Nippon Soda Co., Ltd.

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Nippon Soda Co., Ltd.

2-2-1 Otemachi
Chiyoda-ku
Tokyo, 100-8165
Japan
Telephone: (+81 03) 3245 6054
Fax: (+81 03) 3245 6238
Web site: http://www.nippon-soda.co.jp

Public Company
Incorporated: 1920
Employees: 1,527
Sales: $1.28 billion (2005)
Stock Exchanges: Tokyo
Ticker Symbol: 4041
NAIC: 325320 Pesticide and Other Agricultural Chemical Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 325998 All Other Miscellaneous Chemical Product Manufacturing

Nippon Soda Co., Ltd., is one of Japan's major chemicals manufacturers. The Tokyo-based company produces a diversified range of chemicals, including industrial chemicals such as caustic soda, hydrochloric acid, caustic potash, sodium cyanide, sodium metal, and others; dye stuff chemicals, such as fluorescent whitening dyes, as well as thermal- and pressure-sensitive chemicals; specialty chemicals, including industrial paint and glue polymers; water treatment chemicals, including disinfectants, and sterilizers. The company's Agro Chemicals division produces a wide range of herbicides, fungicides, pesticides, acaricides, fumigants, and other crop protection chemicals. The company also produces pharmaceutical products, including penem and carbapenem-based antibiotics. Nippon Soda has also been one of the world's leading producers of methionine, an important amino acid used as a feed additive for the poultry and pork industries, although the company intends to exit that market in 2007. In addition to its main chemicals operations, Nippon Soda operates subsidiaries involved in distribution and warehousing, plant construction and civil engineering, and industrial waste processing. The company is present in a number of international markets, including Belgium, Germany, Korea, China, the United States, and Germany. Founded in 1920, Nippon Soda is listed on the Tokyo Stock Exchange and is led by Chairman Katsunobu Inoue. In 2005, the company posted sales of $1.28 billion.

FOUNDING A "NEW ZAIBATSU" IN 1920

Nippon Soda was founded by chemist Yurei Tomonori Nakano, who invented the diaphragm process for salt electrolysis of caustic soda (sodium hydroxide, also known as lye) in 1913. That method later became known more simply as the Nakano method. Nakano's initial foray into business, however, was with the production of galvanized zinc and other electricity-based metallurgical products, through his company Nippon Electric Furnace Industry. It was not until 1920 that Nakano built his first soda production facility, called the Nihongi Plant, in Nakago, in the Niigata Prefecture, founding Nippon Soda Co. (also known as Nisso).

Nisso quickly emerged not only as a major producer of caustic soda, itself an important element in a variety of products and industries, but also as an increasingly diversified manufacturer. Over the next decade, Nisso entered a period of rapid growth, and by the 1930s emerged as one of Japan's "New Zaibatsu," alongside a number of other groups, including Nissan, Nitchitsu, Mori, and Riken. The "new" label was given to these companies as a contrast to the country's existing Zaibatsu, literally "financial cliques," that is, the corporate conglomerates that had dominated much of Japan's financial and industrial economy through an intricate series of interconnected directorships since 1900. These included such groups as Mitsui, Mitsubishi, Sumitomo, and Yasuda.

The new zaibatsu, which first appeared during the economic boom in Japan in the post–World War I period, were characterized by aggressive industrial growth, and, like Nisso, were founded and led by engineers and chemists. Many, like Nisso, responded to the Japanese government's objective of achieving technological and industrial independence as a nation, breaking the country's long-held reliance on imported technologies. Also, like the other new zaibatsu, Nisso grew extremely rapidly, in large part due to the Japanese government's massive military buildup into the 1930s. Nisso shared another feature in common with the other new zaibatsu, in that, unlike the original zaibatsu, which were tightly controlled by single families, the new generation were more widely held, with their founders often holding only small minority stakes. Yet, as was the case with Nakano and Nisso, these companies relied on their founders' technological expertise, securing their positions at the head of their companies.

The Nihongi plant's production expanded quickly to include a variety of other products. Much of this diversification was based on the use of chlorine gas, produced as a byproduct of the company's soda production process. By the early 1930s, this diversification enabled Nisso to become one of the country's leading producers of bleaching power, chlorine compounds, dyestuffs, and other chemicals.

Initially, the company supplied its electricity needs, for both its alkaline and metallurgical products, through its own power generation plant. By the mid-1920s, however, the company had already begun to stretch its power generation capacities to the limit, and Nakano went looking for a new source of electricity. By 1926, he had found a hydroelectric producer in Toyama seeking new customers for its output; Nakano then set up the group's second factory there. The new plant, which initially produced coarse sodium to supply the Nihongi plant, soon took over the group's metallurgical production as well, starting with metallic sodium. At that time, Nippon Electric Furnace Industry was merged into Nisso, and by the end of the decade, Nisso had launched production of ferrous and other alloys at the Toyama site as well.

Into the mid-1930s, Nisso expanded rapidly, adding four more plants in Fukushima, Niigata, Tokyo, and Saitama, as well as a second facility in Toyama. This growth was accompanied by a continued diversification, as the company launched the production of ethylene glycol, sulfuric acid, aluminum, nitrocellulose, and a variety of other chemicals, bleaching agents, and the like. During this period, the company started production of pharmaceuticals as well, at the Tokyo plant, established in 1933. That site also developed into the company's main research and development facility as well. By 1935, Nisso's production had expanded to include some 100 different products.

Yurei Nakano's management style was the subject of some debate; one description of Nakano describes a "dictatorial" leader, driven by avarice rather than any determined strategy. Nonetheless, Nakano proved as able a businessman as he was an engineer, and from the beginning the company had developed a strong technological base, in particular by hiring a great number of engineers. The mid-1930s, and the stepping up of Japan's armament effort, presented a new period of opportunity and rapid growth for Nisso. From 1935, the company developed a new strategy, based on the creation of subsidiaries and the formation of a "pillar" based organization. The company formed the Nisso Seiko metallurgical subsidiary in 1935, which in turn led to the creation of a new "pillar," that of the company's own mining operations. Another main subsidiary, Nisso Shoki Co., was created in 1939 as the group's chemicals trading operation.

COMPANY PERSPECTIVES

Nippon Soda's corporate mission is to contribute to the development of society through the supply of superior chemical products.

CHEMICALS FOCUS IN THE POST–WORLD WAR II ERA

Japan's defeat led to a breakup of most of the country's zaibatsu, both old and new, in the immediate postwar era. As one of the so-called widely held zaibatsu—because of the group's wide shareholder base—Nisso's operations appeared less affected by the process than other groups, and especially the older zaibatsu, which were broken up and otherwise forced to exit a number of business areas. During the postwar era, however, Nisso itself began to turn away from its metallurgical operations in order to refocus the company more strongly as a chemicals group.

Nisso launched its next growth phase in 1949, when it listed its stock on the Tokyo and Osaka stock exchanges. The company added a logistics subsidiary, Sanwa Soko Co., in 1949. Toward the end of that decade, Nisso expanded its research and development capacity with the creation of the Nisso Institute for Life Science, located in Oiso, in Kanagawa Prefecture. The new facility enabled Nisso to add new biological research capabilities. As a result, the company extended its production range to include agricultural and crop protection chemicals. This business area later grew into one of the company's largest divisions.

Nisso added another important product category, that of methionine, in 1967. Methionine, an amino acid, had been developed in the previous decade and represented an important breakthrough as a feed additive for the poultry and pork industries. Nisso grew into one of the world's main methionine producers through the end of the century.

The company's chemicals operations were boosted in 1969 with the launch of its highly successful Topsin fungicide and disinfectant product line. In that year, also, Nisso expanded its production capacity with the construction of a new plant in Mizushima, in Okayama Prefecture. The company also set up a new subsidiary that year, Nisso Chemicals Co. By 1974, Nisso's chemicals business grew again, this time with the creation of a dedicated fine chemicals research facility in Odawara, in Kanagawa Prefecture. The company's crop protection operations, meanwhile, were developing a new major success for the company, Nabu, a herbicide launched in 1981. The Nabu line later became a major international seller for the company, with sales in more than 70 countries.

Nisso continued building up its chemicals research capacity into the 1980s. In 1984, the company created a new research center, at Odawara. This facility then took over the operations of the Nisso Institute and its Fine Chemicals Research Laboratory. At the same time, Nisso boosted its specialty chemicals development, founding a dedicated research and development facility in Chiba. The company's agricultural products division itself grew with the creation of the Bandai Agricultural Research Station in Fukushima Prefecture. These efforts led to a string of new products, such as Kusagard, a herbicide; Nissorun, an acaricide (a pesticide targeted at mites) introduced in 1985; and the fungicide Tifmine, introduced in 1986. The company's biological research efforts also led the company into the insecticides market, with the launch of Mosiplan in 1995. That product, capable of destroying a number of hard to eradicate insect species, found quick success on an international level.

KEY DATES

1913:: Yurei Nakano, founder of Nippon Electric Furnace Industry, invents diaphragm process for salt electrolysis of caustic soda.
1920:: Nippon Soda Co. (Nisso) is established in order to produce caustic soda; chlorine-gas based products are developed as well.
1926:: Nisso takes over Nippon Electric Furnace Industry and builds second factory, in Toyama, for metallurgical operations.
1935:: With network of six factories, Nisso creates dedicated metallurgical subsidiary, Nisso Seiko, which later leads company into mining operations as well.
1949:: Nisso lists stock on Tokyo and Osaka exchanges.
1967:: Company launches production of methionine, a major feed additive for the pork and poultry industries.
1969:: Topsin, a fungicide, is introduced.
1986:: Company founds U.S. subsidiary.
1991:: Nisso succeeds in producing AOSA, one of the main intermediates used in the development of a new generation antibiotic category.
1995:: Nisso begins developing PCB decontamination method.
2001:: Company debuts PCB decontamination method.
2005:: Nisso founds Shanghai sales and marketing subsidiary.
2007:: Nisso exits methionine production.

NEW PRODUCTS IN THE NEW CENTURY

The global success of these and other products led Nisso to begin building an international network. The company formed a U.S. subsidiary in 1986. This operation was followed by the company's entry into Europe, and the establishment of a sales and marketing subsidiary in Germany in 1989. The company later expanded into a number of other markets in the 1990s, including Belgium and Brazil. By the 2000s, the company had extended into China, forming a sales and marketing subsidiary in Shanghai, in 2005. In 2006, the company added a dedicated sales unit in South Korea as well.

In the meantime, the company continued to expand its range of operations. In 1991, also, Nisso joined with Mitsui to acquire the former methionine production subsidiary of Monsanto, which was renamed Novus International Inc. That purchase boosted Nisso into the ranks of the top three methionine producers worldwide, alongside Degussa and Rhone Poulenc (later Aventis). That position, however, led Nisso into difficulties in the early 2000s, when all three methionine producers were charged with operating a price-fixing cartel over a 15-year period. The breakup of the cartel led to a drop in methionine prices into the mid-first decade of the 2000s. At the beginning of 2007, Nisso announced its intention to exit methionine production.

Instead, the company counted a new range of products to lead it into the new century. During the mid-1990s, the company had begun developing in two highly promising directions. The first of these was the production of pharmaceuticals, including penem and carbapenem-based antibiotics. Toward that end, the company had begun producing AOSA, one of the main intermediates used in the development of the new generation antibiotic category, in 1991. By 1997, the company had succeeded in jointly developing its first antibiotic, faropenem sodium. By 2006, the company had reached an agreement to supply the intermediate for production of faropenem sodium to a drug manufacturer in the United States. In the meantime, the company's pharmaceuticals division had experienced new success with the development of a mass-production technique for piperazine amide, an important intermediate for anti-HIV drugs.

The other promising direction for Nisso was its development, starting in the mid-1990s, of a method for the safe disposal of highly toxic PCBs. The company launched the process in 2001, a method for dechlorinization of PCBs, attracting a great deal of attention. The company's PCB detoxification equipment was expected to begin generating a strong share of the group's revenues as early as 2008. As it neared the 100th anniversary of the patent that had launched the company, Nippon Soda Co. could look back on a long history as a leading edge Japanese chemicals group.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Cerexagri-Nisso LLC (U.S.A.); Certis Europe B.V. (Belgium); IHARABRAS S/A. INDUSTRIAS QUIMICAS (Brazil); Japan Agro Service (JAS) S.A. (Belgium); NIPPON SODA TRADING (SHANGHAI) Co., Ltd.; Nisso America Inc.; Nisso Brasileira Representacao Ltda. (Brazil); Nisso Chemical Europe GmbH (Germany); Nisso TM LLC (U.S.A.); Novus International, Inc. (U.S.A.).

PRINCIPAL COMPETITORS

Bayer CropScience AG; BASF Aktiengesellschaft; Dow Europe GmbH; Makhteshim-Agan Industries Ltd.; Monsanto Co.; Sumitomo Chemical Company; Nufarm Limited; Arysta LifeScience Corporation.