SHOWA CORPORATION Business Report FY2009
|(in millions of JPY)|
|FY2009||FY2008||Rate of Change (%)||Factors|
|Sales||207,657||271,510||(23.5)||-Sales decreased due to lower demand in the automotive sector and a negative foreign currency translation.|
|Operating income||(2,370)||2,409||-||-Despite some improvements as a result of measures such as streamlining operations and reducing costs, operating and ordinary income decreased mainly due to a decline in production.|
|Current net income||(8,593)||(11,609)||-||-Current net income decreased mainly because losses that resulted from the Company's liquidating assets and business impairment losses were posted as extraordinary losses.|
|Sales||195,895||259,628||(24.5)||-Sales of automotive parts increased in some regions such as Southeast Asia and China.
-Sales and operating income decreased due to lower sales of automotive and motorcycle parts, triggered by production cutbacks because of the overall slowdown in the market.
Highlights by Region (Automotive business)<Japan>
-Production volume of some vehicle models increased due to government-sponsored tax credits that applied to purchases of eco-cars; and due to other incentives encouraging consumers to buy new vehicles. As a result, production of some automotive parts increased.
-Income decreased due to a drop in sales of automotive and motorcycle parts that was triggered by production cutbacks at the Company's main customers.
-Income decreased in the USA due to lower sales of automotive and motorcycle parts that was triggered by production cutbacks at the Company's main customers.
-Income decreased in Canada due to lower sales of automotive parts.
-Income decreased in UK due lower sales of automotive parts.
-Sales of motorcycle shock absorbers decreased in Spain.
South East Asia
-Income decreased due to lower sales of automotive parts and motorcycle absorbers that was triggered by production cutbacks at the Company's main customers.
-Nevertheless, the Indonesian market shows some signs of recovery.
-Income decreased due to lower sales of motorcycle absorbers that was triggered by production cutbacks at the Company's main customers.
-Income increased because the market remained strong and sales of automotive parts increased.
-Income increased due growing sales of power steering systems.
Business Restructuring-The Company will integrate production of sintered parts used in shock absorbers and power steering systems for motorcycles and automobiles. The Company, which now manufactures these products globally at its three plants, namely its Saitama Plant in Gyoda City, Saitama Prefecture; Showa Kyushu Corporation in Uki City, Kumamoto Prefecture; and the American Showa Incorporated in Ohio, U.S.A, will consolidate its lines into Showa Kyushu by the end of May in order to centralize production resources and improve business efficiency. (From an article in the Nikkan Jidosha Shimbun on May 12, 2009)
-The Company will revise its production operations for its core product of automotive shock absorbers. Seven production lines at the Saitama Plant, Gyoda, Saitama Pref., Japan, will be decreased to five as early as this summer. It plans to consolidate the major products to these five lines, which will be operated on two shifts, for higher efficiency. One of the two lines which will stop mass production, will be operated as a high-mix low-volume production line, while the other line will be closed. (From an article in the Nikkan Jidosha Shimbun on May 25, 2009)
-The Company has decided to accelerate its efforts on production optimization. Production of motorcycle shock absorbers at Nagoya Plant, Kasugai, Aichi Pref., Japan will be transferred to Asaba Plant, Fukuroi, Shizuoka Pref. in a year in order to concentrate motorcycle parts production. Outboard parts production will also be transferred. To the vacant space of the Nagoya Plant to be made as a result of the production concentration, manufacturing of automotive shock absorbers for automakers from Nagoya and to the west of Nagoya will be moved from its Saitama Plant, in order to lower the distribution cost. (From an article in the Nikkan Jidosha Shimbun on Nov. 2, 2009)
-The Company will reorganize its production structure for power steering systems and shock absorbers. The company, which has been manufacturing all major components used in these products at its own facility, is set to partly switch to procurement from other manufacturers. The company will initially focus on cast housings of power steerings and shock absorber pipes. By the end of the fiscal year 2010, it is going to stop producing shock absorber pipes and fully switch to outside procurement of these parts. Considering cost required for updating production facilities and developing new production technologies, the company decided it was wiser in terms of both cost and quality to purchase these products from specialized manufacturers. Aiming to become capable of responding more flexibly to fluctuating demand levels in the market to enhance its profitability, the company intends to expand use of items manufactured by other companies. Showa, however, will continue handling production and assembly of precision parts, which have decisive influences on vehicle operational feeling and riding comfort. The company is looking to raise the percentage of outside procurement to around 30 to 40 percent, or 50 percent at the maximum for the majority of its steering systems and shock absorbers. (From an article in the Nikkan Jidosha Shimbun on Jan. 13, 2010)
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)
|(in millions of JPY)|
Automobile parts business
-The Company improved the competitive edge of its existing products by reducing cost through specification amendment and other measures.
-The Company enhanced its research and development capabilities, including an evaluation of conformity to material requirements that supports local procurement of materials from a technical point of view.
|(in millions of JPY)|
Investment in Japan-The Company focused on improvement, streamlining and update of production facilities including construction of a new plant at Gotenba.
New Facilities-The total amount of capital investment planned for fiscal year 2009, which ended March, 2010, was 11,672 million yen. The following outlines major construction projects for new facilities.
|Type of facility||Planned investment
|Construction start month||Planned completion||Production capacity growth after completion|
(Gyoda City, Saitama, Japan)
|Production facilities for automobile parts||931||April 2009||Jan., 2011||-|
(Fukuroi City, Shizuoka, Japan)
|Production facilities for automobile and motorcycle parts||932||April 2009||Jan., 2011||-|
(Kasugai City, Aichi, Japan)
|Production facilities for automobile and motorcycle parts||652||April 2009||Jan., 2011||(Note 1)|
|P.T. Showa Indonesia Mfg.
|Production facilities for automobile and motorcycle parts||656||Dec., 2009||Dec., 2010||(Note 1)|
|American Showa, Inc.
|Production facilities for automobile parts||397||Oct., 2009||Dec., 2010||(Note 1)|
|American Showa, Inc.
|Production facilities for automobile parts||439||Dec., 2009||Dec., 2010||(Note 1)|
|Showa Canada Inc.
|Production facilities for automobile parts||1,356||Dec., 2009||Dec., 2010||-|
|Guangzhou Showa Autoparts Co., Ltd.
|Production facilities for automobile parts||428||Dec., 2009||Dec., 2010||(Note 1)|
|Shanghai Showa Auto Parts Co., Ltd.
|Production facilities for automobile parts||659||Aug., 2009||Oct., 2010||(Note 1)|
|Showa Seiko Co., Ltd.
(Hadano City, Kanagawa, Japan)
|Production facilities for automobile parts||1,604||Feb., 2010||March 2011||(Note 2)|
(Note 2) This project mainly involves acquiring a new plant, so some increase in production capacity is expected after it is completed.