Keihin Corporation Business Report FY ended Mar. 2019

Financial Overview

(IFRS, in millions of JPY)
  FY ended Mar. 31, 2019 FY ended Mar. 31, 2018 Rate of Change
(%)
Factors
Revenue 349,220 351,494 (0.6) -Even though sales of products for motorcycles, as well as general products increased in Asia and China, income fell because of lower sales of automotive products for passenger vehicles in North America and negative currency translation due to weak valuations of currencies in emerging countries.
-Motorcycle / general-purpose products 100,334 96,104 4.4
-Automobile products 248,885 255,390 (2.5)
Operating income 26,259 28,313 (7.3) -Increased expenses for R&D activities on electrification and expenses in India for electronic fuel—injection systems for motorcycles were offset by rationalization initiatives, income fell because of negative currency translation due to weak currencies in emerging countries.
Pre-tax income 24,759 27,145 (8.8) -
Profit for the year attributable to owners of the parent 15,706 17,824 (11.9) -



Business Developments and Performance by Region

Japan
-Sales of motorcycle products and general products destined for India and China fell.
-Even though sales of automotive products rose in Japan, sales overall fell because of lower sales to the USA and China, and due to lower sales of climate-control products in Europe.
-Overall sales increased, with operating profit reaching JPY 159,000 million, which was a JPY 2,018 million increase over the income generated the previous year.

Americas
-Sales of motorcycle products and general products increased in South America.
-Sales of automotive products were lower overall with, including lower sales in North America.
-Operating profit, which was JPY 92,570 million, was lower year-over-year (y/y) by JPY 6,573 million due to negative currency translation.

Asia
-In addition to increased sales of motorcycle products and general products, automotive products in India increased.
-Operating profit, which was JPY 113,203 million, was higher (y/y) by JPY 3,793 million despite negative currency translation.

China
-Sales of motorcycle products, general products, and automotive products increased.
-Operating profit, which was JPY 85,622 million, was higher (y/y) by JPY 2,905 million despite negative currency translation.

 

Recent Business Developments

<Electrification>

ーThe Company will make a full commitment to developing next-generation electrified vehicle technology through measures such as aiming for the in-house development of a thermal management system for electric vehicles (EVs). Keihin started an enterprise based on its partnership with HORIBA MIRA Ltd., a UK-based engineering service company, in the current fiscal year to strengthen its structure for research and development of a full EV system. Keihin unveiled the "E drive system" next-generation electrified vehicle technology at the Tokyo Motor Show 2017. On the basis of this technology, the supplier will research and develop a comprehensive EV system in an effort to enhance its ability for promoting an electrified vehicle system in the future. (From an article in the Nikkan Jidosha Shimbun on July 11, 2018)

-The Company is planning to increase the production capacity of intelligent power modules (IPMs) at its plant in Kakuda City, Miyagi, Japan, by 2.5 times to 250,000 units a year in the fiscal year 2019 (ends in March 2020). IPMs are the core part of power control units (PCUs) to control drive motors of hybrid vehicles (HVs) and electric vehicles (EVs). The company will increase investments in the parts of electrified vehicles in step with the move to build more electrified vehicles by Honda, its key customer, and other automakers. In addition, a rapid spread of electrified vehicles is anticipated in China with the enactment of the regulations on new energy vehicles (NEVs) in 2019. The regulations require automakers to build more EVs and plug-in hybrid vehicles (PHVs). Aiming to win new orders, Keihin has started preparations to produce PCUs in China. The company has not decided whether it will only make PCUs or produce both PCUs and IPMs locally. The company is considering starting production between 2020 and 2022 depending on demand trends. (From an article in the Nikkan Jidosha Shimbun on May 18, 2018)

Japan
-announced that it will effect a merger between its wholly-owned subsidiaries, Keihin Watari Co., Ltd. (Keihin Watari) and Keihin Sakura Corporation, on October 1. The two subsidiaries produce and sell products for motorcycles, automobiles, and general purpose applications. Keihin aims to improve its business efficiency and competitiveness by unifying the two companies’ production and management functions. Keihin Watari will be the surviving company, and rename itself Keihin Manufacturing. It will have JPY 40 million in capital and be wholly owned by Keihin. (From an article in the Nikkan Jidosha Shimbun on August 6, 2018)

China
-announced that it will effect a merger between its wholly-owned subsidiaries, Keihin Watari Co., Ltd. (Keihin Watari) and Keihin Sakura Corporation, on October 1. The two subsidiaries produce and sell products for motorcycles, automobiles, and general purpose applications. Keihin aims to improve its business efficiency and competitiveness by unifying the two companies’ production and management functions. Keihin Watari will be the surviving company, and rename itself Keihin Manufacturing. It will have JPY 40 million in capital and be wholly owned by Keihin. (From an article in the Nikkan Jidosha Shimbun on August 6, 2018)

-announced that it will exhibit at the international automotive parts trade fair "Internationale Zuliefererborse (IZB) " held Oct. 16-18 in Wolfsburg, Germany. This is the third time that Keihin has participated in the IZB. This time, the company will showcase electric vehicle control systems, including a power control unit, and its systems to help improve fuel efficiency and reduce emissions, including solutions for gasoline direct injection engines, natural gas fueled vehicles and air conditioning systems. (From a press release on October 10, 2018)

Major Supply Agreements received in FY ended Mar. 2018

OEM Model Products delivered
Honda Japan: CR-V Power control-units, electronic control-units, electronically controlled throttle bodies, port-injection injectors, electronic control-units for passenger-car transmissions
Honda Clarity PHEV Power control-unit
Honda North America:Passport Electronic control-unit for V6 engines, fuel-supply products
Ford North America: Ranger Heat-exchanger condensers
SUBARU Japan:Forester Hybrid Control valves for transmissions

 

The 13th mid-term management plan (FY ending Mar. 2018 - FY ending Mar. 2020)

-Strengthen corporate capabilities in electrification
・Establish the xEV section, which oversees business strategies
・Establish the BMS Development Department
・Strengthen production-technology capabilities in the power-module segment
-Advance fuel-injection technology
・Advance developments in the upstream section
-Strengthen business framework to win new customers
・Establish Sales Promotion Department directly overseen by the company president
 

-Total capital investment amount: JPY 70.0 billion (Total in 12th mid-term plan was JPY 48.0 billion.)
・Invest to migrate to motorcycle fuel-injection systems in India, to advance activities under the xEV Section, and set up testing facilities to develop upstream products
・Increase capital-expenditure ratio, from 5% to 7%, in relation to consolidated revenue

 

-Total R&D expenses: JPY 67.0 billion (Total in 12th mid-term plan was JPY 57.6 billion.)
・Work to improve efficiencies by revamping flow of R&D activities and allocate R&D resources toward developing new business areas
・Increase R&D-expenditure ratio, from 6% to 7%, in relation to consolidated revenue.

 

Outlook for FY ending March 31, 2020

(IFRS, in millions of JPY)
  FY ending Mar. 31, 2020
(Forecast)
FY ending Mar. 31, 2019
(Actual Result)
Rate of Change
(%)
Revenue 350,000 349,220 0.2
Operating income 18,500 26,259 (29.5)
Pre-tax income 16,000 24,759 (35.4)
Profit for the year attributable to owners of the parent 8,300 15,706 (47.2)


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

R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2019 FY ended Mar. 31, 2018 FY ended Mar. 31, 2017
Overall 24,658 22,771 19,404


-The R&D Expenditure for FY ending March 31, 2019 is planned to be JPY 25,500 million.

R&D Facilities

Japan

Daiba R&D Office
(Ome, Koto Ward, Tokyo)

Japan Tochigi R&D Center
(Takanezawa Town, Tochigi Pref.)
Japan Kakuda R&D Center
(Kakuda City, Miyagi Pref.)
U.S. Keihin North America, Ltd.
(Anderson, Indiana)
Thailand Keihin Asia Bangkok Co., Ltd.
(Bangkok)
India Keihin India Manufacturing Pvt. Ltd.
(Gurgaon, Haryana)
China Dongguan Keihin Engine Management System Co., Ltd.
(Dongguan, Guandong)
China Keihin R&D China Co., Ltd.
(Shanghai)
Germany Keihin Sales and Development Europe GmbH
(Ismaning, Bayern)

-The Company held an opening ceremony for its new Odaiba R&D office, a development center for electronic powertrain control systems. Until now, the company has engaged in the development of engine software in upstream areas at its headquarters in Shinjuku-ku Tokyo. However, Keihin relocated its software development function to Odaiba, Tokyo to strengthen its development capacity and secure top personnel. The supplier is taking a role in developing upstream software that controls engines in order to lighten the burden on OEMs, who are concentrating their resources on the development of next-generation vehicles. By doing so, Keihin will receive more orders for products that make up powertrain systems. (From an article in the Nikkan Jidosha Shimbun on April 7, 2018)



R&D Activities

Automobile Business
-Development/commercialization of fuel-supply systems and exhaust-system products designed for environmentally advanced engines.
-Development/commercialization of injectors for gasoline direct-injection and port-injection systems.
-Development/commercialization of alternative-fuel-supply systems and related products.
-Development/commercialization of electronic PCUs for engines and power rear gates.
-Development/commercialization of control units for electric-vehicle motors and batteries.
-Development/commercialization of cell-voltage sensors for lithium ion batteries.
-Development/commercialization of PCUs for electric vehicles.
-Development/commercialization of products for automotive air-conditioning systems.
-Development/commercialization of heat-exchangers for automotive air-conditioning systems
ーDevelopment/commercialization of automotive air-conditioning systems and parts for electric cars.

-announced that it will start Fundamental Research of Advanced Vehicle Technology Laboratory (KEIHIN)  from April 1 2018, collaborating with Institute of Fluid Science, Tohoku University. Keihin and the Institute established jointly the laboratory KEIHIN on April 1, 2015. The research at the laboratory is focused on simulation technology using computational fluid dynamics, the advancement of experiment evaluations and applications of these technologies. For KEIHIN , they will research on thermal management and thermal control for electric vehicles (EVs), electric motor technology for the improvement of motor efficiency, high heat flux cooling system for EVs and heat flow visualization, high accuracy prediction and optimization of compact/low load air conditioning unit. (From a press release on April 9, 2018)

 

Capital Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2019 FY ended Mar. 31, 2018 FY ended Mar. 31, 2017
Total 29,746 18,873 16,575
 by region: Japan 7,958 7,455 6,355
                 Americas 1,817 3,476 3,973
                 Asia 12,857 2,038 1,320
                 China 940 1,092 1,720

-Invested substantially more this past year compared with the previous year, investing in India for electronic fuel-injections systems for motorcycles and launching commercial production of next-generation products for electric vehicles.

 

Capital investments in the FY that ended March 2019

-By investment type: Production (JPY 23,572 million), R&D (JPY 1,208 million), and Other (JPY 4,967 million)

Planned Capital Investments(Mar. 2020)

(As of Mar. 31, 2019)
Segments Planned Amount of Investment
(in millions of JPY)
Japan 13,658
Americas 3,727
Asia 15,334
China 7,064
Total 39,810

-Capital investments by category:

  1. Production: JPY 23,929 million
  2. R&D: JPY 2,280 million
  3. Other: JPY 13,601 million