Nissin Kogyo Co., Ltd. Business Report FY ended Mar. 2014

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 Rate of Change (%) Factors
Sales 220,868 174,252 26.8 1)
Operating income 19,417 8,762 121.6 -
Ordinary income 21,703 10,568 105.4 -
Current net income 12,200 4,929 147.8 -

Factors
1) Sales
<Japan>
-Sales were JPY 51,619 million, a year-on-year increase of 16.0% due to the launch of new products for automobiles.

<North America>
-Sales were JPY 57,184 million, a 27.8% year-on-year increase, thanks to the strong 4 wheel vehicle market and favorable currency translation.

<Asia>
-Sales were JPY 96,388 million, a 35.7% year-on-year increase due to strong sales in Indonesia, a sales recovery and launch of new vehicle models in China, a production recovery after the past flooding in Thailand, and favorable currency translation.

<South America, Europe>
-Sales increased 11.9% year-on-year, to JPY 15,676 million due to favorable currency translation and other positive factors, despite sluggish motorcycle sales in Europe.

Recent Development Outside Japan

<Germany>
Opening of New Branch in Germany
-In December 2013, the Company opened a new branch in Germany as its second office of Nissin R&D Europe, S.L.U., which is located in Spain. The new branch, Nissin R&D Europe, S.L.U., Niederlassung Deutschland, will be engaged in development and sales activities to boost the Company's sales in the European market.

<Mexico>
Starting Production in January 2014
-Nissin Brake de Mexico, S.A. de C.V., which was established in October in 2012 in Irapuato city of Guanajuato in Mexico, will start mass-production in January 2014. Production items are Master cylinder/Master power assemblies, Disk bake calipers, Brake assemblies, Parking brake assemblies, Engine mount brackets, and Clutch systems.

Contracts

-The Company started delivery of Regenerative braking system to Honda "Vezel Hybrid" which launched in market in December 2013.

-The Company will expand the sales of regenerative braking system for HVs and EVs. The Company started the sample shipment of electric servo brake systems which have been supplied to Honda, to other automakers. Previously, the new technologies co-developed with Honda were not allowed for sales to other automakers for 3 years from the start of its supply to Honda. However, as the competition beyond the affiliated group business has become fiercer, the Company hopes to secure its place as a braking system supplier by making the early marketing efforts to supply Its competitive products with a technological edge, widely to the market.

New Mid-term Management Plan (FY March 2015 - FY March 2017)

-Automotive brakes: strengthen capabilities for product promotions and sales as a general systems maker.
  • Developing high level of technological and developmental capabilities in the area of advanced safety systems, focusing on ESC technology.
  • Strengthening reliability in terms of ensuring system functions
  • Strengthening R&D capabilities to win new sales contracts
  • Strengthening organization to maintain its superior competitiveness
  • Major product focus: environmental products for cooperative regenerative systems in 2014, light-weight calipers in 2015, and advanced safety products in 2016
-Sales & Operating profit target: for FY March 2017, Sales JPY 253,000 million (14.5% increase from FY March 2014) and Operating profit ratio 10% against Sales.

-The Company will increase capital investment in China and Mexico. To meet growing demands in these countries, the Company will increase production capacity of vehicle brake systems. The Company will also start full-scale production of electronic stability control systems in China. The Company plans to invest JPY 15 billion to JPY 16 billion annually during the three years between FY March 2015 and FY March 2017. Total planned investment will be more than 20% of the invested amount between FY March 2012 and FY March 2014.

Outlook for FY ending Mar. 31, 2015

(in million JPY)
FY ending Mar. 31, 2015
(Forecast)
FY ended Mar. 31, 2014
(Actual Result)
Rate of
Change (%)
Sales 233,000 220,868 5.5
Operating income 20,000 19,417 3.0
Ordinary income 21,000 21,703 (3.2)
Net income 11,300 12,200 (7.4)

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

R&D

R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Overall 8,041 6,853 6,283
-For FY ending Mar. 31, 2015, JPY 8,800 million is planed for R&D expenditure.

R&D Structure

-R&D facilities: Tochigi R&D Center (Nasukarasuyama City, Tochigi Pref.), Nagano R&D Center (Tomi City, Nagano Pref.)

<Japan>
-With a global perspective in mind, the Company is developing products, materials, and manufacturing methods in the pursuit of making its products designed mainly for two- and four-wheel vehicles lighter, smaller, more fuel efficient, safer and more comfortable. These include basic brake systems, mechatronics-based automatic control-systems, and aluminum products, which form the backbone of its product range.

-The Company is working to develop products, materials, and manufacturing methods that contribute to reducing CO2 emissions.

-The Company announced that for development of brake systems used in two- and four-wheel vehicles, it has begun to construct a new test track, which will extend over Asahikasa City and Kamikawa District, Hokkaido, Japan. The new track will cover approximately 480,000 square meters. The Company is investing some JPY 700 million in the first phase. Construction began in September 2012 and is expected to be completed in November 2014.

<North America>
-The Company focused on developing products that meet the market needs in North America, such as basic braking systems, mechatronic automatic control systems, and aluminum products.

<Germany>
-In December 2013, the Company opened a new branch in Germany as its second office of Nissin R&D Europe, S.L.U., which is located in Spain. The new branch, Nissin R&D Europe, S.L.U., Niederlassung Deutschland, will be engaged in development and sales activities to boost the Company's sales in the European market.

Major R&D Achievements in Automobile Parts

Development of an automatic control mechatronics system
-The compact and light ESC (Electronic Stability Control) is being equipped on five vehicle models. It can be used in existing Collision Mitigation Brake Systems (CMBS) and low-speed collision avoidance systems (City-braking active systems). As a means to provide more driving comfort, the Company added an automatic braking function that continues to apply the brakes, even when the foot is off the brake pedal, when the vehicle is stopped on hills or in traffic jams.
-The Company's new customer has adopted Its ESC for one vehicle model.
-The  regenerative braking system for EVs and hybrid vehicles is being equipped on three vehicle models.

Foundation brake development
-To respond to the requirement for lower fuel consumption, the Company optimized and expanded the development of products for brakes, such as a plunger master cylinder that is more compact, lighter in weight, and has less drag torque. Also, the Company is lowering costs and producing more products locally at its global sites.
-The Company further developed its series of new-design, low-drag, front disk brake systems, and launched commercial production in plants in Thailand and China following the production in Japan and North America.
-Plans are for expanding applicable sizes and increasing production facilities in order to reduce weight through combining lower drag torque and aluminum bodies.
-The Company launched commercial production of a plunger-type master cylinder in Thailand, Indonesia and India following the production in Japan, the U.S.A and China. In FY ending Mar. 31, 2015, the Company further plans to launch production in Brazil and Mexico.

Development of weight reduction technology
-In addition to making its current-production engine mounting brackets and knuckles lighter in weight, the Company is developing aluminum chassis parts based on high quality casting and material characteristics. The aluminum-cast engine mounting brackets are being equipped on four vehicle models, while the aluminum-cast rear knuckles are being equipped on one vehicle model.

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2014 FY ended Mar. 31, 2013 FY ended Mar. 31, 2012
Japan 2,185 1,683 1,530
North America 3,149 1,962 3,112
Asia 6,548 7,541 5,606
South America/Europe 1,346 456 755
Adjustment (268) (210) (132)
Total 12,961 11,431 10,872
-For FY ending Mar. 31, 2015, JPY 15,500 million is planed for capital expenditure.

-The Company will increase capital investment in China and Mexico. To meet growing demands in these countries, the Company will increase production capacity of vehicle brake systems. The Company will also start full-scale production of electronic stability control systems in China. The Company plans to invest JPY 15 billion to JPY 16 billion annually during the three years between FY March 2015 and FY March 2017. Total planned investment will be more than 20% of the invested amount between FY March 2012 and FY March 2014.

Planned Capital Expenditure

(As of Mar. 31, 2014)
Company or Office Name Facility type Estimated
amount of
investment
(in millions JPY)
Start Scheduled Completion
Ueda Plant
(Ueda City, Nagano Pref.)
Production facilities 989 Jul.
2013
Feb.
2015
Tobu Plant
(Tomi City, Nagano Pref.)
Production facilities 332 Jun.
2013
Feb.
2015
Naoetsu Plant
(Joetsu City, Niigata Pref.)
Production facilities 385 Sep.
2013
Mar.
2015
Nagano Development Center
(Tomi City, Nagano Pref.)
R&D facilities 1,322 Apr.
2013
Dec.
2014
Nissin Brake Ohio Inc.
(Ohio, USA)
Production facilities 3,183 Jan.
2014
Mar.
2015
Nissin Brake Georgia Inc.
(Georgia, USA)
Production facilities 1,688 Jul.
2013
Mar.
2015
Nissin Brake (Thailand) Co., Ltd.
(Nakornratchasrima, Thailand)
Production facilities 2,312 Apr.
2013
Dec.
2014
P.T. Chemco Harapan Nusantara
(Cikarang, Indonesia)
Production facilities 1,481 Apr.
2013
Dec.
2014
Shandong Nissin Industry Co., Ltd.
(Shandong, China)
Production facilities 146 Jul.
2013
Dec.
2014
Zhongshan Nissin Industry Co., Ltd.
(Guangdong, China)
Production facilities 4,878 Oct.
2013
Dec.
2014
Nissin Brake Vietnam Co., Ltd.
(Vinh Phuc, Vietnam)
Production facilities 281 Jul.
2013
Dec.
2014
Nissin Brake India Pvt. Ltd.
(Rajasthan, India)
Production facilities 928 Jul.
2013
Dec.
2014
Nissin Brake Do Brasil Ltda.
(Manaus-Am, Brazil)
Production facilities 1,393 Apr.
2013
Dec.
2014