RIKEN CORPORATION Business Report FY2007
Business Highlights
| Financial overview | ( in millions of JPY ) |
| FY2007 | FY2006 | Rate of Change(%) | Factors | |
| Overall | ||||
| Sales | 95,765 | 91,272 | 4.9 | -Sales increased year-on-year despite the impact of the Niigata-ken Chuetsu-oki Earthquake in July 2007, which hit the Company's production facilities and affiliates in the Kashiwazaki area of Japan. Operations at these plants were resumed after a temporary stoppage. |
| Operating income | 7,346 | 7,554 | (2.7) | -Operating income decreased year-on-year due to the Company's having realigned its product array. Soaring materials prices also had a negative impact on the operating income. |
| Ordinary income | 8,765 | 9,058 | (3.2) | - |
| Current net income | 4,165 | 5,443 | (23.5) | -Net income fell compared from last year's result because the Company posted extraordinary losses for disposing assets and restoring operations after the Niigata-ken Chuetsu-oki Earthquake, which occurred in July, 2007. |
| Automotive/Industrial Machinery Component Division (excludes transactions among divisions) | ||||
| Sales | 81,590 | 77,691 | 5.0 | -Although there was a temporally drop in sales due to the impact of the large earthquake that struck near the Company, sales increased year-on-year, supported by strong sales of piston rings, camshafts, and seal rings. The rise was also because of substantial growth in sales of formed and fabricated materials; and valves. |
| Operating income | 5,297 | 5,440 | (2.6) | Operating income fell slightly year-on-year. Some of
the factors behind the drop are: - the Company's having realigned its product range; - the Company's drive to enhance quality and accuracy of its products in order to meet customers' requirements; and - rising oil and materials prices. |
Business tie-up
-The Company announced that it has formed a global business alliance in areas of production, sales and technology with MAHLE GmbH, a leading engine parts supplier in Germany. They plan effective use of both companies' management resources, seeking for higher competitiveness based on synergy effects, mainly with piston rings and camshafts. In the meantime, they will reinforce their joint piston ring supplier in North America and will study possibilities in mutual use of their operations in Europe and China. In the area of technology, they plan to establish cooperative operations both for products and manufacturing, in consideration of expected tighter environmental regulations. (From an article in the Nikkan Jidosha Shimbun on Jun.25 2007)
Divestitures
-The Company its entire stake in its Korean subsidiary Riken of Korea Inc. (Headquarters in Daejon), which accounts for 60% of all the shares issued and outstanding, at the end of January 2008. This transaction involves the Korean subsidiary being taken over by a new management led by current management team and employees at the Korean site. Riken of Korea engages in the manufacturing and sales of piston rings and cylinder liners. Riken of Korea, a supplier of automotive components to leading Korean automakers, was established in 1988 as a joint venture with a local company. The Company confirmed that it would continue to provide technical support to the Korean entity, specifically in the area of the production of piston rings for local OEMs. (From a press release on Feb. 29, 2008)
R&D
| R&D Expenditure | ( in millions of JPY ) |
| FY2007 | FY2006 | |
| Group | 1,576 | 1,482 |
| Automotive/Industrial Machinery Component | 1,393 | 1,378 |
<Main R&D activities>
-Automotive/Industrial Machinery Component
1. Low friction and long-lasting gasoline-engine piston rings that lower fuel consumption
2. Diesel-engine piston rings that comply with emissions regulations
3. Valve parts, transmission sealing rings
4. Various surface treatment technology that enables a high degree of high sliding
performance
5. Light- weight and high-strength chassis parts
6. In-vehicle NOx sensors
Technical Tie-ups (As of March 2008)
| Company name | Country | Contract | Contract date | Contract period |
| Taiwan Riken Ind. Co., Ltd. | Taiwan | Manufacturing methods for various forged steel engine components such as piston rings, cylinder liners, sleeves, blocks and pistons | Aug. 22, 2005 | 3 years |
| Siam Riken Ind. Co., Ltd. | Thailand | Manufacturing methods for piston rings and other forged steel engine components | Apr. 19, 2004 | 5 years |
| P. T. Pakarti Riken Indonesia | Indonesia | Manufacturing methods for joint and forged parts | Jan. 1, 2006 | 5 years |
| Shriram Pistons & Rings Ltd. | India | Manufacturing methods for piston rings | Mar. 1, 2007 | 7 years |
| Allied Ring Corp. | USA | Manufacturing methods for piston rings | Sept. 1, 1989 | Terms for extending the agreement are subject to negotiation |
| Grede Foundries, Inc. | USA | Manufacturing methods for ductile forged components | Jul. 17, 2005 | by 2007.07.16 |
| Lower Control Arm | Jul. 23, 2001 | 8 years from the start of delivery of mass produced products | ||
| Sheet parts | Sep. 16, 2003 | 8 years from the start of delivery of mass produced products | ||
| Riken of Korea Inc. | Korea | Manufacturing methods for piston rings | Mar. 1, 2005 | 5 years |
| Xiamen Riken Ind. Co., Ltd. | China | Manufacturing methods for piston rings | Aug. 1, 1999 | 10 years |
| Manufacturing methods for camshafts | Oct. 1, 2004 | 5 years | ||
| Riken Automobile Parts (Wuhan) Co., Ltd. | China | Manufacturing methods for piston rings, seal rings, valves and other cast iron products. | Mar. 1, 2005 | 10 years |
Investment Activities
| Investment Expenditure | ( in millions of JPY ) |
| FY2007 | FY2006 | |
| Group | 7,208 | 6,428 |
| Automotive/Industrial Machinery Component | 6,334 | 5,735 |
Automotive/Industrial Machinery Component Division
-The Company invested mainly in production facilities for increasing the production capacity for piston rings and valve lifters.
| Planned capital investment for FY2008 | ( in millions of JPY ) |
| Company Office (Location) |
Purpose | Planned investment amount | Starting | Estimated completion | Production capacity increase upon completion |
| New addition | |||||
| Riken Corp. Kashiwazaki Plant (Niigata Prefecture, Japan) |
Installing production facilities for making piston rings | 702 | Apr. 2008 | Oct. 2009 | 5% |
| Building a facility and installing equipment to assess product functions | 2,577 | Apr. 2008 | Oct. 2009 | - | |
| Riken Corp. Kumagaya plant (Saitama Prefecture, Japan) |
Installing production equipment to manufacture valve parts | 1,284 | Apr. 2008 | Oct. 2009 | 10% |
| Riken Kikai Co., Ltd. Headquarters plant (Kashiwazaki, Niigata Prefecture, Japan) | Constructing a new plant building | 660 | Apr. 2008 | Oct. 2009 | - |
| Refurbishment | |||||
| Riken Corp. Kashiwazaki Plant (Niigata Prefecture, Japan) |
Installing production equipment to manufacture piston rings and other automotive components | 2,285 | Apr. 2008 | Oct. 2009 | - |
| Riken Corp. Kumagaya plant (Saitama Prefecture, Japan) |
Enhancing utilities and working environment | 594 | Apr. 2008 | Oct. 2009 | - |
| Riken Seimitsu Co., Ltd. (Niigata Prefecture, Japan) |
Constructing a new plant building |
551 | Apr. 2008 | Oct. 2009 | - |
| P. T. Pakarti Riken Indonesia Head office plant (Surabaya, Indonesia) | Installing new equipment to produce auto parts | 298 | Jan. 2008 | June 2009 | - |