Tomen Announces Medium-term Management Plan To Integrate with Toyota Tsusho Corp.; Tomen to Gain Support from Toyota Group and Financial Institutions
2002-12-27
Tomen Corporation announced today its medium-term management plan starting March 2003 (ending March 2006), which includes support from the Toyota Group. Tomen will strengthen its business structure and its cost competitiveness under the plan by receiving management support from the Toyota Group with the goal of management integration with Toyota Tsusho Corporation in the coming years.
1. Support from the Toyota Group:
Toyota Group, including Toyota Tsusho Corporation, accepted a proposal forTomen's capital increase by third-party allotment for a total of ¥ 10 billion.
The capital increase will raise the Toyota Group's share in Tomen. After completing the capital increase, Tomen will become Toyota Tsusho's affiliated company under the equity method. In September 2000, Toyota Tsusho became Tomen's largest shareholder with 11.5% equity, after Tomen and Toyota Tsusho formeda business and capital alliance in March 2000.
Tomen and Toyota Tsusho plan for the management integration to begin in the future when Tomen completes implementation of its medium-term management plan. Tomen has its strength in chemicals, foodstuffs, textile, electronics, power supply and telecommunications business fields. Toyota Tsusho is an industry leader in the metals and machinery business fields. Therefore, the two companies' operations are complementary and the integration is aimed at creating strong business synergy. Tomen aims to contribute to new core business development and global expansion of theToyota Group.
To prepare for Tomen's integration with Toyota Tsusho, Tomen reviewed and examined its business portfolio, financial position and business policies, including adjusting of real estate and securities holding value. This resulted in the change in Tomen's business policy on holding risk assets. Following a review of Tomen's current business operations, Tomen will also dispose of some businesses and assets. To achieve this policy change, Tomen decided to implement its own determined efforts, and decided to ask shareholdersand financial institutions for their support.
2. Support from UFJ Bank Limited and other major financial institutions:
In order to offset the loss resulting from the above mentioned business structure reform, Tomen will raise funds from extraordinary profit through the sale of assets, from net profit and from reducing stockholders' equity. Tomen asked UFJ Bank and other major financial institutions for financial support to cover the shortage to offset the loss. The financial support includes ¥110 billion in debt forgiveness and ¥60 billion by acceptance of preferred stocks. Tomen expects to receive full support from UFJ Bankand other major financial institutions.
3. Revision of interim results and business projection for FY2002:
In order to proceed with its business structure reform, Tomen decided, in accordance with Tomen's auditing firm's suggestion, to revise its interim result ended September 30, 2002 and its business projection of fiscal year2002 ending March 31, 2003, which Tomen announced on November 14, 2002.
4. Other measures:
Tomen is considering submitting the business restructuring plan to the Ministry of Economy, Trade and Industry (METI) with a request that the Law on Special Measures for Industrial Revitalization be applied in order to speed upit business structure reform.
5. Capital reduction:
Upon receiving the debt forgiveness from the financial institutions, Tomen plans a 90% capital reduction to reserve funds for the accumulated deficit. Tomen plans to ask shareholders for their approval at the next annual general shareholders' meeting slated for June 2003. The capital reduction will be planned by way of transferring part of the capital and capital surplus into accumulated deficit. As such, there will be no change in the amount of shareholder's equity and the number of shares issued. Hence, there willbe no change in shareholders' equity per share.
6. Medium-term Management Plan: Medium-term Management Plan, which starts March 2003, is an interim phase during which Tomen will prepare for its integration with Toyota Tsusho Corp. Combining the Toyota Group's management style with Tomen's business expertise will enable Tomen to solidify its profit structure. In the meantime, Tomen will make its own efforts to strengthen its business structure to create increased value, following which Tomen will move intothe planned integration with Toyota Tsusho Corp.
Key Policy Points:
| (1) | Promote reorganization of businesses and solidify management stability
- Reorganization to separate trading business fields and strategic business fields will promote management efficiency and stability of each business field. |
| (2) | Strengthen cost competitiveness -Reduction of expense more than ¥12 billion (consolidated basis) |
| (3) | Promote further reduction of assets and interest-bearing debt
-Reduction of total assets by approximately ¥710 billion
-Reduction of interest-bearing debt by approximately ¥650 billion |
| (4) | Strengthen alliance with the Toyota Group
-Capital increase by third party allotment: ¥10 billion from the Toyota Group including Toyota Tsusho. After the capital increase, Tomen becomes Toyota Tsusho's affiliated company under the equity method.
-With the goal of management integration with Toyota Tsusho, Tomen will strengthen the business alliance with Toyota Tsusho to increase Tomen's profitability and to improve its management structure. |
| Numerical Targets | (Unit:¥billion) |
| | Target Figure at
March 31, 2006 | Figure at March 31,
2002 (Reference) | | Operating Profit | 33.0 | 25.2 | | Ordinary Profit | 25.0 | 23.2 | | Net Profit | 7.7 | 4.7 | | Total Assets | 735.0 | 1,448.3 | | Interest-bearing Debt | 463.0 | 1,112.0 | | Shareholders' Equity | 45.0 | 4.7 | | Net Debt/Equity Ratio (times) | 9 | 203 | | ROA(%) | 1.1% | 0.3% | | ROE(%) | 18.5% | 72.8% | | Shareholders' Equity Ratio | 6.1% | 0.3% |
|
Tomen president Morihiko Tashiro commented on the announcement: "Moving toward integration with Toyota Tsusho is the final step in Tomen's renovation plan. I have full confidence that the move will benefit both Tomen and Toyota Tsusho and that each will see the fruits of this development."
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