Riken Corporation Business Report FY ended Mar. 2015

Financial Overview

(in million JPY)
FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 Rate of Change (%) Factors
Overall
Sales 72,486 75,373 (3.8) -Sales declined year-on-year due to a temporary fall in demand in connection with model changes at OEMs and a sharp fall in demand from the construction machinery market in Indonesia.
Operating income 5,615 5,805 (10.1) -Operating profit declined year-on-year due to an increase in upfront investment such as a new plant project outside Japan.
Ordinary income 6,812 7,286 (6.5) -Operating profit declined year-on-year due to smaller investment gains from ailing equity affiliates in Thailand and India.
Current net income 4,042 4,544 (11.1) -
Automotive and Industrial Machinery Parts Division
Sales 60,438 61,799 (2.2) -Sales declined due to a fall in demand for construction machinery parts in Indonesia.
Operating income 4,024 4,842 (16.9) -Operating profit declined due to a drop in sales and increased costs for expansions overseas.

Business Partnership

-The Company and KS Kolbenschmidt GmbH have reached an agreement to form a global strategic alliance for their power cylinder system businesses. KS Kolbenschmidt is a German supplier of pistons. The two companies will combine their sales, engineering and development of pistons and piston rings in some regions including China. Power cylinder systems will be jointly developed for all kinds of powertrains in both automotive and industrial markets. Through the alliance, the two companies aim to cut manufacturing costs, reduce CO2 emissions and improve reliability of their power cylinder systems. (From an article in the Nikkan Jidosha Shimbun on April 30, 2015)

Joint Venture

-The Company announced that it will establish a 50-50 joint venture with India-based Amtek India Limited in September 2014. The new company, Amtek Riken Casting Private Limited, will be located in Rajasthan, India and will manufacture and sell automotive castings such as camshafts. Capitalized at INR 250 million (approximately JPY 430 million), the joint venture is scheduled to start operations in December 2015. There are expected to be approximately 90 employees by 2017. (From a press release on August 6, 2014)

Divestiture

-The Company announced that Euro-Riken GmbH, Riken’s consolidated subsidiary in Germany, has sold its entire 100 percent stake of Riken Espana, S.A. to Spain-based PMG Polmetasa S.A.U. Riken Espana, based in the province of Tarragona, Spain, manufactures and sells shock absorber pistons and washers. It currently employs 35 associates. (From a press release on August 1, 2014)

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

R&D Expenditure

(in million JPY)
FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Overall 1,550 1,550 1,299
-Automotive and Industrial Machinery Parts 1,498 1,527 1,105

R&D Structure

-The Next-Generation Product Planning Division inaugurated its planning activities with the aim of creating new products in areas with high growth potential such as hybrid and electric vehicles.

-R&D activities in the Automotive/Industrial Machinery Component Business are conducted by the R&D Department, Piston-ring Technological Development Department, Piston-ring Product Technology Department, and the product development and production technology sections at each of the manufacturing divisions.

R&D Activities

-Automotive/Industrial Machinery Components
1. Low friction and long-lasting gasoline-engine piston rings that lower fuel consumption.
2. Diesel engine piston rings to meet requirements for low fuel consumption and emission regulations.
3. Low-friction automotive and industrial machinery seal parts, designed to lower fuel consumption
4. Light-weight, low-friction, automotive and industrial machinery valves
5. Surface treatment technology that responds to all kinds of surfaces, and which enhances the gliding properties of products.
6. Light-weight, high-strength suspension parts
7. High-strength aluminum-made products demonstrating excellent durability

Technology licensing-out Agreement

(As of Mar. 31, 2015)
Company name Country Contract Contract date Contract period
Taiwan Riken Ind. Co., Ltd. Taiwan Manufacturing methods for various cast iron engine components such as piston rings, cylinder liners, blocks, cam shafts, and knuckles Aug. 22, 2008 9 years
Siam Riken Ind. Co., Ltd. Thailand Manufacturing methods for piston rings and other cast steel engine components Jan. 18, 2015 5 years
P.T. Pakarti Riken Indonesia Indonesia Manufacturing methods for joint and cast iron parts Jan. 1, 2006 10 years
Shriram Pistons & Rings Ltd. India Manufacturing methods for piston rings Mar. 1, 2014 7 years
Allied Ring Corporation U.S. Manufacturing methods for piston rings Jan. 1, 2014 Until May 31, 2017
Grede Holdings LLC U.S. Manufacturing methods for knuckles and damper forks Aug. 17, 2010 5 years
Manufacturing methods for lower control arms Aug. 17, 2010 5 years
Korea Piston Ring Inc. Korea Manufacturing methods for piston rings Mar. 1, 2015 5 years
Xiamen Riken Ind. Co., Ltd. China Manufacturing methods for piston rings Jul. 1, 2013 10 years
Manufacturing methods for camshafts Jul. 1, 2013 10 years
Riken Automobile Parts (Wuhan) Co., Ltd. China Manufacturing methods for piston rings, seal rings, valves and other cast iron products Mar. 1, 2015 5 years
Riken Mexico, S.A. De C.V. Mexico Manufacturing methods for valve lifters Sep. 1, 2013 5 years
Manufacturing methods for seal rings Jul. 1, 2014 Until Aug. 31, 2018

Capital Expenditure

(in million JPY)
FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Overall 5,904 5,943 4,899
-Automotive and Industrial Machinery Parts 4,725 5,610 4,439


Automotive and Industrial Machinery Parts Division
-The Company invested in machining and surface-treatment facilities at its own plants in general; and in casting facilities at its subsidiary in Indonesia.

Planned Capital Investments

(As of Mar. 31, 2015)
Company
Office
Location Purpose Planned investment amount (in million JPY)
Kashiwazaki Plant Niigata Prefecture, Japan Installing production facilities for making piston rings and auto parts 1,918
Riken Mexico, S.A. De C.V. Aguascalientes, Mexico Installing new equipment to produce auto parts 1,031
P.T. Pakarti Riken Indonesia Sidoarjo, Indonesia Installing new equipment to produce auto parts 594