Pacific Industrial Co., Ltd. Business Report FY2012

Business Highlights

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 Rate of Change
(%)
Factors
Overall
Sales 79,579 84,631 (6.0) -
Operating
income
3,699 5,151 (28.2) -
Ordinary
income
4,147 5,281 (21.5) -
Current net income 3,297 2,969 11.0 -
Stamping/resin product business
Sales 56,841 60,209 (5.6) -Sales revenue generated in Japan, its major market, remained at a normal level during the first half of the year. However, for the year as a whole, operating revenue decreased due to several negative factors, including the change of the fiscal year accounting period during the first half of the year in the U.S.A., and the high evaluation of the yen that caused negative currency translation.
Operating income 1,669 2,950 (43.4) -Operating profit fell year-on-year because of the huge decrease in revenue during the first half of the year and the drop in product selling prices due to the extremely competitive market. This was in spite of the efforts the company made to enhance its cost structure and reduce depreciation expenses.
Valve product business
Sales 22,361 24,091 (7.2) -The Great East Japan Earthquake and the flooding in Thailand created havoc in the supply chain all over the world, affecting production at the Company’s major customers. Sales of TPMSs in North America, a major market, significantly fell. In addition, the high evaluation of the yen also negatively impacted the Company’s performance.
Operating income 2,040 2,219 (8.1) -Operating profit was down year-on-year due to the high evaluation of the yen against other currencies and the extreme rise in the cost of materials.

 

New Company

-The Company announced that it will form a wholly-owned regional headquarters, which will be tentatively called Pacific Industries China Corporation, in Tianjin, China. The new company, capitalized at 30 million USD, will be established in May 2012. Pacific Industrial has two Chinese subsidiaries, Tianjin Pacific Auto Parts Co., Ltd. and Changsha Pacific Hanya Auto Parts Co., Ltd. (From a press release on March 21, 2012)

-The Company announced that it will form a wholly-owned sales company in Brussels, Belgium. The new company, which will be tentatively called Pacific Industries Europe NV/SA, will sell automotive parts, including Tire Pressure Monitoring System (TPMS). With capital of 1 million euros, the new company will be established in July 2012. (From a press release on March 21, 2012)

Joint Ventures

-The Company announced on Nov. 4 its plan to set up a new plant in Hunan Province, China. It will establish a new manufacturing subsidiary by the end of this November, jointly with some other firms including Hanya Seisakusho Co., Ltd., Obu, Aichi Pref., whose major customer is Mitsubishi Motors Corp. This is Pacific Industrial's first cooperation in overseas manufacturing with Hanya Seisakusho. The joint venture will lease a local plant, prepare it in order to start production as early as July 2012 and supply body stamping parts to Mitsubishi Motors. It is expected to achieve two billion yen sales in FY 2014. The new company, which will become Pacific Industrial Co.'s third operation in China, will be owned 47 percent by three companies of the Pacific Group, including Pacific Industrial Co.; 47 percent by Hanya Seisakusho; and 6 percent by Metal One Corp., a steel trading company. Pacific Industrial Co. and Hanya Seisakusho, thereafter, will supply stamping parts such as body structural parts to Mitsubishi Motors through this joint venture. (From an article in the Nikkan Jidosha Shimbun on November 7, 2011)

Recent Development Outside Japan

<China>
-The Company's subsidiary, Tianjin Pacific Auto Parts Co., Ltd., will start supplying automotive stamped parts for the first time to Great Wall, from March 2013.

Awards

-The Company has received the "Technology & Development Award" and the "Parts Standardization Award" at the Toyota Motor Corporation's 2012 Global Supplier Convention. The "Technology & Development Award" is for Pacific Industrial's double tank oil pan. Meanwhile, the "Parts Standardization Award" recognizes its development for ornament standardization using film technology. (From a press release on February 27, 2012)

Medium-term management plan OCEAN-15

OCEAN-15 numerical targets FY2015
(Planned)
Sales 95 billion yens
Ordinary income In the 6% range
Percentage of revenue generated overseas Over 40%
Total asset turnover 1.05

 

Outlook for FY ending Mar. 31, 2013

(in millions of JPY)
  FY ending Mar. 31, 2013
(Estimate)
FY ended Mar. 31, 2012
(Result)
Rate of Change
(%)
Sales 78,000 79,579 (2.0)
Operating profit 3,800 3,699 2.7
Ordinary income 4,500 4,147 8.5
Net income 3,100 3,297 (6.0)

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

R&D

R&D Expenses

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Stamping/resin products business 122  114 73
Valve products business 344  84 84
In Common 133  525 518
Overall 603 735 684

 

R&D Structure

-The R&D activities of the Company are being conducted by the R&D technical functions and the production-technology functions at each division, with the R&D Technical Planning Department in charge of activities designed to create products for the future. The R&D functions collaborate with each other in developing new materials and production methods so as to develop new products and strengthen the Company's competitive advantages.

-The Company's subsidiary, PI Systems, conducts R&D activities on software.

-The Company, in working to speed up R&D developments and further deepen research, works closely with specialized companies, universities, and R&D organizations under an R&D framework based on industry-academia-government cooperation.

R&D Activities

Business
segment
Departments
Major activities
Stamping/resin products business -Technical Planning Department
-R&D Department No. 1, Production Technology Department

-The Company researched and developed new stamping methods, including cold stamping technology for ultra high-tensile steel.
-The Company conducted R&D activities on forming technology in order to achieve producing plastic products that are lighter, provide better sound proofing, and have better thermal insulation properties.
-The Company focused on developing molded-in-color metallic materials that reduce VOC and CO2 emissions released through painting, based on a new production method.

Valve products business -R&D Department No. 2; Production Technology Department, and TPMS Department

-The Company developed new tire-valves by applying technology in the field of tire-valve seals.
-The Company developed a TPMS transmitter that can monitor the pressure at each of the tire locations.
-In the area of high-precision stamped parts, the Company is working on improving the net-shape ratio, i.e., reducing the amount of material used.
-In working on developing new production methods, the Company is doing research into standardized production based on unattended, high-precision stamping lines. 

Common -Technical Planning Department -The Company is working on developing lighter weight, multi-functional composite materials.
-The Company is developing products designed for its TPMSs.
-The Company is working to develop environmentally friendly products that require less materials and reduce environmental impact.

Product Development

Double-chamber oil pan
-The Company is the first in the world to develop and commercialize a double-chamber oil pan. The interior of the oil-pan consists of two chambers that increase the speed at which the engine oil temperature rises. This enhances fuel efficiency and reduces CO2 emissions. This oil-pan received the Toyota Technical Development Award in 2011.

Cold-forged pressing process creates ultra high tensile steel
-The Company designed a process for a cold-forged press that can produce ultra high tensile steel. This latest cold-forging process, compared to the heat-forging process, produces about eight times more steel and reduces costs by 20%.

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Stamping/resin products 4,688  3,074 3,888
-In Japan 3,322  2,687 2,636
-Outside Japan 1,366  387 1,252
Valve products 2,139  1,936 424
Overall 6,855  5,065 4,359

 
<Stamping/resin products>
-In Japan, the Company invested to purchase the land and buildings of the plant in Tohoku that it had been leasing; and to prepare for the production of new products such as dies needed for new model vehicles.
-Outside Japan, the Company invested to prepare for production of new products at its stamping facilities in China and North America.

<Valves>
-In Korea, the Company invested to increase the production volume of compressors, etc.

-The Company is planning to invest 8.51 billion yen in capital improvements in facilities and equipment in the fiscal year that ends March 2013.

 

Investment Outside Japan
<China>
-The Company plans to set up a new plant in Hunan Province, China by the end of 2013 business year. The company is preparing to kick off welding of body parts by using a rental plant in the area starting in July 2012. Additionally, it will build its own facility for localizing stamping to construct a comprehensive production system of vehicle body parts with an investment of 2-3 billion yen. Stamping parts at the new plant will be delivered to a new joint venture between Mitsubishi Motors and Guangzhou Automobile Group, which is slated to be formed by the first half of 2012 business year. Pacific Industrial has just won the business for the first production model, which is to enter production at the joint venture by 2012. It aims to increase product items by securing an integrated manufacturing in the neighborhood of the customer's production site. (From an article in the Nikkan Jidosha Shimbun on February 16, 2012)

<Korea>
-The Company announced that Pacific Air Controls Co., Ltd. (PAC), its consolidated subsidiary in Korea, will expand its plant to increase production capacity of casing components of compressor used in car air-conditioning systems. PAC began to conduct a comprehensive production from die casting molding to processing in 2011 and is now producing casing components for 1 million compressors annually. Pacific Industrial will invest 50 billion won (approximately 3.5 billion yen) in PAC between 2011 and 2015 to establish a production structure which will be able to produce casing parts for 3 million compressors in 2012 and for 4 million units in 2015. The total sales of PAC are estimated at 50 billion won (approximately 3.5 billion yen) in 2015. (From a press release on February 3, 2012)

Planned Capital Investments

(As of Mar. 31, 2012)
Facility
(Location)
Business segment Purpose Planned total investment
(in million JPY)
Start Planned completion Production capacity growth after completion
The Company
Nishi Ogaki Plant
(Gifu Pref., Japan)
Stamped and resin New products 3,856 Apr. 2011 Mar. 2015 None
Production expansion and rationalization, etc. 714 Sep. 2011 May. 2014 None
The Company
Higashi Ogaki Plant
(Gifu Pref., Japan)
Stamped and resin New products 1,972 Dec. 2010 Sep. 2014 None
Production expansion and rationalization, etc. 703 Oct. 2011 May. 2013 None
The Company
Yoro Plant
(Gifu Pref., Japan)
Stamped and resin Production expansion, etc. 171 Aug. 2010 Aug. 2014 None
The Company
Tohoku Plant
(Miyagi Pref., Japan)
Stamped and resin Production expansion, etc. 1,920 Apr. 2012 Mar. 2014 Increase in production capacity to around 130%
The Company
Kita Ogaki Plant
(Gifu Pref., Japan)
Valve New products 512 Nov. 2011 Oct. 2014 None
Production expansion and rationalization, etc. 476

Oct. 2011

Mar. 2014 None
The Company
Mino Plant
(Gifu Pref., Japan)
Valve Production expansion, etc. 186 Jan. 2012 Dec. 2014 None
The Company
Headquarters
(Gifu Pref., Japan)
Common R&D, etc. 119 Sep. 2011 May 2013 None
Pacific Industries USA Inc.
(Ohio, USA)
Stamped and resin,
Valve
New products, etc. 693 Apr. 2012 Mar. 2013 None
Pacific Valve (Taiwan) Co., Ltd.
(Taichung, Taiwan)
Stamped and resin,
Valve
New products, etc. 369 Apr. 2012 Mar. 2013 None
Pacific Valve Industrial Co., Ltd.
(Yangsan, Korea)
Valve Maintenance and retooling, etc. 83 Jan. 2012 Dec. 2012 None
Pacific Air Controles Co., Ltd.
(Asan, Korea)
Valve Production expansion, etc. 1,793 Jan. 2012 Dec. 2012 Increase in production capacity to around 50%
Pacific Industries (Thailand) Co., Ltd.
(Chachoengsao, Thailand)
Valve Maintenance and retooling, etc. 82 Apr. 2012 Mar. 2013 None
Tianjin Pacific Auto Parts Co., Ltd.
(Tianjin, China)
Stamped and resin New products, etc. 121 Jan. 2012 Dec. 2012 None
Changsha Pacific Hanya Auto Parts Co., Ltd.
(Changsha, China)
Stamped and resin New products, etc. 181 Jan. 2012 Dec. 2012 Some facilities commenced operations in July 2012