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5. Riken Corporation Business Report FY ended Mar. 2017

Riken Corporation Business Report FY ended Mar. 2017

Business Alliances

-The Company will expand its joint-venture business with Germany-based KSPG AG in order to more than double the volume of piston rings it supplies to KSPG. The Company's piston rings are expected to account for 25% of all piston rings used in KSPG's power cylinder units by the fiscal year ending March 2021, which will be a significant increase from the current level of a little over 10%. The two companies operate joint venture businesses in China and India, where the Company supplies high-performance piston rings for KSPG's power cylinder units. The Company's products are mainly used in power cylinder units for luxury models produced locally by European automakers, but recently, they are increasingly adopted for mass-market vehicles as well. The Company intends to receive more orders from KSPG by accelerating joint development of power cylinder units that are more environmentally friendly and have a longer product life. The Company is a leading piston ring supplier in Japan, delivering 50% of the products required by Japanese automakers. However, its supply volume to non-Japanese OEMs accounts for only 8% of all piston ring requirements by these customers, and the Company's global market share stands at around 20%. Expanding supply to foreign automakers is expected to be the key to the Company's future growth. In order to achieve its mid-term goal for a 30% share of the global market, the company is looking to supply 18% of piston rings required by non-Japanese automakers by aggressively developing their demand. (From an article in the Nikkan Jidosha Shimbun on September 13, 2016)

Management Plan

“Plan 2020” Mid-term Management Plan
-The Company announced its mid-term management plan "Plan 2020". Under the plan, Riken Group, including Riken's nonconsolidated subsidiaries, will aim to achieve sales exceeding JPY 140 billion in fiscal year 2020 (ends in March 2021), up 26.0% from FY 2015 (ended in March 2016). The Riken Group is targeting sales of JPY 130 billion at the end of the first stage of the plan, through FY 2018, to create momentum for meeting its goals in the second stage. Specifically, The Company will try to win more orders for ultrathin camshafts made of chilled iron and small components for downsized engines. Moreover, the company’s portfolio of value-added products with high heat and wear resistance including valve guides, valve seats, and bushes for turbo engines will be expanded in order to boost sales. The Company will also focus on winning more orders from non-Japanese automakers for piston rings, its mainstay product, by taking advantage of its tie-up with the German piston maker Kolbenschmidt, which was strengthened in FY 2015. The Company is planning to expand sales in China, where the company is operating a joint venture with a local partner to raise its global share of the piston ring market from present 20% to 30%. The planned capital expenditure in the mid-term plan amounts to JPY 45 billion. (From an article in the Nikkan Jidosha Shimbun on June 23, 2016)

Business Alliances

Business Alliance with Brother Precision Ind. Co., Ltd
-The Company announced that it has signed a business collaboration agreement of camshaft and a joint venture agreement with Brother Precision Ind. Co., Ltd. (BPI). They aim at strengthening competitiveness and expanding global businesses though the unification of their know-how in automotive components field. The new joint venture is scheduled to be set up in Chiryu City in Aichi Prefecture on April 1, 2017. Riken invests 51% and BPI invests 49% of the capital JPY 90 million. (From a press release on March 17, 2017)

Dissolving Allied Ring Corporation Joint Venture

-The Company announced that it will dissolve Allied Ring Corporation, its piston ring joint venture in the U.S. with Germany-based Mahle Group (Mahle), at the end of 2018. Riken's subsidiary, Riken of America Inc., and Mahle's U.S. subsidiary have reached an agreement. Riken and Mahle will independently promote their business in the future. (From an article in the Nikkan Jidosha Shimbun on March 24, 2017)

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

R&D Structure

-The New Product Development Department conducts R&D activities for the purpose of developing innovative new products for new areas of development such as hybrid, electric vehicles, etc.

-The automotive and industrial-equipment business has an R&D department, ring technology department, ring-production department, and product-development and production-technology department in each production section.

R&D Activities

Automotive-Industrial Machinery Parts Business
1. Development of low-friction/long-life piston rings for gasoline engines, which improve fuel efficiency.
2. Development of piston rings for fuel-efficient diesel engines that meet exhaust-gas regulations.
3. Development of low friction seal parts for automotive and industrial-machinery, which reduce fuel consumption.
4. Development of lightweight, low-friction, highly durable valve parts for automotive and industrial equipment use.
5. Development of technology for treating any kinds of surfaces, which achieves high performance in terms of sliding properties and durability
6. Development of lightweight, high-strength underbody parts
7. Development of high-strength aluminum products that excel in durability.

Automotive-Industrial Machinery Parts Business
-Capital investments in machine processing, surface treatment facilities, and machine processing facilities at the Mexican subsidiary.


-The Company will start local production of automotive engine piston rings in Mexico. The company is planning to start operations of piston ring production lines with a monthly production capacity of 1.6 million units in the first half of 2017 and begin mass production. Riken will gradually install additional production facilities and increase monthly production capacity to 3 million units by around 2020. Anticipating that orders from Japanese, U.S. and European automakers will increase, the company is aiming to expand its business by increasing its local supply capacity. Riken Mexico, S.A. DE C.V., Riken's Mexican subsidiary in Aguascalientes State, will produce piston rings, the company's mainstay. Riken started trial operations of the production lines in the first half of 2016, and full-scale production is likely to start at the beginning of 2017. The company is planning to start supply of piston rings to Japanese automakers for vehicles produced locally in Mexico in the first half of 2018. Riken will double capacity by 2020 because the initial monthly production capacity of 1.6 million units will be insufficient to address full-fledged orders. (From an article in the Nikkan Jidosha Shimbun on November 8, 2016)