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5. Kasai Kogyo Co., Ltd. Business Report FY ended Mar. 2019

Kasai Kogyo Co., Ltd. Business Report FY ended Mar. 2019

North American Business

ｰKasai Kogyo Co., Ltd. (Kasai Kogyo) will reinforce its North American operations, the largest business in terms of revenue. The company will advance the reorganization of its U.S. plants and the integration of design and development bases. In addition, the company intends to increase profitability of its interior ceiling parts business, one of its main businesses. The company’s North American operations posted a growth in revenue for the fiscal year ended March 2019, with profitability declining due to soaring material costs and labor costs. The company expects that the reinforcement, coupled with the company’s rationalization efforts started last year, will push up the profitability of its North American business from the fiscal year that ends in March 2020 onwards. Kasai Kogyo will advance the reorganization mainly at two plants located in Tennessee, including changing the line of products produced at each plant to cut fixed costs. Also, the company’s three design and development bases in the U.S. will be integrated. The bases in Michigan and Tennessee will be consolidated to the existing base in Dublin, Ohio, by the end of 2019, to improve development efficiency. Kasai Kogyo produces and sells about 80% of its celling parts in North America and conducts large-lot production of a small range of products. The company has adopted the Japanese production system, but will change it to the system that matches the order characteristics in North America, with the aim of improving profit structure of its ceiling parts business. In Mexico, the company is planning to launch production of parts for eight vehicle models, the largest in the company’s history, in the current fiscal year. (From an article in the Nikkan Jidosha Shimbun on June 28, 2019)

-Among the Company's sales in the fiscal year that ended in March 2019, the North American operations accounted for JPY 99,454 million, or 43.7% of total sales. This was an increase of 2.3% year-over-year, thanks to growing demand for SUVs and new vehicles.

Chinese Business

ｰKasai Kogyo Co., Ltd. (Kasai Kogyo) will establish a new joint venture plant in Wuhan, which is expected to become a major battleground in the Chinese market. The company’s subsidiary, Dongfeng Kasai (Wuhan) Roof Trim Systems Co., Ltd. (Dongfeng Kasai), has been supplying automotive parts for Nissan Motor Co., Ltd. Kasai Kogyo aims to win new orders from other car brand makers globally in 2021 by strengthening its production system in Wuhan. In China, Dongfeng Kasai has three plants in Wuhan, Dalian, and Xiangyang. Kasai Kogyo’s largest consolidated subsidiary in the country, Guangzhou Kasai Automotive Interior Trim Parts Co., Ltd., has one plant, and Kaifeng Kasai Automotive Trim Parts Co., Ltd. (Kaifeng Kasai) has another. Kasai Kogyo plans to establish a joint venture with a partner of Kaifeng Kasai in Wuhan, and borrow land and buildings. (From an article in the Nikkan Jidosha Shimbun on June 12, 2019)

European Business

ｰRoechling Automotive SE & Co. KG, entered into an agreement with Kasai Kogyo Co., Ltd to sell its plant in Wolfsburg-Hattorf. The 13,000 square meter plant in Wolfsburg-Hattorf, built in 2001, produces door and side panels for automobiles. However, Roechling Automotive has increasingly focused on systems and components for aerodynamics, propulsion and new mobility in recent years. The sale of the plant thus concludes a process initiated by the plastics specialist in 2011. The sale of the plant will affect about 170 employees. Kasai Kogyo is taking over the entire business operations and thus all employees. No job losses are anticipated. (From a press release on May 7, 2019)

ｰKasai Kogyo Co., Ltd. (Kasai Kogyo) will set up a new company in Morocco in March 2019 as part of its business expansion strategy in the European market. The new company will supply sun visors to Renault’s site in Morocco for the time being. It will be the first time for Kasai Kogyo to specialize in business with Renault. Since Morocco is close to Europe, the company will make the new site a base for sales promotion targeting other automakers in the European market. The new company, Kasaikogyo Morocco SARL AU located in Tangier, Morocco, will be a wholly-owned subsidiary of Kasai Kogyo and capitalized at JPY 175 million. It will sell, import and export automotive interior and exterior parts, with the parts being supplied to Renault. Production is planned to begin in the middle of 2020. (From an article in the Nikkan Jidosha Shimbun on March 15, 2019)

-In the fiscal year that ended in March 2019, sales in Europe were JPY 15,056 million, which was a decrease of 3.3% year-over-year, that resulted from either the end of production, or lower production volumes, of some major vehicle models.

Other Business Developments

ｰKasai Kogyo Co., Ltd. (Kasai Kogyo) will set up a new subsidiary to oversee the company’s production plants in Japan. The new subsidiary will be set up to consolidate Kasai Kogyo’s domestic business and three group companies in Japan. The subsidiary will supervise operations of all eight plants in Japan including two directly operated by Kasai Kogyo. Kasai Kogyo will become the global headquarters and manage overseas operations. The new subsidiary is planned to be set up in the autumn of 2019.   (From an article in the Nikkan Jidosha Shimbun on May 16, 2019)

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

ｰKasai Kogyo Co., Ltd (Kasai Kogyo), a supplier of interior components for automobiles, will focus on the development of next-generation products making use of  Interior User Interface (IUI) and weight-saving technologies. This move is to keep pace with automakers’ move to introduce vehicle electrification, autonomous driving, and connected technology. Kasai Kogyo aims to commercialize an IUI-based ceiling module and develop a technology to reduce component weight using cellulose nanofiber (CNF) for its ceilings and door trims. The company aims to put the next-generation ceiling module into practical application by 2023. (From an article in the Nikkan Jidosha Shimbun on November 19, 2018)

-Planned amount of investment for FY March 2019 is JPY 12,000 million. It will be used mainly for installing and revamping major new facilities.

ｰKasai Kogyo Co., Ltd. (Kasai Kogyo) will increase its production capacity in and outside Japan. Since interior parts are heavy, Kasai Kogyo will perform final assembly near customers' sites to reduce physical distribution costs and strengthen its competitiveness in an effort to continuously receive orders. In North America, the supplier will construct a new plant within the premises of one of Nissan Motor Co., Ltd.'s plants to produce parts for the automaker's mid-size sedans. In North America, the supplier has received orders for parts for use in a total of six new models like Honda Motor Co., Ltd.'s and Subaru Corporation's large SUVs, as well as Nissan's mid-size sedans, that they will start building by the end of fiscal year 2018 (ending in March 2019). The supplier will boost its production capacity there to form a parts supply network. In Japan, Kasai Kogyo will increase its production capacity in the Kyushu region. Kyushu Kasai Co., Ltd., a subsidiary of Kasai Kogyo, will construct a new plant at a location near the plant of Nissan Motor Kyushu Co., Ltd. (Kanda, Fukuoka Prefecture). The new plant will have a site area of about 17,000 square meters and is scheduled to begin operations in mid-2019. In Japan, the supplier has received orders for parts for use in a total of six new models like Subaru's SUV, Honda's light commercial vehicle, and Hino Motors, Ltd.'s medium-duty truck that they will start building in FY 2018. (From an article in the Nikkan Jidosha Shimbun on June 29, 2018)

Business Plan

-The Company mapped out a new long-term management plan, KR10 (Kasai Realize 10), which covers the period between 2014 and 2023. Plans are to offer excellent quality to global customers by standardizing manufacturing methods and processes, to create its "only one" technology and develop it into a "number one" technology, and to generate new business targeted at the automotive industry. Following are financial targets for the final year of the plan:

• Sales: JPY 300 billion
• Operating profit margin: 8%
• Global market share (interior trim): 10%