21CHORI CO., LTD.

Tsumugu Report 2020

22

Overview and Strategies by Business Segment
Fiscal 2019 Business Resultsby Segment

Fibers, Textiles,
and Garments
Business

Chemicals
Business

MachineryBusiness

Due to the lack of recovery in domestic consumer
sentiment and the unfavorable state of the Japanesemarket, net sales in fiscal 2019 came to ¥114.5 billion, a4.8% decline over the previous fiscal year. However, on
the back of brisk results in the overseas base materials
sector and higher profitability in the domestic apparelsector, operating income climbed 16.1%, to ¥4.3 billion,
while ordinary income rose 8.6%, to ¥4.0 billion.

As a result of sluggish market conditions for bulk
products in the organic chemicals sector, net sales
dropped 14.7% year on year, to ¥150.6 billion,
operating income fell 12.9%, to ¥3.2 billion, andordinary income declined 9.6%, to ¥3.5 billion.

Due to the steady performance of the vehicles
business and its transactions with Central andSouth America as well as its entry into the Europeanand African markets, net sales grew 7.4% from theprevious fiscal year, to ¥64.1 billion, operating
income surged 44.4%, to ¥0.5 billion, and ordinary
income soared 28.9%, to ¥0.4 billion.

(Billions of yen)(Billions of yen)
120.2

113.3

114.5

160

176.5

3.5

3.5

3.7

3.7

4.3

150.6

142.3

4

0

0

2017

2018

Operating income

2019¥150.6 billion（45.7%）¥0.5 billion¥0.2 billion（6.1%）（2.6%）

60(FY)

Ordinary income

2017

Net sales¥4.3 billion（52.7%）

64.1

59.7

56.0

3.6

2018

Operating income

3.9

3.2

2019

¥0.7 billion¥0.4 billion（4.8%）

4
3.1

3.0

Operating
Income¥8.2 billion（38.6%）

80

8

4.0

3

Net sales

Net Sales¥329.4 billion

100

12

9
6

¥64.1 billion（19.5%）(Billions of yen)200

¥114.5 billion（34.8%）¥3.2 billion

150
120

¥0.1 billion（0.0%）（8.3%）

3.5
2(FY)

Ordinary income

0.2

0

0.2

2017

Net sales

0.3

0.3

2018

Operating income

0.5

0.4

2019

(FY)

Ordinary income¥3.5 billion

Ordinary
Income¥8.7 billion¥4.0 billion（40.5%）（46.4%）█ Fibers, Textiles, and Garments █ Chemicals█ Machinery █ Other (incl. corporate adjustments)

Over viewGroup Structure

CHORI CO., LTD.

Major Subsidiaries

Main Business

Fibers, Textiles, and Garments
Business: 10 companies

ASADA U CO., LTD.
CHORI MODA CO., LTD.

Sales of automotive interior and packaging materials
Planning of fashion apparel

Chemicals Business andMachinery Business:
10 companies

Chori Machinery Co., Ltd.

Sales of transportation equipment and other products

Miyako Kagaku Co., Ltd.

Sales of chemical products, industrial materials, pharmaceuticals, and food-related ingredients

CHORI GLEX CO., LTD.

Import sales of chemical products, construction materials, and industrial products

Other: 2 companies
Overseas subsidiaries:
19 companies

Business Anchor Corporation Outsourcing of administrative work
CHORI (CHINA) CO., LTD.
CHORI AMERICA, INC.

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

Note: In general, overseas subsidiaries are classified into multiple business segments.

Ratio of Net Sales in Fiscal 2019 by Region

Japan (Domestic Sales)

Japan (Imports)

Central andSouth America

Greater China*

14.6 %

9.9 % 4.7 %¥94.1 billion¥71.8 billion¥56.4 billion¥48.0 billion¥32.5 billion ¥15.7 billion

28.6 %

21.8 %

17.1 %

Asia

MiddleEast

North
America /Others

3.3 %¥11.0 billion

Overseas Transactions 71.4%
Domestic sales: A mount ofdomestic sales

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

Domestic sales declined from the previous fiscal year in the face of sluggish market conditions in the organic
chemicals sector of the Chemicals Business and a slowdown in domestic consumption attributable to the spreadof COVID-19. By contrast, sales overseas were brisk owing to steady transactions of the vehicles business in the
Middle East with Central and South America as well as entry into the European and African markets.

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CHORI CO., LTD.

Tsumugu Report 2020

Overview and Strategies by Business Segment

Fibers, Textiles, andGarments BusinessMedium-Term Management Strategy:

1Synthetic Fiber
Business Dept.

Synthetic Fiber andAutomotive Interiors Dept.

Performance Fiber
and Textile Dept.

Technical Textiles Dept.

Technical Material& Garments
Business Dept.

Apparel &Sportswear
Business Dept.

Technical Fiber
Garments Dept.

Intimate Apparel Dept.

(Billions of yen)

Bolster collective strength in the businessIn a bid to further solidify the integrated management of the Fibers, Textiles, and Garments Business,
Chori reorganized its three-division structure into a single-division structure, realizing an optimal
management system. In so doing, we will bolster the collective strengths of the business, which
integrate the entire textile manufacturing process, from upstream to downstream, on a global basis.

2

Enhance global supply chain management
By forming strategic partnerships with competitive manufacturers across the globe, Chori will improve
the sophistication of its manufacturing, procurement, processing, and sewing platforms and build aunique supply chain. We will also execute an exit strategy for global SPA apparel and sporting goods
manufacturers and enhance our six-region global framework.

3

Strengthen global proposals and marketing capabilities for Chori’s original products
Chori will step up its proposals of product lineups based on the themes of the environment andrecycling. We will also distinguish our products from those of our competitors through branding offunctional products.

Textile-Fabric Dept.
Textile Division

Ordinary Income Target

GLOBAL ONE STOP Operation By CHORI

5.2

1.3

times

4.0

FY2019(Result)

FY2022(Target)Initiative to Realize Medium-Term Management Plan
Menswear &Sportswear Dept.

Apparel Dept.

By merging the three divisions of the Fibers, Textiles, and Garments Business to form a single division, Chori established its new Textile
Division. Doing so has eliminated divisional boundaries and united the divisions to operate as a single entity.
Through the ability to seamlessly conduct operations as a result of the restructuring, the Fibers, Textiles, and Garments Business haslaunched cross-divisional projects, shared ideas and know-how, and engaged in joint efforts with manufacturers as well as with partners inindustry and academia. The restructuring has also facilitated the development of unique materials with water-repellent, odor-eliminating, andantibacterial features, in addition to proposals of optimal solutions at each stage of the material production process.

Strengths of the Fibers, Textiles, and Garments Business
A Global Supply Chain Combining Commercial and
Manufacturing Capabilities
The Fibers, Textiles, and Garments Business has been thecornerstone of Chori’s business throughout the nearly 160 years
since its establishment. We have been building trust alongside
our track record by leveraging our sound expertise and extensive
insight. Today, on the strength of its global network, the businessengages in every stage of the textile manufacturing process,from the handling of raw materials (upstream) to the
management of textiles and other materials (midstream) and the
manufacture and distribution of finished products (downstream).
Another strength of the business is its “commercial” capabilities,
which include the marketing of products and procurement of raw
materials, and its “manufacturing” capabilities, which cover the
production, manufacture, and quality control of textiles. By merging
these capabilities, Chori will continue to evolve the Fibers, Textiles,
and Garments Business into a high-value-added business.

Commercial

Manufacturing

company function

company function

Upstream

Midstream

Downstream

Handling of
raw materials

Handling ofmaterials

Handling ofproducts

fieldsfieldsTotal Business

Joint Project with Utsumi Recycle Systems Inc.
Chori has continued to promote business investments in growth fields since its previous medium-term
management plan. Recognizing the potential of and growing demand for recycled materials, in
September 2019 Chori decided to engage in a joint project with Utsumi Recycle Systems Inc.
For this business project, we have provided a recycled pellet extruder to Utsumi Recycle Systems—
which collects, cleans, and pulverizes used plastic bottles and produces pellets out of them—and havejointly engaged in sales of recycled pellets. Approximately ¥900 million will be invested toward theestablishment of this machinery, which will generate roughly 15,000 tons of recycled pellets per year.
Moreover, we have implemented traceability for its manufacturing process, spanning the procurement of raw materials to the
manufacture of the finished product. In the future, we will look to acquire identification information to verify the use of Chori’spellets in apparel products in an effort to build a production system that caters to high levels of safety and quality.
Please refer to page 30 for more information on our environment-related products.
Regional Strategies
Evolution and Expansion of China Business Strengthen sales of original products Boost sales in China
Entry into
 xpand globally through China-based business
E
European Market fieldsEurope Expand businesswith Global Maison Bolster sales oftextile materials Grow business with the world’s leading manufacturers I ncrease direct trade with CHORI (DALIAN) TRADING CO., LTD.

MiddleEast /
Africa

China

Japan

Acceleration of Global Expansion
 Strengthen overseas subsidiaries Establish six-region global framework for
car seats and materials Bolster China and ASEAN businesses Develop production base in the ASEAN
regionStrengthening of Planningand Proposal Capabilities Collaborate with the Hokuriku region Further enhance original design
manufacturer (ODM) capabilities Upgrade Chori’s original products Pursue synergies with ASADA U CO., LTD.
 Strengthen environmental businessthrough textile recycling

Development of ASEAN Business

ASEAN
Traditional Middle Eastern
Garments Business Strengthen business foundation of textiles
and products manufactured at facilities inJapan and the ASEAN region

Northand Central
AmericaStrengthening of U.S.
Market Boost sales of lifestylerelated materials Bolster sales of textile
materials for automobiles in
the U.S. and Mexico Promote sales of sewn
textiles for use in sports
apparel Promote Indonesia Project
Reinforce system integrating processes from procurement of raw
materials to supply of finished products in Indonesia Expand business in China and other countries (including the ASEAN region and India) Establish business foundation through collaboration with successful partners
 Rapidly expand business within the thriving market of Vietnam
 Strengthen subsidiary in Vietnam

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CHORI CO., LTD.

Tsumugu Report 2020

Overview and Strategies by Business Segment

Chemicals
BusinessMedium-Term Management Strategy:
1

Chemical &Materials Business
Dept.
Performance Chemicals Dept.

Inorganic Fine Materials Dept.

3

Transfer business headquarters to optimal location
Chori will promote the expansion of business operations at overseas subsidiaries and optimally deploy
human resources with a wealth of experience.

4

Strengthen subsidiaries centered on Miyako Kagaku Co., Ltd.
Chori will pursue business synergies through the exchange of personnel with Miyako Kagaku Co., Ltd.
and other subsidiaries. We will also look to expand our lineup of new products.

Life Science Dept.
5

By separating management of the Machinery Business from the previous Chemicals & Life Science, Machinery, Electronics
Operations, Chori established its new Chemicals Division. Also, with the aim of realizing strategic and functional business management, the Chemicals Division consists of multiple departments in the same manner as the Fibers, Textiles, and Garments Business.
This restructuring will facilitate the exchange of personnel and information among divisions, departments, and subsidiaries, while
enabling Chori to promptly respond to the needs of communities worldwide with the potential for economic growth.

Strengths of the Chemicals Business
Global Pursuit of the Three “N”s
Chori is developing its business activities in accordance with its
three “N”s: Needs (analyzing client needs), Network (building a
network with domestic and overseas manufacturers), andNiche (creating niche markets). Recognizing the potential of
petrochemicals, Chori began handling chemical products in
1956 and has since built a track record spanning over 60 years
in the Chemicals Business. Over the course of this time, wehave built a robust global network and centered our efforts not
only on procurement and sales within China, but also on
exports to and intermediary transactions with countries in the
Middle East and Africa.
We have set ourselves apart from the competition andenhanced our market presence by addressing the needs of ourclients for niche products while taking advantage of our global
network. Looking ahead, we will step up our approach in new
fields where we foresee further needs, such as pharmaceuticalproducts and agrochemical intermediates, food ingredients, rawmaterials for cosmetics, electronics and battery materials, andbiodegradable plastics and other environment-related materials.

1.5

Needs

Network-building
capabilities

Network

3.5

FY2019(Result)

FY2022(Target)Expand business domain through M&A
Chori will invest in fields with growth potential and expand its business domain.

Initiative to Realize Medium-Term Management Plan
Expansion of Business of Miyako Kagaku Co., Ltd.
While “fortifying defensive measures,” as laid out in the new medium-term management plan, Miyako
Kagaku Co., Ltd. will strive to expand its business in order to realize medium- to long-term growth.
Miyako Kagaku, which became a Group subsidiary in 2015 through an M&A, is a trading company
that handles chemical products, industrial materials, and pharmaceutical and food-related ingredients.
The company was founded in 1921 and has since developed solid relationships with business
partners mainly in Japan. Miyako Kagaku will work to contribute to higher profits as a member of theGroup through the continued growth of its business by drawing on Chori’s extensive global network.
Use of biodegradable resin for the
In an effort to realize the new medium-term management plan, the company will adopt a more cultivation of seedlings
environmentally responsive approach aimed at achieving a decarbonized society, such as by
reducing sludge at plants through the use of biodisinfectants in the chemical products field and rolling out biodegradable resin to
the agricultural industry and other primary sectors in the industrial materials field. Moreover, in the pharmaceutical and foodingredients fields, the company will address the needs of the flourishing healthcare market by building a platform for the supply of
amino acids, which it specializes in, and by incorporating functional lactic acid materials. In order to transform into such a nextgeneration business, Miyako Kagaku will leverage the Group’s global network in its product procurement.

Regional Strategies
Analysis ofclient needs

5.3

times

Accelerate global expansion
Chori will continue to strengthen and expand its China-based business and fast-track its
establishment of businesses within the ASEAN region. We will also move ahead with the developmentof large-scale projects in South America and Africa.

Industrial Chemicals Dept.

Life & Fine
Chemicals Business
Dept.

(Billions of yen)

Enhance business investments and promote development of new businesses
Chori will concentrate its management resources in fields with growth potential, such as environmental,
5G-related, electronics and battery materials, healthcare, and agriculture. We will also expedite thecreation of new products and bolster our development capabilities.

2

Chemicals Division

Fine Chemicals Dept.

Ordinary Income Target

Accelerate the Transformation to a Business Model Based on Business Investments

Creation ofniche markets

Russia /Europe

Niche

North
AmericaChina Develop products locallyin Russia and Europe Strengthen capacity to procure locally (for chemical
products, electronics materials, pharmaceuticaland agrochemical intermediates, and food andfeedstuff additives) Boost exports to Japan and third-party countries Develop products in the fields of lifestyle, environmental, and electronics and battery materials Develop products locallyin North America

AfricaIndia /ASEAN
 xpand handling of raw
Ematerials for fertilizers

 Expand business within the ASEAN region andbetween Japan, China, and the ASEAN region
 Expand business in the fields of functional
chemical products, healthcare, and raw
materials for cosmetics

 Continue to move forwardwith the lithium compound project in Chile

Centraland South
America26

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CHORI CO., LTD.

Tsumugu Report 2020

Overview and Strategies by Business Segment

MachineryBusiness
1

Operating Company

Chori Machinery Co., Ltd.

Wholly owned consolidated domestic subsidiary

Four-wheel vehicles, two-wheel vehicles, and trucks;
agricultural machinery; industrial equipment; construction materials;
construction machinery; and marine equipment

With the aim of providing greater flexibility, in April 2017 Chori spun off Chori Machinery Co., Ltd., which supplies automobiles,
machinery, and related materials to Central and South America.
Leveraging the Group’s unique global network, which has expanded over the years, Chori Machinery commercializes products
acquired from China, India, South Africa, and Mexico in markets such as Europe, the ASEAN region, and North, Central, and SouthAmerica. Most notably, the company engages in a project in which the automobiles of Chinese automakers are assembled throughsemi-knocked-down production and sold in Mexico.
Recently, the company has been growing its business in the new markets of Africa and Southeast Asia. By drawing on its longcultivated know-how and unique trade routes, Chori Machinery will continue to expand its business in the years ahead.

Supplier
China

EuropeMarketSouth
Korea Japan

AfricaSupplier and market

Mexico

India
ASEAN

Ordinary Income Target

Develop the Global Market by Leveraging the Vehicles Business Platform(Billions of yen)

Develop markets of four regions + India
Chori Machinery will strengthen its presence in the four regions of Mexico and Central and SouthAmerica, the Middle East and Africa, Southeast Asia, and Europe, while expanding the Indian market.

2

Expand product lineups through vehicles business and convert to revenue model
Chori Machinery will expand its business and revenue by extending beyond the scope of its vehicles
business to the supply of such products as construction materials and food products of conglomeratecompanies, with which it has established business ties.

3

Promote strategic alliances with global corporations in each region
On the back of solid business relationships established through core products, Chori Machinery will
pursue the growth of its business and revenue by swiftly adapting to the changing market conditionsof each region and tapping into new businesses in areas with the potential for economic growth.

1.3

times

0.5

0.4

FY2019(Result)

FY2022(Target)Initiative to Realize Medium-Term Management Plan
Establishment of the Economic Community of West African States (ECOWAS) as a Priority Area
In 2017, Chori Machinery began working with a company equipped with an automobile production system that handles foodproducts, automobiles, chemical fertilizers, and other consumer goods. Through this joint venture, we will assemble
Japanese, Korean, Chinese, and Indian automobiles through semi-knocked-down and knocked-down production in Nigeria.
In addition, we will enhance our portfolio of construction materials and food products for the Nigerian market and pursue
multiple projects in ECOWAS.
In 2020, Chori Machinery embarked on the business of three-wheeled vehicles. We have partnered with a company that
handles such automobiles to export parts from India to Nigeria, where the automobiles are assembled in knocked-down
production and then sold. Going forward, Chori Machinery will look to expand its business in the ECOWAS region as apriority area.

Centraland South
AmericaSouth
AfricaMedium-Term Management Strategy:

ECOWAS

Core Project of Machinery BusinessSemi-Knocked-Down Production in Mexico
In semi-knocked-down production, automobile parts aretransported to another country, where the parts are assembled
and the automobile is completed. It differs from knocked-down
production in that the engine, suspension, and other main
components have already been assembled by the time they aretransported overseas. Accordingly, semi-knocked-down
production offers the benefit of lower import tariffs.
In 2014, Mexico’s annual automobile production volume
surpassed that of Brazil, becoming the seventh highest in theworld, and in 2018 it reached the 4.1 million-unit mark. Moving
forward, Chori Machinery will continue to seek greater business
opportunities within Mexico’s prominent automotive industry.

Plant in Mexico
JointventureNigeria

Benefit from lower importtariffs due to semiknocked-down production

Joint venture(Nigeria)

Chineseautomobile

Three-wheeled vehicle(India)ECOWAS
Assembly

Automotive retailer
in Mexico
30 stores as of end-2019
35 stores as of end-2020

User

The Economic Community of West African States (ECOWAS) was founded in 1975 as a subregional group that promotes the economic integration of the countries constituting West Africa. ECOWAS currently consists of 15 nations in West Africa, including Nigeria,
which accounts for a significant portion of the group’s overall GDP.

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