Upon assuming the presidency
Q Please tell us your thoughts at the time of agreeing to become president.
I was very surprised when I was asked to be the next president. As the Senior General Manager of the International Business Division, I had new initiatives I was eager to implement for our overseas operations in the coming fiscal year. I also felt some apprehension about transitioning from a business-specific role to overseeing the entire company as president. However, I have always believed in taking action rather than letting opportunities pass by, so despite my initial reservations, I decided to embrace this new challenge, understanding that overthinking things would not change the situation.
Looking back on my life since joining the company when I was young, I had always intended to pursue a career as an engineer, but I also had the experience of suddenly becoming the secretary general of a labor union. The English expression "leap of faith" resonates strongly with me. It perfectly captures the spirit of embracing challenges even when the outcome is uncertain. This time, too, with this leap of faith mindset, I will do my utmost as president for the further development of our group.
Q Please tell us about your ideal company and leader image.
"Cheerful, fun, and energetic." I think it is absolutely important to have a positive attitude of cheerfulness, fun, and working hard together. Also, I'm not sure if I can call it my motto, but what I have written in my notebook is “One who knows is no match for one who likes. One who likes is no match for one who enjoys." This is a passage from the Analects of Confucius, and it means that the work of a person who enjoys doing it is better than that of a person who likes it, and the work of a person who likes it is better than that of a person who knows it. After all, a company life where one says "I have to do it because there's no other way" is not interesting, so I want to make it a cheerful, fun, and energetic company.
And in order to grow, it is important to bring together everyone's wisdom. Therefore, as a leader, I always try to revitalize discussions. For example, prior to the General Meeting of Stockholders in June this year, we gathered the officers and conducted a brainstorming session. The General Meeting of Stockholders is also an opportunity to thoroughly study one's own company once a year, so it is an important opportunity to speak up and discuss various problems and challenges, including those of other departments, and think about what one would do if one were in their shoes. It is very important to go beyond the silo mentality of refraining from speaking up because it is a matter for another department, and to speak up from a different perspective. It is also one of my roles to create an open atmosphere where people feel free to speak up, even when the topic is not their responsibility. I am working hard with the belief that a company cannot grow unless it is a company where people can say what they want to say.
Q As the president of one of the top specialized manufacturer in Japan, how do you think the cement industry should be in the future?
Cement is a material that was born in Europe more than 2,000 years ago, but even today, there is no substitute for it. Even in the future, there are no materials that we can think of that might replace it at least 10 years from now. This is the greatest feature and strength of cement as a material. We are providing the foundation of society, and we continue to produce materials that cannot be replaced.
Domestic demand has been on a long-term downward trend, and there are opinions that domestic plants should be consolidated to balance supply and demand. However, in addition to ensuring a stable supply of materials that will become social overhead capital, the concept of resilience of social infrastructure has been attracting attention in recent years. And, in the event of emergencies such as the frequent occurrence of severe disasters in recent years, it is the mission of our industry to supply cement, with mobility, for the earliest possible recovery. If we say "Please wait" at such times, there will be no quick recovery, so it is necessary to maintain some leeway.
Another important social mission is the acceptance of waste and by-products. The cement industry effectively utilizes waste and by-products as alternative raw materials and fuel, and the amount is equivalent to about 11% of the waste recycled in Japan as a whole. In order to continue to play this role, it is important to maintain the operation of our domestic plants.
Therefore, I believe that the cement industry, which bears such a mission, cannot say "There is no future for the Japanese cement industry" just by looking at the decline in domestic demand. From now on, various costs, including environmental conservation and labor costs, will continue to rise. In order to be able to properly pass through cost increases to prices, we need to improve the status of the cement industry, otherwise it will end with "We cannot accept price increases." Now is the turning point to enable us to pass through price increases. By doing so, we will be able to secure profits and stabilize our business foundation, which will lead to a virtuous cycle of investment to solve social challenges and attracting human resources.
We work with our customers, partner companies and maintenance-related companies that support the operation of our factories, and transportation companies that transport our products, raw materials, coal, etc., totaling more than 300 companies. My idea of "good for everyone" is "good for the seller, good for the buyer, and good for the supporter." I want us to value the idea that it is our role to support those who work behind the scenes. If we do not raise the status of the cement industry here and now, make a decent profit as a company, become an attractive presence for the next generation of human resources, and have the spirit to coexist and prosper with our partner companies and the people who work there, we have no future.
Our industry is important, and I want to make it a vibrant industry with the enthusiasm that "it will not disappear; it is indispensable."
President Taura's vision for the future
Q Please tell us about what Taiheiyo Cement is aiming for through its long-term visions for 2050 and 2030, and the 26 Medium- Term Management Plan back-casted from them.
What I am aiming for is for us to be a company that can steadily generate profits and return them sufficiently to stakeholders, namely, our investors, shareholders, employees and everyone who supports us. I want to make Taiheiyo Cement a happy company, where permanent employees are satisfied with the company's situation and their own treatment.
To achieve this, we must aim for growth where both Japan and overseas operations are equally important, rather than the traditional approach of prioritizing Japan and treating overseas operations as secondary. Currently, we rely on the U.S. for our overseas business, but the Philippines and Vietnam also have great potential to contribute to profits. I believe that there is still plenty of room for profit growth in Asia if we can leverage our know-how, network, and experience. In the future, I would like to make Japan, the U.S., and Southeast Asia our three main pillars.
One of the most important themes is carbon neutrality, and we are focusing on the development of the C2SP Kiln, an innovative technology. The C2SP Kiln, which recovers carbon dioxide generated during clinker firing, is our own and a world-first technology. It is not yet cost-effective at this stage; however, in any field, such as with aircraft and automobiles, the first unit is never profitable. However, once the technology is established, the costs will be significantly reduced and it will become widely adopted. If someone does not do it first, others will not follow. It is truly our “Apollo program,” which the base of innovative technologies expand at once from the establishment of one innovative technology. That is why I definitely want us to complete the development of our C2SP Kiln. With the prospect of making the C2SP Kiln a global standard, we aim to complete the development of innovative technologies by 2030.
On the other hand, one initiative that we can definitely implement in the short term is the promotion of blended cement. Currently, the need for blended cement with lower emission of CO2 is increasing in the world. The usage ratio in Japan is about 20%, but in Southeast Asia and Oceania, it has reached as high as 50% in some areas. In the future, we will expand exports of blended cement with lower CO2 emission in these directions. Increased production for export will also lead to maintaining the operation of our domestic plants. Until now, exports have been largely complementary to domestic demand, but from now on, we will position them as a growth strategy.
Q How do you view the three years of the 23 Medium-Term Management Plan up to last year?
The previous Medium-Term Management Plan was a period when all manner of risks overlapped. First, the COVID-19 pandemic occurred in 2020, and we faced supply chain risks, with coal prices, which had been hovering around $100 per tonne at the beginning of the year, exceeding $200. Then, in 2022, geopolitical risks such as the invasion of Ukraine overlapped, and coal prices exceeding $400 dealt a major blow to our cement business.
We do not know when and how such pandemics, supply chain, and geopolitical risks will occur again. There are also resource risks, and countries such as China and Vietnam, which used to export large quantities of coal, have now become importers due to the depletion of resources. Coal is exported at first because it is profitable, but when reserves are depleted, industrial policy changes dramatically. As a country's industries develop, coal-fired power plants become necessary, and when coal is used in the cement and chemical industries, coal is directed domestically rather than exported. Resource risks and resource crises will continue to emerge in the future. Therefore, in addition to pandemic risks, logistics risks, and geopolitical risks, it is important to address resource risks.
The 23 Medium-Term Management Plan was a period in which we caught a glimpse of this and learned the lesson that we must prepare for risks. We also learned that it is important to diversify and hedge such risks. We were able to somehow get through the 23 Medium-Term Management Plan period because cement prices were drastically revised in a short period of time for the first time in the history and the significant contribution of the U.S. business. Although the U.S. business also had a long period of deficit from 2009 to 2013, now, it is contributing to our overall performance. The cement industry, including the domestic market, is greatly affected by the economic fluctuations in the region, so it is necessary to hedge regional risks. Without such preparations, if the ups and downs become too severe, the cement industry's position will be jeopardized by things like incurring excessive debt or resorting to restructuring. We truly learned many lessons during this period.
Q How will you proceed with the domestic cement business in the 26 Medium-Term Management Plan?
The revitalization of our domestic business is one of the important themes of the 26 Medium- Term Management Plan. While it's true that we cannot be overly optimistic about domestic demand in quantitative terms, the industry's social importance remains undiminished. It is crucial to persevere and continue operations, not only to supply materials for recovery and resilience from severe disasters but also to address social issues through accepting waste and by-products.
Our mindset reform also leads to bargaining power. The cement industry has been pursuing market share expansion amid declining demand since 1991, which has made raising prices difficult. But what we learned again through the price increase is that we can secure stable profits by securing appropriate pricing, not just by prioritizing market share. Costs are expected to increase further due to coal prices, environmental measures, and aging facilities and equipment, so we cannot avoid passing on these costs. I have told our sales representatives on site to understand the background of such costs and negotiate prices with users.
Of course, we will not only seek price increases, but also propose "total solutions" in order to continue to survive together with our users. Our group has 13 limestone quarries in Japan and therefore is working to national resilience. There are growing concerns about the depletion of aggregates and sand, which are raw materials for ready-mixed concrete. In parallel with the price increase of cement, we will propose and solve related issues and requests, such as the supply of aggregates and sand, respond to transportation problems as total solutions.
Q In addition to the mainstay U.S. business, you are also aiming to expand business in Southeast Asia.
The U.S. is a country that is growing, with a large population and high level of immigration. Surprisingly, there is still room for growth in infrastructure development. Looking at the accumulated use of cement in infrastructure, the amount of cement used for infrastructure. Since the start of the cement industry in Japan is about 30 tonnes per capita, but in the U.S. it is still around just 18 tonnes. The U.S. is known for its car culture, so one might imagine that roads are well-developed, but surprisingly, the accumulated infrastructure using cement is less than one might expect. A $1 trillion infrastructure bill, the largest since the New Deal, is being implemented specifically with an eye on addressing the country’s aging infrastructure, so demand from this will continue to grow. Our understanding is that there are still frontiers left in the U.S.
I can say with confidence that there is a high probability that Asian countries will also continue to grow in the long term. In terms of the aforementioned accumulation of cement use, the Philippines and Indonesia are still at only around 6 tonnes per capita. Both countries have a young average age and a growing population, just like Japan during the "Sanpaku" or Three-Whites economic boom (involving white commodities such as paper, sugar and cement) era. Domestic demand in Vietnam is sluggish, but Nghi Son Cement has turned profitable since it started exporting to the CalPortland Company in the U.S. Now is the time to expand our investment in Asia.
Q What are the challenges in realizing the long-term vision?
The biggest challenge is "people." The first thing I said when I became president was, we need to develop human resources. To have the ability to support the company, you need not only expertise, but also competencies such as information gathering, a challenging spirit, and the courage to tackle innovation. To support our company 26 years from now, in 2050, when we envision our future, we must give opportunities to those who have just joined the company as new graduates and nurture them. We are working with a sense of urgency to develop human resources who can realize the desired image of 2050.
Workplace diversity is also important for this. We have been promoting the active participation of women in our company, but the challenge for the future is multi-nationalization. It is impossible for Japanese people to do everything, so it is necessary to become a true global company that fosters and entrusts human resources who can become representatives in each country. On the other hand, I recognize that how to supervise local governance is a very difficult issue.
Another major theme is climate change. While working to achieve carbon neutrality by 2050, we should also accept the reality of the increasing number of severe disasters in front of us and take visible steps one by one. We will fulfill our social mission to infrastructure by supplying cement and building materials for resilient facilities. We also want to explore, as a group, what technologies and products we can offer during disasters.
In addition, we have decided to cooperate with the "Zero Carbon Island Concept" of the town of Yakushima, where our group company Yakushima Denko is located. Just as there are model towns for autonomous driving in the automotive industry, we also plan to cooperate various initiatives in Yakushima, including the promotion of local production and consumption of renewable energy (hydropower).
What our stakeholders are asking for
Q Please give a message to all stakeholders.
We are working to create social value as a company, with the understanding and cooperation of local communities where we have factories and quarries. In order to contribute to the development of local communities while ensuring the peace of mind of our neighbors, we are conducting tours of our factories to show the actual sites and quality control status, in addition to providing opportunities for dialogue and explanation. In addition to safety and security, we are also actively participating in social and cultural activities such as festivals and cleaning activities, aiming for coexistence and co-prosperity with the community.
For those who have invested in our company's shares, I believe it is very important to demonstrate our position with visible figures. In addition to improving figures such as ROE and PBR, we would like to put more effort into communicating with our investors. In the 26 Medium-Term Management Plan, we will meet your expectations by realizing medium- to long-term corporate value enhancement through growth investment while continuing stable dividends and shareholder returns through share repurchases.
QFinally, how do you look back on your first quarter as president?
My impression is that my first quarter as president has gone by in a flash. After assuming the presidency, I have been visiting our domestic bases, and there are many new discoveries. At my business trip destinations, I take time to have dialogues with permanent employees, and everyone listens to my talk of future growth and overseas expansion with great interest, and we have lively discussions. I would like to continue to work positively, especially in the first year, by listening to various stories in various places and conveying my own thoughts, while valuing the input of permanent employees and customers and opportunities for dialogue.
