Tokai Carbon Announces €350 Million Investment Strategy in Carbon Black Industry

Tokai Carbon is gearing up for a significant investment in its carbon black business, outlining a Yen57 billion (€353 million) commitment over the next three years, concluding at the end of 2026. This strategic move is embedded within Tokai's T-2026 mid-term management plan, reflecting a broader initiative to fortify its core business. The primary focus of this investment is to elevate the carbon black and fine carbon units into a "higher value-added business" while simultaneously expanding production capacity.

Breaking down the comprehensive investment plan, Tokai aims to inject a total of Yen146 billion into various facets of its operations, with Yen57 billion specifically allocated to the carbon black business. Among these allocations, Yen4 billion is designated for advancing carbon neutrality efforts, another Yen4 billion is earmarked for addressing environmental concerns primarily at North American plants, and a substantial Yen49 billion will be invested in the regular updates and relocation of the Thai plant.

The carbon black business at Tokai demonstrated robust performance in 2023, witnessing a remarkable 73% year-on-year surge in operating income, reaching Yen21.3 billion, fuelled by a 7.2% increase in sales amounting to Yen148 billion.

However, Tokai acknowledged a slight decline in volumes, attributing it to an extended period of production adjustments for truck and bus tire customers and subdued demand in non-tire products. This decrease occurred despite a recovery in demand for new cars and related products. The uptick in net sales and operating income was driven by selling price hikes, reflecting elevated environmental investment costs and contributions from enhanced productivity.

Looking ahead to 2024, Tokai anticipates a nearly 25% decline in carbon black operating income to Yen16 billion due to increased depreciation, with overall earnings expected to dip by 11% to Yen26 billion. On the sales front, Tokai projects carbon black revenue to grow to Yen170 billion, building upon the Yen148 billion reported in 2023. Short-term earnings may be impacted by inventory cutbacks related to demand for replacement tires in North American trucks and buses. However, Tokai remains optimistic about the recovery in demand for new vehicles, projecting annual growth for tire production to remain at 3% over the medium- to long-term.

Looking further into the future, Tokai sets ambitious targets for 2026, with expected earnings reaching Yen32 billion, marking a 10% increase from 2023, while sales are projected to reach Yen184 billion. This forward-looking approach underscores Tokai's commitment to sustainable growth and resilience within the competitive landscape of the carbon black industry. The comprehensive investment plan signifies not only a commitment to enhancing operational capabilities but also a strategic alignment with evolving market trends and demands.