Taiyo Nippon Sanso’s (TNSC) new medium-term business plan was announced on 25th March and financial analysts Nomura Securities Co. has revised its earnings estimate for the company accordingly, also predicting a positive long term outlook for the Japanese group.
Domestic demand for industrial gas is expanding steadily and while Nomura believes the short-term outlook for the company’s overseas operations appears ‘harsh’, it expects strong growth to resume - driven by electronics-related businesses and the company’s overseas operations.
The company anticipates average annual operating profit growth of 6% for TNSC, compared with a sector average of 4%, and while it takes ‘a rather conservative outlook
on TNSC’s short-term earnings and prospects for achieving the targets set forth in its
medium-term plan’, Nomura also notes that ‘we retain our positive stance on the company's strategies for long term growth’.
Aiming to become a global operator, TNSC’s new medium-term business plan outlines the group’s vision for future potential growth and its target of increasing its global market share to 10%, from around 6% at present. The company also intends to invest heavily in expanding operations overseas where strong growth is anticipated, while also moving upstream to supply manufacturers with scarce resources such as helium.
While Nomura notes that it believes it will be difficult for the company to achieve its global operator targets in three years, it also ‘finds the company’s long-term growth strategies highly appealing’ and envisions the bolstering of the company's on-site business in Asia and electronics-related business in China, as well as the establishment of footholds in emerging markets such as Brazil, India and Russia.
Sales and operating profits of ¥450bn and ¥38bn respectively, are expected to be met up to one year ahead of schedule due to the steadily expanding industrial gas demand and contributions from companies acquired through mergers and acquisitions.
TNSC buys most of its specialty gases from chemicals manufacturers before selling them and if the company increases its in-house production of electronic materials gases, an area in which it is highly competitive, it is felt that this will expand its margins and help differentiate products, with Nomura describing this as ‘an effective strategy’.