Asahi Glass Company, Limited Business Report FY2006

Business Highlights

Financial Overview
in million JPY FY2006 FY2005 Rate of change (%)
Sales 1,620,540 1,526,660 6.1
Operating Profit 136,611 118,194 15.6
Glass segment 
Sales 815,335 758,894 7.4
Operating Profit 46,485 37,986 22.4
Percentage of sales and operating profit at the Glass segment
Sales 50.3% 49.7% -
Operating Profit 34.0% 32.1% -

Major Factors of the Business Performance 
  Positive Factors Negative Factors
Overall - Growth in demand for glass substrates used in flat panel displays (FDPs) - Slowing demand for cathode-ray tube (CRT) bulbs
- Slumping business at the Chemical Products Division 
Glass segment
Sheet Glass  - Booming European market
- Greater exports to Russia and other emerging markets 
-Soaring prices of heavy oil and other materials 
-Falling demand in some Asian countries 
Automotive Glass - Greater volume of vehicle production worldwide, especially by Japanese automakers.  - Stagnant economy in some Asian countries 
Other Glass Products - Strong sales of glass fiber and other products - Rising material prices

Medium-term management plan JIKKO-2007
The Company announced its new medium-term business plan named JIKKO-2007 in January 2006, under which it will work on the following: 

- Generating sales of 1,700,000 million yen, of which 800,000 million yen is expected come from the Glass Division. In terms of profitability, it aims to raise its operating profit to approximately 180,000 million yen, and operating profit margin to over 10 percent. 

- Starting full-fledged production and sales activities at the new Electronics & Energy Segment, in addition to improving profitability at the existing business.  

- Focusing on production and sales at the Glass Segment of high-value added products in Western Europe, North America, and  Japan, while actively conducting marketing activities to win business in emerging markets such as Russia and China. It will establish the most efficient manufacturing system that can be shared across the group, by reviewing and benchmarking its production methods at its global facilities.

The following outlines some of the major projects at the Glass Division:
(1) Increasing production capacity in emerging markets. 
- The new Hungary plant started mass-production at the beginning of 2006.
- Operations at its second plant in China (Foshan Plant) are scheduled to begin in the first quarter of 2008. >>See Capital Investment for more details

(2) Improving profitability in Europe and the U.S.A. by implementing build-and-scrap practices. 

(3) Improving productivity in North America by implementing build-and-scrap practices. The Company plans to close down its plant in Mexico as part of the initiatives.  
 -The Company has decided to dissolve AGC Automotive Mexico S.A. de C.V., its subsidiary in Mexico. It will stop the operations in Mexico and liquidate AGC Automotive Mexico S.A. de C.V. in order to optimize the automotive glass business in North America. AGC is scheduled to liquidate the subsidiary in the second half of 2007. The liquidation of the aforementioned subsidiary will have only a negligible impact on the company's consolidated and non-consolidated operating results. (From a press release by the company on Feb. 2, 2007)

-The Company will shut down its Cinnaminson plant (New Jersey, U.S.A.), which belongs to AFG Industries, Inc. It has decided to close this unprofitable plant, which manufactures float glass, because there is currently a rather excessive supply of float glass in the market. This is an attempt to improve the balance between supply and demand and raise the utilization rate of its production facilities in North America. By closing this pant, the Company's flat glass production capacity will be lowered by approximately 10%. (From a press release by the company on Feb. 5, 2007)

(4) Others
-The Company announced its wholly owned subsidiary, Asahi Techno Glass Corporation (Funabashi City, Chiba Prefecture, Japan), will cease operations at its Nakayama plant by the end of December 2008. The Asahi Techno Nakayama plant launched production of automotive headlights in 1966 and since then, has successfully expanded its scope of business into the production of various glass products, including glass for physics/chemistry studies, heat-resistant glassware, and industrial glass tubes. The Company will restructure three production facilities in the Group, namely the Nakayama plant, Shizuoka plant, and Thai plant (Thai Iwaki Glass) to strengthen its competitive edge in terms of both costs and quality. The Company will install a new state-of-the-art furnace, together with a production and processing line, at the Shizuoka and Thai sites. The total investment will be around 4 billion yen. (From a press release on Mar. 16, 2007)


R&D Expenditure
in million JPY FY2005 FY2004
Overall 30,781 31,706
Glass business 7,419 7,039
R&D expenditures at the Glass Division as a % of overall R&D expenses 24.1 22.2

R&D Structure
- Based on its strategy of "Look Beyond" initiatives, the Group is working on strengthening its existing business in terms of sales and profitability, by levering the core technology it developed at its glass and chemical divisions. Further, it is working on developing and cultivating new business in the area of information communication, electronics, energy and environment, and other leading industries for the next generation.  

Division Overview
Technical Planning Section The section oversees the group-wide R&D activities 
Central Research Center The research center covers the following areas:
1. Medium- to long-term projects; projects based on basic technology; and research on enhancing technical platforms
2. Projects for developing and cultivating new business
R&D and engineering centers at respective divisions Engineers at each division handle the following areas:
1.New product development related to existing business
2.Development of mass-production technology and equipment 

Glass business?スF
-The Glass Division is working on developing new products and technology in the area of glass sheets and automotive glass. It is also conducting research to improve operations efficiencies of glass kilns and float baths, and to design various types of glass through computer simulation. 

Technological Alliance
Research Frontiers Incorporated announced that the Asahi Glass acquired a worldwide, non-exclusive license to use Research Frontiers' patented SPD-Smart light-control technology for various automotive glass products, including sunroofs, other roof glass systems, and automotive windows. Users of SPD-Smart products can manually or automatically "tune" the amount of light, glare and heat that passes through glass or plastic. SPD-Smart products offer functional and aesthetic benefits such as savings on heating and cooling expenses, reduced fading of interior fabrics and other materials, noise-attenuation and impact-resistance, as well as the ability to control light and glare without losing spectacular views from the vehicle. (From a press release by the company on May 15, 2006)

Investment Activities

Capital Expenditure
in million JPY FY2006 FY2005


252,700 204,000

Glass business

79,600 73,000
Capital investment at the Glass Division as a % of overall capital expenditures 31.5% 35.8%
Glass business:
- Projecting the construction and automotive industries in China to grow further, the Company  began making glass sheets at its new facility in Suzhou in May 2006.

Capital Investment Plans for FY2007 (as of Dec. 31, 2006)
in million JPY Expenditure



Glass business

Capital investment at the Glass Division as a % to overall capital expenditure 37.5%

- The Company announced it will build a new automotive glass plant in Fosan, Guangdong Province, its second in China. In early 2007, it will start the construction of the new plant that will produce laminated and tempered glass. The Company is making an investment of approximately 6.5 billion yen. Mass production is due to start in the first quarter of 2008. By combining the production capacity of the second plant, which is about 1million sets per year, with that of its existing glass plant in Quinhuangdao, Hebei Province, producing about 1.2 million sets per year, Asahi will be able to acquire a supply of approximately 2.2 million sets in total per year in China. (From a press release by the company on Oct. 12, 2006)

-The Company will invest more than 1 billion yen to improve product quality at its glass processing plant in Russia. The project will be launched in fiscal 2007 in preparation for  the production of the Camry that Toyota is planning to roll out from December 2007 at its plants in Russia, to which the Company will supply all the automotive glass required. Asahi Glass will introduce cutting edge equipment at its local factory, Bor Glass Works (BGW), in which it took a financial stake in 1997. Under the plan to complete revamping the whole line by 2009, the Company intends to finish installing the majority of new machinery by the autumn of 2007, prior to the production launch of the Camry. While a greater part of the investment will be made on front-end processing equipment including cutting, painting, and bending machinery, the Company's proprietary carrier devices and inspection systems using robots will be also introduced to BGW over time. Having completed an investment project for a production hike in 2005, the Company will now focus on refurbishing aging manufacturing facilities in Russia. (From an article in the Nikkan Jidosha Shimbun on Dec.18, 2006)

- The Company announced that it will build an additional float glass furnace in Russia. It will invest approx. 135 million euros (about 21 billion yen) in the construction of the furnace. This new furnace, the world's largest, having a production capacity of 1,000 tons/day, will be the fourth furnace for the group in Russia. The Company intends to start mass-production at the new furnace early in 2009 to meet increasing demand for high value-added products, including mirrors and highly insulated Low-E (Low-Emissivity) glasses. It established itself in the Russian market in 1997, following the acquisition of Bor Glassworks, a Russian company, by Glaverbel S.A., its subsidiary based in Belgium. (From a press release on Mar. 22, 2007)