Asahi Glass Company, Limited Business Report FY2008
Business Highlights
Financial Overview
Major Factors
Overall
-Demand for glass substrates used in flat panel displays was strong in the first half of the year. The business, however, started to slow down in the third quarter because of panel suppliers' moves to adjust production. Sales of sheet glass, which continued to be weak in Japan and North America, began to improve in Europe. The chemical products sector enjoyed strong sales until the third quarter, after which demand started to slow down.
Glass segment
-FY2008's sales at the Automotive Glass Division, which accounted for some 39 percent of the overall glass sales at the Company, fell from what they were a year ago. Some of the major reasons for the drop are the fewer vehicle production in North America throughout the year, which extended to Europe in the third quarter. This was followed by a sharp drop in all areas including Europe, Japan, and Asia in the fourth quarter.
Restructuring
<North America>
-The Company announced that it has decided to restructure its flat glass business in North America. The Company plans to halt production at three float glass plants and two other plants specializing in architectural coating in the region from April to December 2008. Also, it will sell the architectural glass fabrication business. The Company will shift its group resources to concentrate on areas with higher growth potential such as solar cell glass, raw glass for automotive use, and value-added architectural glass. (From a press release on Apr. 17, 2008)
-The Company has decided to accelerate cutback in automotive glass production in North America in the second half of 2008. Although it has started production adjustment of approx. 10% in the beginning of 2008 in response to the flagging new vehicle market in the U.S., vehicle production curtailment by the U.S. and Japanese automakers, its major customers, has accelerated faster than expected. The glass supplier has therefore decided to reduce production by another 15% in the second half of 2008. It will downsize its employees, mainly non-permanent ones, reduce production lines in operation and raise productivity per line at its two U.S. plants manufacturing automotive glass out of flat glass: AGC Automotive Americas Co., Hebron, KY and Belletech Corp., Bellefontaine, OH. Both plants have an annual production capacity of tempered side and rear glass and laminated front glass for two million vehicles and had been operated almost to the full capacity. (From an article in the Nikkan Jidosha Shimbun on Aug.21, 2008)
<Thailand>
-The Company announced that it will liquidate its Thai subsidiary for production and sales of flat glass, Bangkok Float Glass Co., Ltd. (BFG), located in Chonburi, as part of its production system restructuring plan. BFG, a wholly owned subsidiary of Asahi Glass. BFG will be liquidated in the first half of 2009. (From an article in the Nikkan Jidosha Shimbun on July 16, 2008)
| (in million JPY) | FY2008 | FY2007 | Rate of change (%) |
| Overall | |||
| Sales | 1,444,317 | 1,681,238 | (14.1) |
| Operating Profit | 154,013 | 197,452 | (22.0) |
| Ordinary income | 109,756 | 187,878 | (41.6) |
| Net income | 39,178 | 69,634 | (43.7) |
| Glass segment | |||
| Sales | 741,297 | 866,031 | (14.4) |
| Operating Profit | 18,678 | 63,663 | (70.7) |
| Percentage of sales and operating profit at the Glass segment | |||
| Sales | 51.3% | 51.5% | - |
| Operating Profit | 12.1% | 32.2% | - |
Major Factors
Overall
-Demand for glass substrates used in flat panel displays was strong in the first half of the year. The business, however, started to slow down in the third quarter because of panel suppliers' moves to adjust production. Sales of sheet glass, which continued to be weak in Japan and North America, began to improve in Europe. The chemical products sector enjoyed strong sales until the third quarter, after which demand started to slow down.
Glass segment
-FY2008's sales at the Automotive Glass Division, which accounted for some 39 percent of the overall glass sales at the Company, fell from what they were a year ago. Some of the major reasons for the drop are the fewer vehicle production in North America throughout the year, which extended to Europe in the third quarter. This was followed by a sharp drop in all areas including Europe, Japan, and Asia in the fourth quarter.
Restructuring
<North America>
-The Company announced that it has decided to restructure its flat glass business in North America. The Company plans to halt production at three float glass plants and two other plants specializing in architectural coating in the region from April to December 2008. Also, it will sell the architectural glass fabrication business. The Company will shift its group resources to concentrate on areas with higher growth potential such as solar cell glass, raw glass for automotive use, and value-added architectural glass. (From a press release on Apr. 17, 2008)
-The Company has decided to accelerate cutback in automotive glass production in North America in the second half of 2008. Although it has started production adjustment of approx. 10% in the beginning of 2008 in response to the flagging new vehicle market in the U.S., vehicle production curtailment by the U.S. and Japanese automakers, its major customers, has accelerated faster than expected. The glass supplier has therefore decided to reduce production by another 15% in the second half of 2008. It will downsize its employees, mainly non-permanent ones, reduce production lines in operation and raise productivity per line at its two U.S. plants manufacturing automotive glass out of flat glass: AGC Automotive Americas Co., Hebron, KY and Belletech Corp., Bellefontaine, OH. Both plants have an annual production capacity of tempered side and rear glass and laminated front glass for two million vehicles and had been operated almost to the full capacity. (From an article in the Nikkan Jidosha Shimbun on Aug.21, 2008)
<Thailand>
-The Company announced that it will liquidate its Thai subsidiary for production and sales of flat glass, Bangkok Float Glass Co., Ltd. (BFG), located in Chonburi, as part of its production system restructuring plan. BFG, a wholly owned subsidiary of Asahi Glass. BFG will be liquidated in the first half of 2009. (From an article in the Nikkan Jidosha Shimbun on July 16, 2008)
R&D
R&D Expenditure
R&D Structure
The focus of development activities is on the following:
1. Strengthening collaboration among its R&D facilities in Japan, the U.S., and Europe
2. Developing solar panel technologies for the global market
3. Accelerating development of innovative, energy-saving glass dissolution forming technology
4. Developing revolutionary technology from compositional design to processing
R&D Activities
Glass business
-The Glass Division is working on developing new products and technology in the area of sheet glass and automotive glass. It is also conducting research to radically improve operations efficiencies of sheet glass production lines, and it is designing various types of glass through computer simulation.
-The Company started developing technology to produce glass for solar cells, conductive layer, and low reflecting coating.
-Development focus is also set on technology to reduce carbon dioxide gas emissions in the glass production process and to engineer innovative technique to produce glass.
-The Company sees it tangible to develop a technology to make more sophisticated automotive glass by improving the glass itself. Additional functions including heat and noise insulation have been achieved so far by adjusting characteristics of the film inside the pairglass. More efficient automotive glass production will be realized by this technology to achieve additional features in the glass itself without the intermediate film. As its first application, the Company plans to develop a new glass with larger degree of freedom in coloring and market it by FY 2010. (From an article in the Nikkan Jidosha Shimbun on Feb. 18, 2008)
| (in million JPY) | FY2008 | FY2007 | FY2006 |
| Overall | 37,700 | 33,943 | 30,781 |
| Glass business | 9,160 | 9,728 | 7,419 |
| R&D expenditures at the Glass Division as a % of overall R&D expenses | 24.3 | 28.7 | 24.1 |
R&D Structure
The focus of development activities is on the following:
1. Strengthening collaboration among its R&D facilities in Japan, the U.S., and Europe
2. Developing solar panel technologies for the global market
3. Accelerating development of innovative, energy-saving glass dissolution forming technology
4. Developing revolutionary technology from compositional design to processing
| Division | Overview |
| Central Research Center | The research center covers the following areas: - Medium- to long-term projects; projects based on basic technology; and research on enhancing technical platforms - Projects for developing and cultivating new business |
| Engineering centers | - Development of mass-production technology and equipment |
| 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.Improving production technology 3.Technical services to customers |
| Industrial engineering center | - Developing innovative glass production technology |
| Technical Planning Section | The section oversees the group-wide R&D activities by mapping out a group-wide development strategy for the entire group based on macro trends and technology outlook.. It will then establish for each division optimum development themes based the strategy. |
| Global technical integration project |
The project team is responsible for mapping out and conducting large projects, and allocating development activities for each project worldwide. |
R&D Activities
Glass business
-The Glass Division is working on developing new products and technology in the area of sheet glass and automotive glass. It is also conducting research to radically improve operations efficiencies of sheet glass production lines, and it is designing various types of glass through computer simulation.
-The Company started developing technology to produce glass for solar cells, conductive layer, and low reflecting coating.
-Development focus is also set on technology to reduce carbon dioxide gas emissions in the glass production process and to engineer innovative technique to produce glass.
-The Company sees it tangible to develop a technology to make more sophisticated automotive glass by improving the glass itself. Additional functions including heat and noise insulation have been achieved so far by adjusting characteristics of the film inside the pairglass. More efficient automotive glass production will be realized by this technology to achieve additional features in the glass itself without the intermediate film. As its first application, the Company plans to develop a new glass with larger degree of freedom in coloring and market it by FY 2010. (From an article in the Nikkan Jidosha Shimbun on Feb. 18, 2008)
Investment Activities
Capital Expenditure
Glass business
-Investment projects included revamping production equipment to manufacture sheet glass in Russia.
Overseas Investments
-AGC Flat Glass Europe inaugurated the third float line at its Retenice production plant in the Czech Republic. This is the group's 17th float line and will be devoted mainly to producing automotive glass, against the background of continued growth in demand for flat glass in central Europe. The new float line represents an investment of approx.100 million euros and is designed to produce an exceptionally wide strip of glass, the first of its kind for AGC Flat Glass Europe. (From a press release on Sep 16, 2008)
-The Company plans to raise production efficiency in its automotive glass manufacturing bases in the world. To all its automotive glass plants it will introduce by the end of 2010 manufacturing facilities that flat glass cutting and bending processes are directly connected. The company aims to reduce fixed costs by thus eliminating the intermediate stock and the space for it as well as by introducing the new automated line which combines the two processes. These several years the Company has introduced to its mass production plants, mainly in Japan, the state-of-the-art glass processing facilities in which cutting and bending processes are directly connected to promote laborsaving in the principal processes. At present the glass supplier has 21 automotive glass plants in total: twelve in Japan and Asia, two in North America and seven in Europe. It has introduced the latest facilities to 14 of them and plans to work on the rest seven so the system will be fully introduced company-wide in two years. (From an article in the Nikkan Jidosha Shimbun on Oct. 17, 2008)
| (in million JPY) | FY2008 | FY2007 | FY2006 |
| Overall | 252,147 | 231,131 | 252,700 |
| Glass business | 102,957 | 98,266 | 79,600 |
| Capital investment at the Glass Division as a % of overall capital expenditures | 40.9% | 42.5% | 31.5% |
Glass business
-Investment projects included revamping production equipment to manufacture sheet glass in Russia.
Overseas Investments
-AGC Flat Glass Europe inaugurated the third float line at its Retenice production plant in the Czech Republic. This is the group's 17th float line and will be devoted mainly to producing automotive glass, against the background of continued growth in demand for flat glass in central Europe. The new float line represents an investment of approx.100 million euros and is designed to produce an exceptionally wide strip of glass, the first of its kind for AGC Flat Glass Europe. (From a press release on Sep 16, 2008)
-The Company plans to raise production efficiency in its automotive glass manufacturing bases in the world. To all its automotive glass plants it will introduce by the end of 2010 manufacturing facilities that flat glass cutting and bending processes are directly connected. The company aims to reduce fixed costs by thus eliminating the intermediate stock and the space for it as well as by introducing the new automated line which combines the two processes. These several years the Company has introduced to its mass production plants, mainly in Japan, the state-of-the-art glass processing facilities in which cutting and bending processes are directly connected to promote laborsaving in the principal processes. At present the glass supplier has 21 automotive glass plants in total: twelve in Japan and Asia, two in North America and seven in Europe. It has introduced the latest facilities to 14 of them and plans to work on the rest seven so the system will be fully introduced company-wide in two years. (From an article in the Nikkan Jidosha Shimbun on Oct. 17, 2008)