Teikoku Piston Ring Business Report FY2006

Business Highlights

Financial overview
(In million JPY) FY2006 FY2005 Rate of Change (%) Factors
Sales 52,307 48,507 7.8 Sales increased due to sales growth at the Group companies overseas, even though domestic sales in Japan remained unchanged.
Operating income 5,272 5,271 0.0 Operating income remained unchanged from that of the previous year due to the Company's efforts to  mitigate negative factors that impacted its business. These include a change in its product mix, increases in costs connected with quality control, and  amortization costs for facilities.
Ordinary income 5,849 5,848 0.0
Current net income 2,751 3,066 (10.3) Current net income decreased due to the increased use of allowances budgeted for constructing facilities that respond to environmental measures; and other purposes.
Automotive related product business
Sales 39,383 36,725  7.2

Please see below.

Operating income 3,946 3,982 (0.9) Operating income decreased due to sagging revenue resulting from a change in the product mix of its mainstay products, namely piston rings and cylinder liners.

Factors (Automotive product business)
-In its piston ring business, sales decreased by 0.9% year-on-year to 15.356 billion JPY due to the decreased sales of after market parts, despite the increased production volume and sales in North America.

-In its cylinder liner business, sales increased by 12.4% year-on-year to 18.849 billion JPY due to increased demand for its proprietary cast cylinder liners for aluminum blocks in line with the growing use of aluminum engine blocks. 

-For sintered alloy parts business, the Company achieved a good performance due to the strong production and sales at its bases in China, while the domestic demand in Japan remained unchanged.  

-For aluminum business, the sales of aluminum wheels for motor cycles increased favorably.

Rationalization activities

The Company is set to accelerate its cost reduction activities by raising the target to twice the level of the original plan set for the period of three years from fiscal 2006 to 2008. The original target aimed at achieving a result two times higher than the actual result in fiscal 2005 was already met during this fiscal year, which is the first year in the mid-term plan. At its Nagano plant, which plays a role of a global mother plant for production of components including piston rings, various steps for rationalization are aggressively being taken, including introduction of a 24-hour operation of the production line and increased application of automation. As expertise and know-how nurtured at the Japanese plant is disseminated worldwide, TPR intends to pursue more vigorous measures for rationalization, such as transfer of the production base of some products from Nagano to Vietnam in the future. (From an article in the Nikkan Jidosha Shimbun on Mar. 8, 2007)

The Company will strengthen its streamlining initiatives in order to increase its profitability at the sintered products business. Demand for valve sheets and other sintered components used in engine products and other auto parts is growing as Japanese automakers are stepping up worldwide production. The market is projected to expand further because applications of such products are expected to increase. The company, which now finds it difficult to maintain profitability in the business due to surging prices of copper powders and other materials, aims to become more competitive in the market by ensuring greater production efficiencies. (From an article in the Nikkan Jidosha Shimbun on Mar. 27, 2007)

Establishment of new subsidiares
The Company established its wholly owned production subsidiary, TPR Vietnam Co.,Ltd. (TPRV, as it is tentatively named), in Vietnam in August 2006. The new production subsidiary was capitalized at 5 million dollars and is constructed on a site which is located 32km North of Ho Chi Minh, Binh Duong Province. The Company plans to produce 30 million cast-iron piston rings per year there. The start of production is planned for July 2007. Total number of employees will be 200.  

The Company established Dailian Bo Xin Te Gang Zhipin Co., Ltd in September 2006 jointly with Dailian Ding Xin Te Gang Zhipin Co., Ltd  and Anqing Huanxin Group Co., Ltd. This new facility processes, manufactures and sells special alloy materials in China.
>>>See Capital Investment for more details

Future tasks

1. Expand sales of core product items such as piston rings, cylinder liners, and sintered products.
2. Enhance product creation and implement innovative cost-reduction activities in all the facilities among the Group companies.
3. Development of human resources to support its business operations worldwide.
4. Enhancement of development activities to create leading world-class technologies and products.
5. Establish a quality assurance structure worldwide.
6. Work to build a global procurement network.
7. Promote CSR activities
8. Support its new businesses to grow

<Target figures to achieve in FY2009>
(Consolidated figures)
Sales: 60,000 million yen
Operating profit: 5,800 million yen
Ordinary profit: 6,800 million yen


R&D costs for FY2006 were 1,667 million yen.

Main development achievements (Automotive product business)
① Engine components
1) Piston rings
-Development of super low friction rings (undergoing DLC coating treatment)
-Development of thin, highly-functional oil rings (with high flowing capacity and durability)
-Efforts to build a production line that achieves reducing the production costs of piston rings
2)  Cylinder liners
-Development of super thin azrock centrifugal casting iron liners (Development of more compact blocks)
-Development of super light-weight, highly thermal-conductive liners (Aluminum liners)
3) Valve seats
-Development of highly abrasion-resistant materials of used in valve seats (In response to the use of alternative fuels.)

② Other products
 1) Aluminum products: Development of new casting method for aluminum wheels used on motorcycles and installing the facilities
to handle them.
 2) Sintered mechanical parts: Development of processing method that improves the dimensional accuracy of shock absorber components

Improvement in R&D infrastructure
① Improvement and expansion of facilities for evaluating the function of each part as well as the performance of each part when mounted on engines  
② Working on building a simulation system
③ Efforts to develop a support system to assist in developing designs (Piston rings)

Investment Activities

The Company made a capital investment of 6.538 billion JPY in fiscal year 2006 ending in March 2007, mainly to install facilities in order to increase its production capacity as well as to streamline production facilities. Part of the investment was made for environmental measures such as those needed to enhance earthquake reinforcing.

-For the automotive product business, the Company made a capital investment of 5.807 billion JPY mainly for increasing its production capacity for piston rings and cylinder liners, and rationalizing operations to achieve cost reductions.
-Other investments of 731 million yen were made in other businesses for streamlining as well as maintaining and upgrading production facilities.

The Company announced that it will establish a joint venture with Chinese partners in Liaoning Province, China, to manufacture special alloy materials. The Company plans to produce wire rods for dies and shafting for motors from January 2007, with a total investment of US$10 million. A joint venture will be established by the end of this September with US$ 6 million in capital. It will be owned 42.0% by DDX, a Chinese company, 34.8% by TPR and 23.2% by another local partner, to manufacture and process special alloy materials at a plant to be built in the Dalian Economic Development Zone, Dalian, Liaoning Province. It will employ about 150 people and monthly production volume of wire rods for dies and shafting for motors will be 400 tons in 2010. (From an article in the Nikkan Jidosha Shimbun on Sep.19, 2006)

New facilities:  (Automobile related product business)

Name of the business
Type of facility and purpose Planned investment
(million JPY)
Planned construction start date Planned completion Increased capacity upon completion
Head office Nagano factory Facilities for piston rings 1,432 2007.4 2008.3 3% increase
Head office 
Gifu factory
Facilities for sintered valve seats 280 2007.4 2008.3 10% increase
TPR Vietnam Co.,Ltd. Facilities for piston rings 607 2007.4 2008.3 Planning to start commercial operations in FY2007

Facility refurbishment: (Automobile related product business)
Name of the business
Type of facility and purpose Planned investment
(million JPY)
Planned construction start date Planned completion Increased capacity upon completion
Head office Nagano factory Rationalizing  facilities for piston rings 1,591 2007.4 2008.3 None
Teipi Industries Co., Ltd. Rationalizing  facilities for cylinder liners 900 2007.4 2008.3