H-ONE Co., Ltd. Business Report FY ended Mar. 2014

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 Rate of change(%) Factors
Sales 179,944 138,042 30.4 1)
Operating income 5,318 5,595 (5.0) 2)
Ordinary income 5,663 5,624 0.7
Current net income 3,496 5,081 (31.2)

1) Sales
-The Company produced greater volumes of automotive frames due the overall increase in automotive production worldwide.

-Sales increased 13.7% year-on-year due to the greater volume of automotive frames the Company produced as a result of new vehicle launches from autumn and after, and the rise in demand created by last-minute automobile purchases before the consumption tax increased in Japan.

<Europe, North America>
-Sales increased 23.9% year-on-year, thanks to not only favorable currency translation buy also to the overall greater production volumes achieved by the Company as a result of increased automotive sales by its customers.

-Sales increased 37.7% year-on-year due to several factors: higher automotive demand, record-breaking production volumes by local subsidiaries, and favorable currency translation due the weak yen.

<Asia, Oceania>
-Sales increased 76.9% year-on-year due to several factors. In Thailand, the Company produced greater volumes of automotive frames as a result of higher automotive demand created by the sales-incentive program that was being conducted in the first half of the year, in spite of significant lower production volumes during the second half of the year as a result of the huge surge in demand during the first half. Production volumes in India were high. And the Company's sales activities were successful in winning new orders in the Asia/Oceania region,

2) Operating income
-Operating income fell 5.0% year-on-year in spite of increased sales. In Japan, this was the result of lower production volumes during the first half of the year, and due to cost increases incurred in the second half of the year, in spite of achieving higher production levels. In North America, the overall cost of production increased as a result of lower productivity for some products. And in Thailand, lower performance resulted from the end of the sales-incentive program that triggered strong demand in the first half.

Recent Development Outside Japan

-The Company plans to double its production capacity at H-One Parts Sriracha Co., Ltd. (HPS), its production subsidiary in Chonburi, Thailand. HPS will establish an additional factory to its existing facility, planning to start operations on a new welding line by March 2015. The factory will also install a stamping machine in 2015. With this expansion, the company hopes to meet growing demand for stamping components from a number of Japanese automakers operating in southern Thailand. The Company's major customer, Honda Motor Co., Ltd. is planning to increase its production capacity in the country by 50 percent, as it will open a new factory by 2015. (From an article in the Nikkan Jidosha Shimbun on January 27, 2014)

-The Company will increase the use of automated robots on the welding lines at its production base in Thailand. The company will introduce a total of 116 automatic welding robots in 2013 and 2014 to boost the number of machines working in the plant by 80% compared to 2012. In Thailand, labor-intensive production lines are more likely to impact profitability because they are susceptible to rising labor costs. Meanwhile, local demand for automotive components is growing as Japanese automakers expand  production in the country. Increasing automation in these plants allows the company to mitigate the impact of labor costs while ensuring higher productivity and capacity to meet these growing needs.(From an article in the Nikkan Jidosha Shimbun on July 3, 2013)

-The Company will strengthen its stamping capacity in Guangdong, China. JPY 2.7 billion will be invested in the expansion of its subsidiary's stamping plant in Qingyuan, Guangdong. The Qingyuan plant will introduce three new stamping machines including a large transfer press machine. These new machines will start operations in July 2015. The plant will also reinforce its welding lines. This project was started due to Honda's production increase in China and its consequent needs for high-strength, steel, body framework parts. H-one intends to increase its productivity with the synchronization of its production system with Honda's vehicle production. (From an article in the Nikkan Jidosha Shimbun on December 11, 2013)

<North America>
-The Company will start restructuring its production operation in North America. Its main customer Honda has been ramping up global vehicle exports from its U.S. plants, expanding the types and specifications of parts that need to be supplied locally. Due to this expansion, the Company's North American facilities need to deal with multi-products and increasing management costs. The company will review and optimize its production structure, including deployment of equipment, and accelerate steps to improve its operational efficiency to the same level in Japan. From FY2013, full-scale efforts will be made at the Ohio manufacturing facility where workload is particularly increasing. (From an article in the Nikkan Jidosha Shimbun on Apr. 4, 2013)

Mid-term Business Plan

-Targets for fiscal year ending March 2017, under the 4th mid-term business plan, are as follows:
1) Sales: over JPY 200 billion
2) Profit margin: 4.5%

Outlook for FY ending Mar. 2015

(in millions of JPY)
  FY ending Mar. 2015
FY ended Mar. 2014
(Actual Results)
Rate of Change
Sales 191,000 179,944 6.1
Operating income 6,000 5,318 12.8
Ordinary income 5,100 5,663 (9.9)
Net income 2,700 3,496 (22.7)
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)


R&D Expenditure

(in millions of JPY)
FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Overall 1,024 970 813

-Most of the Company's R&D expenditure was directed to automotive parts related businesses.

R&D Structure

-Centering on its development technology headquarters, the Company carried out R&D activities in cooperation with many research and development institutions including those of Honda Group.

R&D Facilities

Name Location
Research and development center Tochigi Pref. Japan
Model development center Tochigi Pref. Japan
Development & Engineering center Fukushima Pref. Japan

Recent R&D Achievements (Automotive Component Division)

-Developed a welding/mating process
-Developed stamping process technology for high tensile materials and light weight materials
-Developed a outer parts stamping process
-Developed functional parts by incorporating thick plate precision stamping technology and assembly technology
-Developed material hardening technology
-Developed an in-house information system based on CAD, CAM, and CAE technology; and trained engineers to use it
-Developed stamping process technology for precision metal parts

Investment Activities

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Overall 30,824 17,813 13,424

-The Company's capital investment was mainly directed towards the automotive business.
-Automotive Parts Division: JPY 17,888 million to launch production of new automotive parts, and JPY 12,937 million to increase/upgrade general-purpose production facilities and plants to raise productivity.

New Equipment Installations

(As of Mar. 31, 2014)
Company Name Location Estimated total amount of investment
(in millions of JPY)
Project duration
From To
Kameyama Factory Mie Pref. Japan 1,889 Mar. 2014 Oct. 2016
Maebashi Factory Gunma Pref. Japan 4,450 Feb. 2014 Jan. 2016
Koriyama Factory Fukushima Pref. Japan 4,418 Mar. 2014 Mar. 2016
Consolidated Subsidiaries
KTH Parts Industries Inc. Ohio, USA 6,196 May 2013 Aug. 2016
Kalida Manufacturing, Inc. Ohio, USA 2,519 Mar. 2014 Apr. 2016
KTH Leesburg Products, LLC. Alabama, USA 2,511 Dec. 2013 May. 2016
KTH Shelburne Manufacturing, Inc. Ontario, Canada 3,669 Jan. 2014 Apr. 2016
GH Auto Parts Industries Inc. Guangdong, China 5,560 Feb. 2013 Jun. 2016
QH Auto Parts Industries Inc. Guangdong, China 4,702 Dec. 2013 Sept. 2015
WH Auto Parts Industries Inc. Hubei, China 7,331 Oct. 2013 Sept. 2016
H-one Parts (Thailand) Co., Ltd. Ayutthaya ,Thailand 3,083 Jan. 2014 Oct. 2016
H-one Parts Sriracha Co., Ltd. Chonburi, Thailand 6,918 Mar. 2014 Oct. 2016
H-one India PVT., Ltd. Uttar Pradesh, India 2,449 Feb. 2014 Sep. 2016