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5. TPR Co., Ltd. Business Report FY ended Mar. 2015

TPR Co., Ltd. Business Report FY ended Mar. 2015

Business Plan

Expansion of business in Southeast Asia
-The Company will expand its automotive engine parts business in Southeast Asia. The Company intends to raise the ratio of automotive engine parts sales to total engine parts sales in Southeast Asia, which currently stands at between 30 and 40 percent, to 50 percent or higher over the mid-term. The Company has not set its deadline in consideration of output fluctuation of the automakers, but aims to raise the ratio to 50% or above by the fiscal year ending March 2021. This move is in response to the output increase by Japanese automakers in the region. The Company plans to win new orders taking advantage of its competitiveness gained in China, where the Company holds the largest market share for piston rings and cylinder liners. (From an article in the Nikkan Jidosha Shimbun on March 14, 2015)

New business
-The Company will commercialize new rear brake drums and electric double layer capacitors, making them its core business. The rear brake drums were developed by utilizing the company's processing technologies for cast spiny cylinder liners. The new capacitors can be used in an energy regenerative system, and contribute to improve fuel efficiency of a vehicle. The Company plans to commercialize them in one to two years, aiming to win new orders. The Company intends to achieve an annual sales of JPY 10 billion with the new products by the fiscal year ending in March 2021 (FY2020). Currently, sample screening tests are conducted by the Company's customers. Volume production is expected to begin in FY2015 at the earliest. In the company's target entitled "T&F Goal 2220," the Company aims to expand its consolidated sales to JPY 200 billion in FY2020, up 34.1% from the FY2013 level. It also plans to increase sales of TPR (excluding Faltec) for FY2020 at JPY 100 billion, an increase of 36.8% again from the FY2013 level. The Company expects that the new products will account for 37.0% of total sales increase of JPY 27 billion. (From an article in the Nikkan Jidosha Shimbun on June 13, 2014)

Business Acquisition

-TOC Capacitor Co., Ltd., a subsidiary of the Company, announced that it will acquire the electric double-layer capacitor (EDLC) business from Nisshinbo Holdings Inc. Nisshinbo Holdings' Asahi Plant's (Chiba Prefecture, Japan) production facilities and distribution rights related EDLC will be transferred on August 1, 2015, while Nisshinbo Holdings retaining ownership of its intellectual property.

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

Mid-term Management Plan

-In 2015, the Company announced its mid-term management plan that starts from the fiscal year ending in March 2016 and ends in the fiscal year ending in March 2018. Sales targets are provided below.

• Consolidated sales: JPY 193,300 million (TPR's amount: JPY 105,000 million; Faltec's amount: JPY 88,300 million)
• Operating income: JPY 26,000 million (TPR's amount: JPY 20,400 million: Faltec's amount: JPY 5,600 million)

-In TPR operations mainly involving metal products, the Company will accelerate sales of automobile parts in North America and emerging countries under the slogan of "Innovation and Expansion." In addition to engine-related parts, the Company will launch new brake drums and new high-performance capacitors, which are made with aluminum and a casting material for weight reduction. During the period of the new medium-term business plan, the Company will aim to gain a foothold with new products toward the next medium-term business plan. The Company will also target to improve profitability in Faltec operations primarily involving plastic parts in an effort to increase the consolidated operating profit.

-The Company plans to expand the production of components other than piston rings and cylinder liners, which are its major products. This strategy is included in the company's mid-term business plan covering from April 2015 through March 2018. The Company has already won new contracts for carbon scraper rings, rubber and plastic sealing for powertrain components, and metal parts used in exhaust gas recirculation (EGR) systems and superchargers. Revenues from the sale of these products are expected to reach approximately JPY 3 billion by FY 2020 that ends in March 2021. A carbon scraper ring is a cylindrical component that is inserted into the upper part of a cylinder liner. It scrapes off the hard carbon deposit from the piston. This prevents the wearing of the inner cylinder, while lowering the consumption of lubricating oil. The product is already used on vehicles from European and U.S. automakers, and its annual production volume is forecast to increase to 2 million units by FY 2020. Rubber and plastic sealing for powertrain components is specifically targeted at Chinese automakers. The Company believes these products will become a strong growth area, as Chinese companies develop and produce higher-performance vehicles. The Company will promote sales of these products by leveraging its extensive sales network and a significant share in the Chinese engine parts market. As for EGR and supercharger components, the company is currently developing new products for Japanese automakers' diesel engine models by applying its expertise in casting. These components are expected to be put on the market within the next two or three years. (From an article in the Nikkan Jidosha Shimbun on February 20, 2015)

Awards

-Major awards received in FY ended Mar. 31, 2015 are as follows:

• Toyota: Excellence for Cost-improvement Award, Excellence for Quality Control Award
• Nissan: Appreciation for Excellence in Quality Award
• Honda: Appreciation for Excellence Award
• Isuzu: Quality Achievement Award

Major R&D Facilities

-R&D activities are conducted at the Technical Center located within the Nagano Plant.

R&D Activities

-The Company worked on developing new products from a variety of aspects. These included lower friction, heat control, lighter weight, cleaner exhaust gas emissions, and alternate fuels (bio-fuels, CNG).
-The Company, in working to make products that have even greater levels of precision, developed new production methods that automate inline measuring, radically reduce costs, and minimize energy used in production operations.
-In order to quickly respond to the needs arising in line with the growth of electric vehicles, the Company is strengthening its capabilities in non-powertrain products. As a result, the Company focused its energy in introducing new technology in seals that mainly include rubber and composite products made lighter in weight by the use of aluminum and plastics. In this regards, the Company is building its R&D framework to create functional, cost-competitive products ahead of its customers, while exploring new business sectors.

R&D Achievements

1) Piston rings
-Development of super low friction rings and low LOC (lubricating oil consumption) rings which are designed to improve fuel economy.
-Development of highly-functional oil rings, which are designed to improve reliability.
-Creation of a production line that is designed to radically reduce the production costs of piston rings.

2) Cylinder liners
-Commercialization of liners for small engines. These liners are smaller in diameter, have super thin walls, are lightweight, and have superior heat-conducting properties, enabling them to respond to the needs for greater output and improved fuel consumption and reliability.
-Commercialization of a new liner material designed for alternative fuels, which demonstrates highly performance in terms of corrosion and abrasion resistance.
-Commercialization of low friction bore liners, which are designed to improve fuel efficiency.
-Commercialization of cylinder liners which have high mechanical strength.

3) Valve seats, valve guides
-Commercialization of valve seat materials which are capable of responding to the need for alternative fuels. These materials are highly resistant to abrasion.
-Development of a new production line with innovative features that remarkably lower costs, enabling the production of low-priced products.
-Commercialization of sintered valve guides.


1) Aluminum-based products
-Commercialized a motor frame for EV motors by creating a new casting method and installing equipment.
-Commercialized an aluminum brake drum by applying a centrifugally casted spiny shaped FC material.

2) Sintered mechanical parts
-Commercialized a small sized seal-ring for turbochargers.
-Development of a processing method that improves the accuracy and enhances the strength of shock absorbers and coupling components

3) Plastic and rubber products
-Commercialized plastic seal-rings for transmissions.
-Created greater precision electromagnetic valve spool rubber seals.

-During FY ended Mar. 2015, the Company made continued investments in its operations overseas, spending to revamp and improve production facilities so as to increase production capacities.