SHOWA Corporation Business Report FY ended Mar. 2013

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 Rate of Change (%) Factors
Overall
Sales 232,962 215,889 7.9 -Profit increased because of higher sales of automotive parts.
Operating income 12,756 7,507 69.9 -Profit increased because of improvements resulting from changing the sales composition and reducing costs.
Ordinary profit 13,916 7,330 89.8
Current net income 7,984 2,549 213.2

Highlights by Segment

<Automobile>
-Although the Automobile sector was negatively impacted by the reduction in both production and sales volumes at customers in China, performance rose year-on-year due to strong automotive markets mainly in Japan, North America, and Asia.

<Steering>
-Like the Automobile Business, the Steering Business also was negatively impacted by the reduction in both production and sales volumes at customers in China. Nevertheless, performance improved for the year due to strong automotive markets mainly in Japan, North America, and Asia.

New Company

-The Company announced its plan to set up a new company for manufacturing and marketing automotive propeller shafts in Wuhan, China. The new Chinese company will be established in June 2013, and start production in May 2014. The new operation is intended to enhance the Group's capacity to supply propeller shafts in the Chinese and Southeast Asian markets, as Showa aims to expand its global presence further. The new production company,"Showa Autoparts Wuhan Co., Ltd. (tentative name)"will be capitalized at 40 million yuan (approx.500 million yen), in which Showa will own a 75% stake, and Guangzhou Automobile Group Component Co., Ltd. will hold a 25% stake. A total investment amount including for production equipment is expected to be around 42 million yuan (approx.540 million yen). (From an article in the Nikkan Jidosha Shimbun on Jan. 31, 2013)

-The Company announced on April 26 that it will set up a second production subsidiary in Indonesia "P.T. Showa Autoparts Indonesia." The new plant will be built at a cost of approximately 1.8 billion yen in the Bekasi Greenland Industrial Park in the suburbs of Jakarta at a site of about 25,000 square meters with a building of about 3,000 square meters. The new production facility is scheduled to go into operation for production of automobile driving gears with production capacity for 1,000 units a day or about 240,000 a year. (From an article in the Nikkan Jidosha Shimbun on April 27, 2012)

Contract

-The Company's new mechanical shock absorber is being equipped on the Honda Accord Plug-in Hybrid.

-The Company announced that its new shock absorber, "S-SEES" (Showa Super Empowering Efficient Suspension)was selected for the new Honda Accord for the North American market and Fuji Heavy Industries' new Forester. The new product uses friction control technology to smoothly absorb minute vibrations on rough roads, and provides better maneuverability by restraining unnecessary tilting of the car body while cornering. Showa's Saitama plant and American Showa Inc's Sunbury plant in Ohio will produce a total of approx. 388,000 S-SEES shock absorbers each year. (From an article in the Nikkan Jidosha Shimbun on Dec. 4, 2012)

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

R&D

R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 FY ended Mar. 31, 2011
Total 6,492 5,880 5,496

-In quickly and accurately grasping the needs of its customers, the Company is enhancing its product competitiveness, undertaking R&D activities that pursue cutting-edge technology.
-R&D expenses by segment are as follows:
  • Motorcycle/ General: 1.8 billion yen
  • Automobile: 2.117 billion yen
  • Steering: 2.483 billion yen
  • Gas spring: 90 million yen

R&D Technical Centers

Name (Location) Main R&D Activities
R&D Automotive Parts
(Saitama, Japan)
shock absorbers for 4-wheeled vehicles, the research and development of gas springs
R&D Center
(Toshigi, Japan)
hydraulic devices, power steering systems and drivetrain research and development
R&D Motorcycle Parts
(Shizuoka, Japan)
2-wheeled vehicle shock absorber research and development

Technological Alliance

-The Company will start production of column-drive electric power steering (EPS) systems by licensing-in technology from TRW Automotive of the U.S. Showa will optimize TRW's product design for application to the vehicles of its customers. It plans to supply the EPS systems globally through license production at its own factories or by using TRW's manufacturing bases. Mass production is scheduled to start in three or four years. (From an article in the Nikkan Jidosha Shimbun on Mar. 21, 2013)

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Motorcyle/General 3,069 1,373
Automobile 2,581 1,883
Steering 1,804 1,682
Gas springs 44 100
Other 174 256
(Adjusted amount) (580) (161)
Total 7,094 5,134
-The 38.2% year-on-year increase was to augment production of motorcycle/general products in India, launch a new production facility in Thailand, increase production volume in Vietnam, and increase production of automobile products in Indonesia.

Investment Outside Japan

<India>
-The Company commenced studies towards a construction of a new plant in India. Projecting growth in production of both two-wheeled and four-wheeled motor vehicles in the country, the vehicle parts manufacturer is now examining where to build the new plant. The facility is likely to be located in southern and western regions where the company has no production site at present. The automotive and motorcycle markets in India are expected to become larger in the medium- and long-term, and Japanese automakers are expanding their production in northern and southern parts of the country. Showa's existing plants are located in Northern India. The addition will allow the company to become more responsive to rising demand for vehicle parts and accelerate its business in emerging countries. (From an article in the Nikkan Jidosha Shimbun on Mar. 25, 2013)

-The Company announced on July 31 that it will make additional investments in its subsidiaries in both India and Vietnam. In India, it will raise capital in Showa India Private Limited (SIP) for the purpose of expanding its facility and boosting capacity to manufacture motorcycle components. The enhancement is intended to raise SIP's financial structure. In Vietnam, Showa will invest in Showa Auto-Parts Vietnam Co., Ltd. (SAV), which has recently started producing components destined for Japanese and the ASEAN markets. Showa is going to provide the full amount required by SAV, while taking over the ownership held by Asian Honda Motor Co., Ltd. (From an article in the Nikkan Jidosha Shimbun on August 2, 2012)

<Thiland>
-The Company announced additional investment in its consolidated subsidiary in Thailand, Showa Autoparts (Thailand) Co., Ltd. (SAT). As the subsidiary will start manufacturing and sales of motorcycle parts, it will invest four million baths (approx. one billion yen) to fund new construction and facilities. SAT's capital amount will then be eight billion baths, more than 1/10 of Showa's capital amount. SAT, therefore, will be Showa's Specified Subsidiary as of May 31. (From an article in the Nikkan Jidosha Shimbun on May 24, 2012)

Planned Capital Investments

-The total amount of capital investment planned for FY ending March, 2014, was 11,506 million yen. The following outlines major construction projects for new facilities.
Facility
(Location)
Type of facility Planned investment
(million JPY)
Construction start month Planned completion Production capacity growth after completion
Saitama Plant
(Gyoda City, Saitama, Japan)
(Note 3)
Production facilities for automobile parts, production machinery facilities 1,060 Apr. 2012 Mar. 2014 (Note 1)
Gotemba No.2 Plant
(Gotemba City, Shizuoka Pref.)
Production facilities for automobile parts 558 Dec. 2012 Mar. 2014 (Note 2)
Asaba Plant
(Fukuroi City, Shizuoka, Japan)
(Note 4)
Production facilities for automobile and motorcycle parts 598 Apr. 2012 Mar. 2014 (Note 2)
American Showa, Inc.
Sunbury Plant
(Ohio, USA)
Production facilities for automobile and motorcycle parts 948 Oct. 2012 Dec. 2013 (Note 2)
American Showa, Inc.
Blanchester Plant
(Ohio, USA)
Production facilities for automobile parts 1,402 Nov. 2012 Dec. 2013 (Note 1)
P.T. Showa Indonesia Mfg.
(Cikarang-Bekasi, Indonesia)
Production facilities for automobile and motorcycle parts 981 Dec. 2012 Dec. 2013 (Note 1)
Showa Autoparts (Thailand) Co., Ltd.
(Chonburi, Thailand)
Production facilities for automobile and motorcycle parts 1,138 Aug. 2012 Dec. 2013 (Note 1)
Summit Showa Manufacturing Co., Ltd.
(Chonburi, Thailand)
Production facilities for automobile and motorcycle parts 697 Sep. 2012 Dec. 2013 (Note 2)
Guangzhou Showa Autoparts Co., Ltd.
Guangzhou Plant
(Guangzhou, China)
Production facilities for automobile parts 648 Oct. 2012 Dec. 2013 (Note 1)
(Note 1) Since the investments are mainly made under projects to enhance capabilities and rationalize operations, any actual increase in capacities, once the projects are completed, are forecast to be slight.
(Note 2) Due to difficulty in calculating production capacity growth after completion, the figure is provided here.