Hitachi Metals, Ltd. Business Report FY ended Mar. 2015

Business Highlights

Financial Overview

(IFRS, in million JPY)
  FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 Rate of change
Rxseevenue 1,004,373 807,794 24.3 -The result of merging with Hitachi Cable in July 2013
Operating Profit 84,407 53,428 58.0 -Extraordinary profit from selling Hitachi Metals Techno, Ltd. (building materials and equipment business).
Profit before tax 86,391 55,820 54.8 -
Profit for the year attributable to owners of the parent 70,569 48,133 46.6 -
High-grade Metal Products
Revenue 257,396 234,464 9.8 1)
Operating Profit 34,661 19,731 75.7 -
Magnetic Materials and Applications
Revenue 135,400 134,326 0.8 2)
Operating Profit 11,492 10,058 14.3 -
High-grade Functional Components
Revenue 282,018 186,025 51.6 3)
Operating Profit 28,074 12,915 117.4 -
Wires, Cables, and Related Products*
Revenue 327,595 251,423 30.3 4)
Operating Profit 19,845 15,975 24.2 -

*The Wires, Cables, and Related Products segment was established based on the former operations of Hitachi Cable, Ltd., with which the Company merged in July 2013. The division was added to the Company's financial statements in the second quarter of FY ended March 2014.
-The Company started to use the International Financial Reporting Standards (IFRS) from the fiscal year that ended March 2015.

1) High-grade Metal Products
-Automotive materials: Strong demand both in and outside Japan for environmentally friendly products such as piston-ring materials and CVT belt materials.
-Commissioned the world's largest Vacuum Induction Melting & Casting (VIM) equipment, designed for CVT-belt materials.

2) Magnetic Materials and Applications
-Rare-earth magnets: Signs of diminishing demand were seen in the Japanese automotive market, while demand outside Japan for automotive electronics installed in hybrid cars and electric vehicles grew.

  • Increased production capacity of rare-earth magnets for hybrid cars (NEOMAX Kinki)
  • Possibly forming a joint venture with Beijing Zhong Ke San Huan High-Tech. Co., Ltd.

-Ferrite cores: There was strong demand for automotive electronic parts and smartphones.

3) High-grade Functional Components
-The business results of Waupaca Foundry, Inc. were announced in November 2014, showing a significant year-on-year increase in sales of automotive casted products.
-Heat-resistant casted products: There were signs of recovery in Europe, a major market region; and strong demand in the U.S.
-High-end ductile cast-iron products: Brisk automotive demand continued outside Japan, such as in the U.S., and there was no clear sign of any drop in demand as a result of the consumption-tax hike in Japan. All regions reported favorable results.
-Aluminum wheels: In Japan, there were fewer units produced of some models on which the Company's aluminum wheels are being mounted. Nevertheless, sales increased year-on-year due to strong demand in the U.S.

4) Wires, Cables, and Related Products
-Automotive parts: Brisk automotive demand continued outside Japan, such as in the U.S., creating strong demand mainly for electrical parts such as onboard sensors. In addition, the facilities in Asia and Central America were upgraded.

Joint venture of magnet business in China

-The Company and Beijing Zhongke Sanhuan Hi-tech Co., Ltd., a Chinese magnet supplier, have reached an agreement to establish a joint venture to produce and sell neodymium-iron-boron magnets in Jiangsu Province, China. Demand for these magnets used in hybrid vehicles and industrial motors is forecast to grow significantly in the Chinese market, and the new company is expected to generate JPY 10 billion in sales per year by FY 2017, which ends in March 2018. The joint venture will be formed in December 2015, and will be called Hitachi Metals San Huan Magnetic Materials (Nantong) Co., Ltd. It will be capitalized at CNY 450 million (approximately JPY 9 billion), of which 51 percent will be provided by Hitachi Metals, and 49 percent will be provided by Beijing Zhong Ke San Huan. The joint venture will set up an integrated production structure for neodymium-iron-boron magnets, planning to begin mass production in December 2016 at the production speed of 1,000 tons per year. Its annual output is expected to increase to 2,000 tons in the future. Beijing Zhong Ke San Huan High-Tech. Co. is the largest producer of neodymium magnets in China, with a long history of licensing Hitachi Metals' technology. (From an article in the Nikkan Jidosha Shimbun on June 22, 2015)

Acquisition of Waupaca Foundry in the U.S.

-The Company announced in November 2014 that it had acquired all the stock shares in Waupaca Foundry (located in Wisconsin, U.S.A.), turning it into a subsidiary. As a result of acquiring this major manufacturer of cast-iron parts for transport equipment, the Company was able to radically strengthen its casting operations and aim for mid-to-long-term growth worldwide. Waupaca, which manufactures brake and engine parts for automobiles and industrial equipment, boasts the largest cast-iron operations in the world, producing 1.57 million tons annually. Based on the acquisition, Hitachi Metals, which has a strong foothold on high value-added products, was able to combine its operations with those of Waupaca, which has huge cast-iron production operations, and significantly expand its business in the transport industry. (From an article in the Nikkan Jidosha Shimbun on August 21 and November 11, 2014)

-In April 2015, the Company reorganized its U.S. operations. The U.S. facility that belongs to the high-end functional products parts company has now been repositioned within the organization, with Waupaca becoming the central entity. Waupaca's production technology will be shared with Hitachi Metals' plants in the U.S., India, and Korea. The Company will expand its customer base for cast-iron products to include Mexico and Europe also.

Global production of electrical parts

-The Company will strengthen its production operations and expand its business in the automotive electrical parts sector worldwide. Torque sensors will now be produced in Mexico, in addition to Thailand. It has started to produce EPB harnesses in China, the Czech Republic, Thailand, and Mexico.

Mid-term Management Plan

-The Company announced its new mid-term business plan in August 2013. In this plan that covers through March 2016, the Company aims to increase its annual sales to JPY 880 billion and raise its operating income to JPY 75 billion.

-The Company has revised its financial targets in its mid-term business plan that covers through March 2016. The Company will acquire all shares in Waupaca Foundry of the U.S. on October 31. Due to the expected impact of this acquisition and a projected increase in global demand, Hitachi Metals has adjusted its targets upward from the original figures that were announced in August 2013. The new sales target for FY 2015 that ends in March 2016 is set at JPY 1.11 trillion, up JPY 230 billion from the previously announced figure. In terms of profits, operating profit target is set at JPY 90 billion, up JPY 15 billion from the original figure, and net profit target is set at JPY 70 billion, up JPY 16 billion from the formerly announced figure. The acquisition of the U.S- based company is forecast to add JPY 187 billion to Hitachi Metals' consolidated sales. (From an article in the Nikkan Jidosha Shimbun on October 29, 2014)

-Based on "innovation" and "expansion", the Company is aiming to be a world-class metal-materials manufacturer, sustaining its business based on the following important points.

  • Strengthen capabilities to create new products and develop new technologies
  • Strengthen and accelerate global growth strategies
  • Establish a strong management foundation

Outlook for FY ending Mar 31, 2016

(in million JPY)
  FY ending Mar 31, 2016
FY ended Mar. 31, 2015
Rate of Change
Revenue 1,100,000 1,004,373 9.5
Operating Profit 107,000 84,407 26.8
Profit before tax 106,000 86,391 22.7
Profit for the year attributable to owners of the parent 73,000 70,569 3.4

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

R&D Expenditure

(in million JPY)
  FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
High-grade Metal Products 5,903 5,719 5,192
Magnetic Materials and Applications 2,861 3,166 3,514
High-grade Functional Components 2,516 2,709 2,370
Wires, Cables, and Related Products 9,623 5,220 -
Total 20,903 16,814 11,076
-Sales ratio 2.1% N.A. N.A.

-In the fiscal year ending in March 2016, the Company plans to spend around JPY 22,000 million on R&D expenses.

R&D Structure

-R&D Organizational Structure:

  • Based on a divisional laboratory program the Company introduced, each business unit is responsible for developing its own products in line with its own strategy.
  • Collaboration between Hitachi Ltd. and all the R&D sections is undergoing, with the aim of developing the next-generation, major, new products; new production methods, and fundamental technology.
  • The Company is collaborating with external organization such as universities, including ones outside Japan, in order to sow the seeds for developing new materials and technology that lead to future, new products.

R&D Facilities

Facility Location
Production System Laboratory Saitama Pref., Japan
Metallurgical Research Laboratory Shimane Pref., Japan
Magnetic Materials Research Laboratory Osaka, Japan
Casting Technology Research Laboratory Tochigi Pref., Japan
Cable Materials Research Laboratory Ibaraki Pref., Japan

Technology Licensed out Agreements

(As of Mar. 31, 2015)
Contract item Contract details Period
Advanced Technology & Materials Co., Ltd.
Fine crystal soft magnetic alloys Granting of nonexclusive licenses on fine crystal soft magnetic alloys From October 1, 2005 to the expiration date of patent covered by the contract.

Major R&D Achievements in FY ended Mar. 2015

Division Development Activities
High-grade Metal Products -High fatigue-strength CVT belt materials
-High-performance, precision casted turbine wheels.
-Ni amorphous brazing filler
Magnetic Materials and Applications -Development of high-performance ferrite magnets
-Transmissions for micro-HEVs
-Metal powder cores for onboard, high-performance mobile terminals
High-grade Functional Components -Expanding lineup of heat-resistant cast steel products for fuel efficient and downsizing engines
-Expanding the line-up of ductile-steel products for lighter weight chassis parts
Wires, Cables, and Related Products -Development of rectangular enamel wire that supports high partial discharge inception voltage of HV and EV motors
-Development of harnesses for electric parking brakes and for vehicle speed sensors
-Pressure-sensitive sensors to stop occupants from being caught in power doors.

Soft ferrite core materials
-The Company announced that it has developed two kinds of soft ferrite core materials that offer excellent high-frequency performances. Mass production lines for these materials are already in place. The new materials, ML95S and ML90S, are expected to help manufacturers produce smaller and more energy-saving components for automobiles, networking equipment, and smartphones. The Company used its original powder-metallurgy and heat-treatment technologies in developing the new materials from Mn-Zn that features low-core losses at high-frequency waves, and achieved higher performances and greater efficiency than Ni-Zn ferrite materials. The new ferrite materials show low-core losses also in high-temperature environment where auto parts are used, which cuts down on power consumption and reduces heat generation. (From an article in the Nikkan Jidosha Shimbun on March 24, 2015)

-The Company has developed a new in-vehicle soft ferrite core material "MB20D" which offers superior dependence at high temperatures. The company will propose the new material as a technology which contributes to increasing the efficiency as well as reducing the size and weight of electronic components for use in electric auto parts. As the newly developed material was added to the product lineup of soft magnetic materials, the company will be able to respond to a wider range of customers' requests. The MB20D, a manganese zinc ferrite material intended for use in automobiles, provides excellent low-loss characteristics under high temperatures. Utilizing the Company's proprietary powder mix, powder processing and heat treatment technologies, the new soft ferrite core material achieves both low core loss and high saturation magnetic flux density. Adoption of the new material into transformers, inductors and other electronic components will enable reductions in power consumption and calorific value of the parts. Shipping of the samples is under way. The Company intends to begin mass producing it by the end of 2015. (From an article in the Nikkan Jidosha Shimbun on December 4, 2014)

Capital Expenditure

(in million JPY)
  FY ended Mar. 31, 2015 FY ended Mar. 31, 2014 FY ended Mar. 31, 2013
Overall 51,474 31,987 26,688
-High-grade Metal Products 18,724 11,849 10,336
-Magnetic Materials and Applications 10,209 7,297 8,368
-High-grade Functional Components 12,576 6,380 7,015
-Wires, Cables, and Related Products 9,094 5,604 -

-Major capital investment projects in FY ended Mar. 2015.

Segment Objective of the investment
High-grade Metal Products To create an organizational structure that can produce high-value added products and strengthen operations in Japan.
Magnetic Materials and Applications To create an organizational structure in and outside Japan with enhanced operations for producing rare-earth magnets.
High-grade Functional Components To reorganize production operations outside Japan and rationalize operations in Japan.
Wires, Cables, and Related Products To strengthen development of high value-added products in Japan and to expand production overseas

Planned Capital Investments

(As of Mar. 31, 2015)
Segment Planned amount of investment
(in million JPY)
Objective of the investment
Overall 65,000 -
-High-grade Metal Products 18,900 To rationalize production plants in Japan and create a production structure capable of producing high value-added products.
-Magnetic Materials and Applications 8,500 To enhance production capacity both in and outside Japan and establish plants outside Japan to produce rare-earth magnet products.
-High-grade Functional Components 17,100 To increase production of automotive components outside Japan and to rationalize production plants in Japan.
-Wires, Cables, and Related Products 14,200 To increase production capacity of automotive electrical parts at plants outside Japan.