Shin-Kobe Electric Machinery Co., Ltd. Business report FY2007

Business Highlights

Financial overview
In million JPY FY2006 FY2005 Rate of change(%) Factors
Sales 78,067 65,344 19 繝サSales rose because the volume of molds sold increased by 6% year-on-year to 15,742 million yen. Also, demand for IPM (Intelligent Power Module) housings in the area of thermoplastic molds remained strong, thanks to the continuous booming sales of hybrid vehicles on which these housings are being mounted. In addition, the Company reviewed underperforming products. In the end, sales of thermoplastic molded components increased slightly year-on-year; while sales of thermosetting molds steadily increased because of the added production volume in China throughout the year, where the Company started operations at the end of the previous fiscal year, and because of a successful roll out to plastic gears for EPS (Electric Power Steering) systems.  
Operating income 5,720 4,961 15
Ordinary income 5,189 4,285 21
Current net income 2,931 2,261 30

Overseas business
<North America>
-The Company will start production of engine gears made of high-strength plastic aiming to reinforce its synthetic resin business in North America. The gears will be supplied to new engines made by Toyota Motor locally. The Company will finalize the plan by the end of this fiscal year to start production soon after 2008. This is the first time for the company to develop business in the region. In the future the company will consider local production of electric parts for hybrid cars. Its high-strength plastic gears have been developed jointly with Toyota Motor, and used in balance shaft gears in 2.4-liter four-cylinder engines. Sales target for current fiscal year has been set at four billion yen, an increase of 10 percent from the previous term. (From an article in the Nikkan Jidosha Shimbun on May.14, 2007)

<China>
-The Company will greatly expand its operations in China. The company will begin production of lead storage batteries for electric vehicles such as forklifts and golf carts and automotive resin parts for interior and exterior applications. The expansion of production items will allow the company to improve its profitability. The electric machinery manufacturer intends to put the plans into effect within this fiscal year. In specific, the company will try to begin local production of the batteries for electric vehicles as soon as possible, as a local demand for these batteries is expected to grow rapidly. The Company established a wholly-owned subsidiary in GuangDong Province, China, in 2003. The subsidiary began full-fledged production of automotive batteries in 2004, and production of engine parts, high-strength resin gears, for Toyota Motor Corporation in January 2007. The company has set a target of increasing a sales ratio of its overseas operations from the current some percent to 10%, and the expansion of operations in the growing China market is part of its efforts to achieve the goal. (From an article in the Nikkan Jidosha Shimbun on Jul.6, 2007)

Challenges for FY2008 (for the automotive  business)
Creation and early launch of new businesses and products
-The Company will work on forming alliances with other companies in and outside Japan to enhance its competitive strength in the area of lead-acid storage batteries.
-The Company will work to achieve a high level of  competence management in the plastic business, positioning high-strength plastic gears, complex electrical molds, and in-vehicle electronic materials as its flagship products.
-Focusing on the Chinese market, the Company will globalize its operations, focusing on automotive products.  It aims to increase the volume of sales generated overseas to 10% of its total sales.

R&D

For fiscal year 2007, R&D expenses were 1,490 million yen.  
There were 151 researchers and the Company held 763 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.


R&D Structure
-The Company will accelerate application of high-strength plastics to automotive gears in a move to strengthen its plastic products business. The Company, which has been producing and supplying engine balance shaft gears and electric power steering components made of plastics, will market gears made of highly reinforced plastics as alternatives for metal gears. The high-strength plastic gears, which were developed jointly between the company and Toyota Motor Corporation, are positioned as the strategic products of the its plastic division. Being made of engineering plastics and aramid fiber, the plastic gears offer a high level of strength and durability that ranks with that of metal gears, and provide an excellent vibration damping property. (From an article in the Nikkan Jidosha Shimbun on Apr.16, 2007)

-The Company and Panasonic Storage Battery Co., Ltd. (PSB, Kosai-shi, Shizuoka prefecture) announced on December 10 that they have developed a new negative electrode additive, which can be used for development of lighter automotive batteries. It is the first time for the two companies to develop an automotive battery product for commercial use since 2004 when they began the joint initiatives in the area of automotive battery business. The new additive is composed of active materials with larger reactive areas than conventional additives. In addition, its reactive chemical compounds have electrical conductivity, which will help the negative-electrode active materials work more efficiently. The two manufacturers will try to add further modifications to the new product and continue their joint activities to develop other products to improve output of automotive batteries, which will lead to development of the lighter and smaller next-generation automotive batteries. (From an article in the Nikkan Jidosha Shimbun on Dec. 11, 2007)

-The Company announced on February 4 that it has developed a new type of lead alloy material for power collectors, which can reduce size and weight of lead acid batteries. The Company applied a method called powder rolling process for the first time to the development of the alloy for lead acid batteries. The new lead-based material can reduce a thickness level, which is required of power collectors to assure corrosion resistance, to 0.2 mm, one fourth as thin as conventional ones, as well as contribute to making the component smaller. The supplier will propose the applications of the new material to drive-train or by-wire systems for large-power-consuming hybrid vehicles to make it commercially viable soon. (From an article in the Nikkan Jidosha Shimbun on Feb. 5, 2008)

Technical assistance contracts (as of March 2008)

Partner point Country Content of contract Contract Period
EXIDE Industries Ltd. Indonesia Lead battery for cars For 5 years since April 1, 1999
Panasonic Storage Battery Co., Ltd. Japan Licensing agreement on lead storage batteries For 10 years since July 1, 2004

Investment Activities

Capital investment in FY2007 amounted to 3,173 million JPY in total, which was spent on upgrading and rationalizing facilities for growth-area products.
-Batteries and Electrical Machinery: The Company invested 1,696 million yen in facilities to increase production of electric-motor vehicle batteries, etc.
-Synthetic Resin Products: The Company invested 1,471 million yen in production facilities for automotive molds, etc.

-The Company announced that it will reinforce production facilities for power supply sources of new hybrid vehicles, plastic products and batteries for electric vehicles such as battery-powered forklifts for FY 2007. The R&D investment will also be increased by 12.9% to 1.8 billion yen. In FY 2007, the investment in its battery and electric equipment business will almost be doubled to 2.035 billion yen, while the investment in its plastic products business will be decreased by 11.0% to 1.865 billion yen. As the company has completed a large scale investment in its China operation in the plastic business in FY 2006, it will concentrate the FY 2007 investment on the strategic businesses including Toyota's hybrid vehicle parts for the meantime. (From an article in the Nikkan Jidosha Shimbun on May.25, 2007)


Plans for construction of new facilities (as of March 2008)
Company/ Office Name Location Planned amount of investment
(in millions of JPY)
Started Completed (or Scheduled  Completion) 
Hikone Works Hikone-shi,
Shiga Prefecture
553 2007.7 2008.8
Shin-Kobe Platechs Co., Ltd.
Osaka Plant
Hirakata-shi, Osaka 663 2008.2 2009.1