Daido Metal Co., Ltd. Business Report FY ended Mar. 2017
Financial Overview |
(in million JPY) |
| FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | Rate of change (%) | Factors | |
| Overall | ||||
| Sales | 85,073 | 81,400 | 4.5 | 1) |
| Operating income | 5,103 | 7,114 | (28.3) | 2) |
| Ordinary income | 5,427 | 6,796 | (20.1) | -Ordinary income was lower, even though the amount of loss from negative foreign-currency translation significantly improved. |
| Profit for the year attributable to owners of the parent | 2,635 | 3,919 | (32.8) | -Profit decreased because of an impairment loss incurred with the sale of land owned by NDC Co., Ltd. (a consolidated subsidiary) and with the loss on fixed assets such as production facilities at Daido Industrial Bearings Europe Ltd. |
| Automotive Bearings | ||||
| Sales | 59,365 | 52,926 | 7.9 | -Overall sales were up slightly, thanks to increased volumes of bearings for turbo-chargers and high-value-added engines. However, sales in Japan were lower because the Company transferred bearing production to Group transplants outside Japan and because new-car-production volumes in Japan decreased. -Higher revenue from increased product orders received in North America, China, and Thailand offset the effect of negative currency translation from European sales. |
| Operating income | 6,939 | 7,031 | (8.6) | |
| Automotive bearings (non-engine) | ||||
| Sales | 12,757 | 17,178 | (1.7) | -Similar to the results of the automotive-engine-bearing business, sales and income decreased because sales in Japan were lower as the result of the Company’s transferring bearing production to Group transplants outside Japan and the effect of negative currency translation, especially in regard to the euro. |
| Operation income | 2,744 | 3,395 | (3.0) | |
Factors
1)
-New-vehicle production in Japan by Japanese OEMs slightly decreased. There was an economic downturn in the shipbuilding and construction-equipment segments. Sales of electrode sheets for electric double-layer capacitors (a new business segment) and the sales generated by Iino Holding Co., Ltd. from the fourth quarter contributed to the consolidated results.
-Higher sales in Asia (China and Thailand) were a positive factor. However, the construction-equipment segment was sluggish in North America. In Mexico, production volumes of automotive bearings were higher than anticipated, which resulted in higher sales. In the European Region that includes Russia, sales on a local-currency basis were higher for the year; however, final sales were lower in the end because of the effect of negative currency translation.
2)
-Due to a slowdown in the shipbuilding and construction-equipment segments worldwide, demand for added-value products fell both in and outside Japan. Income decreased also as a result of higher production and logistics costs that rose in line with responding to quality and delivery priorities, which had to be addressed in line with a huge and sudden surge in orders from customers in Mexico.
Acquisitions
-The Company announced that it will acquire full ownership of Iino Holding Co., Ltd. from its shareholder iSigma Business Advancement Fund II Investment LLP for JPY 10.19 billion (approximately USD 100.3 million). Iino Holding manufactures and sells engine and transmission parts for automobiles, including bending pipes, dowel pins, and numerical control cutting products. The company has manufacturing and sales sites in the Philippines, the U.S., Mexico, and China and also operates a sales company in Indonesia. Sales for the fiscal year ended March 2016 reached approximately USD 6.6 billion. The transaction is expected to be completed by the end of November 2016. (From a press release on September 27, 2016)
-The Company will acquire ownership of Iino Holding Co., Ltd. a manufacturer of automotive engines and transmission parts based in Chiyoda-ku, Tokyo. The company will expand the lineup of its automotive precision metal parts except for plain bearings to strengthen its marketing capabilities. The company will acquire a 100% stake in Iino Holding owned by iSigma Business Advancement Fund II, Iino Holding's shareholder. Daido Metal will link its own and Iino Holding's overseas business bases to make procurement and distribution more efficient. Also, the company aims at improving technological capabilities through personnel exchange and sharing of know-how, production efficiency, management efficiency and expanding its business globally. (From an article in the Nikkan Jidosha Shimbun on October 7, 2016)
-The Company announced that it will acquire ATA Casting Technology Japan, Co., Ltd. (ATA Casting Technology Japan), a subsidiary of Asahi Tec Corporation, for JPY 12.4 billion. ATA Casting Technology Japan and its subsidiary, ATA Casting Technology Co., Ltd., are manufacturers of aluminum die-cast parts mainly for automakers and automotive parts suppliers. The ATA Casting Technology Group is the largest Japanese aluminum die-cast maker in Thailand, taking charge of every phase from aluminum melting through casting, processing, inspection, to shipment. Through the acquisition, the company will promote personnel exchanges and sharing of technology and knowhow, boost production capacity, and improve the efficiency of operating systems. The company is aiming to enhance its business proposition by strengthening its automotive product lineup other than sliding bearings, and diversify its business. The acquisition will be effective in January 2017. (From an article in the Nikkan Jidosha Shimbun on December 27, 2016)
Recent Development in Japan
-The Company will move to expand its production capacity for engine slide bearings in Japan. A third manufacturing plant will be built in Seki City, Gifu Prefecture, to increase supply of engine slide bearings, for which demand is growing globally. The plant will incorporate a newly developed compact production line with half the line length of conventional lines. Since there significant growth in the Japanese new car market is not expected, the company will strengthen its production capacity in Japan with lower initial investments and production costs. The new plant will be built within the premises of Daido Plain Bearings Co., Ltd., the company's manufacturing subsidiary for automotive engine bearings. The plant building will be completed in April 2017, with full-scale operations starting in July of the same year. Slide bearings produced at the plant will be supplied to automakers in and outside Japan. The investment amount will be approximately JPY 2.2 billion, for the construction of the plant building plus the cost for introducing production lines and other facilities. (From an article in the Nikkan Jidosha Shimbun on October 17, 2016)
Recent Development Outside
-The Company will start strengthening its operations in China. It will build a new plant in Suzhou in 2017 to boost its production capacity for engine slide bearings. At the same time, the company will station engineers in China to enhance its support system there with an aim to expand business with Chinese and European OEMs in the country. OEMs are increasing their production volumes in China. The company will bolster its supply network and sales activities there to increase its market share. The company held an about 30% share of the global engine slide bearing market in 2015. Under its mid-term business plan, the parts supplier aims to increase its market share to 40% by the end of fiscal year 2017. (From an article in the Nikkan Jidosha Shimbun on November 7, 2016)
Award
-The Company has been named a preferred supplier of plain bearings by Robert Bosch GmbH for the third consecutive year. In presenting the award, Bosch cited Daido's outstanding services over the past years and inducted the company into the elite ranks of its strategically most important suppliers. (From a press release on April 8, 2016)
Mid-term Management Plan (starting from fiscal year ending in March 2013 and ending in fiscal year ending in March 2018)
-Maintain the world’s highest* share of slide bearings, as a major, global slide-bearing manufacture.
-Continue to maintain the world’s largest* market share of automotive engine bearings, of which slide bearing are the core products.
-Maintain the world’s highest* market share of non-automotive bearings for ships (excluding mega-ships), industrial equipment and machinery, and rotating equipment.
-Operate under a five-regional structure to increase sales.
-Continue to demonstrate technological excellence and strengthen R&D capabilities to meet the needs of all regions around the world.
-Build a solid financial base.
*According to the Company’s estimate
Targets under Stage 2
| FY ended March 2016 (Actual) |
FY ending March 2017 (Actual) |
FY ending March 2018 (Estimated) |
FY ending March 2018 (Planned) |
|
| Sales (in JPY millions) | 81,400 | 85,000 | 96,000 | 111,000 |
| Operating profit (in JPY millions) | 7,100 | 5,100 | 7,000 | 16,700 |
| Profit margin (%) | 8.7 | 6.0 | - | 15 or higher |
Market share in the world
| Calendar year 2010 (Prior to mid-term plan) |
Calendar year 2015 | Final target at end of Stage 2 (FY ending March 2018) |
|
| Engine half bearings | 30% | 31.8% | 40% |
| Bearings for small turbochargers | 26% | 32% | 40% |
*Shares are based on the Company’s estimates
Challenges for Stage 2
From the fiscal year ended in March 2016 to the fiscal year ending in March 2018
- Early profitability of North American operations
- Launch automotive engine bearing business at BBL Daido Private Ltd. (India)
- Ensure that business operations at Daido Metal Russia LLC contribute to business performance, in terms of bearings for trucks and bearings for non-Japanese OEMs
- Launch commercial production at Daido Metal Saga Co., Ltd. sometime during the fiscal year ending in March 2017, in order to enhance production capacity of bi-metals.
- Established the North America Technical Center in the USA in October 2015.
- Established a Global Business Management Office in April 2016.
- Established a Business Improvement Office in April 2016.
- Transferred the design engineers from the European Technical Center in the Czech Republic to the outskirts of Stuttgart, Germany.
- Planned to make Daido Metal USA profitable in the fiscal year that ended in March 2017, although it faced the challenge of responding to production problems and resulting cost increases at Daido Metal Mexico S.A. de C.V., which arose due to unexpected and sudden increases in customer orders.
- Plans to make NDC Co., Ltd. profitable as soon as possible, which was impacted by lower new-vehicle production volumes at Japanese OEMs and which subsequently had to significantly speed up reorganizing production facilities that had to be put into operation for other uses.
Outlook for FY ending Mar. 31, 2018 |
(in million JPY) |
| FY ending Mar. 31, 2018 (Forecast) |
FY ended Mar. 31, 2017 (Actual Results) |
Rate of Change (%) |
|
| Sales | 96,000 | 85,073 | 12.8 |
| Operating income | 7,000 | 5,103 | 37.2 |
| Ordinary income | 7,100 | 5,427 | 30.8 |
| Profit for the year attributable to owners of the parent | 4,200 | 2,635 | 59.4 |
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)
R&D Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | FY ended Mar. 31, 2015 | |
| Overall | 1,821 | 1,667 | 1,559 |
R&D Structure
-Established a technical center in the USA in October 2015.
R&D activities
Development of bearings for fuel-efficient engines with start-stop systems and hybrid mechanism
-Develop new resin overlays that lower friction and improve resistance to wear and seizure.
Development of lead-free overlay bearing
-The Company is developing and already making product presentations on automotive engine aluminum alloy bearings that demonstrate higher performance in terms of resistance to wear, seizure, and friction, and which also meet the highest standards in the world and comply with European lead regulations.
-The Company is developing and already making product presentations on new lead-free overlays and copper-alloy bearing materials that can withstand use in harsh environments.
Development of bearings for race cars
-The Company is developing, while continuing to deliver, highly reliable bearings that can endure ultra-high revolutions and be used in F1 racing cars.
Development of new resin bearing material
-The Company is developing a new type of resin bearing material that achieves higher performance and which can be used for automotive parts, general industrial-use parts, and electric-power-generator parts.
Development of shock-absorber material enhancing riding comfort
-Development of lead-free, resin bearing material that enhances riding comfort, i.e., steering stability and vibration absorption, for automotive shock absorbers. The Company is continuing to develop materials that further improve performance.
Capital Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | FY ended Mar. 31, 2015 | |
| Overall | 12,329 | 14,802 | 10,597 |
| -Automotive engine bearings and non-engine bearings | 6,970 | 7,598 | 6,947 |
| -Facilities to manufacture bi-metals (Bearing material) | 3,363 | 5,084 | 327 |
-Investment activities in FY ended Mar. 31, 2017
| 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, European and North American plants. |
| -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 is making capital investments to increase production capacity and improve productivity at Daido Metal Saga, a subsidiary in Japan. |
Planned Capital Investments (Bearing metal for automobiles business) |
(As of Mar. 31, 2017) |
| Name (Location) |
Purpose of Equipment Installation | Estimated amount (in million JPY) |
From | To |
| Inuyama Plant (Aichi Pref., Japan) |
Facilities and equipment to manufacture half bearings | 628 | Feb. 2015 | Jul. 2017 |
| Bi-metal production plant (Aichi Pref., Japan) |
Facilities and equipment to manufacture bimetals (bearing materials); and construct plant building | 4,126 | Apr. 2014 | Sep. 2017 |
| Production Engineering Center, R&D Center (Aichi Pref., Japan, etc.) |
Other facilities | 475 | May 2015 | Jun. 2017 |
| Daido Plane Bearing Co., Ltd. (Gifu Pref., Japan) |
Facilities and equipment to manufacture half bearings | 3,438 | Sep. 2012 | Aug. 2017 |
| Dong Sung Metal Co., Ltd. (Yeongdong-gun, Korea) |
Facilities and equipment to manufacture half bearings | 236 | Jun. 2015 | Sep. 2017 |
| Dyna Metal Co., Ltd. (Chachoengsao, Thailand) |
Facilities and equipment to manufacture half bearings | 113 | Nov. 2016 | Jun. 2017 |
| Daido Precision Metal (Suzhou) Co., Ltd. (Jiangsu, China) |
Facilities and equipment to manufacture half bearings | 640 | Sep. 2016 | Dec. 2017 |
| Daido Metal Czech s.r.o. (Brno, Czech) |
Facilities and equipment to manufacture half bearings | 283 | Jul. 2013 | May 2017 |
| Daido Metal Mexico S.A.de C.V. (Jalisco, Mexico) |
Facilities and equipment to manufacture half bearings | 1,097 | Jan. 2016 | May 2017 |