Tokai unveils €350m investment plan in carbon black business

Tokyo – Tokai Carbon is planning to invest Yen57 billion (€353 million) in its carbon black business over the three years to end of 2026, as part of a strategy to strengthen the core business.

In its mid-term management plant T-2026, Tokai said it aimed to turn carbon black and fine carbon units into “higher value-added business and expand production capacity”.

Breaking down its investment plans, Tokai said it aimed to pump in a total of Yen146 billion yen into its various operations, of which Yen57 billion is earmarked for the carbon black business.

These will include a Yen4 billion investment in ‘promoting carbon neutrality’, another Yen4 billion in “addressing environmental issues mainly at North America plants” and a Yen49 billion investment in “regular updates and relocation of Thai plant (ERJ report)”.

Tokai’s carbon black business registered a particularly strong performance in 2023, posting a 73% year-on-year in operating income to Yen21.3 billion, on 7.2% higher sales of Yen148 billion.

Segment earnings (EBITDA) for the year grew by nearly 43% to Yen29.3 billion, Tokai reported 13 Feb.

Tokai, however, noted a slight decrease in volumes due to a prolonged period of production adjustments for truck and bus tire customers and bearish demand in non-tire products.

The volume, it said, fell despite a recovery in demand for new cars and related products.

Net sales and operating income increased due to the selling price hikes, reflecting the higher environmental investment costs, as well as contributions from higher productivity.

For 2024, Tokai expects carbon black operating income to decrease by nearly 25% to Yen16 billion due “higher depreciation” and earnings to fall 11% to Yen26 billion.

Sales-wise, the group expects carbon black revenue to grow to Yen170 billion from the Yen148 billion reported in 2023.

Short-term earnings will be affected by inventory cutbacks related to demand for replacement tires in North American trucks and buses.

However, Tokai said demand for new vehicles will recover, projecting annal growth for tire production to stay at 3% over the medium- to long-term.

By 2026, Tokai expects earnings to come in at Yen32 billion, up 10% from 2023, with sales to reach Yen184 billion and operating income falling to Yen15 billion.