Daido Metal Co., Ltd. Business Report FY ended Mar. 2014

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 Rate of change (%) Factors
Overall
Sales 77,350 70,886 9.1 -
Operating income 7,368 6,286 17.2 -
Ordinary income 8,063 6,935 16.3 -
Current net income 4,735 4,385 8.0 -
Automotive Bearings
Sales 50,021 44,364 12.8 1)
Operating income 6,632 5,345 24.1
Automotive bearings (non-engine)
Sales 14,992 13,769 8.9 2)
Operation income 4,053 3,480 16.5

Factors
1) Automotive Bearings
-In addition to strong orders in Europe, the U.S.A. and Asia such as in China, favorable currency translation contributed to the increase in sales outside Japan.
-In Japan, sales increased over the last fiscal year, because vehicle demand increased in the latter half of the year.

2) Automotive bearings (non-engine)
-Sales increased outside Japan as a result of sales activities.
-In Japan, sales increased over the last fiscal year, because vehicle demand increased in the latter half of the year.

Mid-term Management Plan

-The Company announced that it will revise its six-year business plan covering from April 2012 through March 2018 (FY 2012-2017) in order to enhance its global strategy. By the fall of 2014, the Company will map out a rolling plan for the second stage of the plan starting in April 2015. As demand in the North American and Chinese markets is growing more significantly than originally fore-casted, the Company intends to increase production capacity in Mexico and China. In the current project, the Company's new Mexican plant will be able to produce engine bearings for 5 million vehicles per year by March 2017. In order to meet increasing orders from Japanese and American automakers, the Company plans to make an additional investment in the facility. Meanwhile, it is considering setting up its third manufacturing plant in China. (From an article in the Nikkan Jidosha Shimbun on May 14, 2014)

-Performance Objectives
  • Consolidated sales: JPY 111,000 million
  • Operating income: JPY 16,700 million
  • Profit margin: 15% or higher
-First phase of increased production
2012
  • Completion of third plant at Dyna Metal Co., Ltd. (Thailand)
  • Completion of second plant at Daido Precision Metal (Suzhou) Co., Ltd. (China)
2013
  • Completion of second plant at Daido Metal Czech s.r.o. (Czech Republic)
  • Completion of second plant at PT. Daido Metal Indonesia
  • Completion of new plant at Daido Metal Mexico S.A. de C.V.
  • Daido Metal Russia LLC is preparing to respond to automotive production by non-Japanese car makers, and to expected truck production.

Outlook for FY ending Mar. 31, 2015

(in millions of JPY)
  FY ending Mar. 31, 2015
(Forecast)
FY ended Mar. 31, 2014
(Actual Results)
Rate of
Change (%)
Sales 80,000 77,350 3.4
Operating income 7,800 7,368 5.9
Ordinary income 8,100 8,063 0.5
Net income 4,800 4,735 1.4

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

R&D

R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Overall 1,319 1,251 1,214

R&D Structure

-R&D activities are conducted at three centers: R&D Technical Center, Production Technology Center, and the Design Center.
-As of March 31, 2014, the Company has 70 researchers.

R&D Facilities

<Japan>
-The Company established its Central R&D Center (Inuyama, Aichi Prefecture), which is one of the few general tribology R&D centers in the world.

<Czech>
-The Company announced that it will establish the European Technical Center (ETC) in Brno, the Czech Republic. The new technical center, which will be set up at Daido Metal Czech s.r.o., will provide design, development, and technical services to its customers. Operation is scheduled to begin in March 2014. (From a press release on December 20, 2013)

R&D Activities

R&D on engine bearings providing excellent performance in terms of wear and abrasion resistance, for idling-stop and hybrid systems
-The Company developed a plastic overlay with improved durability and non-firing qualities.

R&D on bearings with new lead-free overlay
-It also developed a highly durable aluminum-alloy bearing for engines, which offers excellent performance in terms of resistance to wear, abrasion, and fatigue. The bearing also complies with European lead regulations.

-The Company developed new lead-free overlays and copper-aluminum alloys, which are capable of withstanding use in the very harshest of environments.

R&D on low-friction bearings
-The Company developed a new plastic overlay that lower bearing friction, which is a must in terms of responding to the growth of low-fuel consumption in engines.

R&D on racing bearings
-The Company has developed, and is supplying, racing bearings offering tremendous performance in term of durability and non-firing qualities, capable of enduring ultra-high-speed revolutions in F1 racing cars.

R&D on new PEEK materials
-The Company is developing bearings composed of PEEK materials, working to improve their performance in automotive parts, general industrial equipment, and electric power generators.

R&D on shock-absorber bearings to develop materials that increase riding comfort
-The Company developed bearings made from lead-free, plastic material that enhances riding comfort in terms of steering stability and shock absorption, based on the bearings used in automotive shock-absorbers.

Product Development

Resin-coasted bearing for automotive engines

-The Company developed a new bearing for automotive engines which is coated with a layer of DLA02 resin. The Company has received its first order of these new bearings from an automaker. Solid lubricant is dispersed on the resin, which improves wear resistance and reduces engine vibration. The Company's competitor, Taiho Kogyo Co. Ltd. has already manufactured and supplied similar bearings ahead of the Company. The Company developed the bearing specifically for vehicles with start/stop systems to accommodate engines that regularly shut down and restart. The Company reduced the wear depth of the new bearing to 3-4 micrometers. Conventional aluminum alloy bearings without the DLA02 resin have a wear depth of 26-27 micrometers. The Company will supply the new bearings to American and European automakers starting in 2014. (From an article in the Nikkan Jidosha Shimbun on December 5, 2013)


R&D activities on production technology

Compact production line for Engine slide bearings
-The Company has developed a compact production line for engine slide bearings. The new production line is scheduled to become operational this fall at Daido Plain Bearings Co., Ltd., the Company's manufacturing subsidiary located in Gifu Prefecture, Japan. By reducing the length of the production line to about one-third of the existing line, the Company also cut down on the capital expenditure for the production line to about 30%. This is expected to result in significant cost savings in plant construction and expansion projects. The new compact production line will be introduced at the Company's global facilities at the timing of new product launches. The Company is poised to increase its share in the global engine bearing market to 40% by FY ending March 2018, the final year of the current mid-term business plan. (From an article in the Nikkan Jidosha Shimbun on August 28, 2013)

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Overall 10,838 10,040 5,596
Facilities exclusively for processing automotive bearings 8,502 6,574 2,768
Facilities to manufacture bi-metals (Bearing material)
165 247 1,861

Investments

Facility Outlines
Automotive Bearings
-Facilities specialized in processing -The Company invested in facilities and equipment for the purpose of raising the production capacity at its own and at those of its consolidated subsidiaries (Daido Plain Bearing and NDC) in Japan.
-At its consolidated subsidiaries outside Japan, the Company invested in facilities and equipment for the purpose of raising production capacity, especially at its Asian and European plants.
-A new production plant was founded at Daido Metal Mexico S.A.de C.V.
-Production facilities producing Bi-metal (Bearing material) -The majority of bi-metals used at domestic and overseas plants is supplied by the Company.
The Company invested in facilities and equipment mainly at its own production facilities to raise production capacity.

Investments Outside Japan

<India>
-The Company announced that it will construct a new plant to produce automotive engine bearings at its Indian joint venture, BBL Daido Private Limited (BBLD). The plant is scheduled to become operational by the end of 2015. BBLD, which was jointly established with the Amalgamations Group of India in 2001, has been manufacturing bushes for automotive shock absorbers. With the expansion of BBLD, the Company has raised its equity stake in the subsidiary from the previous level of 40% to 50%. (From a press release on June 10, 2014)

<Czech>
-The Company will produce bearings for turbochargers from 2014 in Czech Republic to meet brisk demands following turbochargers with the downsizing trend of engines in Europe. The Company will increase its supply capacity by expanding its global production base. Currently, the Company is producing bearings for turbochargers in the U.K., Thailand and Japan, having a 33% share in the global market of the product. Adding Czech as its fourth production base, the Company will reinforce its production in Europe and increase sales volume, aiming to raising its global market share to 40% in 2017. (From an article in the Nikkan Jidosha Shimbun on Jun 11, 2013)

<Mexico>
-The Company will speed up expanding its bearing production operations for automobile engines in Mexico. The Company aims to increase its production capacity to 5 million vehicles per year by year 2015 and 2016 to meet growing demand for engine bearings in North America. At the new Mexico plant which will start operation this summer, production of the bearings for the U.S. is planned to begin initially, and production for the domestic Mexican market will soon follow from the year 2014 as more Japanese automakers tap into Mexico. About JPY 3 billion will be additionally invested for the facility to reinforce the production capacity gradually in Mexico. (From an article in the Nikkan Jidosha Shimbun on May 31, 2013)

Planned Capital Investments (Bearing metal for automobiles business)

Name
(Location)
Purpose of Equipment Installation Estimated amount
(in million JPY)
From To Capacity increase
on completion
Bi-metal production plant
(Aichi Pref., Japan)
Facility to produce bi-metals (Bearing material) 268 Jul. 2010 May. 2014 About 8% increase in bi-metal (Bearing material) production capacity
Building 170 Apr. 2014 Dec. 2015 No increase (investment is to rebuild plant building)
Production Engineering Center
(Gifu Pref., Japan)
Facility to conduct testing and research 234 Sep. 2012 May. 2014 -
R&D Center
(Aichi Pref., Japan)
Other facilities 215 Apr. 2014 Sep. 2014 Sheet production capacity
100,000 -150,000m/month
Inuyama Plant
(Aichi Pref., Japan)
Facility to produce half-bearings 318 Apr. 2013 Jun. 2014 About 60% increase in half-bearings production capacity
Facility to produce half-bearings 190 Apr. 2013 Dec. 2014 Maintain current facilities; no capacity increase
Facility to produce half-bearings 604 Jan. 2013 Jun. 2014 No capacity increase to shift production  to the right place
Facility to produce half-bearings 247 Jul. 2013 Jul. 2014 Half bearing production capacity
895,000 pcs/month
Gifu Plant
(Gifu Pref., Japan)
Facility to produce half-bearings 118 Jul. 2013 May 2014 Bearing production capacity 293,000 pcs/month
Daido Plane Bearing Co., Ltd.
(Gifu Pref., Japan)
Facility to produce half-bearings 247 Sep. 2012 Feb. 2015 About 5% increase in half-bearings production capacity
Facility to produce half-bearings 500 Dec. 2012 Nov. 2014 About 20% increase in half-bearings production capacity
Facility to produce half-bearings 130 Jan. 2013 Sep. 2014 Half-bearing production capacity 700,000 pcs/month
Facility to produce half-bearings 340 Dec. 2013 Jun. 2014 Half-bearing production capacity 700,000 pcs/month
Facility to produce half-bearings 250 Dec. 2013 Nov. 2014 Half-bearing production capacity 600,000 pcs/month
Daido Precision Metal (Suzhou) Co., Ltd.
(Jiangsu, China)
Facility to produce half-bearings 240 Feb. 2013 Sep. 2014 About 25% increase in half-bearings production capacity
Facility to produce half-bearings 608 Jan. 2014 Oct. 2014 Half-bearing production capacity 5,650,000 pcs/month
Dyna Metal Co., Ltd.
(Chachoengsao, Thailand)
Facility to produce half-bearings 263 Apr. 2013 Jun. 2014 Half-bearing production capacity 460,000 pcs/month
Facility to produce bearings for turbo-charger 377 Jun. 2013 Sep. 2014 About 53% increase in bearing production capacity for turbo-charger
Facility to produce half-bearings 177 Jan. 2014 Dec. 2014 Half-bearing production capacity 809,000 pcs/month
Facility to produce half-bearings 121 Jan. 2014 Oct. 2014 Half-bearing production capacity 162,000 pcs/month
Daido Metal Mexico S.A.de C.V.
(Jalisco, Mexico)
Facility to produce half-bearings 279 Nov. 2012 Aug. 2014 Half-bearing production capacity 700,000 pcs/month
Facility to produce half-bearings 432 Feb. 2013 Dec. 2014 Half-bearing production capacity 1,000,000 pcs/month
Daido Metal Russia LLC
(Nizhny Novgorod Oblast,
Russia)
Facility to produce half-bearings 863 Mar. 2013 Dec. 2014 Half-bearing production capacity 367,000 pcs/month
Daido Metal Kotor AD.
(Kotor, Montenegro)
Facility to produce half-bearings 336 Aug. 2013 Nov. 2014 About 87% increase in half-bearings production capacity
Daido Metal Czech s.r.o.
(Brno, Czech)
Facility to produce bearings for turbo-charger 283 Jul. 2013 Mar. 2015 Bearing production capacity for turbo-charger 80,000 pcs/month
NDC Co., Ltd.
(Chiba Pref., Japan)
Facility to produce half-bearings 372 Mar. 2014
Apr. 2015 Half-bearing production capacity 4,000,000 pcs/month