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Aichi Steel Corporation Business Report FY2006

Business Highlights

Financial Overview

(in million yen) FY2006 FY2005 Rate of
Change(%) 		Factors
Sales 235,637 224,953 4.7 - Sales increased year-on-year, reflecting the benefits resulting from the Company's initiatives to establish an optimized production structure and improve profitability. 
Ordinary profit 10,109 15,773 (35.9) - Profit dropped year-on-year, due to soaring prices of ferrous alloy and other materials, increased depreciation costs, and greater expenses for outsourcing. 
Net income 4,922 8,152 (39.6)
By segment
Steel 128,078 117,480 9.0 - Although unit sales of steel products decreased from the previous year, revenue at the segment rose from what it was last year. The increase is attributed to the company's adjusting its product sales prices upward in July 2005 and after. 
Forged products 100,163 99,821 0.3 - The forged products division worked on optimizing its production structure in an effort to support its key customer, which is stepping up global production. As a result, sales at the segment slightly increased year-on-year. 
Electromagnetic products 2,975 3,407 (12.7) -

Overseas Business
The Company announced in March 2007 that it will increase the production volume at its forging plant in the U.S. to meet the supply requirements of Toyota vehicles.

>>> See Capital Investment for more details

R&D

FY2006
R&D expenses : 2,446 million yen
Number of R&D staff : 190

(1) Steel business: 1,090 million yen invested in R&D
-Development of new special steel for automotive parts and a new manufacturing technique for producing stainless steel.

Major achievements in FY2006:
-Development of high-strength steel that contributes to lightening the weight of automotive components
-Development of environmentally safe materials

(2) Forged products business:  92 million yen invested in R&D
-Development of forged products for automotive parts.

Major achievements in FY2006
- The Company developed a casting method for crank shafts using white lubricating agent; the new casting technology reduces environmental impact and enhances recycling efficiency.  
- The Company developed advanced inspection technology in order to facilitate quality assurance processes for each and every product it manufactures. 


(3) Electromagnetic products business : 1,263 million yen invested in R&D
- Development of Magneto-Impedance (MI) sensors, magnets for motors, dental magnetic attachments, heat releasers for automotive electronic equipment, and other products.  

Major achievements in FY2006
- The Company developed nanotesla magnetic field sensors incorporating MI sensor technology. 

Investment Activities

In FY 2006, the Company spent 28,359 million yen in total as capital investment into steel and forged products.

-Steel business:  8,432 million yen for capital investment to rationalize facilities for steel making and flatting and other purposes in order to reduce costs.
-Forged products business:  17,302 million yen to lower costs and to reinforce production capacity.
-Electromagnetic products business: 2,571 million yen to reinforce production capacity.

- The Company will increase production for Toyota vehicles at its forging plant in the U.S. While the ratio of its products supplied to U.S. major automakers including General Motors Corp. and Ford Motor Co. is higher at present, the ratio for Toyota Motor Corp. is rapidly increasing along with Toyota's expanding U.S. production. The supplier, therefore, will start investment in FY 2007 to increase production of forged parts for Toyota vehicles to raise the Toyota ratio to 50% in 2010 from the current below-30%. Louisville Forge and Gear Works, LLC, formerly its joint venture with a local company, became its wholly-owned subsidiary in 1999 and produces forged engine parts such as crankshafts and connecting rods. It will raise production of forged engine parts one by one as demands for these products are expected to grow along with Toyota's rising local production. Approx. 1 billion yen per year will be invested from FY 2007 through FY 2009 in facilities to produce crankshafts and other parts for Toyota. (From an article in the Nikkan Jidosha Shimbun on Mar. 22, 2007)

New equipment installation

Name
(Location)		 Type
of
business		 Type
of
facility		 Planned investment
(million
yen)		 Start Completion Production capacity upon completion
Chita Plant
(Tokai City, Aichi)		 Steel etc. 
 Improvement of No.3 electric furnace transformer for environmental measures  1,273
Dec.
2005
Sep.
2007 		*
Production facilities for rolled steel materials 4,989 Sep.
2005		 Aug.
2009		 *
Kariya Plant
(Kariya City, Aichi)		 Steel Integration of rolling lines 1,460

Nov.
2005

 Feb.
2008		 Slight
increase
Production facilities for rolled steel materials 962 Mar.
2006		 Dec.
2008		 *

Forging Plant
(Tokai City, Aichi)

 Forged products Establishment of No.8 rolling mill line 1,936 Nov.
2005		 Feb.
2008		 Slight
increase
Production facility for forging products 2,045 Mar.
2005		 Jun.
2009		 *
Higashiura Plant
(Chita Gun, Aichi) 		Electro magnetic parts
 Production facility for electro magnetic parts
 637 Mar.
2006		 Dec.
2010		 *
Gifu Plant
(Kakamigahara City, Gifu) 		Electro magnetic parts
 Purchasing a piece of land to build a facility to make electro magnetic parts
  		 3,744 Dec.
2005		 Jun.
2009		 *
* The production capacity upon completion is expected to be around the same as that of at the end of March 2007.