Nippon Piston Ring Co.,Ltd. Business Report FY ended Mar. 2016

Financial Overview

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 Rate of Change
Sales 52,199 51,657 1.0 -
Operating income 2,549 1,946 30.9 -
Ordinary income 2,442 2,172 12.4 -
Net income attributable to owners of the parent 1,605 2,173 (26.1) -
Automotive Parts Division
Sales 45,031 44,724 0.7 -Sales were higher in North America, even though the pace of growth in emerging countries like China was slowing down.
-Sales and income increased due to higher sales volumes to non-Japanese OEMs.
Operating income 2,878 2,076 38.6

Revamping Production Operations

-The Company will work on streamlining production operations and establishing smart factories in Japan. The Company will automate more operations at its plants, visualize the equipment operating status and product quality, and establish a consolidated production management system for the purpose of reducing manpower and enhancing profitability. These measures will be introduced initially for mass production at the Company's Ichinoseki Plant in Iwate Prefecture, Japan, which is currently conducting trials on its new streamlined production line. The Company is planning to set up similar lines at its other facilities including the Fukushima Works in Fukushima Prefecture, Japan, which produces valve seats and other products. (From an article in the Nikkan Jidosha Shimbun on March 17, 2016)

Product Strategy

Increasing Sales of Valve Seats
-In its mid-term business plan for FY 2015 through FY 2017, the Company aims to increase its sales by JPY 3.4 billion in fiscal year 2017 (ending in March 2018) compared to the results for FY 2014. The Company will secure 60% to 70% of the targeted sales increase with its valve seat operations. Since the Company is increasingly receiving orders for its high-performance valve seats from non-Japanese manufacturers, the Company will focus on these products as a key part of its growth strategy. The Company will boost production in China and North America to deal with the large number of new orders from local manufacturing plants, and expand sales of products for fuel-efficient engines. (From an article in the Nikkan Jidosha Shimbun on March 2, 2016)

Mid-term Management Plan

-In its sixth mid-term business plan that covers through March 2018, the Company is pursuing the following initiatives to "set the groundwork to survive as a 100 year-old company" and enhance its corporate value based on marketing activities and innovation:

  • Increase sales for strategic models based on product differentiation
  • Advance innovative product-creation
  • Advance business in new product areas (non-automotive)
  • Pursuing the world's highest quality by strengthening human resources development
  • Promoting CSR activities

-Major financial targets (FY ending Mar. 2018):

  • Sales over JPY 55 billion (Piston rings: JPY 26.9 billion, valve seats: JPY 11.9 billion)
  • Operating margin of 7% or higher
  • Sales outside Japan to account for 59% of total sales.
  • Sales to non-Japanese OEMs (Piston rings, valve seats) to account for 11.9% of sales.

Mid-term Management Plan - Figures

FY ended Mar. 31, 2015
(Actual Result)
FY ended Mar. 31, 2016
(Actual Result)
FY ending Mar. 31, 2017
FY ending Mar. 31, 2018
Sales (billion JPY) 51.6 52.1 51.0 55.0
-Piston ring (billion JPY) 25.5 24.9 24.9 26.9
-Valve seat (billion JPY) 8.8 10.3 10.4 11.9
Operating margin (%) 3.8 4.9 5.1 7.0
Percent of sales outside Japan (%) 52 55 58 59
Percent of sales to non-Japanese OEMs (Piston ring, Valve seat) (%) 8.1 10.3 11.9 11.9

Outlook for FY ending Mar. 31, 2017

(in million JPY)
FY ending Mar. 31, 2017
FY ended Mar. 31, 2016
(Actual Results)
Rate of Change
Sales 51,000 52,199 (2.3)
Operating income 2,600 2,549 2.0
Ordinary income 2,500 2,442 2.4
Net income attributable to owners of the parent 1,800 1,605 12.1

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

R&D Expenses

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Overall 1,810 1,647 1,591
-Automotive Parts Division 1,433 1,261 1,204

R&D Activities

Piston rings for next-generation fuel-efficient engines
-The Company is developing new fuel-saving technologies without decreasing the tensional force of piston rings. The Company developed and produces diamond-like carbon coating (DLC), which is a low-friction surface-processing. In the fiscal year that ended in March 2016, the Company expanded sales of products for models that will be further mass-produced, while working on developing even higher performance next-generation DLC coating.

-The Company is working on developing methods for analyzing oil-membrane characteristics, capable of quantitatively understanding the phenomenon of increased oil consumption, as well as reflecting them in standards for designing future piston rings.

Piston rings for next-generation diesel engines
-In response to exhaust-gas emission regulations such as Euro- VI, US10, and fuel economy standards for heavy-duty vehicles, the Company developed a PVD coating technology that achieves high levels of resistance to abrasion and peeling by applying technology it has gained through working on membrane control that reaches the nano-level. Mass production of products using this technology has already begun, and the Company is currently developing PVD coating with higher performances.

-Developing thicker DLC coating that increases durability and reliability, working to expand its application in diesel engines.

-The Company is mass-producing its new-shaped oil-ring that has low tension but high-performance in terms of adjusting lubrication. The oil rings are able to achieve a good balance between cleaner exhaust-gas emissions and lower fuel consumption. The Company is mass-producing them and actively working to expand its market share.

Valve seats
-The Company is developing highly functional materials that can be used for smaller-built gasoline engines, supercharged direct injection engines, and new engines powered by natural gas, ethanol or other fuels. The Company is not only creating high-level specs but also specs that optimally meet the market needs in developing countries, as it aims to satisfy customer needs in all regions of the globe and to offer technical services worldwide.

Assembled sintered camshafts
-In line with the downsizing of gasoline engines, the Company is using a new manufacturing method for camshafts, which further reduces their weight by making the shaft walls thinner.

-In order to strengthen engine braking in line with the downsizing of diesel engines, the Company is expanding the use of sintered camshafts that respond to higher surface pressure by using variable valves.

Metal-powder Injection Molding (MIM) products
-The Company is transferring the production of powder metallurgical ejection-molded products after acquiring the business from Sumitomo Metal Mining Co. The Company has been approached by numerous customers about powder metallurgical injection molded engine parts, making prototypes of them and negotiating with the customers.

New sintered-products
-The Company is researching and already marketing highly functional porous metals that offer excellent performance in terms of insulation and heat dissipation. It has already begun actual solutions to various market needs. The Company is advancing fundamental technology on new production methods, developing production technology capable of achieving porosity and vacant (hollowed-out) shapes, which were impossible to produce through powder press sintering.

Cylinder liners
-In working to comply with exhaust-gas-emission regulations for heavy-duty vehicles, the Company developed a new cylinder liner by forming a dimpled surface on the inner surface. In 2015, it launched sales of this liner, which is the first of its kind in the world. This technology was developed based on the Company's tribological research. In expanding the application of this technology, the Company is developing elemental technology to commercialize cylinder liners for heavy-duty industrial engines.

-The Company is developing new cylinder blocks using this dimpled surface technology, intending to make it a standard for cylinder bores. It is working to reduce fuel consumption from two aspects: cylinder liners and piston rings.

Technology Licensing-out Agreement

(As of Mar. 31, 2016)
Name of the licensed company Country Date Details Term of contract
Seojin Cam Co., Ltd. Korea Jul. 01, 2000 Sintered camshaft production methods Until Jun. 30, 2016
Henan Zhongyuan Engine Fittings Stock Co., Ltd. (ZYNP) China Sep. 02, 2005 Cylinder liner production methods Until the Company no longer supplies the products
IP Rings Ltd. India Feb. 21, 2013 Steel ring production methods Until Mar. 31, 2018
Apr. 1, 2013 Cast iron ring production methods Same as above
Jan. 1, 2016 Nitrogenous ring production methods Until Dec. 31, 2016
Jan. 1, 2016 Oil ring production methods Same as above
Apr. 1, 2012 Oil ring assembly production methods Until Dec. 31, 2017
Jan. 1, 2016 PVD coating technology Until Dec. 31, 2016
ASIMCO Shuanghuan Piston Ring (Yizheng) Co., Ltd. China Nov. 15, 2013 Piston ring production methods 7 years

Capital Expenditure

(in million JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Overall 4,554 4,965 4,849
-Automotive Parts Division 4,025 4,586 4,650

-The Automotive Parts Division made a capital investment in order to respond to new production increases.

Facilities and Equipment Planned under the Mid-term Management Plan (tangible only)

FY ended Mar. 31, 2015
(Actual Result)
FY ended Mar. 31, 2016
(Actual Result)
FY ending Mar. 31, 2017
FY ending Mar. 31, 2018
Overall (billion JPY) 4.8 4.4 6.9 7.0
-New production (billion JPY)
[amount allocated for outside Japan]
-Maintaining, renewing, streamlining (billion JPY) 0.8 1.4 1.8 2.5
-Product production (billion JPY) 0.6 0.6 1.0 0.9
-Environment, other (billion JPY) 0.9 0.4 0.6 0.9

Investments Outside Japan

-The Company will build its own valve seat plant in India. Since the plant it leases in the state of Karnataka has reached maximum capacity, production will be completely shifted to a new, larger plant that will be built close to the existing plant. The plant building is scheduled to be completed and to launch production by the end of 2016. The leased plant went online in 2013, and is capable of producing two million valve seats per month under normal operation. The volume of orders from Maruti Suzuki and Japanese motorcycle makers has increased more than expected, reaching 2.5 to 2.6 million units a month. The supply shortfall is made up for with back-up production at a plant in Thailand, but the Company has decided to build a new plant on the expectation of a further expansion in orders for new models, and increased output for vehicles that already use the Company's valve seats. When operation starts the new plant will have a production line with a monthly capacity of about 3 million valve seats. The Company says that the capacity can be expanded up to 7 million units per month. (From an article in the Nikkan Jidosha Shimbun on March 28, 2016)

Planned Capital Investments

(As of Mar. 31, 2016)
Name Location Type of facility Planned total investment (in million JPY) Construction start month Planned completion month Capacity upon completion
NPR ASIMCO Powdered Metals Manufacturing (Yizheng) Co., Ltd. Jiangsu,
New production facility 2,000 Dec.
9 million a month