Kanematsu Corporation

1889–1997

Kanematsu Corporation was formed in April 1967 as Kanematsu-Gosho Ltd. in the merger of F. Kanematsu & Co., Ltd. and The Gosho Co., Ltd. Its name was changed to the Kanematsu Corporation on January 1, 1990. Kanematsu Corporation is a sogo shosha, a general trading company, which conducts business in diversified import and export markets. Trading companies specialize in bringing together buyers and sellers of a variety of products and handling finance and transport of the resulting transaction. Kanematsu is one of the nine largest trading companies in Japan. In addition to its trading activities, however, Kanematsu is also active in a variety of other areas, including manufacturing, marketing, transportation, construction, and real estate development. Under its umbrella are about 230 subsidiaries and affiliates in more than 50 countries, with these operations organized into the following 13 divisions: machinery, electronics, textiles, foodstuffs/provisions, energy, chemicals/plastics, general merchandise, iron/steel, construction/development, wood products/lumber, transportation, finance, and information systems. In 1997 energy and chemicals/plastics operations represented 32.6 percent of sales; machinery, electronics, and construction/development, 22.2 percent; iron/steel and nonferrous metals, 16.9 percent; textiles, 14 percent; foodstuffs/provisions, 10.9 percent; and general merchandise and wood products/lumber, 3.4 percent.

Early History

F. Kanematsu & Co., Ltd. was established on August 15, 1889, by 44-year-old Fusajiro Kanematsu. With offices in Kobe, Japan, and a staff of seven persons, Kanematsu initially began trading operations in the Australian market. A branch office was set up in Sydney, Australia, in the following year; and a first shipment of 187 bales of Australian wool reached Japan. Trading operations expanded to include wheat, tallow, and other Australian products. In 1918 F. Kanematsu reorganized as a joint-stock company. As Japan's international trade grew dramatically during the early years of the 20th century, F. Kanematsu extended its operations into South Africa and South America. By 1936 it had opened U.S. branch offices in New York and in Seattle, Washington, and a subsidiary in New Zealand. The Kanematsu Trading Corporation, a U.S. subsidiary, was formed in New York in 1941. Much of the trading operations of the company were curtailed during World War II, and as a trading company F. Kanematsu had little to do during the war. Expansion resumed after the war, with Kanematsu New York Inc. being formed in 1951. To adjust itself to postwar economic conditions, F. Kanematsu shifted from its traditional trade in textiles to other areas, including the overseas construction of papermaking plants. In 1961 the shares of F. Kanematsu were sold to the public and the company was listed on the Osaka Stock Exchange.

The Gosho Co., Ltd. was formed by Yohei Kitagawa as Kitagawa & Co. Ltd. in 1891 in Yokohama to engage in the import of cotton yarn. Offices subsequently were moved to Kobe and then to Osaka, where in 1905 it was organized as The Gosho Co., Ltd.; it underwent a reorganization into a joint-stock company in 1917. Direct importing of cotton began from the United States in 1906 and from India in 1907. Crawford Gosho Co., Ltd. and Gosho Corporation, U.S. subsidiaries, were formed in 1912 and 1918, respectively. Until the beginning of World War II, Gosho continued its international trading operations, with cotton as its most important product. From 1935 to 1945, war years for Japan, Gosho withdrew from many international markets but continued to trade in raw materials. In 1943 it merged with Showa Cotton Co., Ltd. and Pacific Trading Co., Ltd. After World War II it began diversifying its business away from textiles. Gosho Trading Co., Ltd. was formed in Thailand in 1959.

for US$25 million; Memorex Telex sold automatic tape libraries and network-related equipment and offered systems integration services.

1967–1991

1967 Merger Formed Kanematsu-Gosho

With the 1967 merger of the two companies into Kanematsu-Gosho Ltd., the surviving firm moved into the top ranks of Japanese trading companies. By 1968 the new company had changed its internal organization into the present divisional structure. The head office was moved to Tokyo in 1970. Shares of the company's stock were listed on the Tokyo and Nagoya stock exchanges in 1973. Sales for the fiscal year ended March 31, 1974, reached ¥1 trillion for the first time. Subsidiary companies were formed in Canada in 1972, France in 1973, and Hong Kong in 1975; an office was opened in Beijing in 1979. The oil-price shocks of the 1970s caused difficulties for the company, as they did for much of the Japanese economy. Structural improvements and several long-range plans restored profitability by the end of the 1980s.

As with all Japanese trading companies, Kanematsu-Gosho continued to seek new investment opportunities throughout the world. In 1986, for example, it filled an order with the People's Republic of China for ¥700 million worth of equipment for manufacturing semiconductors; in 1989 it took a 25 percent interest in a joint venture with Nishimbo Industries Inc. in constructing and operating the first cotton textile mill ever in California and also began participation in Kanebo Spinning Inc., a mill in Georgia. The company also became a player in world money markets when, in 1989, US$130 million in dollar-denominated bonds with stock options were sold in the European financial market, and 25 million shares of new stock were issued at prevailing market prices. In 1990, convertible notes worth SFr 200 million were issued. Subsidiaries were formed in the United Kingdom in 1989, in Spain in 1990, and in Italy in 1991, with branch offices being opened in Bucharest, Warsaw, and Berlin in 1990. Also in 1990, Kanematsu-Gosho changed its name to Kanematsu Corporation. In 1991 the Kanematsu (Europe) Corporation was created and given general control over European operations.

As the structure of the world economy continued to evolve, general trading companies such as Kanematsu had to continue to develop new products to trade and new strategies for how to market those products. In particular, they had to adjust their offerings as the Japanese economy became less reliant on exports, with the domestic market becoming increasingly important for total sales. To keep abreast of these changes, in 1987 Kanematsu formed a research-and-development division to investigate new products. In 1990, it established a "Ladies Life and Living" team, an all-woman marketing group with a responsibility for anticipating the product needs of women over the next decade.

1982–1997

The company shifted the emphasis of its operations during the 1980s by importing more products into Japan. In 1982 imports accounted for 24 percent of total sales, compared to 44 percent in 1991. Other categories of operations adjusted accordingly, with exports remaining 15 percent of total sales, domestic sales falling from 51 percent in 1982 to 27 percent in 1991, and overseas sales growing from 10 percent to 14 percent during the period.

Difficult 1990s

The bursting of the late 1980s Japanese economic bubble led to prolonged difficulties for Kanematsu in the 1990s. Nearly all of the sogo shosha had diversified aggressively into financial investments during the speculative bubble years, in large part because their traditional activity of marginally profitable commodity trading had been in a deep decline for years; in desperation the companies built large stock portfolios and became hooked on the revenues they could gain through arbitrage (or zaiteku, as it is known in Japan). Once the bubble burst, the sogo shosha were left with huge portfolios whose worth had plummeted; all of the trading companies were forced to eventually liquidate much of their stock holdings. Unlike some of the larger trading companies, Kanematsu could not afford to quickly liquidate all of the bad investments it had made in the late 1980s; it had to do so gradually, writing some off in 1993 and 1994, the rest in 1997, when the write-offs--and the liquidation of 10 loss-making affiliates--led to an overall net loss of ¥27.53 billion (US$221 million). This poor performance had followed net losses of ¥6.46 billion in 1994 and ¥15.2 billion in 1995. Kanematsu, like all of the sogo shosha, also felt a prolonged effect from its involvement in arbitrage in the form of damage to the company's financial credibility, leading to higher borrowing rates.

During the 1990s, with the Japanese economy in a lengthy recession, Kanematsu expanded aggressively in Asia, establishing numerous subsidiaries, affiliates, and joint ventures, particularly in China, Indonesia, Malaysia, Thailand, and Vietnam. By 1997 the company had 44 projects operational in China alone, where it established a Shanghai-based subsidiary in July 1996 to increase its internal trading activities within China. The following year Kanematsu created a Shanghai-based holding company to coordinate and support all of the company's operations in the burgeoning market that China had become.

1996–1997

During this period Kanematsu also placed an increasing emphasis on such high-tech areas as electronics, communications, and information technologies. For example, in December 1996 the company entered into a ¥1.8 billion contract to expand the rural telecommunications network of Nepal Telecommunications Corporation. In April 1996 Kanematsu established with a U.S. partner a U.S.-based joint venture called Extel Semiconductor Corp. to manufacture application-specific integrated circuit chips. In June 1996 Kanematsu acquired the Asia-Pacific operations of Memorex Telex N.V. for US$25 million; Memorex Telex sold automatic tape libraries and network-related equipment and offered systems integration services.

As yet another bubble burst with the outbreak of the Asian financial crisis in 1997, Kanematsu faced the possibility of a repeat of its difficulties stemming from the Japanese economic troubles of the late 1980s and early 1990s since it had grown rapidly in some of the most troubled economies: Indonesia, Korea, and Malaysia. Currency devaluations were already cutting into demand in southeast Asia by late 1997 and in turn hurting the profitability of most Japanese trading companies. Kanematsu was known for continually restructuring its activities to keep pace with world economic changes and it would have to do so again in order to survive this latest crisis threatening to undermine it.

Metropolitan Collieries Ltd. (Australia); K.G. International Petroleum Limited (Hong Kong); Greymouth Coal Ltd. (New Zealand); Kanematsu Oil Singapore Pte. Ltd.; Kanematsu Sekiyu Gas Co., Ltd.; Kanematsu Sekiyu Hanbai Co., Ltd.; Kanematsu Yuso Co., Ltd.; KG Babo Petroleum Ltd.; KG Berau Petroleum Ltd.; K.G.I., Limited; KG Kalosi Petroleum Ltd.; KG Wiriagar Petroleum Ltd.; Nisseki Kanematsu Co., Ltd.; Toyo Kokusai Oil Co., Ltd.; UNIX Corporation. CHEMICALS & PLASTICS: Prestige Tyre Center Pty Ltd. (Australia); Yokahama Tyre Australia Pty Ltd.; P.T. Idopherin Jaya (Indonesia); P.T. Java Tohoku Industries (Indonesia); Sanshu-KG (Malaysia) Sdn. Bhd.; Bangkok Polyester Co., Ltd. (Thailand); Gospel Chemical Industry Ltd.; Hanna Plastics Co., Ltd.; Hokuetsu Kasei Co., Ltd.; Kanematsu Chemicals Co., Ltd.; Kanematsu Plastics Company, Ltd.; Kanematsu Wellness Co., Ltd.; Kitaura Plastics Co., Ltd.; Rensoru Co., Ltd. NONFERROUS METALS: Nanjing UBE Magnesium Co., Ltd. (China); P.T. Istana Kanematsu Indonesia; Bangkok Metal Industry Co., Ltd. (Thailand); Hitachi Bangkok Cable Co., Ltd. (Thailand); Thai Kakinuma Co., Ltd. (Thailand); Thai Kikuwa Industry Co., Ltd. (Thailand); Thai Kyowa Engineering & Construction Co., Ltd. (Thailand); Diemakers, Ltd. (U.K.); Diemakers Inc. (U.S.A.); Hibino Corp. of America (U.S.A.); Necoa, Inc. (U.S.A.); Kanematsu Metals Ltd.; Shikoku Cable Co., Ltd.; Technic Japan Inc. GENERAL MERCHANDISE: Chung Chi Leather Co., Ltd. (Taiwan); West Bay Resources Inc. (U.S.A.); Kanematsu Kaneka Co., Ltd.; Kanematsu Rex Corporation. IRON & STEEL: Kanematsu Hoplee Co., Ltd. (Hong Kong); P.T. Emperor Steel Corp. (Indonesia); P.T. Little Giant Steel Corp. (Indonesia); P.T. Maspion Stainless Steel Indonesia; P.T. NAR Stainless Steel Center (Indonesia); Ryoma Steel Sdn. Bhd. (Malaysia); Kobe Mig Wire (Thailand) Co., Ltd.; SKJ Metal Industries Co., Ltd. (Thailand); Thai-Kobe Welding Co., Ltd. (Thailand); KG Specialty Steel, Inc. (U.S.A.); Eiwa Kinzoku Co., Ltd.; Iwaki Steel Center Ltd.; Kanematsu Tekko Hanbai Co., Ltd.; Kanematsu Trading Corporation; Kyowa Steel Co., Ltd.; Kyushu Koki Co., Ltd.; Lanxide K.K.; Nikko Boeki Kaisha Ltd.; World Beam Co., Ltd.; Yachiyo Stainless Center Ltd. CONSTRUCTION & DEVELOPMENT: P.T. Gunung Geulis Sentra Rekreasi (Indonesia); P.T. Mulia Colliman International (Indonesia); Daklak-Japan Properties Ltd. (Vietnam); Aso Country Club; Bizen Country Club; Kanematsu Construction Materials Ltd.; Kanematsu Environment Corporation; Kanematsu E-VALUED Homes Corporation; Kanematsu Housing Ltd.; Kanematsu Toshikaihatsu Co., Ltd.; KR Estate Ltd.; Tsuzuki Concrete Industrial Corp. LUMBER & WOOD PRODUCTS: Forestal Peteroa Ltda. (Chile); KG-Inversiones (Chile) S.A.; Productos Forestales Kamapu Ltda. (Chile); G.P.K. Wood Products Sdn. Bhd. (Malaysia); Karimoku (M) Sdn. Bhd. (Malaysia); Pana Home Tech (M) Sdn. Bhd. (Malaysia); Hokushin Co., Ltd.; Kanematsu-NNK Corporation; Maruyone Trading Co., Ltd.; Morimoku Kaisha, Ltd. TRANSPORTATION: Dalian Shunda Logistic Services Corporation (China); P.T. Dunia Express Transindo (Indonesia); Pan Pacific Trans-Service Pte. Ltd. (Singapore); Southern Pacific Insurance Pte. Ltd. (Singapore); Mar Bin Trans-Service Co., Ltd. (Thailand); Central Air & Sea Service (U.S.A.) Inc.; Vietnam-Japan International Transport Co., Ltd. (Vietnam); Central Express Ltd.; Indochina Trans-Service Co., Ltd.; Japan Logistics Co., Ltd.; Kanematsu Boeki Service Co., Ltd.; KIT Ltd. FINANCE: KG International Trade & Finance Plc. (U.K.); Kanematsu Finance Corporation. OTHERS: ADEPT Corporation; Kanematsu Computer Systems Ltd.; Kanematsu Kanzai Co., Ltd.; Kanematsu Personnel Service Inc.