Shin-Kobe Electric Machinery Co., Ltd. Business report FY2006

Business Highlights

Financial overview
In million JPY FY2006 FY2005 Rate of change(%) Factors
Sales 65,344 60,877 7.3


Operating income 4,961 4,136 20.0
Ordinary income 4,285 3,431 24.9
Current net income 2,261 1,628 38.9 The Company recorded an extraordinary profit due to a change in the percentage of capital it invested in Hitachi Vehicle Energy Ltd. 

Automotive batteries
-In the automotive aftermarket sector, the Company enhanced the added value of its products, expanding the lineup of its general-purpose Cybox models (artificial intelligent batteries) and revising its product selling prices upward in response to a price hike in lead. However these were partially offset by weakened demand due to a cool summer and a warm winter, as well as due to the increasing trend by automakers to to install more compact batteries in vehicles.  
-Sales of batteries for new vehicle models increased, supported by steady demand for them. 
-Sales at Hitachi Battery (Dongguang) Co., Ltd. increased as a result of active marketing efforts targeting both the new car market and the aftermarket.
-Total sales remained almost unchanged from those of the previous year. 


-Sales of molds were 14,906 million yen, up 5% from those of last year. 
-Thermoplastic molds: The Company is developing more value-added products. Intelligent power module (IPM) housings saw a significant increase in sales, as hybrid cars were in good demand. Sales of other products leveled off from those of last year.   
-Sales of thermosetting molds grew dramatically in and outside Japan in response to greater needs for these molds. In February 2007 commercial production of high-tensile plastic gears for balance shaft systems started in China. Sales of other molds for in-vehicle applications leveled off. 

Performance by product
The Company will focus developing and marketing strategic products such as engine gears and electric components for hybrid cars. The Company will position these products as its main profit-making sources to attain annual sales of seven billion yen in the future. The Company's component product for hybrids is the Intelligent Power Module (IPM) housing, which is a metal molding composite installed on Toyota Motor's Prius. Shin-Kobe Electric Machinery expects  that the volume it supplies of these housings will increase in line with the expanding volume of production of hybrid cars. (From an article in the Nikkan Jidosha Shimbun on May, 15, 2006)

The Company, to increase sales at its lithium-ion secondary battery business, will begin aggressive marketing activities to increase sales of these types of batteries for use in hybrid vehicles. Hitachi Vehicle Energy, Ltd., its affiliate producing automotive rechargeable lithium-ion batteries in Hitachinaka City, Ibaraki Prefecture, will start supplying these batteries for installation on hybrid trucks and buses within this year.  As a result, the Company will work especially hard to increase the volume of it sales, hoping to gain a 20 to 30% share in the hybrid vehicle battery market by 2010. It has already launched lithium-ion secondary batteries and supplied them to Nissan for its electric vehicles and hybrid vehicles. (From an article in the Nikkan Jidosha Shimbun on Jun, 9, 2006)

The Company will work to upgrade electronic substrates, mainly focusing on power IC substrates, improving their compounds. These substrates are used to drive and control of electric components. In doing so, the Company hopes to develop new applications and win new orders. The Company plans to increase the percentage that its electronic substrate business accounts for among its total sales, from the current 30% or so, to over 50%, to increase profits. (From an article in the Nikkan Jidosha Shimbun on Nov.7, 2006)

Overseas operations
In addition to starting production of plastic parts at its plant in China this year, the Company is also studying the idea of launching production of automotive batteries and plastic products in India, Russia and Thailand, intending to come up with a concrete plan as soon as possible. Its plan is to increase the volume of production it carries out overseas, which currently is limited to a small percentage, to over 10% by around 2009. Its immediate strategy is to enhance its operations in China.  It will make special efforts to promote automotive battery sales to transplants of Japanese automakers such as Toyota operating in the country, aiming to restore profitability in its battery business. The Company will begin producing high-strength plastic gears for engines and sophisticated plastic sheets for interior and exterior parts there. In its activities to develop new markets, the Company is considering the possibility of producing batteries in India and Russia and plastic parts in India and Thailand. The Company's plans for starting local production in these countries will be developed in line with the growth in automobile production taking place in the respective countries.  (From an article in the Nikkan Jidosha Shimbun on May, 23, 2006)


For the fiscal year 2006, R&D expenses were 1,595 million yen.  
There were 141 researchers and the Company held 798 industrial property rights.

Battery R&D Center and Hitachi Vehicle Energy Co., Ltd.
The Company focused it R&D activities on lead batteries and lithium-ion batteries. In addition, the Company is developing new products that respond to the needs of the automotive aftermarket, next-generation automotive systems, and new uses for industrial machinery.

Plastic R&D Center and Hikone Development Center

The Company worked on R&D activities to launch new products in markets which require rapid technological innovations in short periods of time. These products include layered-products, formed products, and sheets.

New automotive products developed in FY2006
-Batteries for vehicles with alternator regeneration control systems
-High-tensile plastic gears for automobiles
-Intelligent power module (IPM) housings; and others 

A high-strength resin gear was jointly developed with Toyota Motor Corporation, and installed on the balance shaft gear of a four-cylinder engine with 2-liter or more displacement. Compared with a metal gear, this product reduces noise by 15 dB. Also, thanks to a wider tolerance in precision of assembly process, higher productivity can be expected. This product has been installed on about 1.5 million units to date. As production of the engine that uses this component will start in China, supply volume will further expand significantly. (From a story in the Nikkan Jidosha Shimbun on May 15, 2006)

The Company developed a new battery, which is optimized for use in vehicles equipped with idling-stop systems. Having already won a supply award from a domestic commercial vehicle manufacturer, the company will soon start delivering the batteries to the customer for applications in a new model. The new battery is designed to withstand frequent charging and discharging, maintaining good starting performance and high durability. In efforts to win large contracts, the company intends to step up marketing activities by offering technical solutions proposals to automakers at home and abroad. (From an article in the Nikkan Jidosha Shimbun on Nov. 20, 2006)

The Hitachi Group companies, including Hitachi, Ltd. and the Company will accelerate their efforts on product development and sales promotion for lithium-ion batteries for hybrid vehicles in order to expand this business. Trial production of the batteries for hybrid commercial vehicles such as heavy-duty trucks and buses is in its final stage to start supply as early as 2008. The Group will enhance its capability to respond to on-going development projects and new inquiries so that it can move fast for winning large contracts, in an aim to establish a business unit of lithium-ion batteries by achieving sales of one billion yen level at an early stage. In the future, the Group plans to boost a market share close to the largest in lithium-ion batteries for hybrid vehicles. (From an article in the Nikkan Jidosha Shimbun on Nov. 30, 2006)

Technical assistance contracts (as of March 2007)
Partner point Country Content of contract  
EXIDE Industries Ltd. Indonesia Lead battery for cars For 5 years since April 1, 1999
Taiwan Kobe Battery Taiwan Production of control-valve (sealed) lead storage batteries For five years effective March 24, 2003
Panasonic Storage Battery Co., Ltd. Japan Licensing agreement on lead storage batteries For 10 years since July 1, 2004

Investment Activities

Highlights (FY2006)