Sanoh Industrial Co., Ltd. Business Report FY2011

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 Rate of Change
(%)
Factors
Overall
Sales 76,100 79,768 (4.6) 1)
Operating income 3,437 6,620 (48.1) -
Ordinary income 3,014 6,182 (51.3) -
Net income 1,037 3,189 (67.5) -

Factors
1)
-The Company was greatly impacted by the drop in production volumes at OEMs whose business operations had been tremendously affected by the Great East Japan Earthquake and the flooding in Thailand. As a result, the Company's production levels of its mainstay products, mainly tubing/piping for automotive and transport vehicle, and also automotive plastics, significantly decreased year-on-year.

-When looking at sales on a product-by-product basis, sales of plastic products (quick connectors, plastic tubing, etc.,) were almost the same as they were during the previous year. On the other hand, sales of vehicle control products (brake and fuel-system tubing), brazed products (for fuel-injection, water cooling circulation systems, oil cooling, etc.), and automotive safety devices (seatbelts, etc.) were all lower on an annual basis.

Overview by Region

<Japan>
-The volume of program business the Company was awarded from OEMs decreased year-on-year because of the business impact caused by the Great East Japan Earthquake and the flooding in Thailand. Operating revenue was 41.962 billion yen, a 4.2% year-on-year decrease; and operating profit from Japan operations was 2.731 billion yen, a 26.6% year-on-year decrease.

<North and South America>
-The volume of program business the Company was awarded from OEMs in North and South America in FY2011 significantly decreased compared to the volume in FY2010.  Operating revenue was 16.845 billion yen, a 8.7% year-on-year decrease; and operating profit for the region was 198 million yen, an 83.6% year-on-year decrease.

<China>
-The automotive market in China continued to grow at a strong pace. However, the Company's profit performance was affected by negative currency translation due to the high evaluation of the yen. Even though operating revenue rose to 5.32 billion yen, a 4.1% year-on-year increase, operating profit was only 271 million yen, which was a significant drop of 49.3% year-on-year.

<Asia>
-While the automotive market in Southeast Asia and India continued to grow at a good pace, the Company's performance was nevertheless greatly impacted because of the flooding in Thailand and the negative currency translation attributed to the strong yen. Operating revenue was 8.527 billion yen (a 9.3% year-on-year decrease) and operating profit, which was 520 million yen, recorded a huge year-on-year decrease of 60.3%.

<Europe>
-The volume of program business the Company was awarded from OEMs increased for the year, compared to the volume it was awarded in FY2010. In spite of operating revenue increasing by 14.3% year-on-year to 3.447 billion yen, the European operations posted an operating loss of 51 million yen.

Outlook

-The Company is making inroads into the Russian market. The Japanese tubing manufacturer will construct a new plant in Russia for automotive tubing products like brake tubes so that it may go into operation in mid 2013. Forecasting the Russian automotive market growing to 4 million in 2016, Sanoh is looking to localizing production for Japanese automakers, as well as exploring new business opportunities with European manufacturers. The company is planning to acquire production facilities at multiple locations in Russia by investing in local firms to use their existing facilities, and also by building its own plants. It is now making a final decision on where to locate the site, either in St. Petersburg, or in Kaluga State. There are several existing sites, including Tolyatti where the plant of AvtoVAZ, the largest automaker in Russia, is based. Sanoh is projecting combined production capacity in Russia at its own plants and existing facilities of local manufacturers will reach the volume enough to equip more than 2 million vehicles in 2016. (From an article in the Nikkan Jidosha Shimbun on March 2, 2012)

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

R&D

R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Overall 1,810 1,855 1,463

R&D Structure

 -In 2010, the Company established the Global Research and Development Division to conduct research and development activities based on a medium- and long-term prospective.

R&D Activities

Tubing for automobiles 
-Putting the highest priority on responding to the needs for lightweight and eco-friendly products contributing to high fuel efficiency and low CO2 emissions, the Company developed new products by using lightweight materials such as plastic and aluminum and engineered new production technology. Its major development achievements included high-pressure fuel injection rails, fuel tubes, EGR pipes, and ultra high-pressure fuel injection tubes.

-The Company focused on developing module products for electric and hybrid vehicles. It also developed new products and production methods with the aim of improving its cost competitiveness in the growing global markets.

Investment Activities

Investment Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Japan 2,006 2,086 -
North and South America 1,910 1,450 -
Europe 94 78 -
China 928 248 -
Asia 603 307 -
Group 5,541 4,169 2,731

Investments in FY ended Mar. 31, 2012
-Investments were focused on improving productivity and renewal of equipment.