SDS Biotech: Combining forces biochemical pesticides

SDS Biotech, which was established in 1968 as a joint venture by Showa Denko and US company Diamond Shamrock, became a consolidated subsidiary of Idemitsu Kosan this year, starting a new era for the company. Its president Makoto Yasuda plans to weave the strengths of SDS in chemical pesticides and Idemitsu in biopesticides into a robust new business.

Would you explain how SDS came to join the Idemitsu Kosan group?

Yasuda: An investment fund used to own more than half of our shares, but its participation was coming to an end in 2013, so we were looking for a new business partner. We also reviewed our corporate vision, and realized that we needed unique business to become a company with annual sales of 12 bn yen ($155 mn) able to compete against Western majors and domestic market leaders. We produce and sell both chemical and biological pesticides and considered focusing on bio-agrochemicals and biopesticides, including naturally derived active ingredients, because we expected these markets to grow. Agri-Bio is one of Idemitsu Kosan’s business domains, and it is promoting its biopesticides, but it found market cultivation for a combination of biopesticides and chemical pesticides easier than having a portfolio with only biopesticides. The two companies’ visions coincided and each other’s independence was respected, so a capital and business collaboration agreement was concluded in May, and we joined the Idemitsu group after a successful tender offer for our shares.

In what ways are the two companies collaborating?

After completion of the tender offer, we formed a working group made up of members from both companies to maximize synergies in areas like R&D, technology proliferation and overseas development. Although the group will release the findings of its discussions on different issues at different times, we want to make decisions on some of them during this year and have the decisions reflected in our business proceedings.

Overseas sales will be a business driver.

Our current ratio of overseas sales to total sales is about 40%. Our sales volume has been expanding every year, but the strong yen and intensified competition from generics have been affecting our profit margin, which we have to improve. We plan to do so by launching products with high added value. Under the collaboration agreement, Idemitsu will support us in the acquisition of big-seller pesticides and the overseas development of biopesticides, which we wish to leverage into accelerated overseas development. Furthermore, we agreed with US company Gowan Co. in April for Gowan to develop, register and exclusively sell benzobicyclon, our paddy herbicides, in the US market for rice cultivation (AgroNews 2011-04-21). The goal is to have benzobicyclon registered as a pesticide in the US in 2015. We have high expectations for this market, next to Japan and South Korea.

How about new business?

As the popularity of home gardening and kitchen gardening is growing in Japan, we will set up an e-commerce web site for home users this year, named First-aid Box for Home Gardening. People who enjoy home gardening and kitchen gardens tend to be highly nature-oriented, so we will begin by selling our biopesticides on the site. In the future, we plan to introduce herbicides that contain active ingredients based on orange oil and cedar essential oil that are developed by SDS and pesticides that are co-developed with Idemitsu.