ENVALITH
阿波製紙株式会社 logo

AWA PAPER & TECHNOLOGICAL COMPANY, Inc.

3896・Standard Market・Pulp & Paper

Official website
阿波製紙株式会社 logo
AWA PAPER & TECHNOLOGICAL COMPANY, Inc.3896

Business

Awa Paper Mfg. Co., Ltd. is a functional paper and nonwoven fabric specialist manufacturer founded in 1916 and headquartered in Tokushima Prefecture. Its core products consist of three categories: Filter Media for Engines, Base Paper for Clutch Plate Friction Material, and Base Paper for Lead-Acid Battery Separators (automotive-related materials); Nonwoven Fabric for Separation Membrane Support for reverse osmosis membrane modules (water treatment-related materials); and functional paper for food and electric/electronic components (General Industrial Functional Paper (Food & Electric/Electronic Components)). The group, which includes the Thai subsidiary Thai United Awa Paper Co.,Ltd. and the China-based equity-method affiliate Chuzhou Guofeng Awa Filter Media Co., Ltd., operates across two core business pillars: the water treatment field, serving seawater desalination, wastewater treatment, and industrial process water applications; and the automotive-related field, including India and Southeast Asia. In March 2025, the new Komatsushima Plant was completed, strengthening the supply capacity for Nonwoven Fabric for Separation Membrane Support.

Business Model

The Group adopts a make-to-stock production system and manufactures functional paper and nonwoven fabric by leveraging its long-cultivated papermaking and processing technologies, selling these products to automotive parts manufacturers and separation membrane manufacturers for water treatment worldwide. Major customers include Sanko Co., Ltd. (34.5% of net sales) and Kyokuyo Co., Ltd. (11.7% of net sales), among others. With R&D expenses of ¥509 million and 33 R&D personnel, the Group conducts market-in type R&D to develop products that address customer challenges. Revenue depends on product unit selling prices and production volume, and the structure is such that fluctuations in raw material and energy costs directly affect profit margins.

Company Strengths

The company began selling Nonwoven Fabric for Separation Membrane Support in 1983 and has over 40 years of manufacturing track record. The new Komatsushima Plant, completed in March 2025, has strengthened the supply system. In FY2026 (ending March 2026), sales of water treatment-related materials increased sharply by 123.8% year on year, and production volume also achieved a 137.6% year-on-year increase. The company owns dedicated papermaking and processing machines specialized in wet-laid nonwoven fabric manufacturing made of 100% polyester fiber.

Since beginning sales of Filter Media for Engines in 1961, the company has built up over 60 years of supply track record to automobile manufacturers and parts manufacturers. It offers a diverse range of products including Filter Media for Engines, Base Paper for Clutch Plate Friction Material, and Base Paper for Lead-Acid Battery Separators, and has also established an Asian production system through its Thai subsidiary and Chinese affiliate. The company is capturing demand for motorcycles in India and Southeast Asia, and is also expanding exports to overseas replacement parts markets.

In the fiscal year under review, R&D expenses totaled ¥509 million, with 33 research personnel and 5 domestic patent applications filed. Based on proprietary papermaking and processing technology that maximizes the properties of materials, the company is horizontally deploying its pore size, air permeability, and airflow resistance design technologies across multiple fields. The company is also advancing the market launch of new products such as insulation material for LIB (M-Thermo) and new industrial filters, with ongoing progress in expanding the technology's use across multiple applications.

ENVALITH's Perspective

Profit attributable to owners of parent of ¥753 million in FY2026 (ending March 2026) represents a substantial year-on-year increase, but this is primarily attributable to the recognition of ¥1,500 million in subsidy income (extraordinary income) associated with the construction of a new plant. Operating profit was ¥58 million (down 86.4% from ¥432 million in the prior year), and ordinary loss was ¥95 million, indicating a marked decline in core business earning power. Depreciation expense of ¥1,274 million (roughly double the prior year's ¥661 million), together with rising raw material prices, labor costs, and transportation costs, is pressuring profits, making it urgent to restore underlying earning power excluding the subsidy effect.

Interest-bearing debt (short-term borrowings of ¥2,725 million + current portion of long-term borrowings due within one year of ¥1,656 million + long-term borrowings of ¥9,640 million) remained high at approximately ¥14,021 million in total. Interest expense increased to ¥157 million (from ¥99 million in the prior year), exceeding operating profit of ¥58 million, which was the direct cause of the ordinary loss. While the equity ratio improved slightly to 21.9% (from 19.6% in the prior year), the ratio of cash flow to interest-bearing debt remains high at 638.4%, and there is a risk that the financial burden could increase further should interest rates rise.

The company forecasts a recovery in FY2027 (ending March 2027) to net sales of ¥20,600 million (up 11.4% year on year), operating profit of ¥690 million (up ¥631 million year on year), and ordinary profit of ¥550 million. The main basis for this is the expected increase in sales from expanded sales in the water treatment field and stable operation of the new plant, but the company itself acknowledges uncertainties related to geopolitical risk, foreign exchange fluctuations, and raw material prices, and has not disclosed quarterly forecasts, citing an unclear economic outlook. Risks remain from the impact of electrification on automotive-related materials and potential inventory adjustments by business partners, and the probability of achieving the forecast should be assessed with caution.

Growth Strategy

Aiming for earnings recovery through expanded sales in the water treatment field and strengthened supply capacity via stable operation of the new plant

Amid growing demand for seawater desalination, industrial process water, and wastewater treatment applications, the company is actively expanding sales of Nonwoven Fabric for Separation Membrane Support. In FY2026 (ending March 2026), sales of water treatment-related materials reached ¥8,799 million (up 23.8% year on year), and for FY2027 (ending March 2027), sales of ¥20,600 million are planned, driven mainly by growth in the water treatment field.

A subsidy of ¥1,500 million associated with the construction of the new plant was already recorded as extraordinary income in FY2026 (ending March 2026). Stable operation of the new plant will enhance supply capacity for Nonwoven Fabric for Separation Membrane Support, addressing growing demand in the water treatment field. The increase in depreciation expenses (¥1,274 million) is expected to ease as the investment phase runs its course, reducing pressure on earnings.

To offset sluggish growth in domestic automotive-related demand, the company is capturing demand from motorcycles in India and Southeast Asia as well as overseas replacement markets. It will maintain its local manufacturing and sales system through its Thai subsidiary (Thai United Awa Paper Co., Ltd.), while continuing operations and monitoring trends in certain applications amid the progress of electrification.

In response to rising costs for raw materials, labor, and transportation, the company is working to set appropriate sales prices. Together with productivity improvement measures, it aims to restore the gross profit margin. The gross profit margin declined to 13.6% in FY2026 (ending March 2026) from 16.0% in the previous year, and the target is to recover the operating profit margin to 3.3% (forecast) in FY2027 (ending March 2027).

Last updated: July 19, 2026