HI-LEX Corporation Business Report FY ended Oct. 2016

Financial Overview

(in million JPY)
FY ended Oct. 31, 2016 FY ended Oct. 31, 2015 Rate of Change
(%)
Factors
Overall
Sales 235,710 239,131 (1.4) Even though sales were higher, especially in China, Korea, and Europe, sales reported by operations outside Japan were lower y/y, which resulted from the effect of negative currency translation due to the high valuation of the yen.
Operating profit 16,882 17,381 (2.9) -
Ordinary income 16,727 20,626 (18.9) -
Net income 10,922 13,432 (18.7) -

Recent Business Developments in Japan

-The Company established Hi-Lex Miyagi Co., Ltd. in October 2016, a new company located in Kurihara, Miyagi Prefecture. The new company, which is wholly owned by Hi-Lex, is capitalized at JPY 1.8 billion. Hi-Lex Miyagi manufactures and sells automotive control cables and window regulators. (From an August 12, 2016 press release)



Business Plan

1. Establishing global production and development structure
-The Company's challenge as world's No. 1 automotive cable manufacturer
4-pole global production structure: Japan (Asia); North America; Europe; and China

1) Japan

  • Hi-Lex Miyagi Co., Ltd. (new company): Plant constructed started in March 2017 and is scheduled to be completed in April 2018.

2) North America

  • Hi-Lex Miyagi Co., Ltd. (new company): Plant constructed started in March 2017 and is scheduled to be completed in April 2018.

3) Asia

  • Hi-Lex India Private Ltd. (in Gujarat) Plant expansion started in November 2015 and first shipments came off the line in January 2017

4) Europe

  • Hi-Lex Czech, s.r.o. (New company) Plant constructed started in March 2017 and is scheduled to be completed in June 2019)


2. Development of new products and technologies
1) Electronic and electric components for cable-less products

  • Power slide door systems
  • Power liftgate systems
  • Electric parking brake systems
  • Wheelchair fastening equipment

2) New technologies

  • Irregularly shaped inner cables
  • Newly designed geared wires
  • High-performance anti-vibration cables
  • Split seat cables
  • Seat unlocking actuators

Outlook for FY ending Oct. 31, 2017

-The Company expects its sales to be JPY 237,300 million, and its operating profit to be JPY 16,670 million.

R&D Expenditure

(in million JPY)
FY ended Oct. 31, 2016 FY ended Oct. 31, 2015 FY ended Oct. 31, 2014
Japan 1,774 1,780 975
North America 378 375 357
China 676 760 429
Asia 700 628 294
Europe 317 - -
Adjustment 2 134 70
Total 3,847 3,677 2,125

R&D Structures


-Research and development activities are conducted at the following operations. Focus is set on development of new materials, technologies and products in the areas of automotive components, industrial equipment and home-related equipment.

  • R&D Group
  • Systems Planning Group
  • Cable Design Group
  • Utsunomiya Technical Center


-Engineers at the Automotive Center of HI-LEX Controls Inc. are developing new technologies and products targeted at the automotive industry in North America.


-Engineers at Chongqing HI-LEX Cable System Group Co., Ltd. are developing new technologies and products targeted at the automotive industry in China.


-Major development activities are conducted at Daedong HI-LEX Inc. Focus is set on developing new technologies and products, especially in the area of automotive door modules.

R&D Activities

New materials
-The Company is developing lightweight cables with low stretch rates by producing super-fiber steel compounds with high-strength and high-elasticity rates.

New technology
-The Company has developed a new cable with high sliding properties by utilizing a new coating technology. The cables are expected to be used for transmission shift cables.
-In order to support advanced drive-by-wire technology, the Company is developing new system solutions by utilizing and integrating its cable and controller technologies.

New products
-Window regulators: the Company will continue to develop compact, lightweight, and highly durable products
-Door modules: the Company will develop next generation products
-Door opening and closing systems: the Company will develop new products incorporating various sensing technologies and control technologies to address the needs for safer and user-friendly technologies.

Capital Expenditure

(in million JPY)
FY ended Oct. 31, 2016 FY ended Oct. 31, 2015 FY ended Oct. 31, 2014
Japan 1,389 814 1,316
North America 1,262 1,781 2,123
China 2,379 3,748 3,193
Asia 3,426 2,619 2,317
Europe 805 1,210 568
Total 9,263 10,174 9,519

-The Company expects to invest JPY 12,300 million in FY ending Oct. 2017.

Planned Capital Investment

(As of Oct. 31, 2016)
Company name
(Location)
Type of project Planned
total
investment
(in million JPY)
Project period Increased capacity upon completion
From To
HI-LEX Controls Inc.
Hudson Plant
(Michigan, USA)
Equipment installation 1,887 2015.07 2016.03 -
HI-LEX Hungary Cable System Manufacturing LLC
Headquarter and Plant
(Budapest, Hungary)
Equipment installation 1,214 2015.10 2016.09 62% increase in production capacity

Operations outside Japan


-The Company announced that it has completed the acquisition of full ownership of Lames S.P.A., an Italy-based manufacturer of window regulators and door modules. As a result of this acquisition, Lames became a specified subsidiary of HI-LEX and will change its corporate name to HI-LEX Italy S.P.A. in November 2016. (From a press release on October 14, 2016)

-The Company announced that it will acquire full ownership of Italy-based Lames S.P.A. for EUR 19 million (JPY 2.43 billion). The transaction is expected to be completed after August 2016. Lames, which manufactures and sells window regulators and door modules, filed a request for concordat (civil rehabilitation proceedings) in July 2015. Lames generated sales of EUR 81 million (JPY 10.3 billion) in 2015. Through this acquisition, HI-LEX aims to expand business with European automakers and increase its share in the European market. (From a press release on January 15, 2016)


-The Company announced that it completed the establishment of a wholly owned subsidiary, HI-LEX Czech, s.r.o. in Most, the Czech Republic, to manufacture and sell door modules. HI-LEX initial capital was CZK 110 million (JPY 500 million). The new subsidiary was set up on March 2, 2017 although initial establishment date was October 2016. According to HI-LEX's timely disclosure as of July 16, 2016, the subsidiary was scheduled to be a fifty-fifty joint venture by HI-LEX and HI-LEX's subsidiary, TSK of America Inc. (From a press release on March 9, 2017)

The company is accelerating the expansion of its operations in Europe. In 2016 Hi-Lex acquired Lames S.p.a., an Italian parts supplier handling window regulators. The new subsidiary, Hi-Lex Czech, s.r.o., was set up in Most, Czech to manufacture door modules. It is capitalized at CZK 110 million (JPY 500 million). (From an article in the Nikkan Jidosha Shimbun on March 24, 2017)

-The Company announced that it will establish a new subsidiary to manufacture and sell door modules in Plzen, the Czech Republic. The new company is scheduled to be set up in October 2016. It will be capitalized at EUR 18 million (approximately JPY 2 billion), of which 50% will be provided by HI-LEX and 50% will be provided by HI-LEX's subsidiary, TSK of America Inc. By establishing the new company, HI-LEX will be able to accommodate a new order for door modules, which was received from a European automaker. (From a press release on July 16, 2016)