Mitsubishi Materials Pushes to Bolster Carbide Tool Business

Mitsubishi Materials Corp. (5711) will accelerate investments at its factories and pursue acquisitions as it seeks to break the domination of the world’s top three suppliers of tungsten carbide tools.

The company will add a 10 billion yen ($97 million) automated line at its Tsukuba factory north of Tokyo to boost output by 20 percent next quarter, Executive Officer Fumio Tsurumaki said in Tokyo. It will also consider expanding capacity or building new plants outside Japan and will unveil details of the expansion of its carbide tool business along with other products under a three-year business plan, he said.

“We intend to expand the business faster than the market grows,” Tsurumaki said in an interview at the company’s Tokyo headquarters. “We’re aiming to increase our share of the market. We’ll also invest enough to expand operations.”

Worldwide demand for cemented carbide tools, which are used in cutting metal at manufacturing plants, is set to grow annually at 5 percent to 10 percent on average as growth in Asia and other emerging markets boosts production of cars and planes. An investment decision by Mitsubishi comes as Prime Minister Shinzo Abe pushes for more spending at home as Japanese manufacturers move to faster-growing economies in Asia.  The company is interested in acquiring a company though it’s not ready to reach a deal with any potential partners, Tsurumaki said. Mitsubishi Materials will challenge Sweden’s Sandvik AB (SAND), IMC International Metalworking Cos. of the Netherlands and the U.S.’s Kennametal Inc., which dominate the $15 billion carbide tool market.

Carbide Tools

Mitsubishi Materials’ operating profit from sales of advanced materials and tools, mostly tungsten products, was forecast to reach 16.9 billion yen, or 23 percent of total operating profit, for the financial year ended March 31, according to the company’s earnings statement. Aside from the Tsukuba plant, Mitsubishi Materials operates plants that make metal-cutting inserts in Thailand, Spain and China.

Smelting copper accounts for half of Mitsubishi Materials’ sales. The company also makes cement and aluminum cans.

Mitsubishi Materials closed up 1 yen, or 0.3 percent, to 294 yen in Tokyo trading, paring this year’s decline to 24 percent.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Iain Wilson, Keith Gosman

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