H-ONE Co., Ltd. Business Report FY ended Mar. 2015

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 Rate of change (%) Factors
Sales 185,750 179,944 3.2 -Sales increased year-on-year due to the addition of the results from the subsidiary in Indonesia, which became a consolidated subsidiary; and due to favorable currency translation. This was in spite of flat production levels since the previous year for automotive frames and the falling unit price per automobile.
Operating income 2,232 5,318 (58.0) -Operating income was lower year-on-year because of increased depreciation costs, lower production levels in Japan, a worsening product mix in China, and initial start-up costs incurred to launch operations in Indonesia.
Ordinary income 1,659 5,663 (70.7) -
Current net income 292 3,496 (91.6) -
Sales by segment
-Japan 39,727 44,148 (10.0) -Sales decreased year-on-year due to lower production volumes of automotive frames for major customers and due to severe price competition.
-Europe and North America 85,886 80,709 6.4 -Sales were higher due to favorable currency translation, even though the production volumes of automotive frames decreased year-on-year.
-China 32,764 31,588 3.7 -Sales were higher year-on-year due to favorable currency translation as a result of the strong Chinese yuan to the Japanese yen, in addition to higher production volumes in China due to increased automotive demand in the country. However, the product mix in China worsened for the year.
-Asia and Pacific 27,372 23,498 16.5 -Sales were higher year-on-year due to higher production volumes of automobile frames in India and the addition of the results from the subsidiary in Indonesia, which became a consolidated subsidiary. However, production volumes in Thailand decreased year-on-year.

Restructuring in Japan

-The Company announced that it will close its Toda Plant in Saitama Prefecture by the end of March 2016. The plant is engaged in welding of automotive frames. The closure will affect 72 employees at the plant. In accordance with this closure, the Company plans to move the production operations and employees from Toda Plant to other facilities. (From a press release on May 18, 2015)

-The Company has decided to discontinue production at the Karasuyama Plant (in Nasukarasuyama City, Tochigi Prefecture) of its Koriyama Factory, at the end of March 2015. Koriyama Factory (in Koriyama City, Fukushima Prefecture) will take over production of automotive frame parts for large vehicles and parts for general-purpose machineries from the plant. The Karasuyama Plant was founded in 1992 as a plant to mainly manufacture non-automotive products. After this production transfer, the plant will be utilized as a research and development facility. (From an article in the Nikkan Jidosha Shimbun on February 4, 2015)

Increasing In-house production of Dies

-The Company will increase in-house production of stamping dies to 770 units per year by FY 2016 that ends in March 2017. The volume is 50% larger than the amount made in FY 2013. The Group will expand the capacity of its facilities in Japan, as well as those in emerging markets such as Thailand, China, India and Indonesia in order to improve its supply capability on a global basis. Currently, the Company's die business relies heavily on outside suppliers. During FY 2013, it outsourced nearly 90% of die production to other manufacturers. (From an article in the Nikkan Jidosha Shimbun on June 26, 2014)

Mid-term Business Plan (FY ended Mar. 2014 - FY ending Mar. 2017)

-Targets for fiscal year ending March 2017, under the 4th mid-term business plan, are as follows:
1) Sales: JPY 200 billion and more
2) Ordinary income rate: 4.5%

Management Policy: "Surpass the competition worldwide with H-ONE's superior competitive advantages and technology, to fully satisfying customer needs."

Policy Initiatives
① Establish production operations unequaled in terms of volume and quality -
② Strengthen R&D capabilities to satisfy customer needs -Develop lighter frames that improve collision-safety performance.
-Strengthen structural analysis technology to ensure performance of frames and reduce R&D lead-time.
-Make use of new machining methods in production processes; and invest to reduce labor in the stamping and welding processes.
③ Maximize capabilities of individual, and enhance corporate strength through collaboration among functions. -

Outlook for FY ending Mar. 2016

(in millions of JPY)
FY ending Mar. 2016
FY ended Mar. 2015
(Actual Results)
Rate of Change
Sales 192,000 185,750 3.4
Operating income 4,200 2,232 88.2
Ordinary income 2,500 1,659 50.7
Net income 1,000 292 242.5

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

R&D Expenditure

(in millions of JPY)
FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Overall 1,161 1,024 970

-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 Function
Model development center Tochigi Pref. Japan Product designing, Sales planning
Model development center Karasuyama Tochigi Pref. Japan Development of prototypes of the automotive parts
Development & Engineering center Fukushima Pref. Japan Model planning, Welding engineering, Die engineering, Die manufacturing

Recent R&D Activities (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

Product Development

Tube heat-induction bending technology
-The Company has developed a new tube heat-induction bending technology that enables use of pipes in curved auto body frame parts. Thanks to the high-frequency induction hardening technology, the Company achieved the pipe strength equivalent to that of hot stamped parts. The Company intends to start mass production of parts by using this technology at its Koriyama Factory in Koriyama, Fukushima, Japan, by the end of 2014. Conventional body frame parts use stamped steel sheets. The use of pipe can reduce the width of the body frame. For example, when the pipes are used for pillars, the narrower pillar can improve a driver's visibility as well as auto body design. The pipes also can save the amount of necessary steel materials, which will lead to the reduction of total vehicle weight. (From an article in the Nikkan Jidosha Shimbun on May 30, 2014)

Auto body frame parts made from ultra high-tensile steel sheets with 1180 MPa (120 kg-class) tensile strength
-The Company has received its first orders for auto body frame parts made from ultra high-tensile steel sheets with 1180 MPa (120 kg-class) tensile strength. Several automakers have placed the orders.The Company will start producing and supplying the products in Japan before April 2015. Automakers are increasing the ratio of high-tensile steel sheets used in body frames to make cars lighter. In many instances, automakers use 120 kg-class ultra high-tensile steel sheets having the highest level of strength among cold stamping parts. The Company will add such products to its lineup to accommodate the demand for ultra high-tensile steel sheets. The demand is expected to grow further in future. (From an article in the Nikkan Jidosha Shimbun on October 3, 2014)

-Further, auto body frame parts made from steel sheets with 1470 MPa is ready for series production.

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Overall 33,995 30,824 17,813

-The Company's capital investment was mainly directed towards the automotive business.
-Automotive Parts Division: JPY 12,979 million to launch production of new automotive parts, and JPY 21,016 million to increase/upgrade general-purpose production facilities to raise productivity and to extend and reconstruct buildings.

Investments Outside Japan

-Major activities in FY ended Mar. 2015:

Factory Location Details
KTH Parts Industries Inc. Ohio,
-Installed large-sized servo-stamping machine, enhanced capabilities where needed, strengthened steel that will be used in automotive frames.
WH Auto Parts Industries Inc. Hubei,
-Decided to install large-sized servo-stamping machine.
GH Auto Parts Industries Inc. Guangdong,
-Installed additional large-sized stamping machines and completed expansion of welding line.
QH Auto Parts Industries Inc. Guangdong,
H-one India PVT., Ltd. Uttar Pradesh,
-Established second production plant in Rajasthan, launched welding operations, advanced preparations for installing stamping machines.
PT. H-one Kogi Prima Auto Technologies Indonesia Karawang,
-Die-casting plant launched operations. Created seamless production operations, from producing die materials up to producing the dies.

-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%, as it will open a new factory by 2015. (From an article in the Nikkan Jidosha Shimbun on January 27, 2014)

Planned Capital Investment

(As of Mar. 31, 2015)
Company Name Location Estimated total amount of investment
(in millions of JPY)
Project duration
From To
Kameyama Factory Mie Pref. Japan 1,402 Mar. 2015 May 2016
Maebashi Factory Gunma Pref. Japan 6,068 Feb. 2015 Jan. 2017
Koriyama Factory Fukushima Pref. Japan 3,556 Feb. 2015 Jan. 2017
Consolidated Subsidiaries
KTH Parts Industries Inc. Ohio, USA 5,556 Jun. 2013 Aug. 2017
Kalida Manufacturing, Inc. Ohio, USA 1,968 Mar. 2015 Aug. 2017
KTH Leesburg Products, LLC. Alabama, USA 1,726 Mar. 2015 Sep. 2016
KTH Shelburne Manufacturing, Inc. Ontario, Canada 1,807 Nov. 2014 Oct. 2016
GH Auto Parts Industries Inc. Guangdong, China 4,435 Oct. 2014 Dec. 2016
QH Auto Parts Industries Inc. Guangdong, China 3,074 Jan. 2014 Dec. 2016
WH Auto Parts Industries Inc. Hubei, China 3,421 Oct. 2014 Feb. 2017
H-one Parts (Thailand) Co., Ltd. Ayutthaya,Thailand 2,567 Mar. 2015 Nov. 2016
H-one Parts Sriracha Co., Ltd. Chonburi, Thailand 1,016 Mar. 2015 Oct. 2016
H-one India PVT., Ltd. Uttar Pradesh, India 2,827 Mar. 2015 Dec. 2016
PT. H-one Kogi Prima Auto Technologies Indonesia Karawang,
2,948 Mar. 2015 Oct. 2016