Asahi Glass Co., Ltd. Business Report FY ended Dec. 2014

Business Highlights

Financial Overview (IFRS)

(in million JPY)
  FY ended Dec. 31, 2014 FY ended Dec. 31, 2013 Rate of change (%) Factors
Overall
Sales 1,348,308 1,320,006 2.1 -
Operating income 62,131 79,894 (22.2) -
Profit before tax 41,163 44,381 (7.3) -
Net income 15,913 16,139 (1.4) -
Glass segment
Sales 709,044 664,239 6.7 1)
Operating income 564 (13,068) - -


Factors

1) Glass segment
-Sales for FY ended Dec. 2014 increased 6.7% year-on-year. The volume of automotive glass shipment increased thanks to strong demand, although vehicle production volumes decreased in some regions. Sales were also boosted by the impact of a weaker yen.

Contracts

-The Company announced that its light control glass Wonderlite has been selected for the Magic Sky Control panoramic glass roof available as an option for the new Mercedes-Benz "S-Class Coupe" for Europe and the U.S. The S-Class Coupe is the first vehicle to use the Company's light control glass. The Japanese glass maker will market Wonderlite aggressively to other automakers as a product that contributes to increased comfort and energy savings of cars. (From an article in the Nikkan Jidosha Shimbun on September 30, 2014)

Co-development of new Refrigerant for Automotive air conditioner

-The Company will produce HFO-1234yf, a refrigerant for automotive air conditioners from 2015. HFO-1234yf was jointly developed by Honeywell International, Inc. (Honeywell) and E.I. du Pont de Nemours and Company (DuPont), both headquartered in the U.S. The Company will build a new plant in Chiba to produce the new refrigerant by using the Company's proprietary fluorochemical technologies. The HFO-1234yf produced at the plant will be sold by Honeywell to customers in Europe, U.S. and Asia. The new plant and Honeywell's existing plants in the U.S. will meet growing demand throughout the world including Japan. HFO-1234yf refrigerant is a new product with a very low global-warming potential (GWP) of less than one, which is below the value of CO2. HFO-1234yf has increasingly been chosen for new cars to comply with the Mobile Air Conditioning (MAC) Directive in Europe. Regulations on high-GWP refrigerants are also slated to take effect in Japan in 2015. Currently there are 500,000 vehicles which use HFO-1234yf in the global market. The number is expected to grow to 2 million units by the end of 2014. (From an article in the Nikkan Jidosha Shimbun on January 24, 2014)

Outlook for FY ending Dec. 31, 2015

(in hundred million JPY)
FY ending Dec. 31, 2015
(Forecast)
FY ended Dec. 31, 2014
(Actual Results)
Rate of change (%)
Sales 14,200 13,483 5.3
Operating Profit 620 621 (0.2)



Mid-term Plan

-The Company announced its new mid-term business plan called "AGC plus" for 2015 to 2017. By the final year, the Company aims to achieve an operating profit of JPY 100 billion, which is 60% higher than its 2014 result. Sales target is set at JPY 1.6 trillion, which is 18.6% higher than the 2014 level. The Company will further accelerate its efforts to develop new products and technologies and to enter new markets to boost its profitability. It will do so by taking advantage of its diversified product line. The automotive division will expand global sales of high value-added glass products. Such profit-making products include light control glass, which is enjoying growing demand especially in Europe. The division also intends to win new business in the booming markets including the Middle East and Southeast Asia by stepping up collaborations with local companies. (From an article in the Nikkan Jidosha Shimbun on February 10, 2015)

Financial targets for 2017

  • Sales: JPY 1.6 trillion
  • Operating profit: JPY 0.1 trillion
  • ROE: 5% or more (2014 result: 1.4%)
  • D/E: 0.5 or lower (2014 result: 0.42)

Sales ratio targets for 2020 (recent achievements)

  • Sales in emerging markets: 30% of overall sales (2014 result: 24%)
  • Sales of environmentally friendly products: 30% of overall sales (2014 result: 15%)
  • Sales of new products: 30% of overall sales (2014 result: 12%) 

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

R&D Expenditure

(in million JPY)
  FY ended Dec. 31, 2014 FY ended Dec. 31, 2013 FY ended Dec. 31, 2012
Overall 44,758 46,882 48,360
-Glass segment 8,190 8,529 8,053


-The Group plans to spend approximately JPY 45,000 million in R&D activities in FY ending Dec. 31, 2015.

R&D Structure

-The Company's Technology Division consists of following centers and functions:

  • The Research Center develops new materials, products and basic technologies
  • The Production Technology Center conducts research and development of manufacturing technology and equipment
  • The Engineering Center develops engineering technologies, and performs maintenance of production equipment
  • The Intellectual Property Center analyzes and applies for intellectual property rights, and formulates and implements related strategies
  • The Technology Planning Office develops and plans technological strategies, and engineers new products and manufacturing technologies

R&D Facilities

Chemicals business
-The Company started operations of its first technical center for chemical business in Shanghai, China, on March 10, 2014. The center will provide technical services, and conduct application development as well as analysis for fluorinated resin, fluoropolymer films, fluoropolymer resin for coating, fluorinated elastomers, water and oil repelling processing agents and other fluorinated functional chemicals. Fluorinated functional chemicals have excellent weatherability and long service lives. Therefore, demand for the chemicals is increasing for use in automotive and electronics products. The chemicals have significant demand growth potential in environmental field as well. (From an article in the Nikkan Jidosha Shimbun on March 15, 2014)

Technology Licensing-out Agreement

(As of Dec. 31, 2014)
Company Country Contractual coverage Contract period
PT Asahimas Flat Glass Tbk Indonesia Provision of manufacturing technology for float glass Ten year from Jan. 1, 1993. (automatic extension every year thereafter)



Product Development

Tempered and laminated glass that can block UV rays
-The Company announced that its light control glass Wonderlite has been selected for the Magic Sky Control panoramic glass roof available as an option for the new Mercedes-Benz "S-Class Coupe" for Europe and the U.S. The S-Class Coupe is the first vehicle to use the Company's light control glass. The Japanese glass maker will market Wonderlite aggressively to other automakers as a product that contributes to increased comfort and energy savings of cars. (From an article in the Nikkan Jidosha Shimbun on September 30, 2014)

Capital Expenditure

(in million JPY)
  FY ended Dec. 31, 2014 FY ended Dec. 31, 2013 FY ended Dec. 31, 2012
Overall 118,200 138,500 155,300
-Glass segment 44,600 73,800 58,400


-The Group is planning to invest approximately JPY 150,000 million in plants and equipment in FY2015.

-In the current mid-term business plan that covers from 2015 through 2017, the Company plans to limit its capital expenditure to JPY 400 billion, the level of depreciation. The Company intends to allocate 35% of its spending to its glass business, 35% to its electronics business, and 30% to its chemicals business, as it focuses its investment on high grow areas.

Investment Outside Japan

Glass business
<Indonesia>
-The Company decided to invest JPY16 billion in constructing a new float glass furnace at its consolidated Indonesian subsidiary, PT Asahimas Flat Glass Tbk (AMG) (located in Jakarta). The new furnace will be constructed near AMG's Cikampek Plant that processes automotive glass. The furnace is scheduled to start mass production in the latter half of 2016. It enables the Company to supply high-quality automotive and architectural float glass to its customers. The annual production capacity of the new furnace is estimated to be 210,000 tons. With this new furnace, the Company aims to increase its annual glass production volume in Indonesia from the current 570,000 tons to 630,000 tons. The new furnace will replace one of the two existing float glass furnaces at AMG's Jakarta Plant. (From an article in the Nikkan Jidosha Shimbun on September 4, 2014)

<Mexico>
-The Company held a groundbreaking ceremony for a new automotive glass plant in San Luis Potosi, Mexico. The factory will be operated by AGC Automotive Mexico S.A. de C.V., the Company' new production and sales subsidiary in the country. The plant is expected to be able to produce glass for 750,000 vehicles per year by 2016. The Company will invest approximately JPY 6 billion in this project, which is a major plan based on its "Grow Beyond" business strategy. (From an article in the Nikkan Jidosha Shimbun on June 11, 2014)

Chemicals business
<Vietnam>
-The Company will increase production capacity of the polyvinyl chloride (PVC) facility by 50% at Phu My Plastics & Chemicals Co., Ltd. (PMPC; headquartered in Ba Ria-Vung Tau Province, Vietnam), the Company's subsidiary in Vietnam. The Company aims to meet the growing PVC demand in Southeast Asia and increase its share of the Southeast Asian PVC market. After the PVC facility enhancement, PMPC's annual production capacity will increase from the current 100,000 tons to 150,000 tons in 2016. PVC is lightweight and fire retardant and also has electrical insulating properties. Consequently, PVC is used for automotive undercoat materials and a wide variety of materials in different industries. Vietnam is the third largest PVC market in Southeast Asia following Thailand and Indonesia. As the Vietnamese PVC market is expected to continue to grow, the Company has decided to bolster its production capacity. With PMPC's increased production capacity, the Group's annual PVC production capacity in Southeast Asia will reach 700,000 tons. (From an article in the Nikkan Jidosha Shimbun on March 26, 2015)