGoriented products, and the higher costs of raw
materials were passed on to selling prices. As
a result, sales increased 25.4% from theprevious year to ¥144.8 billion and ordinary
profit soared 71.2% to ¥5.1 billion.

2020

2021

(1.3)
（FY）
2022

Ordinary profit (loss)

Tsumugu Report 2023

24

Overview and Strategies by Business Segment

Fibers, Textiles,
and Garments Business

Road to Achieving

Chori Innovation Plan 2025

We will leverage Chori’s strengths to
By merging the three divisions of theFibers, Textiles, and Garments
Business to form a single division in
fiscal 2020, Chori established its Textile
Division. This action has improved our
flexibility and united the divisions tooperate as a single entity.
The ability to seamlessly conduct
operations as a result of establishing
this single division has allowed theFibers, Textiles, and Garments
Business to conduct cross-divisional
projects, share ideas and know-how,and engage in joint efforts with
manufacturers as well as with partners
in industry and academia. In addition,
we are expanding our businessactivities for materials, products, andresources in the growth sectors of theenvironment, health, and comfort, in
addition to overseas.

pursue new business ventures that
Synthetic
Fiber
Business
Dept.

Fiber Raw
Materials Dept.

Automotive Materials
and Fabrics Dept.

Technical
Textiles Dept.

Textile-Fabric
Dept.

Career Apparel &Workwear Dept.

Apparel Dept.

cater to the needs of changing markets.

Hiroshi Yoshida
TextileDivision

Technical
Material &Garments
Business
Dept.

Managing Executive Officer
General Manager of Textile Division

Performance
Apparel Dept.

Material Development Team
Logistics Dept. (Textile)
Business Administration Dept. (Textile)

SWOT Analysis of the Fibers, Textiles, and Garments Business

Weaknesses

Strengths• Two-pronged business model involving manufacturing andcommercial capabilities• Customer base in the Hokuriku region, the largest textile-producing
region in the world• Well-versed team of personnel in Japan and overseas• Operation of OEM business that integrates supply chain processes,
encompassing production to distribution, by leveraging thecapabilities of production overseas• Responsiveness to customer needs by drawing on
global network•L ate start to globalization in downstream fields• Digitalization measures• Lack of low-pricing strategy

S

W

O

T

• Growing demand for car seats stemming from recovery
of automotive market• Growing demand for hygienic materials• Increasing demand for sports apparel owing to greater
health awareness• Expansion of textile product market due to a rise in global population

In the first half of fiscal 2022, the business environment remained
challenging due mainly to the sluggish apparel market in Japan
resulting from the effects of COVID-19, global supply chain
disruptions, and the soaring prices of raw materials. In the second
half, however, we saw a recovery in demand for apparel andautomotive materials, for which we were able to accurately meetthe needs of customers, resulting in a year-on-year increase in bothsales and operating profit to ¥144.8 billion and ¥5.1 billion,
respectively. With respect to the soaring raw material prices, rather
than just passing on the higher costs to selling prices, we focusedon developing and proposing products that offer higher added
value and increased our line of mid- to high-priced products, anarea of strength for Chori, which improved our profitability.
Moreover, Summit Garment Saigon (SGS), a sewing factory in
Vietnam operated by STX Co., Ltd. that temporarily discontinued
operations in fiscal 2021, nearly fully resumed operations in fiscal
2022. Also, we reduced costs through the strengthening of• Sluggish consumer sentiment due to rising prices• Global supply chain management disruptions•C oups d’état or conflicts in emerging countries anddisruptions to production and supply systems•S urging raw material and crude oil prices and volatile
foreign exchange rate movements

Under our business strategy of “reinforce our proprietary businessmodel” set forth in Chori Innovation Plan 2025 (CIP2025), we willcontinue to enhance the strengths of our GLOBAL ONE STOPCHORI supply chain development from upstream (materials) to

Ordinary Profit (Segment Profit)

CHORI CO., LTD.

downstream (finished products). While many of its competitors arestrengthening their downstream operations, over the years Chorihas been handling and refining its expertise for high-quality,
differentiated products in the upstream and midstream areas of theFY2021Net Sales

25

cooperation and more timely sharing of information between theoverseas branches of STX, contributing to a ¥2.1 billion increasein ordinary profit. Going forward, we will strive to develop new
products by uniting Chori’s strengths in synthetic fibers with STX’s
strengths in natural fibers.
In terms of the market environment, demand for highly
functional and mid- to high-priced products is on the rise acrossthe globe, and Chori will continue to focus on these areas in which
it excels. While the supply chain in Asia and other textile producing
regions is showing signs of recovery from the effects of COVID-19,
we are keeping a close eye on the impact of geopolitical risks andunseasonable weather on the textile industry. In particular, thedecoupling of the United States and China is spurring greater
emphasis on local production for local consumption. Chori willcontinue to promote measures that are geared to the specificneeds of each country by leveraging the global network it has
cultivated over its long history.

Business Strategies of Chori Innovation Plan 2025

Threats

Opportunities

Overview of Fiscal 2022 Performance and Market Environment of the Fibers, Textiles, andGarments Business

FY2022Difference(Billions of yen)

Ratio

115.5

144.8

+29.3

+25.4%

3.0

5.1

+2.1

+71.2%

Tsumugu Report 2023

26

Overview and Strategies by Business Segment
Fibers, Textiles, and Garments Business

Road to Achieving

Chori Innovation Plan 2025

supply chain with high entry barriers. Meanwhile, the demand forenvironment-friendly products has continued to grow in recent years.
In order to develop business activities that are truly friendly to theenvironment, we must incorporate environmentally conscious solutions
from the manufacturing stages of raw materials. Our knowledge of
upstream and midstream manufacturing structures allows us topropose environment-friendly solutions that meet the specific needsof our customers. Through these and other measures, we will seek
to differentiate ourselves even further from the competition. Anotherstrength of Chori is its semi-industrial/semi-commercial businessmodel. In addition to overseas trade, the Company has been working
with manufacturers to create high-value-added products over its
many years in business. Most notably, we have developed a relationshipwith the Hokuriku region of Japan that spans over 90 years, and anumber of high-quality products from the region have been used bysome of Europe’s leading brands. While our transactions with the
Hokuriku region amounted to ¥22.1 billion in fiscal 2022, we aim toincrease this value to ¥25.0 billion by fiscal 2025 through not only thesale of materials but also the sale of fabric to businesses overseas
and the expansion of our finished product business. In this way,under Chori Innovation Plan 2025 we will strive to achieve stable
growth in each of the areas of materials, products, and resources,
rather than focusing specifically on a single area. Under thebusiness strategy of “ensure stable growth in the three areas ofmaterials, products, and resources,” we will strengthen our
proposal-based sales for materials used in car seats and otherautomotive components in response to the rapidly advancing shift
to electric vehicles (EVs) that is taking place across the globe.
Meanwhile, under the business strategies of “expand businessin growth sectors the (the environment, health, and comfort)” and“pursue exceptional levels of functionality and expertise and further
set ourselves apart from the competition,” we will promote ourBLUE CHAINTM initiatives, which aim to achieve sustainability
throughout the supply chain. In addition to ECO BLUETM, a recycled

polyester fiber made of used plastic bottles, we will move ahead
with the B-LoopTM recycling initiative by collecting around 300 tonsof industrial waste per month in the Hokuriku region, which isreused in pavement materials for riverbeds and automotive
materials, as well as recycling used clothing into new textile
products. We will continue to expand our recycling efforts in such
ways to develop a circular economy and increase our sales from
BLUE CHAINTM initiatives to ¥30.0 billion by fiscal 2025.
In order to continue to expand the Fibers, Textiles, andGarments Business over the medium to long term, we must
execute our business strategy of “continue to grow the businessacross the globe.” To that end, we will strengthen our response to
the needs of Japanese manufacturers with which we havecontinued to do business with in China as well as the local needs of
the Chinese markets. The demand for highly functional products
used in sportswear and other apparel continues to grow in China.
Going forward, we will steadily capture this demand through theproposal of Chori’s differentiated highly functional products. Whileenhancing our presence in China not only as a production hub but
also as a market, we will work to integrate the operations of our
production sites in Thailand, Indonesia, Hong Kong, Taiwan, andother ASEAN countries as a measure to overcome geopolitical risk.

Major Group Companies in the Fibers,
Textiles, and Garments Business

STX Co., Ltd.
Became a wholly owned subsidiary in June 2021

With Chori specializing in synthetic fibers and STX Co., Ltd. specializing in
natural fibers, this collective effort between two companies with their own
specialties has improved our ability to propose solutions to customers. In
June 2023, the two companies held an exhibition together.
Summit Garment Saigon (SGS), a sewing factory in Vietnam operated
by STX, has played an integral role in our customer proposals through thestrong reputation it has built for production capacity. Since joining theGroup, STX has continued to increase the number of orders from sports
brands, including golf-related products, and for new high-end brands.
Going forward, STX will strive to ensure that SGS becomes the largest
production plant in the ASEAN region.

ASADA U CO., LTD.
CIP2025 Segment Strategy(1) Reinforce our proprietary business model(2) Ensure stable growth in the three areas of materials,
products, and resources(3) Expand business in growth sectors (the environment,
health, and comfort)(4) Continue to grow the business across the globe(5) Pursue exceptional levels of functionality and expertise andfurther set ourselves apart from the competition

Became a wholly owned subsidiary in July 2017

Founded in 1950 as Asada Shoten in the Ozone area of Nagoya City, ASADAU CO., LTD. handles a wide range of textile products used in packaging andautomotive interior materials.
The automotive interior materials business tailors its plans andproposals to diversifying lifestyles and various customer needs based on
its years of achievements and experience. Having received ISO 9001
certification, the company is committed to maintaining high levels of quality.
In addition, the functional materials business handles construction andautomotive materials.

Toward the Achievement of Fiscal 2025 Targets
In response to the late start to globalization in downstream fields,
which was identified as a weakness in the SWOT analysis, theCompany established MCC Industry COMPANY LIMITED in Hong
Kong in 2021. Through this move, we will expand our sales ofapparel to the global market, mainly in China, Europe, and theUnited States, and strengthen our business with partner companies
that specialize in overseas sales. With respect to digitalization
measures, Chori is revamping its core system through theCompanywide business transformation project CARAT. In fiscal
2022, we made preparations to begin full-scale operations of our
new system from fiscal 2025. By streamlining operations, we will
improve efficiency and lay the groundwork for the further growth of
the Fibers, Textiles, and Garments Business.
In order to achieve our segment profit target of ¥7.5 billion by
fiscal 2025, we must remain both progressive and unchanging in
our approach going forward. In other words, we will create newvalue by pursuing new businesses that address the needs ofchanging markets and continuing to focus on our strengths of

27

CHORI CO., LTD.

mid- to high-priced products. Chori’s high level of expertise inengaging in every stage of the supply chain, from upstream todownstream, and its semi-industrial/semi-commercial businessmodel are both the sourceof growth and theSegment Profit of Fibers,
strengths of the Fibers,
Textiles, and Garments BusinessTextiles, and Garments(Billions of yen)
Business. The Textile
7.5
8.0
Division is full of people
who are fond of this kind
6.0
5.1
of business. We willcontinue to harness these
4.0
strengths and increase
Chori’s impact on the
2.0
market through relentless
pursuit with our sights set
0
on long-term business
FY2022
FY2025(Target)growth.

MCC Industry COMPANY LIMITEDIn March 2021, MCC Industry COMPANY LIMITED was established in Hong
Kong to serve as a sales hub for sportswear manufacturers in Europe. The
company’s headquarters is based in Hong Kong and its branch office is in Tokyo.
MCC Industry produces and supplies fashionable and highly functional
sportswear, outdoor wear, and sports casual products in Japan and overseas,
mainly for golf and athletic use for the leading brands of major manufacturers.
Many manufacturers are highly conscious of sustainability and are inclined toincrease the use of environment-friendly materials. Such manufacturers havetherefore transitioned to the use of ECO BLUETM recycled polyester fiber madeof recycled plastic bottles, which is well-regarded as a raw material.

Tsumugu Report 2023

28

Overview and Strategies by Business Segment

Chemicals Business

Road to Achieving

Chori Innovation Plan 2025

We will expand our global network
Established in 1956, the Chemicals
Business has a track record spanningover 60 years. We have continued totake advantage of our global network
not only in terms of procurement andsales within China but also throughexports and intermediary transactions
with Southeast Asia, India, the Middle
East, and other regions. Through these
efforts, coupled with our ability to meetthe needs of our clients for niche
products, we have set ourselves apartfrom our competitors and enhanced
our market presence.
With an extensive productportfolio that encompasses theenvironmental, electronics and battery
materials, 5G-related, personal careand healthcare, and agricultural fields,
Chori caters to the wide-ranging ofneeds of its customers.

and build a foundation for
Chemical &Materials
Business Dept.

Chemicals
DivisionLife & Fine
Chemicals
Business Dept.

our next stage of growth.

Performance
Chemicals Dept.

Inorganic Fine
Materials Dept.

Industrial
Chemicals Dept.

Fine Chemicals
Dept.

Life Science Dept.

SWOT Analysis of the Chemicals Business• Global network centered on China• Diverse lineup of high-performance materials• Exceptional synergies created with subsidiaries• Product development and product supply capabilities thatdraw on the market-in approach• Highly specialized knowledge

Weaknesses• Lack of brand recognition and smallness of businessscale within business-to-business market relative tomajor competitors overseas• Length of time needed for new businesses to contributeto revenue

S

W

Opportunities• Growing demand for automotive-related materials• Increasing demand for products in the field ofsustainability• Rising interest in environmental products

Threats

O

T

Managing Executive Officer
General Manager of Chemicals Division

Overview of Fiscal 2022 Performance and Market Environment of the Chemicals Business

Logistics Dept. (Chemicals)
Business Administration Dept. (Chemicals)Strengths

Yoshihiro Teratani• Global supply chain management disruptions• Country risk such as Russia’s invasion of Ukraine• Supply–demand imbalance stemming from market
deterioration• Limited desire among potential customers to switch toother products due to economic recession

In the first half of fiscal 2022, the Chemicals Business performed
favorably in all areas owing to the soaring prices of raw materials. In
this environment, we were able to improve earnings by securing
and supplying products without delay. Despite a gradual decline inraw material prices and deteriorating market conditions from thesecond half of the fiscal year, we maintained the positive results ofthe first half, leading to increases in both sales and ordinary profit to¥180.0 billion and ¥8.8 billion, respectively. In addition to theparticularly strong performances of the fine chemicals segment(see “Chori’s Strengths” on pages 21 to 22), which handles
agrochemicals; the electronics and battery materials segment; andthe semiconductor materials segment, the food additive business,
which took a downturn in fiscal 2021 due to stay-at-homemandates set as a result of COVID-19, recovered in fiscal 2022
owing to higher demand for eating out that stemmed from theeasing of COVID-19 restrictions. Because of this, we not only rode
the wave of higher demand but also looked to increase our sales
outlets in order to improve profitability. Although food additives weresold primarily to dealers in the past, we have expanded sales tofood manufacturers and other end users, allowing us to offer awider variety of products.



FY2021Net Sales
Ordinary Profit (Segment Profit)

29

CHORI CO., LTD.

Although the sales of some products are showing signs ofrecovery from the effects of COVID-19, the market for chemical
products, in general, has been on a downward trend since October
2022. Due to supply chain disruptions arising from the spread of
COVID-19 and the conflict between Russia and Ukraine, manufacturers
stocked up on inventory by ordering various products in larger
quantities as a part of their business continuity plans until the endof the first half of fiscal 2022. From the second half, however, theirinventory levels swelled as we began to see a gradual recovery insupply chain disruptions. For example, replacement demand forTVs, PCs, mobile phones, and other products, which remained
high for a period of time, has subsided due to their increased
durability, resulting in a stagnant market for flat panel displays.
Although China has substantially eased its zero-COVID policy since
December 2022, domestic demand has not reached the levels we
had anticipated. Therefore, in fiscal 2023 we will focus on building afoundation and framework for our next stage of growth whilesteadily promoting the basic strategies of Chori Innovation Plan
2025 in response to our market conditions, which will likely begin togradually recover from October 2023.

FY2022Difference(Billions of yen)

Ratio

164.2

180.0

+15.9

+9.7%

7.4

8.8

+1.4

+18.4%

Tsumugu Report 2023

30

Overview and Strategies by Business Segment
Chemicals Business

Road to Achieving

Chori Innovation Plan 2025

Major Group Companies in the Chemicals BusinessBusiness Strategies of Chori Innovation Plan 2025
As one of the business strategies of the Chemicals Business, wewill continue to “promote consolidated management centered on
our global business” as set forth in Chori Innovation Plan 2025.
During our previous medium-term management plan, we wereunable to develop new businesses due to COVID-19 and fewer
opportunities to engage in face-to-face sales as a result. Duringthat time, however, we worked to establish an organizational
structure that is conducive to creating new businesses. In addition
to increasing our mid-career hires, who will have an immediate
impact on our business, we have developed a global organizational
structure in which our employees are assigned to overseas basesin Malaysia, Vietnam, and now India. Through these measures,
we will address the rising demand for biodegradable resins,
plant-based meats, and other SDG-oriented products andexpand our product portfolio by devoting more attention to
over-the-counter pharmaceuticals in the life sciences field, where
ethical pharmaceuticals have traditionally been the mainstay.
With respect to our business strategy of “establish
environmentally conscious businesses that offer high levels offunctionality and profitability in place of existing substandard
businesses,” we will transition from a product-out business model,
which allows manufacturers to be in control, to a market-in businessmodel, which enables Chori to take initiative. Chori’s strength lies in
its proposal-based business, which makes use of its high levels of
expertise. While some businesses are based on product output andothers are based on market entry, we will promote the market-in
approach for all areas of our business going forward. We will
provide optimal products that cater to specific customer needs
with a view to expanding profits. To that end, we will promote ouroutsourcing business, in which products desired by customers areproduced and imported from overseas, in line with our businessstrategy of “develop frameworks and product domains that are
resilient to changes in market and economic conditions.” In
addition, for the inorganic fine chemicals and the chemical raw
materials domains in particular, we will expand our business model,
in which we meet the demands of customers by assuming the roleof a manufacturer and securing products procured from overseas.
In so doing, we will establish a system that is less susceptible tochanges in the economy while working to mitigate geopolitical risk
by diversifying our procurement sources overseas.
As for our basic strategy of “strengthen cooperative efforts with
China, India, South Korea, and countries in Southeast Asia andSouth America,” we will step up our efforts with various
countries that have the potential for further growth. We will respondto geopolitical risk and strive to achieve medium- to long-term
growth by strengthening our measures in a number of countries,
such as India, where the market will likely continue to expand;
ASEAN countries, where the average age of the population is low
and the market is flourishing; and South America, where the lithiumcompound production project is ongoing, in addition to leveraging
our strong track record in pharmaceuticals.
CIP2025 Segment Strategy(1) Promote consolidated management centered on our global
business(2) Establish environmentally conscious businesses that offer
high levels of functionality and profitability in place ofexisting substandard businesses(3) Develop frameworks and product domains that are resilient
to changes in market and economic conditions(4) Strengthen cooperative efforts with China, India, South
Korea, and countries in Southeast Asia and South America

Toward the Achievement of Fiscal 2025 Targets
To address the lack of brand recognition and the smallness ofbusiness scale within the business-to-business market relative tomajor competitors overseas, which was identified as a weakness
through the SWOT analysis of the Chemicals Business, Chori is
working to enhance awareness of its brand through measures suchas placing advertisements in publications for chemical products
around the world. We also intend to engage in M&As to expand thescale of our business going forward. Meanwhile, the COVID-19
pandemic has also led to increased business opportunities. In
response to the risk of changes in the supply chain, Chori has beenable to gain new business opportunities with first-time customers.
Accordingly, we will diversify our product portfolio so that Chori canserve as a second and third source of supply in a timely manner. In
addition to such responsiveness, the promptness of our sales
activities is a source of our competitiveness. At Chori, our sales
activities are carried out in a prompt and thorough manner, even by
our younger employees who gain practical experience throughoverseas business trips. We will continue to draw on this DNA of
the Chemicals Business while aiming to remain a prominent
presence in the market.
31

CHORI CO., LTD.

Fiscal 2023 is a period of preparation for our next stage of
growth. We are investing even more in our human resources withan eye on the medium- to long-term growth of the Chemicals
Business. We will continue to focus on securing, developing, andproviding the mostsuitable opportunities to
Segment Profit of
our employees, who are
Chemicals Business
Chori’s greatest asset,(Billions of yen)while steadily seizing
9.5
10.0
8.8
business opportunities inan effort to achieve the
8.0
goals of Chori Innovation
Plan 2025.
6.0
4.0
2.0
0

FY2022

FY2025(Target)Miyako Kagaku Co., Ltd.
Became a wholly owned subsidiary in May 2015

Founded in Osaka City in 1921, Miyako Kagaku Co., Ltd. handles basic
materials, various synthetic resin materials, food ingredients, pharmaceuticals,
cosmetics materials, and packaging materials. The company also engages in
the painting work business for petrochemical complexes in the areas of
Yokkaichi and Chiba.
In fiscal 2022, despite the impact of the lockdown in China, sales andordinary profit amounted to ¥45.9 billion (accounting for more than 10% of
Chori’s consolidated net sales) and ¥1.2 billion, respectively. Over the courseof Chori Innovation Plan 2025, we will expand the scope of this business inenvironment-related fields, such as bioplastics and microbial formulations;healthcare fields, such as lactic acid bacteria; and electronics materials fields
and build an even stronger revenue base.

KOZAKURA SHOKAI CO., LTD.
Became a wholly owned subsidiary in March 2018

Since its founding in 1949, KOZAKURA SHOKAI CO., LTD. has establisheditself as a trading company that specializes in chemical products through the
supply of various additives, catalysts, solvents, and other chemical products,
primarily to businesses in the petroleum industry and related industrial fields.
The company handles lubricant additives and other performancechemicals used in the automotive, construction machinery, and metal
processing industries; industrial chemicals used in general chemical industries
and petroleum refining processes; and oleo fine chemicals, such as raw
materials for lifestyle-related products (including personal care and food products).

CHORI GLEX CO., LTD.
Became a wholly owned subsidiary in February 2013

Founded in Nagasaki Prefecture in 1859 as Frazer Company, the first foreigncapitalized company in Japan, CHORI GLEX CO., LTD. introduced the steam
locomotive, electric streetcar, and Ford Model T automobile to Japan. The
company currently engages in the import and export of specialty chemical
and industrial products.
CHORI GLEX handles chemical products, such as epoxy resin andother thermosetting resin-related products; construction materials, such asstones and bricks; hearing device components, such as transducers andother electronic components and peripheral parts; and industrial products,
such as organic and inorganic chemicals, paint materials, and rubber
chemicals.

Tsumugu Report 2023

32

Overview and Strategies by Business Segment

Machinery Business

Road to Achieving

Chori Innovation Plan 2025

We will continue to expand ourChori Machinery Co., Ltd., which was spun off in April 2017 to enhance the flexibility of Chori’s business operations, hasbeen expanding its portfolio of automobiles, machinery, and related materials across the globe.

business by leveraging our sales
expertise and adapting to the needsof each country.

Operating Company

Chori Machinery Co., Ltd.
Wholly owned consolidated
domestic subsidiary
Four-wheeled vehicles, two-wheeledvehicles, and trucks; agricultural
machinery; construction materials;
and marine equipment
Supplier
MarketSupplier and market

China

Europe

South
Korea

MexicoIndia

AfricaJun Hayami

Japan

ASEAN

CentralandSouth
AmericaSouth
AfricaOverview of Fiscal 2022 Performance and Market Environment of the Machinery Business

Leveraging the Group’s unique global network, which has
expanded over the years, Chori Machinery commercializes
products acquired from China, India, South Africa, and othercountries in markets such as Europe and the ASEAN region.
Most notably, the company engages in a project in which theautomobiles of Chinese automakers are assembled throughsemi-knocked-down production and sold in Mexico.

Recently, the company has been growing its business in Africa
and other emerging markets in particular. By drawing on its
long-cultivated know-how in global trade and unique traderoutes, Chori Machinery will continue to expand its business inthe years ahead.

SWOT Analysis of the Machinery Business

Strengths• Sophisticated information and global networks• Creation of niche market by leveraging unique customer base• Market-in proposals by employees deeply familiar
with markets• Ability to develop customer relations worldwide bydrawing on individual capabilities

Weaknesses

S

W

O

T

Opportunities• Global recovery of automotive market• Expanding product line in Africa, Southeast Asia,and other thriving emerging markets• Growing business opportunities associated with shift
to environment-friendly vehicles• Expanding product line in non-vehicles businesses

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CHORI CO., LTD.

President, CEO & COO
Chori Machinery Co., Ltd.

• Need for improvements to flexibility andorganizational capabilities that draw on the strengthsof each individual• Timeliness of digital transformation measures

Threats• Country risk and risk of pandemics, coups d’état,and economic crises in emerging countries• Market fluctuations resulting from intense climate change• Global supply chain management disruptions

In fiscal 2022, the Machinery Business posted sales of ¥4.4 billion
and an ordinary loss of ¥1.3 billion. In Mexico and Italy, key sales
regions of the business, the market recovered to a greater degree
than anticipated as new and replacement demand for automobiles
increased around the world on the back of pent-up demand andthe easing of COVID-19 restrictions. Mexico in particular has
benefited from the recovery of the U.S. economy, with which it isclosely linked due to geographical factors, as the vehicles businessdemonstrated brisk results. On the other hand, the businessrecorded an additional allowance for doubtful accounts due to adelay in collecting receivables from business partners in the UAE.
The delay is mainly due to a lack of foreign currency in the country
stemming from monetary policies and cutbacks in the production ofoil for sale to Nigeria. While the economy in the UAE is taking awhile to recover due to delays in economic recovery measures, the
new administration, which was introduced in August 2023, isfocusing on stabilizing the foreign currency policy and establishing
oil refining operations in the country. Although the future remains
uncertain, we will continue to work to restore the situation as
quickly as possible while keeping an eye on the state of theeconomy in Nigeria.
The flagship product of the Machinery Business is­automobiles. Although the demand for automobiles can besusceptible to economic changes, it is steady for the most part due
to their importance as a means of transportation as well as in daily
life. The automobiles handled by Chori Machinery are mainly those
produced in China. Based on 2023 projections, China will accountfor approximately one-third of the 85 million automobiles that will besold around the world throughout the year. It is also estimated thataround four million units of the automobiles produced in China will
be exported in 2023. Considering that the number of cars exported
from China annually between 2006, when we began handlingvehicles from China, and the years leading up to COVID-19 wasaround one million leads us to believe that the image and reputationof Chinese cars has dramatically improved over the past decade or
so. The Chinese government is particularly focused on thedevelopment and sale of EVs as a part of its national policy, anddemand for such vehicles is growing worldwide. In response to suchchanges in its business environment, Chori Machinery will address
the demand for environment-friendly vehicles, which continues toincrease particularly in Europe, as well as gasoline vehicles, which
are still the mainstream in developing countries. Meanwhile, several
new manufacturers are entering the EV scene, which is expected tointensify competition even more in the future. In view of this, we will
do our utmost to seize every business opportunity by forming
relationships with these new manufacturers as quickly as possible.


FY2021

FY2022Difference(Billions of yen)

Ratio

Net Sales

4.3

4.4

+0.1

+2.9%

Ordinary Loss
(Segment Loss)

(0.0)

(1.3)

–1.2

–

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Overview and Strategies by Business Segment
Machinery Business

Road to Achieving

Chori Innovation Plan 2025

Core Initiatives of the Machinery BusinessBusiness Strategies for Fiscal 2023
While continuing to quickly and thoroughly adapt to the changes inour key markets of Mexico, Italy, and Central and South America,
we are focusing on India as our second largest supplier next toChina, due to its large population and diverse market. Motorcycle
culture has been deeply ingrained in India over the years and ourbusiness in the country for two-wheeled vehicles continues tothrive. We are currently expanding our network of suppliers in India
in an effort to develop a business structure for the intermediary
export of electric two-wheeled vehicles produced by Indian
manufacturers to developing countries.
In the Machinery Business, we aim to improve profitability by
expanding our automobile business and our line of peripheralproducts. Specifically, we are developing an infrastructure foreverything from telematics (a vehicle movement monitoring systemthat incorporates telecommunications and information processing),
which will continue to evolve going forward, and devices centeredon vehicle safety to after-sales services, such as repair parts. In thisway, we will continue to propose products and other tangible
solutions and also develop a proposal-based business model thatallows us to utilize our sales know-how, an intangible asset that has
been cultivated in Mexico and other markets.

One example of the changes that are taking place in thisindustry is that although just a decade ago automobiles equippedwith CD players and other car audio equipment were the mainstream,
today these devices have been replaced with new technologies,
such as the screen mirroring functions on smartphones. Given suchextremely rapid changes in this industry, simply focusing on the
trade of goods, which has been our approach to date, will become
relatively risky. Therefore, we will also direct our attention to the saleof ideas and know-how. Seeing that Chori’s efforts to date havebeen recognized by the automotive industry and are used as bestpractices, we believe there is demand for its platforms.
In fiscal 2022, we also achieved success in our joint initiativewith a business partner in Italy. For this initiative, we developed
environment-friendly vehicles that use natural gas, which earned
the support of the local markets. Italy is unrivaled when it comes to
its culture of being very particular about automobile design. Taking
this into account, we have entrusted the customization of designs
to our partner company in Italy, which is well aware of the local
tastes and preferences and continues to enhance its presence inthis market. In the future, this business will be expanded toneighboring countries in Europe.

Our Approach Going Forward
One of the strengths of the Machinery Business is the market-in
proposals made by its employees who have a profound knowledgeof the market. To continue to make the most of the strengths of ouremployees, who are our greatest asset at Chori Machinery, we will
focus on creating a workplace environment where each employee
can work comfortably and gain a sense of fulfillment.
Although the Machinery Business has expanded over theyears through the collective strengths of each employee, in order togrow even further going forward, it must continue to enhance its
flexibility and organizational capabilities that draw on the strengthsof each individual. We will continue to improve our organizational
capabilities by enhancing internal communication to share ideas on
projects and holding study sessions, in addition to establishing anorganizational structure that facilitates timely responses to drasticchanges in market conditions and country risks. From the viewpointof digital transformation, we will standardize our sales support
operations to further reduce the use of labor.

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CHORI CO., LTD.

In the Machinery Business, we developed the China-based
automobile business ahead of our competitors. Accordingly, we will
harness our strengths as a front-runner in this industry while
continuing to build on our foundation to address new demands,
such as for EVs.
The majority of the markets served by Chori Machinery Co.,
Ltd. are developing countries that offer tremendous future potential.
In these countries, the population of young people is particularly
large, and the economy is expected to continue to grow, albeit atdifferent speeds, leading to even further demand for automobilesand electric two-wheeled vehicles. We will invest all of ourmanagement resources to fulfill the various demands that stemfrom the growth of each market with the aim of achieving stable
growth over the medium to long term.

1

Initiative

Semi-Knocked-Down Production in Mexico
In semi-knocked-down production, automobile parts andcomponents are transported to the country of destination,
where they are assembled and the automobile is completed.
It differs from completely knocked-down production in thatthe frame, engine, powertrain, and other main components
have already been assembled by the time they aretransported overseas.
Semi-knocked-down production offers a variety of
economic benefits, such as job creation and tax benefits forthe country of destination. As a result, more employment
opportunities are available for local residents in not only
assembly processes but also at sales agencies and forafter-sales services. Although it fell short of reaching the 4.0
million-unit mark that had been achieved prior to COVID-19,
in fiscal 2022 Mexico’s annual automobile production volume
steadily recovered to the level of 3.3 million units due to theinevitable effects of the semiconductor shortage. Moving
forward, Chori Machinery will continue to seek greaterbusiness opportunities centered on Mexico’s mainstream
automotive industry.

2

Plant
in Mexico

Benefit from cost due toJointventuresemi-knocked-down
production

Chineseautomobile

Assembly

Automotive
retailer in
MexicoUser

Initiative

Enhancement of Our Presence in Italy
and Other Parts of Europe
Chori Machinery has partnered with a company based in
Italy to develop businesses in the country and other parts ofEurope, including Spain. The stylish and environment-friendly
vehicles developed by Chori’s business partner have been
well received by the younger generation and the local markets
and continue to increase in sales.
This joint initiative began with the establishment of ourpresence in Italy, a market on the scale of 1.3 million units.
Since then, in addition to expanding our business in Europe,
we have continued to form partnerships with other companies
to examine new business opportunities in Asia and Central
and South America.

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