Sanyo-Kokusaku Pulp Co., Ltd.

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Sanyo-Kokusaku Pulp Co., Ltd.

4-5 Marunouchi 1-chome
Chiyoda-ku, Tokyo 100
(03) 3211-3411
Fax: (03) 3287-6480

Public Company
1946 as Sanyo Pulp Co.
Employees: 4,237
Sales: ¥473.31 billion (US$3.49 billion)
Stock Exchanges: Tokyo Nagoya Osaka Kyoto Hiroshima Fukuoka Niigata Sapporo

Sanyo-Kokusaku is one of the leading pulp and paper manufacturers in Japan, and the countrys largest producer of printing and writing paper. Its operations include the manufacture and sale of a range of products including wood-free uncoated and coated paper, specialty paper, newsprint, paper pulp and dissolving pulp, converted paper and film, chemicals, building materials, and lumber. The company operates overseas offices in Seattle, Washington, and in Vancouver, British Columbia. Sanyo-Kokusaku also operates a fleet of five cargo ships, since more than 50% of its raw materialwood chipsmust be imported. It has joint ventures with Scott Paper and The Mead Corporation, and also works with companies in Australia and New Zealand.

Sanyo-Kokusaku was established in 1972 when Sanyo Pulp Company and Kokusaku Pulp Company merged. Sanyo Pulp had been established independently in 1946. In 1947 Japanese pulp production was down to 231,190 from its wartime high of 1,703,034 tons. This drastic reduction was caused by the loss during World War II of the raw materials in the southern half of the island of Sakhalin and the loss of pulp imports, as well as the loss of production access to Korea, Karafuto, and Formosa. Japanese pulp companies sustained relatively low levels of physical damage, however, since most of Japans paper principal mills were not located in heavily bombed areas. In 1947 Kokusaku ranked among Japans top three pulp companies. Kokusaku, Oji Paper Manufacturing, and Hokuetsu Paper Manufacturing together controlled approximately 75% to 80% of Japans postwar pulp manufacturing capacity.

During the late 1940s and early 1950s, as the general Japanese economy bounced back, many of Sanyo-Kokusakus contemporary subsidiaries were established. These include SAN-MIC Trading Co., established in 1947, which trades pulp, paper, and related chemicals and machinery; Otake Paper Mfg. Co., established in 1948, which deals in printing and packaging paper; and Matsuura Trading Co., Ltd., a seller of building materials. These were followed in 1949 by Sakurai Co., which processes and trades paper, films, and adhesive papers; and in 1951 by New Hokkai Hotel Co., Ltd, a hotel and food supplier; and Marukuni Kogyo Co., Ltd, which focuses on materials handling and civil engineering.

The 1960s were a period of tremendous growth for the Japanese economy. This was reflected in the expansion of the pulp and paper market, which grew 10% to 13% annually between 1965 and 1973. Sanyo and Kokusaku formed their first joint venture in 1968, establishing Sanyo-Kokusaku Industry Co., to pursue civil engineering, gardening, insurance, real estate, and building maintenance services. The two companies merged in 1972.

In addition, many of Sanyo-Kokusakus major subsidiaries were formed during this time. Sanyo formed two substantial partnerships with foreign companies. In 1961 it built a mill near Tokyo with Scott Paper Company to manufacture and sell sanitary paper products in Japan under the Scott trademark. The new company, Sanyo-Scott, was capitalized at US$3 million, with each parent company taking a 50% share of its common stock. In 1970, Sanyo formed another Tokyo-based joint venture with a U.S. company: with Avery Products Corporation of San Marino, California, Sanyo built a plant for the manufacture of self-adhesive materials.

The year 1961 saw the establishment of Kokuei Paper Co., Ltd., which processes and sells paper; and Shin-yo Limited, which manufactures wood chips and lumber, and builds and sells housing. Pearl Package Co., Ltd., a manufacturer of polystyrene sheet and flexible packaging sheet, as well as fine papers, was founded in 1962. In 1964 two companies were formed: Sohken Kako Co., Ltd., to manufacture and sell specialty papers, film, and liquid filling machinery; and SANFLO Co., Ltd., for the trading of concrete admixtures. These were followed in 1965 by Kokusaku Kiko Co., Ltd., which designs mechanical, electrical, and water supply facilities. In 1970 MDI Co., Ltd., began its business developing mangrove chips; in 1971, Nippon New Zealand Trading Co. Ltd. was set up to handle the companys New Zealand trading, and 1979 saw the formation of Pal Plywood Co., Ltd., a maker of plywood, flooring, and wall panels.

As Japanese intolerance of kogai, or environmental disruption, escalated during the early 1970s, industrial offenders such as paper mills developed new, more environmentally considerate processes. Sanyo-Kokusaku began using new technology for making pollution-free chlorine dioxide at its plant in Iwakuni in 1973. The process, known as SVP, single vessel process, was designed to eliminate the necessity of acid byproduct disposal.

The end of the 1970s was a successful time for the pulp and paper industry, as strong demand and rising prices encouraged production internationally. Among pulp and paper companies outside North America, Sanyo-Kokusaku ranked fourth in 1979. Its sales increased 29% from 1978, reaching US$1.88 billion; 1979 earnings were US$13.2 million, up 33% from the previous year. Among paper companies internationally, the company ranked 18th, down slightly from its position of 14th in 1978.

Sanyo-Kokusakus slight fall in international ranking portended a trend in the Japanese pulp and paper market that intensified in the early 1980s. Excessive borrowing, spending on pollution prevention, and the rising cost of energy during the 1970s had driven profits down. The Japanese government eventually declared its domestic pulp and paper industry structurally depressed. This step brought into play special laws established to prevent a declining Japanese industry from leading to high unemployment and regional depression. Thus, in compliance with a 1981 government cartel designed to reduce output, Sanyo-Kokusaku laid off 3,500 workers at four of its plants. Management did obtain union approval for these layoffs, which were planned to last for three months. During this industrial slump, Sanyo-Kokusaku considered contributing to a 1980 joint project with Associated Pulp & Paper Mills (APPM) and five other Japanese firms, including Mitsubishi Pulp and Jujo Paper. The companies proposed constructing a mill in Wesley Vale, Tasmania, that would provide pulp both for APPM and the affiliates. Two years later, Sanyo-Kokusaku shelved these plans.

By 1984 Japans pulp and paper sales ranked below average for Japanese manufacturing industries, and Japanese pulp and paper manufacturers found themselves in the atypical position of combating foreign imports. Despite weak growth in Japanese demand for pulp and paper, U.S. and other foreign paper producers were gaining market share. The foreigners easy access to less expensive raw materials and energy allowed them to offer end-products with prices that the Japanese could not match. Still, the top ten Japanese companies retained a 48% share of the paper and paperboard market. During this time, Sanyo-Kokusaku ranked sixth among Japans pulp and paper producers, with a 3.5% share of the Japanese paper and paperboard market. The majority of its share fell in the paper market, where it held 5.8%; in paperboard, it claimed only a 0.2% share.

In 1988 Primex Fibre Limited was set up as a joint venture in Canada to manufacture and sell woodchips. The company was designed to provide Sanyo-Kokusaku with a regular supply of woodchips and to provide another supply source. The company continued to upgrade its facilities in 1989 by purchasing a new papermaking machine for its Iwakuni mill and a newsprint machine at its Yufutsu mill. In the last three years of the 1980s, the company steadily improved its international status, ranking 22nd among the worlds paper companies in 1990.

As it headed into the 1990s, Sanyo-Kokusaku took a conservative view of the future. Although the Japanese economy as a whole continued to improve and demand for paper was rising, the company braced itself for an escalation in sales competition and rising raw material costs. In the early 1990s, its three-year plan focused on increased production and sales, management development, and strengthened international competitiveness.

Principal Subsidiaries

Sanyo Scott Company, Ltd.; Mishima Paper Co., Ltd; Chiyoda Shigyo Co., Ltd.; Otake Paper Mfg. Co., Koyo Paper Mfg. Co., Ltd.; SAN-MIC Trading Co., Ltd.; Sakurai Co., Ltd.; Pearl Package Co., Ltd.; Kokuei Paper Co., Ltd.; Shin-yo Limited; Matsuura Trading Co., Ltd.; Pal Plywood Co., Ltd.; Hokkaido Soda Co., Ltd.; SANFLO Co., Ltd.; New Hokkai Hotel Co., Ltd.; Sanyo-Kokusaku Industry Co., Ltd.; Kokusaku Kyoei Co., Ltd.; Kokusaku Kiko Co., Ltd.; Marukuni Kogyo Co., Ltd.; Nippon New Zealand Trading Co., Ltd.; MDI Co., Ltd.; Primex Fibre Limited.

Elaine Belsito