Yutaka Giken Co., Ltd. Business Report FY ended Mar. 2016

Financial Overview

(IFRS, in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 Rate of change (%) Factors
Overall
Revenue 165,315 144,992 14.0 -Despite fewer orders for products in Japan, revenue and income were up for the year due to an increase in product orders received outside Japan and due to favorable currency translation because of the weak yen as average.
Operating income 14,637 11,494 27.4
Income before income taxes 13,451 11,968 12.4
Profit for the year attributable to owners of the parent 7,194 7,502 (4.1) -
Japan
Revenue 21,996 23,098 (4.8)

-Revenue for the year was practically the same as those of the previous year because of fewer orders for products in Japan, even though sales of facilities and equipment increased due production increases at subsidiaries overseas. Operating income increased due to effective streamlining initiatives to reduce expenses such as fixed costs.

Operating income 774 736 5.2
North America
Revenue 62,083 53,147 16.8 -Revenue and income both increased due to greater orders from customers, favorable currency translation due to the weak yen, and transferring production operations to Yutaka Technologies de Mexico S.A. de C.V.
Operating income 3,571 2,879 24.0
Asia
Revenue 26,186 25,051 4.5 -Revenue and income increased due to greater orders from customers, favorable currency translation due to the weak yen, and effective cost-cutting initiatives to streamline operations, although the Company incurred higher expenses in terms of start-up costs at the Indonesian automotive business and for the new production plant in Thailand.
Operating income 2,923 2,627 11.3
China
Revenue 47,816 37,032 29.1 -Revenue and income increased due to greater orders from customers, favorable currency translation due to the weak yen, and effective cost-cutting initiatives to streamline operations.
Operating income 7,689 5,640 36.3
Other regions (Including affiliated company in UK and Brazil)
Revenue 7,233 6,664 8.5 -Revenue and income increased at the UK operations. However, due to an impairment loss for tangible fixed assets resulting from the weak Brazilian currency, an operating loss was reported, even though revenue actually increased.
Operating income (559) 61 -

Business Planning

-Since April 2014, the 12th medium-term plan started. Slogan is "Breakthrough to the next stage".

-FY2020 vision: Continuously develop innovative products and technologies that impress customers

  • To offer the world's most competitive products in the area of its core technologies
  • To develop and produce next-generation products that support a new era of mobility
  • To demonstrate global leadership in creating the future, with each employee taking the initiative

-The Company will restructure its production system at its plants in Japan between 2015 and 2017, aiming to reduce labor costs and achieve a substantial improvement in production efficiency. The Company will introduce seamless production lines, from material input to assembly, for exhaust system parts and torque converters. The new lines will be significantly automated and will eliminate intermediate stock of parts between lines. The Company will also mechanize inspections with cameras and reduce the manpower required for the overall production lines. Honda, the Company's key customer, has chosen the Company as the sole supplier of mufflers and torque converters for its next-generation mini vehicle series. Competitors are supplying these parts for Honda's current mini vehicle series. The Company has successfully won the parts order because of the Company's efforts to restructure its production system and to cut costs by reducing the number of components. (From an article in the Nikkan Jidosha Shimbun on February 18, 2015)

  • During the FY ended March 2015, the Company constructed the most advanced torque converter production line at its Yutaka Plant in Hamamatsu, Shizuoka Prefecture, Japan. The new integrated and synchronized production line almost quadrupled (up 280 %) the production efficiency in terms of the number of units produced by a single worker. The Company plans to introduce this advanced and efficient production system to its each and every plant.

New Business


-The Company was awarded a first contract to supply stators for drive motor cores, and will enter into the motor core business. A motor core consists of a rotor and a stator. The Company's stators will be used in hybrid vehicles (HVs) with a 1-motor system from Honda Motor Co., Ltd., the Company's major customer that is expanding its HV lineup. The Company leveraged its high-speed stamping and precision die-making techniques in making stators, and actively promoted its products to the automaker. It has invested JPY 600 million to install a high-speed stamping machine and other production equipment at its home plant in Yutaka, Hamamatsu City, Shizuoka Prefecture, Japan. Commercial production is planned to begin in the middle of 2016. The Company expects to manufacture stators for 250 hybrids in the initial year. The Company also plans to begin production of heat collectors for HVs. Its annual sales from the motor core and heat collector business are expected to reach JPY 4 billion in the medium term. Electrification of drive systems is expected to increase further, as OEMs aim to reduce CO2 emissions and clean exhaust fumes. The Company believes the new motor core business will boost its sales in Japan and spur its growth in the medium to long terms. (From an article in the Nikkan Jidosha Shimbun on November 27, 2015)


-The Company was successful in developing a heat-collector, which it began commercially producing in April 2016. This latest heat-collector improves fuel efficiency when the engine is warming up by reducing the time it takes for the engine to heat up when it is cold. This heat-collector enables the electric-vehicle motors on hybrid-vehicles especially, which run on only the motor, to start quickly. This is anticipated to improve fuel efficiency even further. The Company has seven patents pending related to this heat-collector.

(From a press release on September 8, 2016)

Contracts

-Major contracts given for FY ended March 2016
Car makers / Models Region Products Production plant
Honda
"Civic"
China Catalytic converter, Silencer Wuhan Jin Feng Autoparts Co., Ltd.
Thailand YS Tech (Thailand) Co., Ltd.
Honda
"Step WGN",
"Civic"
Japan Turbine twin damper torque converter The Company's Yutaka Plant
Mexico Yutaka Technologies de Mexico S.A. de C.V.
Honda
"Odyssey Hybrid"
Japan Aluminum magnet plate -

Outlook for FY ending Mar. 31, 2017

(IFRS, in millions of JPY)
FY ending Mar. 31, 2017
(Forecast)
FY ended Mar. 31, 2016
(Actual Results)
Rate of Change
(%)
Revenue 151,000 165,315 (8.7)
Operating income 11,200 14,637 (23.5)
Income before income taxes 10,200 13,451 (24.2)
Profit for the year attributable to owners of the parent 5,100 7,194 (29.1)


-The Company predicts that revenue and income will decrease year-on-year for the fiscal year ending in March 2017, due to unfavorable currency translation.

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

R&D Expenditure

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Japan 2,547 2,746 2,815
North America 134 120 125
Total 2,681 2,865 2,940

R&D Structure


-Tochigi Development Center and the Production Technology Office mainly promote R&D activities.


-Cardington Yutaka Technologies Inc. (Ohio, USA) is the main technological center in North America, conducting R&D activities on products designed for the North-American market.

R&D Facilities

-The Company will expand its Tochigi R&D Center in Sakura City, Tochigi Prefecture, Japan. The Company has acquired land with a building adjacent to the existing center and will start operation of the expanded center in April 2016. The Company is under pressure to enhance its development capabilities for design, prototyping, and testing as a result of intensified competition from rival mega suppliers in Europe and the U.S. The Company expects that the expansion will help it secure orders from Honda, its major customer, and also increase sales to other automakers. It is also planning to make capital investments and increase staff at the center. (From an article in the Nikkan Jidosha Shimbun on March 16, 2016)

R&D Activities


Exhaust system
-The Company focuses on further advancement of eco-friendly technologies, like improving the cleaning of exhaust gases, fuel-efficiency and reducing noise, etc. Developed production technology and carried out R&D on exhaust systems, which improved both its product competitiveness and productivity.

Drive system
-The Company focuses on R&D and production technology development in further efforts to reduce the size and weight of parts and improve fuel-efficiency, etc, which improved both its product competitiveness and productivity.


-The Company focuses on product development mainly for automotive exhaust system for the North-American market.

Product Development

Exhaust heat recovery system
-The Company was successful in developing a heat-collector, which it began commercially producing in April 2016. This latest heat-collector improves fuel efficiency when the engine is warming up by reducing the time it takes for the engine to heat up when it is cold. This heat-collector enables the electric-vehicle motors on hybrid-vehicles especially, which run on only the motor, to start quickly. This is anticipated to improve fuel efficiency even further. The Company has seven patents pending related to this heat-collector.

Major features:

  • Compact, high-efficiency heat-exchanger with a high-density fin at the core, based on precision-stamping and precision-joining technology.
  • Wide opening channel switching valve makes it possible to reduce exhaust resistance using a long-stroke thermo actuator.
  • Compact design in terms of its excellent ease and accessibility when being equipped on vehicles.

Improving performance:

  • Heat collection: 5% better performance than competitors’ products
  • Heat insulation after warm up: 44% better performance than competitors’ products
  • Exhaust-pressure loss: 72% better performance than competitors’ products
  • Size: 31% smaller than competitors’ products
  • Weight: 5% lighter than competitors’ products

Capital Expenditure

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Group 14,072 14,789 14,211
by Region
-Japan 2,157 3,960 2,418
-North America 5,187 3,510 5,111
-Asia 2,060 3,577 4,079
-China 2,972 2,950 2,410



-Investment to install production facilities to respond to new models, and streamline operations to reduce costs.


-Investment mainly at Cardington Yutaka Technologies Inc. and Yutaka Technologies de Mexico S.A. de C.V. to manufacture new types of automobile parts and streamline operations.


-In response to the growing Asian market, investment mainly at YS Tech (Thailand) Co., Ltd. and P.T. Yutaka Manufacturing Indonesia to increase production capacity and respond to new models.


-Investment in Foshan Yutaka Auto Parts Co., Ltd. to manufacture automotive parts for new models and increase production capacity.

Investment Outside Japan


-The Company will increase production of torque converters at its plant in Mexico. The Mexican plant has two torque converter production lines, and the Company will move one line from its plant in Ohio State in the U.S. to Mexico by the end of March 2017. Labor costs in Mexico are much lower than the U.S., and producing parts that require much assembly in Mexico offers production cost advantages. The Company expects that car production in Mexico and demand for torque converters in the U.S. will increase, and is looking to improve its cost competitiveness in North America by rearranging part of its production system. The Mexican plant was opened in Guanajuato State in 2014 to match the start of production at Honda Motor Co., Ltd.'s Mexican plant, and produces exhaust systems and torque converters. The plant has two production lines for torque converters, and supplies the parts to Honda's Mexican plant. Another line will be moved from the Ohio plant to boost production capacity at the Mexican plant. (From an article in the Nikkan Jidosha Shimbun on April 1, 2016)

Planned Capital Investments

(As of Mar. 31, 2016)
Name of company or subsidiary
(Location)
Type of facility Planned amount of investment
(million JPY)
Start Planned
completion
Head Office
YutakaPlant
(Shizuoka Pref., Japan)
Manufacturing facilities for automobile parts etc., other facilities 1,835 Nov. 2015 Mar. 2017
Mie Plant
(Mie Pref., Japan)
Manufacturing facilities for automobile parts 921 Jan. 2016 Mar. 2017
Ranzan Plant
(Saitama Pref., Japan)
Manufacturing facilities for automobile parts 79 Dec. 2015 Mar. 2017
Tochigi R&D Center
(Tochigi Pref., Japan)
R&D facilities 621 Apr. 2016 Mar. 2017
Cardington Yutaka Technologies Inc.
(Ohio, USA)
Manufacturing facilities for automobile parts 1,297 Apr. 2016 Mar. 2017