Aichi Steel Corporation Business Report FY ended Mar. 2016

Financial Overview

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 Rate of
Sales 214,120 240,647 (11.0) -Sales of major products (steel and forged products) were weak.
-Sales were lower as a result of the explosion that occurred at the Company’s Chita Plant in January 8, 2016.
5,883 10,616 (44.6) -Lower sales and lower product-selling prices caused income to fall, in spite of lower raw-material and energy costs.
-Income fell due to extra expenses involved with securing alternate production that was needed because of the explosion at the Chita Plant.
5,835 11,141 (47.6) -
Net income attributable to owners of the parent 20 6,023 (99.7) -An extraordinary loss (JPY 4,426 million) was recorded in conjunction with the explosion at the Chita Plant and the resulting recovery expenses.
Sales 94,321 114,808 (17.8) -Sales were lower due to the explosion at the Chita Plant and due to lower sales overall, in addition to lower product-selling prices.
6,157 8,320 (26.0) -
Forged products
Sales 102,248 108,976 (6.2) -Sales were lower due to fewer overall product sales and lower product-selling prices.
(1,217) 1,195 - -
Electromagnetic products
Sales 13,495 12,665 6.6 -
416 642 (35.2) -

New Product Orders

-The Company announced that connecting rods made from its new steel material are used on the next-generation turbo engines that are featured on the redesigned Toyota "Auris". The steel, which was developed jointly with Toyota, offers a 50% improvement in strength level than the previous steel material. In addition, the rods can be made 15% lighter than conventional rods used on same displacement engines. According to the supplier, these improvements mark the first major innovation in connecting rod steel technology in approximately 20 years. The Company aims to generate JPY 500 million in sales of the technology in the initial year. Revenues from the technology are expected to reach JPY 3 billion by 2020, the final year of the Company's long-term business plan. (From an article in the Nikkan Jidosha Shimbun on April 8, 2015)

-The above-mentioned connecting rod is being equipped also on the Lexus "NX200t" and Lexus "RC F". The Company’s steel has achieved world’s highest level of performance in terms of strength and workability, based on using the Company’s "forge-steel consistency" process that it developed.

Recent Development in Production

-The Company will add two hot forging lines for continuously variable transmission (CVT) parts at its head office's forging plant in Tokai City, Aichi Pref. Japan. Construction of the new lines has begun with commencement of operations expected in January 2017. The two new lines will have a total monthly production capacity of about 300,000 units. The Company's existing line produces about 290,000 units per month, and part of the production will be transferred to the new lines after they are operational. The Company's total monthly production capacity for CVT parts, including that of the new lines, will increase by about 20% to 360,000 units. The Company will invest JPY 3.8 billion in the new lines. (From an article in the Nikkan Jidosha Shimbun on November 17, 2015)

-The Company announced that it has launched the third phase of its 4S (Simple, Slim, Short and Straight) & Re-engineering project, a five-phase plan to enhance its steel production processes. The third phase involves improvement of the finishing and testing process, the final stage of steel material production, to reduce delivery lead-time and expand supply capacity. The initiative is implemented at the Chita Plant in Aichi Pref. Japan, the Company’s major facility. Specifically, the Company will install additional water cooling equipment to facilitate testing process. It will also build a new finishing and testing line for steel bars of certain sizes to meet growing demand. Investment in this project is expected to reach JPY 3 billion, and new operations are scheduled to begin in January 2017. The new line’s monthly capacity is expected to reach 13,000 tons. (From an article in the Nikkan Jidosha Shimbun on October 22, 2015)

-The Company will double its production of plated products used for cooling parts of inverters in Japan. The Company will boost production capacity at its Chita Plant (in Tokai city, Aichi pref. Japan), and will install new production lines at its Gifu Plant (in Kakamigahara city, Gifu pref. Japan). The operations of the new facilities at these plants will start in 2016. The Company plans to invest a few billions of yen in total in the enhancement of production capacity. The Company is a Toyota group supplier, and the demand for the Company's plated parts used for the hybrid vehicles will grow as Toyota Motor Corporation increases number of hybrid models. The Company will disperse production locations while increasing production capacity, and will ensure its supply capacity even in disaster situations. (From an article in the Nikkan Jidosha Shimbun on June 4, 2015)

2020 Vision

Financial objectives for the fiscal year ending in March 2021

  • Consolidated sales: JPY 300 billion
  • Operating income: JPY 20 billion

-Initiatives to achieve the objectives of the 2020 Vision

Issue Initiative
Re-create safety and security ①Revising methods to make operations easier and prevent reoccurrences through conducting thorough training on operating procedures and following rules.
②Create a safe and secure workplace through lock-outs at production plants and fail-safe procedures.
③Re-create a Business Continuity Plan (BCP) and Backup Action Plan (BAP) based on uniform and consistent management of inventory, including customer processes, and production risks.
Strengthen competitiveness of major business operations

①Strengthen profitability by implementing ZZZ200 (1*) with a view to achieving the 2020 vision and by quickly recognizing costs.

(*1) The ZZZ200 effort embraces the philosophy of "fractional management." Under this concept, cost of sales is the denominator. Important to this figure is the extent to which we can conduct production and sales efficiently without waste or loss.
②Reap the benefits of rectification and innovative product creation by implementing thorough, planned capital investments based on 4S Re-engineering (Simple, Slim, Short, Straight Re-engineering).
③Create products based on following the Toyota New Global Architecture (TNGA), working with customers from the start.
④Thailand has become an important supply base for IMV (Innovative International Multi-purpose Vehicle) products. In response the Company will strengthen its ASEAN forging locations through its Thai subsidiary.
⑤Positioning the production plants in Japan as lead plants, set up a supply chain that includes the Philippines, Indonesia, China, and the US and set up a strong, global business structure that takes into consideration a Business Continuity Plan (BCP) and Backup Action Plan.
Building global operations ①Ensure improved and stable management based on effective use of limited resources at forging plants outside Japan, i.e., limited production volumes and effective management based on limited resources.
②Reap the benefits of a forge-steel consistency globally by forming a partnership with Usha Martin Limited located in Kolkata, West Bengal, India.
Strengthen profit structure by launching new businesses ①Respond to the next generation based on developing products and technology that make use of proprietary products and technology and by creating innovative plans for new products.
②Respond to recreating infrastructure and hydrogen-based society/lifestyle through market penetration based on the special features and beneficial qualities of stainless-steel products.
③Increase profits through developing and expanding the business by making use of the strong brand in terms of electromagnetic products and the organizational structure that ensures consistent product delivery.

  • Electro-magnetic business: Develop compact motors for use in automobiles
  • Sensor business: Development of magnetic sensors, including through synergies based on an alliance with ROHM Co., Ltd.
  • Components for cooling the inverters on hybrid units: Having a major share of the market. As HV, PHV, EV, FCV become more prevalent, expect the need demand for these components to continue growing.

Outlook for FY ending Mar. 31, 2017

(in million JPY)
FY ending Mar. 31, 2017
FY ended Mar. 31, 2016
(Actual Results)
Rate of Change
Sales 213,600 214,120 (0.2)
Operating income 12,000 5,883 103.9
Ordinary income 11,500 5,835 97.1
Net income attributable to owners of the parent 7,500 20 -

>>> 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
Steel 2,154 2,204 2,049
Forged products 57 116 177
Electromagnetic products 1,071 1,216 1,244
Total 3,282 3,538 3,471

R&D Structure

-The Company has about 230 employees engaged in R&D as of March 31, 2016.

R&D Activities

Steel business
-The following were the main R&D results achieved:

  • R&D on steel used in crank shafts and conrods, in order to lighten engine weight and enhance fuel economy
  • In making transmission units lighter and able to offer higher output, conducting new-product development on steel for environmentally friendly gear wheels, which requires fewer resources, offering a good balance between product strength and lowering/eliminating alloys (MO, Cr-free).
  • Further development of AU316L-H2 stainless steel for low-cost, high-voltage hydrogen that uses fewer alloys and which responds to the growing hydrogen-based lifestyle.

Forged products business:
-The following were the main R&D results achieved:
1) Greater efficiency and lower costs for forging processes

  • Improve productivity of CVT shafts by improving shot-blast process and machining.
  • Make optimum use of the 4,500-ton press for making small-sized crankshafts and consolidating the production of heavy-duty, large crankshafts by using only 6,000-ton presses.
  • Make optimum use of rear axle shafts by screw-forming, which is an alternative production method to the upsetter method, working to expand operations globally.
  • Reduce energy use and CO2 by improving and strengthening the insulation inside heat-processing furnaces.

2) High-precision and low-cost forging

  • Enhance the lineup of high-precision parking lock gears
  • Development of surface-processing technology to lengthen the product life of forging dies; and apply this technology to more products.

Electromagnetic products business:
-The following were the main R&D results achieved:

  • MI sensor, motor magnets for use in heat-radiation parts for onboard electronics devices
  • Participating in a project sponsored by the New Energy and Industrial Technology Development Organization (NEDO) to develop technology on magnetic materials used in highly efficient motors designed for next-generation vehicles.
  • Based on a technical alliance with Rohm in developing MI sensors, increasing sales of MI elements by making use of the synergy effects from both companies; as well as developing products for next-generation applications, which make use of the high-precision and energy-saving qualities of MI sensors.

Capital Expenditure

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Steel 8,942 4,721 3,199
Forged products 4,752 5,967 7,730
Electromagnetic products 1,194 2,003 1,960
Others 520 61 41
Total 15,408 12,752 12,930

-Streamlining and renewing manufacturing facilities, making them environmentally compliant.

Forged products
-Invested to enhance production capacity; and streamline, maintain, and renew production facilities

Electromagnetic products
-Enhancement of production capacity, etc.

Planned Capital Investment

(As of Mar. 31, 2016)
Type of
Type of
Planned investment
(in million
Start Completion Production capacity upon completion
Chita Plant
(Aichi Pref., Japan)
Steel etc. Facilities for producing steel, rolling equipment, etc. 11,986 Feb.
Kariya Plant
(Aichi Pref., Japan)
Steel Rolling equipment, etc. 502 Jun.

Forging Plant
(Aichi Pref., Japan)

Forged products Facilities for producing forged products 9,775 Dec.
Gifu Plant
(Gifu Pref., Japan)
Electro magnetic products, etc. Facilities for producing electronic functional materials and components, etc. 1,569 Dec.
Seki Plant
(Aichi Pref., Japan)
Electro magnetic products Facilities for producing magnet applied products 72 Nov.
Electronic Components Plant
(Aichi Pref., Japan)
Electro magnetic products Facilities for producing electronic functional materials and components
13 Mar.

*The production capacity upon completion is expected to be around the same level as what it was at the end of March 2016.