NGK SPARK PLUG CO., LTD. Business Report FY ended Mar. 2017

Financial Overview

(in million JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 Rate of
Change (%)
Sales 372,919 383,272 (2.7) -
Operating income 53,595 66,279 (19.1) -
Ordinary income 55,559 64,478 (13.8) -
Net income 25,602 30,815 (16.9) -Net income decreased because of recording an extraordinary impairment loss of JPY 20,187 million from the loss on the assets and goodwill amortization of Wells Vehicle Electronics, which the Company acquired in 2015.
Automotive components
Sales 318,149 322,856 (1.5) Although sales of the Company’s products were higher, thanks to robust sales of new vehicles in China and other emerging countries, revenue and income decreased due to the effect of negative currency translation because of the strong yen.
Operating income 57,988 71,134 (18.5) -

Business reorganization

-The Company announced that it will change its operating structure on April 1 by abolishing its existing divisional system and introducing product-based business units. Until now, the Automotive Components Group has dealt with spark plugs and sensors and the Technical Ceramics Group has handled semiconductors and other products, but the new operating structure will be divided into nine business divisions including spark plug and fuel cell business divisions. (From an article in the Nikkan Jidosha Shimbun on March 4, 2016)

Recent Development Outside Japan

-The Company is aiming at expanding its share in the market of spark plugs for new vehicles in China to 30% by fiscal year 2020 (that ends in March 2021). The Company's share in China is just below 20%, less than half of its global share of 40%. China produces the largest number of vehicles in the world, and in order to enhance its presence there, the Company will target the major market segment of middle to low-end vehicles and low-end vehicles, which are seeing rising unit sales. The Company will strengthen promotional campaigns targeting locally-funded Chinese automakers. (From an article in the Nikkan Jidosha Shimbun on August 24, 2016)

Product Development

Hydrogen-detection sensors for FCVs
-The Company has started sales of hydrogen leak detection sensors for fuel cell vehicles (FCVs). In addition to improved accuracy through adoption of a heat conduction detection method, the sensor's resistance to age deterioration, vibration, and shock has been increased, and it was recently adopted for use in new FCVs. The Company started development of the sensor in 2006, and this resulted in a heat conduction detection method where hydrogen leaks are detected with high precision by measuring the amount of heat the hydrogen takes from the heater. (From an article in the Nikkan Jidosha Shimbun on March 15, 2016)

Solid oxide fuel cells (SOFCs)
-A fuel cell that creates electricity and heat through an electrochemical reaction. The Company is working on developing "stacks" that generate SOFC electricity, which helps to further grow hydrogen-based infrastructure.

Lead-free piezoelectric ceramics
-Development of lead-free piezoelectric ceramics that achieve the same level of performance as conventional ones, but without the use of lead. Developing piezoelectric ceramics that generate voltage when power is added from external voltage piezoelectric ceramics.

R&D Structure:

-The Company's R&D functions include the main R&D Center at the home office, the new-business development office, the fuel-cell development office, and the engineering functions at each business. In addition, the Company participates in joint-development activities both in and outside Japan with academic organizations and associations, universities, and public R&D organizations, working to develop and introduce the latest technological breakthroughs.

-The Company has technical centers in the U.S., Europe, Brazil, and Korea.

R&D Activities

Spark plugs
-The Company is working to increase the performance of spark plugs by improving their resistance to high heat and high voltage, as well as enhance their high-ignition capability. This is in addition to reducing the size of their diameters and elongating them. This involves seamless R&D activities, from developing materials, up to designing products and developing new production methods.

-The Company is developing long-reach plugs that optimize engine-cooling performance by making the plugs smaller in diameter and more elongated, combining new insulation that improves their voltage-resistance performance. These plugs are being factory-installed on models built by European OEMs.

-The Company is verifying spark-plug specs, which meet performance demands, offer longer durability, and have longer-lasting ignition capability; for high-efficiency turbos.

Glowplugs for diesel engines
-The Company is developing spark plugs that meet exhaust-gas regulations, offer better performance against rising temperatures, and have longer product lives. It is also developing control systems that control temperatures.

-The Company is developing a new product that integrates glowplugs and voltage sensors into a single unit. In order to commercialize this unit, the Company is now verifying its laser-welding technology to make precision welding possible; as well as verifying production technology involved with product designs and production methods.

-The Company is developing energy-saving and resource-saving sensors that need to comply with exhaust-gas regulations, making them more environmentally efficient by improving their performance in terms of coping with high temperatures, thermal shock, vibration, and moisture.

-The Company is developing sensors for onboard diagnostics (OBD) that are needed for new, exhaust-gas regulations; and sensors that control EGR systems.

-The Company is expanding value-added features of oxygen-intake sensors, which it has decided to launch, for controlling EGR systems for automobiles, in order to expand their use.

-The Company developed and commercialized an ignition unit that improves the durability of spark plugs for gasoline engines.

-Development of a next-generation application specific integrated circuit (ASIC) for every range of air-fuel ratio, which has the capability to interface with automotive engine control circuits.

R&D Expenditure

(in million JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 FY ended Mar. 31, 2015
Overall 23,416 23,123 21,337
-R&D expenditures, excluding costs for upgrading current products; and applied research 4,089 5,401 4,596
-Automotive Components Group 1,081 1,460 1,157

Capital Expenditure

(in million JPY)
FY ending Mar. 31, 2018
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 FY ended Mar. 31, 2015
Overall 48,400 36,328 45,339 36,372
-Automotive Components Group 35,300 27,577 37,682 31,876

Investments in Japan

-The Company will consolidate some of its production of ceramic insulators for spark plugs at its subsidiary SparkTec TONO Co., Ltd.'s Nino Plant in Kani City, Gifu Prefecture, and double the production capacity there by 2020. Along with shifting some of its insulator production to the high-efficiency plant, the Company will upgrade its equipment and boost annual production capacity. The Company is aiming to increase its global spark plug sales by about 200 million units from the current sales volume to 1 billion units in 2020, and will expand its production capacity for spark plug insulators in accordance. It will integrate its insulator production capacity in the Chubu region into the Nino Plant, which was completed in 2014. The Company discontinued insulator production at its headquarters plant in Nagoya in March 2016, and will discontinue production at its Komaki Plant in Aichi Prefecture by the end of 2017, with the respective insulator production capacities of these plants to be shifted to the Nino Plant. The Nino Plant's monthly insulator production capacity is 20 million units as of June 2016. The Company will upgrade production facilities at the Nino Plant and increase the plant's capacity to 30 million units by the end of this year, and to 40 million units by 2020.(From an article in the Nikkan Jidosha Shimbun on June 24, 2016)

-The Company announced that construction has been completed for a new spark plug parts plant in Komaki City, Aichi Prefecture. The new plant is a production facility of NGK Spark Plug's subsidiary, Nittoku SparkTec WKS Co., Ltd. The new plant will begin producing electronic parts such as center electrodes and terminals for spark plugs in March. Investment in the new plant amounted to JPY 7 billion. With the new plant in operation, the production capacity of the Company's subsidiary is expected to increase 30% from the current level by 2020. The Company is aiming to gain momentum to expand its market share with the increased production capacity. The new plant has environment-friendly features, including air-conditioning equipment utilizing geothermal energy, and a system for visualizing energy consumption. The Company began construction of the new plant on about 26,000 square meters of land in May 2015. (From an article in the Nikkan Jidosha Shimbun on March 1, 2016)

Planned Capital Investment

(As of Mar. 31, 2017)
Company Name Segment Planned investment
(in million JPY)
Type of facilities / purpose
The Company
Automotive 27,200 Production increase and R&D facilities
Technical ceramics 5,000 Production increase and facilities to streamline operations
Consolidated subsidiaries in Japan Automotive 1,087 Production increase and repair facilities
Technical ceramics 7,825 Production increase and facilities to streamline operations
Consolidated subsidiaries outside Japan Automotive 7,006 Production increase and facilities to streamline operations
Technical ceramics 282 Production increase and facilities to streamline operations

Outlook for FY ending Mar. 31, 2018

(in million JPY)
FY ending Mar. 31, 2018
FY ended Mar. 31, 2017
(Actual Results)
Rate of
Change (%)
Sales 384,900 372,919 3.2
Operating income 53,400 53,595 (0.4)
Ordinary income 55,900 55,559 0.6
Net income 38,200 25,602 49.2
Automotive components
Sales 327,100 318,149 2.8
Operating income 57,400 57,988 (1.0)

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

-In the fiscal year ending in March 2018, the Company forecasts that operating income will be JPY 13,000 million, which will result from achieving higher revenue, optimizing the product range and streamlining operations. However, because of the following negative factors, operating income in the end be lower, being impacted by JPY 6,200 from negative currency translation, JPY 3,600 million from higher costs, and JPY 3,400 from selling-price fluctuations.

Long-term Management Plan: NGK Theory of Evolution (launched in 2010)

  • Delving deeper (covering the FY ending in March 2011 through the FY ending in March 2013) Delve even deeper into aspects of current businesses; and plant seeds for growing new businesses.
  • Newness (covering the FY ending in March 2014 through the FY ending in March 2016) Launch new products and businesses
  • Evolving (covering the FY ending in March 2017 through the FY ending in March 2019) Speed up launches of new products and businesses
  • True value: Become a company creating innovative products, achieving high rates of return, and developing human talent, in order to provide true value in 2020.

7th Mid-term Management Plan (covering the FY ending in March 2017 though the FY ending in March 2021)

-Objectives to be achieved by the fiscal year ending in March 2021:

  • Sales: JPY 520,000 million
  • Operating Profit: JPY 100,000 million

-Further strengthen existing businesses

  • Spark plug and sensor businesses: expand market share in emerging countries, develop products that better respond to environmental regulations, and increase sales of automotive products by taking advantage of Wells' expertise.

-Plan for renewing ceramic package (PKG) business

  • Establish independent subsidiaries: Establish NTK Ceramics (a new company) and Ceramic Sensor Nakatsugawa (CS Nakatsugawa) sometime around July 2016. By October 1st, consolidate the semiconductor package businesses at NGK and NTK Ceramics (a wholly owned subsidiary) into NTK Ceramics. And consolidate the automotive sensor business of NTK Ceramic into CS Nakatsugawa.
  • Selection and consolidation of products: Sometime around March 2018, withdraw from the crystal PKG business and concentrate on automotive, medical, and high-speed communications sectors, which include autonomous driving and LED products. By the fiscal year ending in March 2019, return to profitability on a monthly basis, and to full profitability for the entire fiscal year ending in March 2020.

-Creation of new businesses

  • Launch new products for non-internal combustion engine vehicles, which includes next-generation vehicles; and expand business into new sectors such as environment/energy and medical