Sanoh Industrial Co., Ltd. Business Report FY ended Mar. 2016

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 Rate of Change
Sales 130,008 130,627 (0.5) -Vehicle production increased overseas.
Operating income 5,250 5,840 (10.1) -Profits were lower due to increased expenses in line with a new launch in Europe and a loss resulting from negative currency translation.
Ordinary income 4,255 5,123 (16.9)
Net income attributable to owners of the parent (618) 1,577 - -
Sales 34,743 38,193 (9.0) -Sales and income decreased because of a decline in vehicle sales in Japan
Operating income 876 2,171 (59.6)
North and South America
Sales 45,515 41,861 8.7 -Sales and profits were higher due to a recovery in automotive demand, the winning of new orders, increased sales from the new production plant in Mexico, and favorable currency translation.
Operating income 2,693 1,862 44.6
Sales 22,987 24,446 (6.0) -Sales were lower due to negative currency translation.
Operating income (113) 606 - -An operating loss was reported, which was the result of increased expenses involved with a new launch at Geiger Automotive GmbH.
Sales 10,835 10,345 4.7 -Sales and profits increased due to a huge increase in shipments of direct-fuel injection rails destined to Japan, as a result of the launch of operations at a new plant.
Operating income 436 75 481.3
Sales 15,926 15,781 0.9 -Practically the same as last year.
Operating income 874 1,426 (38.7) -Income was lower due to a decrease in sales in Indonesia and an increase in fixed expenses in India.

Reasons for and measures in response to Geiger’s declining profits
-Reason: Production issues arose as a result of receiving orders from BMW for air shutter guides at the same time as making a new launch.
-Response: Launched the Geiger Operational Management Project (to strengthen backup operations).
Implemented the Sanoh Program Management System.

Reasons for and measures in response to losses in Russia
-Reasons: Automotive production in Russia fell 37% over the past three years.
    Value of Russian ruble fell 43% over the past three years.
1. Freeze the plant construction project in the special economic zone.
    2. Improve operations and productivity by consolidating three production plants into one.
    3. Advance localization of management, shifting to management run by local executives.
    4. Negotiate selling prices with customers in line with currency fluctuations.

Reasons for and measures in response to losses in Brazil
-Reasons: Automotive production in Brazil fell 35% over the past three years.
    Value of Brazilian real fell 29% over the past three years.
1. Freeze the construction of tube production plant.
    2. Procure and produce facilities locally to mitigate currency-fluctuation risks.
    3. Localize production of plastic products that are being purchased from the Sanoh Mexico Group as finished products.
    4. Negotiate selling prices with customers in line with currency fluctuations.

Reasons for and measures in response to losses at operations in Saitama and Shiga factory in Japan

-Current state: Sales at Saitama factory fell 55% between 2007 and 2015 (8 years).
    Sales at Shiga factory fell 55% between 2007 and 2015 (8 years).
1.Sales in Japan fell due to the fast pace of launching local production plants outside Japan.
   2. The production of braised products was consolidated, with the other plants’ operations being migrated.
    3. Customers relocated their production operations to other regions in and outside Japan.
4. As lead-plants of the Group, a significant increase in expenses occurred in line with installing new technology and facilities/equipment.
-Responses: Changed the organization, from one based on conducting individual production processes to one based on automotive tube business.
    1. Implement a total profit-management system for processes other than the processing and assembling operations that were unprofitable.
2. Strengthen global lead functions and return royalties.
    3. Reorganize and optimize production operations.
    4. Speed up launching new technology and products on the market.
    5. Respond more quickly to customer needs.

Expanding production of fuel injection rails for direct injection engines

-The Company will expand production of fuel injection rails for direct injection engines. Along with current production in China and Mexico, the Company will also start manufacturing fuel injection rails in Japan in 2016, to raise the production volume to 10 million units or more in 2020, approximately six times larger than the amount produced in 2015. Direct injection engines improve fuel efficiency and reduce exhaust gas emissions of vehicles, and they are expected to be more prevalent worldwide. For 2020, the Company aims to have a 25% share in the global market of fuel injection rails for direct injection engines. (From an article in the Nikkan Jidosha Shimbun on June 3, 2015)


-In Mar. 2016, Sanoh America Inc. has received "Excellence Award" or "Special Recognition Award" from Toyota Motor Corporation. (From a press release on March 16, 2016)

-In Jun. 2015, the Company announced that it has received the "2014 Value Improvement Award" from Mitsubishi Motors Corporation. Sanoh has a production line to produce tubular products within the premises of Mitsubishi Motors' Mizushima Plant in Okayama Prefecture, Japan. (From a press release on June 22, 2015)

Outlook for FY ending Mar. 2017

(in million JPY)
FY ending Mar. 31, 2017
FY ending Mar. 31, 2016
(Actual Results)
Rate of Change (%)
Sales 132,000 130,008 1.5
Operating income 5,100 5,250 (2.9)
Ordinary income 5,000 4,255 17.5
Net income attributable to owners of the parent 2,000 (618) -

-Major fluctuation factors (sales):

  • Sales increase in Japan, Asia (Thailand, India)
  • Sales decrease in Americas and Europe because of unfavorable currency translation

-Major fluctuation factors (operating income):

  • Due to the strong valuation of the yen, profits fell because of the rise in prices of materials that were purchased from Japan by operations outside Japan.

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

R&D Expenditure

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Overall 2,978 2,965 2,394

R&D Activities

New Mid-/Long-term Management Plan: GOAL 15
-The Company revised its mid-term management plan from FY2010, taking into consideration various aspects such as the current state of global affairs and possible future developments. It created a new, mid-term/long-term management plan called GOAL 15.
-The Company developed environmentally friendly, lighter weight automotive parts a new, energy-saving production method, and advanced 30 initiatives to create products and technology in order to launch new lines of business for value-added products and new products.
-In the fiscal year that ended in March 2015, the Company is advancing activities to gather information and build a foundation for conducting research under the concept of a new, mid-term R&D project with a vision toward 2025, which is ten years later.

Developing lightweight auto parts
-European OEMs and other automakers are increasingly shifting to plastics for fuel injection rails, fuel tubes, filler pipes and other powertrain components and fuel systems parts. Under such circumstances, the Company acquired Geiger Automotive GmbH, a Germany-based plastic components supplier in October 2013, and established a sales and development office for its plastic product business in Europe.
-In working to find materials to replace streel, such as plastic and aluminum that are lighter than steel, the Company is conducting simulations on strength, vibration, and flow; expanding evaluation and testing facilities; and strengthening its capabilities in analysis.

Developing high value-added products
-The Company is promoting the development and mass-production of high-pressure fuel injection rails for direct injection engines, ultra high-pressure fuel injection tubes for diesel engines, heat-exchange components used around inverters and batteries, plastic fuel tubes, and composite parts for engine cooling systems and EGR systems.
-The Company is continuing to work on R&D activities on next-generation power devices and energy-storage systems.

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Japan 2,946 2,205 2,158
North and South America 2,173 2,964 2,466
Europe 1,422 721 263
China 892 1,155 1,404
Asia 769 875 1,338
Overall 8,202 7,919 7,629

Investments in FY ended Mar. 31, 2016
-Investments were focused on improving productivity and renewal of equipment.

Development of Production Technology

Compact production line in automaker's plant
-The Company has developed a new solution for final processing of brake tubes at vehicle assembly plants. It will introduce compact brake tube production lines utilizing robots. Brake tube unit parts production will be synchronized with vehicle production, which will enable a significant reduction in inventories held at automakers' plants and distribution costs. The Company is aiming to increase its order intake by convincing automakers that the solution will create mutually synergistic effects. The new solution will be closely related to automakers' production plans. The Company is looking ahead to future model launches, and will suggest a package that includes its solution and brake tubes to receive orders. (From an article in the Nikkan Jidosha Shimbun on September 8, 2016)

Downsizing the production line manufacturing brake tubing by 75%
-The Company has initiated a project to develop a new compact production line for brake tubes, which is expected to be one fourth the size of its current line. The Company is on track to achieve a significant space-saving by utilizing its proprietary new technology that completely eliminates water discharge in the plating process, which makes drainage facilities unnecessary. This improvement also reduces costs required for new plants and is expected to facilitate the Company's global expansion initiatives, while mitigating exchange risks. The Company's patented "ZAM-Dry plating technology", which uses molten zinc, aluminum, and magnesium alloy as plating materials, eliminated the need for drainage equipment that was required in electro galvanizing. The technology also offers a high corrosion resistance. In addition to introducing the new plating technology, the Company will also enhance its tube fabrication method. Instead of using a large furnace for generating heat for brazing, the Company will shift to utilizing electric resistance for heat generation, which would require smaller equipment. Adoption of these technologies is expected to shorten the brake tube production line to approximately 80-90 meters from the current level of approximately 340 meters. The Company's current production lines that use large equipment in each process were designed for mass production. With the new compact line, the Company expects to lower the break-even point of the brake tubes to one fifth the current level. (From an article in the Nikkan Jidosha Shimbun on August 1, 2016)