KYOWA LEATHER CLOTH CO., LTD. Business Report FY2007

Business Highlights

Financial overview
In million JPY FY2007 FY2006 Rate of Change (%) Factors
Sales 39,505 37,967 4.1 Sales in the automotive segment grew 10.8%, reaching 22,515 million yen. This was mainly due to increased sales of lightweight, synthetic-leather materials called Le Kar and Silfy; higher sales of TPO (thermoplastic olefin) covering materials that are easily recyclable; and greater volume of vinyl chloride leather. This was the result of  an increase in auto production in Japan and new car models using the Company's products.
Ordinary income 1,604 1,659 (3.3) Ordinary income was down due to a sharp rise in materials prices caused by soaring crude oil prices. 
Current net income 964 308 213.0 Current net income was up since the Company did not post any extraordinary loss, as it did the the previous fiscal year.

Dissolution of subsidiary
The Company decided at the Board of Directors meeting held on Mar. 29, 2007 to dissolve Kyowa Leather Cloth U.S.A., INC, its subsidiary in Ohio, U.S.A. Kyowa Leather Cloth U.S.A., INC, which currently sells leather and synthetic leather for automobiles, was originally established in February 1997 as an equity firm for a joint venture, Sandusky Athol International Holdings Limited ("SAI"). Kyowa opted for the dissolution of Kyowa Leather Cloth U.S.A., INC as the subsidiary incurred a significant amount of debts and continued to struggle financially without a positive future outlook since SAI had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in November 2006. The company confirmed that they will utilize outside channels available for future handling and exporting products manufactured in Japan through major trading firms specializing in the distribution of automotive interior parts. (From a press release on Mar. 30 2007)


R&D Expenditure
R&D expenses were 537 million yen in FY2007.
- Development agendas of the automotive interior business were:
-The Company is developing new, synthetic-leather materials that contribute to enhancing the quality of vehicles.
-The Company is working to improve upon and develop product technology that takes into consideration factors such as weight reduction, ease of recycling, lowered costs, environmental protection, and  greater comfort for passengers.

Investment Activities

Capital Expenditure
Capital investment in FY2007 totaled 1,688 million yen.
-The Company invested in order to build a QA center, improve the efficiency of production facilities, and lower manufacturing costs.
New Facility (abstract)
Main Products Total Amount Invested
(millions of yen)
Started Expected to Complete in: Increased Capacity after Completion
1st Tenryu Plant
Leather (for cars, furniture, shoes and general merchandise) 609 Apr., 2008 Mar., 2009 No increase (initiated for rationalization purposes only)
Shinshiro Plant
Composites for molding, and other products (for automotive use) 515 Apr., 2008 Mar., 2009 No increase (initiated for rationalization purposes only)
2nd Tenryu Plant
Composites for molding and synthetic leather (for vehicles, furniture, shoes and general merchandise) 372 Apr., 2008 Mar., 2009 No increase (initiated for rationalization purposes only)
Head Office
R&D facilities 257 Apr., 2008 Mar., 2009 No increase because they are R&D facilities.