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5. Topre Corporation Business Report FY ended Mar. 2015

Topre Corporation Business Report FY ended Mar. 2015

Factors
1) Press Products: Sales

-There was a last-minute-buying spree before the consumption-tax increase went into effect in April 2014. After the increase, demand fell, but the recovery in vehicle production and sales after the spree ended has been very slow to materialize. While sales of minicars and small vehicles during the first half of the fiscal year were strong, sales for the entire fiscal year ended up lower year-on-year (y/y).


-Sales outside Japan were higher y/y because of strong sales in the U.S. and because two production plants launched operations, Topre Autoparts Mexico, S.A. de C.V. in January 2014; and Topre (Xiangyang) Autoparts Corporation in April.

2) Press Products: Operating Profit
-Even though the Company's businesses operating outside Japan received higher volumes of orders, operating profit was lower y/y due to damage caused by snow and due to initial expenses the Company incurred in line with launching new production plants outside Japan.

Acquisition of Yachiyo Industry's press part business

-In May 2015, Yachiyo Industry Co., Ltd. and the Company announced that the two companies have signed a basic agreement under which Yachiyo will transfer its press parts business in Japan to the Company. They will continue discussions, aiming to complete the transfer in October 2015. Yachiyo's withdrawal plan from the press parts business follows the discontinuance of its press parts business in North America. Yachiyo plans to transfer YG Tech Co., Ltd. (Mie Prefecture), its consolidated subsidiary, and the stamping facility of Yokkaichi Factory (Mie Prefecture) to Topre in order to focus its management resources on the plastic fuel tank and sunroof business. Because mini-vehicle assembly business for OEMs is decreasing and competitions among suppliers are further intensifying, it has become increasingly difficult for Yachiyo to maintain the profitability of its press parts operations. Meanwhile, Topre, which specializes in press parts, aims to expand sales in the mini-vehicle sector. It began operations of its new plant in Suzuka, Mie Prefecture in 2014 to increase support to Honda Motor Co., Ltd. (From an article in the Nikkan Jidosha Shimbun on May 12, 2015)

Recent Developments in Japan

-The Company plans to boost sales of components for Honda's mini vehicles. The Company's new plant that is located near the automaker's Suzuka Factory in Mie Prefecture will produce tailgates for some Honda N-series vehicles, starting in the fall of 2014. Sales at this new facility are forecast to reach JPY 200 million during FY 2014 ending March 2015. The Company expects to win more orders for other N-series models, and hopes to increase the plant's annual sales by tenfold to JPY 2 billion by FY 2016. (From an article in the Nikkan Jidosha Shimbun on April 9, 2014)

-The Company's subsidiary in Kurume-shi, Fukuoka Prefecture, Topre Kyushu Corporation, will build a new plant to manufacture dies for automotive stamping parts. Topre anticipates that new orders for automotive stamping parts will increase for new models which are produced outside Japan. The Company is preparing itself by expanding its die manufacturing capacity. The new plant will be built on an adjacent 13,500-square-meter land to the subsidiary's headquarter. The total investment in the plant will be JPY 2.5 billion and production launch is scheduled in October 2015. The new plant is expected to generate sales of JPY 1.5 billion in the fiscal year ending in March 2018. (From an article in the Nikkan Jidosha Shimbun on March 18, 2014)

Recent Developments outside Japan

-The Company plans to increase sales of its auto body frame parts in Thailand to JPY 8 billion in the fiscal year ending in March 2017 (FY 2016). Taking advantage of its own local production facilities to be launched in FY 2015, it will seek for larger orders from Japanese OEMs. In FY 2016, it aims to quadruple the expected FY 2014 sales of JPY 2 billion earned by the consignment production at a local supplier. Topre will continue the consignment production, which started four years ago. The Company aims for additional JPY 6 billion sales to be generated at the new plant. Pillar, roof and other cabin frame parts will be manufactured from September 2015. The total investment is anticipated to reach JPY 10 billion, JPY 4 billion larger than its original assumption due to an increased land acquisition cost. It plans to boost the plant operation ratio right after the launch. (From an article in the Nikkan Jidosha Shimbun on April 4, 2014)

-The Company announced that it will construct a new satellite production facility within the premises of Nissan Motor's supplier park in Thailand. The satellite facility will assemble automotive stamping parts that will be produced at Topre's new Thai plant, which will become operational in July 2015. The Company plans to establish an efficient distribution structure by assembling products at its customer's site. Details of the project for the satellite facility, including the timing of the groundbreaking and opening, are yet to be announced. The Company intends to start preparing for the construction when it decides on the site. (From an article in the Nikkan Jidosha Shimbun on December 8, 2014)


-The Company announced that it will make additional investments in its two wholly-owned subsidiaries, Topre America Corporation and Topre Autoparts Mexico, S.A. de C.V. The subsidiaries manufacture and sell automotive stamping parts and dies. The Company will invest approximately JPY 5 billion (USD 42.1 million) in Alabama-based Topre America. Plans include adding approximately 100,000 square meters of land and an approximately 12,000 square-meter plant and installing a large stamping machine and other production equipment. Meanwhile, approximately JPY 4 billion (USD 33.7 million) will be invested in Topre Autoparts Mexico, which is based in Queretaro, to construct an approximately 12,000 square-meter plant and add a large stamping machine and other equipment. The new facilities in the U.S. and Mexico are expected to start operations in April 2017. (From a press release on February 13, 2015)

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

R&D Activities

Press Products Business
-In North America, the Company started producing 1180MPa-class, cold-forged-high-tensile steel. Following that, the Company began selling the steel in markets worldwide and finding uses for it in all sorts of frame parts.

-As means to raise its competitive strength, the Company is working to commercialize 1470MPa-class, cold-forged-high-tensile steel products, which have the same level of strength as hot-stamped products, and is working to find applications for the steel.

-In responding to the need for weight saving, the Company is conducting R&D activities to produce stamped aluminum parts.

Press Products Business (FY ended Mar. 31, 2015)
-JPY 14,491 million for facilities and equipment

• JPY 2,301 million mainly for dies used for stamping automotive parts.
• JPY 13,242 million mainly for press equipment to produce automotive components at Topre Kyushu Corporation, Topre America Corporation, Topre (Foshan) Autoparts Corporation, Topre (Xiangyang) Autoparts Corporation, and Topre Autoparts Mexico, S.A. de C.V.