Daido Metal Co., Ltd. Business Report FY ended Mar. 2018
Financial Overview |
(in million JPY) |
| FY ended Mar. 31, 2018 | FY ended Mar. 31, 2017 | Rate of change (%) | Factors | |
| Overall | ||||
| Sales | 106,648 | 85,073 | 25.4 | As stated below. |
| Operating income | 6,511 | 5,103 | 27.6 | -Income increased year over year, thanks to a solid launch of operations at the plant in Mexico and effective cost-reduction initiatives, despite increased prices for materials and temporary costs incurred to acquire two companies. |
| Ordinary income | 6,708 | 5,427 | 23.6 | - |
| Profit for the year attributable to owners of the parent | 3,281 | 2,635 | 24.5 | -Posted a JPY 140 million impairment loss for fixed assets in subsidiaries. |
Factors
-Japan: Income in the automotive sector rose, thanks to higher sales of automotive engine bearings and turbo-charger bearings. In addition, the two companies that were recently acquired contributed an additional JPY 2.16 billion yen in sales this reporting period.
-Outside Japan: In North America, sales of bearings for automobiles and construction equipment were strong. In addition, sales in Europe and Asia grew, increasing 47.0% year over year.
Recent Business Developments
-The Company will open a Chinese technical center in 2019. The aim of this move is to respond more speedily to the needs of its customers and to win more orders from Japanese, U.S., and European carmakers operating in China, as well as Chinese local automakers. The Chinese government's new energy vehicle (NEV) regulations will go into effect in 2019. Daido Metal expects that the new technical center will contribute to an order increase not only for engine bearings, its main product, but also for the electric vehicle parts produced by the company and Daido Metal Group companies. (From an article in the Nikkan Jidosha Shimbun on July 30, 2018)
-The Company announced that it will establish a subsidiary to manufacture aluminum die-casting products for EVs in Samutprakarn, Thailand. The company aims to increase orders for its products and secure its place as a pioneer. The subsidiary will be capitalized at THB 200 million. It is scheduled to start operations in February, 2020. (From a press release on January 10, 2018)
-Nippon Piston Ring Co., Ltd. (Nippon Piston Ring) announced that it has reached an agreement to transfer a portion of shares in its wholly-owned subsidiary, NPR of Europe GmbH (NPR of Europe), to Daido Metal Co., Ltd. (Daido Metal). Nippon Piston Ring and Daido Metal are aiming to enhance cooperation and establish a system to supply highly competitive products to automakers in Europe. Currently, Daido Metal is supplying products like engine bearings through NPR of Europe. (From an article in the Nikkan Jidosha Shimbun on December 26, 2017)
Orders
-The Company announced that it has received an order to supply engine bearings, including main bearings, from Nissan for use in the Variable Compression-Turbo (VC-T) engine. The engine will enter series production in 2018. Compared to a same-class engine (2L, in-line 4 cylinders) without VCR technology, the VC-T engine needs more than double bearings. The monthly production will reach approximately 1 million units. (From a press release on December 5, 2017)
Mid-term Management Plan
(starting from fiscal year ending in March 2019 and ending in fiscal year ending in March 2024)
-Objectives set under the previous mid-term management plan are as follows: sales of JPY 111.0 billion; operating profit of JPY 16.7 billion; and an operating profit margin of 15%.
The actual results as of the fiscal year that ended in March 2018 (the last year covered under the plan) were as follows: sales of JPY 106.6 billion, operating profit of JPY 6.5 billion, and an operating profit margin of 6.1%.
-The business environment is changing in line with the growth of electric vehicles, which is affecting the Company’s own business. On one hand, the unit production volume of engine-mounted vehicles is forecast to grow overall worldwide. However, the Company indicated that the number of bearings per engine will decrease in line with the reduction in the number of cylinders because of the downsizing in engine exhaust emissions.
-The Company outlined the following four major policies:
- Refining existing businesses: conduct activities to win new customers in China and India, expand market share, and enhance productivity such as improving efficiency. Aim to achieve the highest share in the turbomachinery bearing market.
- Creating new businesses: Increase R&D spending, actively conduct M&As, and collaborate with Iino HD and ATA Casting Technology Japan.
- Reorganizing management structure: Establish technical center in China and R&D center in Germany.
- Activating the organization
-Continue investing JPY 10 billion as a financial strategy. In the latter half of the plan, exercise a cautious approach to the shrinking automotive engine-bearing market. Also, heavily invest in R&D, new-business-development, and M&A activities and ensure to maintain a solid foundation with a self-owned-capital ratio of 35%.
| FY ended March 2018 (Actual) |
FY ending March 2019 (Planned) |
FY ending March 2021 (Planned) |
FY ending March 2024 (Planned) |
|
| Sales (in JPY millions) | 106,600 | 107,000 | 120,000 | 140,000 |
| Operating profit (in JPY millions) | 6,500 | 6,700 | 10,000 | 14,000 |
| Profit margin (%) | 6.1 | 6.3 | 8.3 | 10.0 |
| ROE(%) | 6.9 | 8.9 | 9.5 | 10.0 |
| Capital Expenditure(in JPY millions) | 8,600 | 7,000 | 10,100 | 10,000 |
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)
R&D Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2018 | FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | |
| Overall | 1,923 | 1,821 | 1,667 |
R&D Structure
-Established a technical center in the USA in October 2015.
R&D activities
Development of bearings for low-fuel consuming engines with start-stop systems and hybrid architectures
-The Company is developing these to significantly improve wear resistance, seizure resistance, and friction characteristics, developing various types of plastic overlays that can respond to all sorts of requirements much better than existing products can.
Development of bearings with new lead-free overlays
-The Company is developing these bearings that comply with European lead regulations and offer the highest standards in the world in terms of performance (fatigue resistance, seizure resistance, and wear resistance); and furthermore, the Company is developing and promoting new, lead-free overlays, aluminum alloy bearings, and copper alloy bearings that can withstand harsh environments.
Developing bearings for racing use
-The Company is developing and continuing to launch bearings for use in F1 and NASCAR racing. These bearings demonstrate excellent reliability in terms of their exceptional response to ultra-highspeed revolutions.
Developing new resin materials for use in bearings
-The Company is developing bearings made of new, plastic materials, which further enhance performance, for use in automotive parts, general industrial-use parts, and electric-generator parts.
Development of materials that increase riding comfort, for bearings used in shock-absorbers
-The Company is developing lead-free, plastic materials for bearings used in automotive shock absorbers, which improve riding comfort by providing more stable steering control and enhanced vibration absorption.
-The Company is conducting R&D activities such as theoretical analyses, analytical evaluation, single-unit testing and evaluation, and simulation testing and evaluation on turbomachinery bearings, developing uses for other types of bearings.
Capital Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2018 | FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | |
| Overall | 8,694 | 12,329 | 14,802 |
| -Automotive engine bearings and non-engine bearings | 4,420 | 6,970 | 7,598 |
Planned Capital Investments (Bearing metal for automobiles business) |
(As of Mar. 31, 2018) |
| 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 | 382 | May. 2016 | Sep. 2018 |
| Bi-metal production plant (Aichi Pref., Japan) |
Facilities and equipment to manufacture bi-metals (bearing materials); and construct plant building | 1,634 | Oct. 2015 | Sep. 2018 |
| Production Engineering Center, R&D Center (Aichi Pref., Japan, etc.) |
Other facilities | 475 | May. 2015 | Dec. 2018 |
| Inuyama Administration Office (Inuyama, Aichi Prefecture) |
Other facilities | 108 | Sep. 2017 | Sep. 2018 |
| Home Office (Naka Ward, Nagoya) |
Invest in systems | 490 | Jan. 2018 | Apr. 2020 |
| Daido Plane Bearing Co., Ltd. (Gifu Pref., Japan) |
Facilities and equipment to manufacture half bearings | 2,128 | Dec. 2015 | Aug. 2019 |
| Daido Precision Metal (Suzhou) Co., Ltd. (Jiangsu, China) |
Facilities and equipment to manufacture half bearings | 640 | Sep. 2016 | Dec. 2018 |
| Daido Metal Czech s.r.o. (Brno, Czech) |
Facilities and equipment to manufacture half bearings | 432 | Jan. 2017 | Apr. 2018 |
| Daido Metal Mexico S.A.de C.V. (Jalisco, Mexico) |
Facilities and equipment to manufacture half bearings | 1,097 | May. 2017 | May. 2018 |