Denso Corporation Business Report FY2010
|(in 100 million JPY)|
|FY2010||FY2009||Rate of Change
-Due to increased volumes of vehicles produced mainly in North America and Asia/Oceania, sales rose 5.2% year-on-year, reaching 3 trillion, 131.5 billion yen, or a 154.8 billion yen increase over last year's sales. Even though the company experienced negative foreign currency translation due to the higher valuation of the yen, the Company's business operating profit was 188.3 billion yen for the year, which was a year-on-year increase of 37.8% or 51.7 billion yen; ordinary profit increased 35.7% year-on-year, reaching 207.2 billion yen (a 54.6 billion yen increase for the year); and net profit for the year was 143.0 billion yen, a year-on-year increase of 94.8% or 69.6 billion yen due to greater sales volumes coupled with capacity utilization gains, initiatives to rationalize operations, and reduced depreciation costs.
-The Great Eastern Japan Earthquake affected business performance, forcing all the car makers to adjust their production volumes lower. As a result, vehicle production volumes for the 2010 fiscal year, which ended March 2011, were down for the year, which subsequently reduced sales by 60.0 billion yen. In spite of this, the Company did not post any extraordinary losses because of the Earthquake.
-In spite of the Great Eastern Japan Earthquake, sales rose 3.5% year-on-year, reaching 2 trillion, 112.9 billion yen, which was a 71.6 billion yen increase. The increase was the result of auto sales promotions done during the first half of the year, and due to the greater volume of parts the Company exported for production operations overseas. Business operating profit grew 63.4 billion yen year-on-year (a 55.0% or 22.5 billion yen increase) as a result of the Company's reducing fixed costs and rationalizing operations.
-As a result of a greater volume of units produced, sales in North America rose for the year, reaching 530.6 billion yen (a year-on-year increase of 61.6 billion yen, or 13.0%); while business operating profit was 25.4 billion yen, compared to 19.2 billion yen in the previous year, achieving a year-on-year increase of 309.8% due to improved capacity utilization gains and other factors.
-In spite of greater volumes of units sold by European auto makers, the Company suffered a 2.4% drop in sales year-on-year (posting 401.3 billion yen), which was a year-on-year decrease by 9.8 billion yen as a result of negative currency translation . However, the business operating profit rose 2.3% year-on-year, reaching 10.9 billion yen, which was a 200 million yen yearly increase.
-As a result of greater production volumes of vehicles produced by Japanese auto makers, and other factors, sales in Asia/Oceania rose 22.2% year-on-year, reaching 652.5 billion yen (a 118.4 billion yen increase for the year); and business operating profit grew 10.2% year-on-year to 83.0 billion yen, or a yearly increase of 7.7 billion yen due to improved profit margins in relation to operating ratio and other factors.
-In other business regions, sales were 60.3 billion yen for the year, which was a year-on-on-year increase of 2.5 billion yen, or 4.3%. Business operating profit, however, which was 6.5 billion yen, was 3.6% lower year-on-year, or 200 million yen less compared to that of the previous year.
>>>Financial Forecast for the Next Fiscal Year(Sales, Operating Income etc.)
Outlook for FY2011
|(in 100 million of JPY)|
|(in billion JPY)|
-The entire Denso Group spent 290,069 million yen for the year on R&D activities. The breakdown by region is as follows: Japan (256,712 million), North America (13,353 million), Europe (7,316 million), Asia/Pacific (11,739 million), and Others (949 million). Currently, R&D spending at overseas operations accounts for 11% of all R&D expenses. Based on plans to reorganize its R&D structure, the Company expects this percentage to increase over time.
R&D Structure-The Company is improving and strengthening its R&D structure, which is organized around seven Technical Centers worldwide (Japan, North America, Europe, Asia/Pacific, China, India, South America). During this fiscal year, the Company announced that it would expand its Aachen Engineering Center, which is a part of the European Technical Center; and open Technical Centers in India and Brazil, which are scheduled to be established at the end of 2011, and the beginning of 2012, respectively. Going forward, the Company will continue strengthening its R&D structure, mainly enhancing its R&D expertise in China, India, South America, and Southeast Asia, regions in which auto markets are expected to grow.
-The Company will enhance the designing capacity of its engineering center in Germany, Aachen Engineering Center (AEC) in Wegberg of DENSO AUTOMOTIVE Deutschland GmbH, Munich, through expansion. Since its opening in 2005, AEC has carried out application design work and performance evaluations on powertrains including diesel common rails. Facilities have been enhanced with the floor area more than tripled, including an additional climatic testing laboratory. The employees will be largely increased to approx. 100 in 2011 from current 42. Taking the opportunity of such enhancement in functions and personnel, Denso will transfer part of electronics and electrical system development functions for engine control units and starters of idle stop systems from Japan in order to establish the AEC's R&D capabilities so that it should be able to quickly meet the local needs. Denso invested 19.3 million Euros (approx. 2.1 billion yen) in the expansion. (From an article in the Nikkan Jidosha Shimbun on July. 15, 2010)
-The Company will set up a technical center in Brazil in early 2012. This facility is built with the aim of developing competitive products more speedily by exploring more deeply the needs in the South American market through localization of development activities of products for the market. Denso will invest approx. 4 billion yen and hire about 100 employees by 2015. Also, as part of a strategy to bolster operations in South America, functions that are now scattered at separate locations in the region, including sales, engineering and procurement, will also be consolidated in DENSO Do Brasil Ltda (DNBR), which will build the new technical center on the premises of its new plant now under construction in Santa Barbara d'Oeste City. The new technical center is planned to have a total floor space of 8,000 square meters when it is established. (From an article in the Nikkan Jidosha Shimbun on November. 12, 2010)
-The Company will establish a technical center in Gurgaon, India by the end of 2011 as a technology development base. It aims to expand its business in India by conducting thorough design processes locally to meet market needs. The total investment will be approximately three billion yen. The new technical center will be established as part of DENSO Sales India Pvt. Ltd. (DSIN), its local sales subsidiary. Denso will construct a new building with a total floor area of 5,040 m2, which will be operated by approximately 70 employees in 2015. The activities will include development of powertrains, electric and electronic systems, information and safety systems and small motors.(From an article in the Nikkan Jidosha Shimbun on September. 16, 2010)
-The Company will establish a joint venture subsidiary in India for designing car air conditioners and other products. By utilizing assets of a leading local air conditioner systems manufacturer, Denso has an intention of developing low cost and high technology products and expanding customer bases targeting local vehicle manufacturers. The new joint venture company tentatively called "DENSO Subros Thermal Engineering Center India Limited" will be set up in September. Capitalized at 68 million rupees (approximately 140 million yen), it will be 74 percent owned by Denso and 26 percent by Subros located in Noida on the outskirts of New Delhi. The new company, which will be headquartered on the premises of Subros, plans to offer the products it has designed to two Denso manufacturing subsidiaries, DENSO Kirloskar Industries Private Limited and DENSO Faridabad Private Limited, as well as Subros for commercial production and supply to local car plants of Toyota, Suzuki, Tata and other makers. (From an article in the Nikkan Jidosha Shimbun on July. 1, 2010)
R&D Activities-In working to reduce fuel-consumption, the Company conducted R&D activities based on input from a cross-section of all functions such as powertrain, heat, electrics, electronics, and information safety, aiming to reduce overall fuel-consumption from the point of view of (1) improving efficiency, (2) reducing loads, and (3) making use of regenerated energy. This was done under the concept of energy management that looks for ways to use energy efficiently. The Company's work in the powertrain area included finding solutions for improving internal combustion engines that for the time being will continue to be the mainstream engines in use, strengthening its R&D technology on Idle Stop Systems (ISSs) and hybrids, which are areas projected to see market growth. As a result, the Company developed a new injector and high-pressure pump with enhanced presure and fuel injection performance for direct injection gasoline engines. The Company began mass-producing these products last fall. Also, the Company developed a new starter for an ISS, which can stop and then restart the engine when moving at reduced speed.
-While working to enhance product performance and reduce the costs of its mainstream products such as inverters, DC-DC converters, battery-monitoring units, battery compressors, etc. in the HV sector, the Company is improving its R&D expertise from the viewpoint of systems and vehicles by setting up a HV Systems R&D Department and conducting company-wide initiatives.
-In developing low-cost products designed for emerging-market countries, the Company currently has a goal to reduce costs on average by around 40%, conducting R&D activities so as to reduce costs by half under its Cost Halving Project by the end of March 2012, which focuses on mainly 23 products. In addition, the Company will continue to develop basic processes needed for product planning.
Product DevelopmentNew Heat Exchangers Designed for Indian Market
Denso Corporation announced on February 28 that it has developed four heat exchangers, which include radiator, evaporator, heater core and condenser, with substantially reduced costs through use of fewer types of materials and increased efficiency in production designed for the Indian market. Increased use of common materials has decreased cost by 70 percent and use of common parts has reduced types of components by more than 40 percent. Furthermore, local sourcing rate has been raised and an innovation in manufacturing process has enabled production on a single production line to increase efficiency in low volume production. The four new heat exchangers are already used in the Toyota Etios, which was launched in the local market last December. Denso aims to deploy these products to other models as well, and also expand application of low cost production technologies globally to other markets. (From an article in the Nikkan Jidosha Shimbun on March 1, 2011)
Higher Spec Common Rail System
-The Company has raised the injection pressure of its diesel engine common rail system from the current 2,000 bar to 2,500 bar. Having already completed the development program, the company is likely to launch the new product around 2013. Higher injection pressure in the common rail system enhances fuel vaporization, contributing to improved engine combustion. Denso has boosted the pressure level to 2,500 bar, since a further pressure increase will be required to meet tighter diesel engine emissions standards. (From an article in the Nikkan Jidosha Shimbun on February 7, 2011)
-The Company has developed one of the world’s lightest automotive starters for compact vehicles. The new product weighs 1.9 kilograms, which represents a 40 percent weight reduction from Denso’s conventional starters. Even compared with the lightest automotive starters currently available in the market, it is 500 grams lighter. The starter is used in the Suzuki MR Wagon launched in January. The major breakthrough in the new technology is the pinion shift mechanism that separates the clutch and pinion, which are normally integrated in conventional mechanisms. When using the pinion shift system, only the pinion needs to engage with the engine ring gear to start the engine, whereas in conventional system the whole, integrated clutch and pinion unit needs to be shifted toward the ring gear. The new technology contributes to making the switch part lighter and smaller, because less power is needed to move the pinion alone, which is 70 percent lighter than the integrated clutch and pinion unit. The lighter and downsized starter contributes to an improved vehicle fuel efficiency as well as easier installation in the engine compartment. The starter can be used in compact cars powered by gasoline engines of up to 1,200cc in displacement. Denso has also developed another starter to support vehicle engines of 1,200cc to 2,500cc. This starter, which is about 30 percent lighter than existing ones, is already used in the Toyota Ractis. Production of these two new starters will be carried out at Denso’s Anjo Plant in Anjo City, Aichi Prefecture. The company is looking to manufacture 5 million units per year, targeting not only customers in Japan but also those in China, Thailand, Brazil and India. (From an article in the Nikkan Jidosha Shimbun on February 1, 2011)
Hybrid-Bus Air-conditioning System
-The Company has developed an air-conditioning system for hybrid buses, and begun to supply it for the first time to Hino Motors for its Blue Ribbon City Hybrid route bus that was launched in June. The new air-conditioning system is Japan's first-mass produced, electric air-conditioning system integrating a battery-powered compressor with a built-in inverter. It features advantages such as reduced power consumption and lighter weight, as well as stable air-conditioning function even while the engine is stopped. (From an article in the Nikkan Jidosha Shimbun on June. 29, 2010)
Major Technical Contracts
(As of Mar. 31, 2011)
|Doowon Heavy Industrial Co., Ltd.
|A/C systems||Licensing of patents and expertise||Feb. 19, 2008 -
Feb. 18, 2013
|-ECU for Vista Engine||Licensing of patents and expertise||Oct. 16, 2007 -
until the target engine discontinue manufacturing.
|-Semiconductor Device||Licensing of patents||Jan. 1, 2010 -
Dec. 31, 2019
|(in billion JPY)|
-This year the Company will invest predominantly in R&D facilities in order to respond to production increases, prepare for next-generation products, be able to switch over to new products, and develop new products. The Company will invest a total of 145,087 million yen for the year, investing the following amounts by region: Japan (95,496 million), North America (9,099 million), Europe (12,135), Asia/Pacific (22,820 million), and Others (5,537 million).
Investments Outside Japan<China>
-The Company will set up a new car air-conditioner manufacturing plant in Changchun, Jilin Province, the tenth production site in China, yet the first in northeastern China. With construction scheduled to start in August 2011, the new plant will begin operations at the end of 2012 to supply the products to customers like FAW Toyota and FAW VW, both of which are affiliated with China FAW Group Corporation. The plant, in which 132 million yuan will be invested by the end of 2012, will be named the Changchun Branch Plant of Tianjin Fawer DENSO Air-Conditioner Co., Ltd. based in Tianjin City., China. It will have a site area of approx. 40,000 square meters and a floor area of about 15,000 square meters. It plans to generate 1,070 million yuan (approx. 12.9 billion yen) in sales and create about 280 jobs as of the end of March 2016. (From an article in the Nikkan Jidosha Shimbun on Nov. 26, 2010)
-The Company Denso do Brasil Ltda. (DNBR), its subsidiary, will establish a new plant in Brazil to manufacture car air conditioning systems. The company aims to boost sales of its existing products and win orders for new products so as to support growing demand for automobiles in the country. The company will invest 65 million Brazilian real (approximately 3.2 billion yen) in this expansion project, planning to start production operations in January 2011. The facility will be located on 300,000 square meters of land in Santa Barbara d'Oeste City, Sao Paulo State and employ 315 people. In line with the establishment, existing operations at DNBR's sub plant in Pindamonhangaba City, Sao Paulo State will be transferred to the new facility. DNBR was established in 1980. It manufactures and sells car air conditioning systems, compressors, radiators and other products. Its sales during fiscal year 2008 reached 512 million real (approximately 25 billion yen). (From an article in the Nikkan Jidosha Shimbun on March. 17, 2010)