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5. Kasai Kogyo Co., Ltd. Business Report FY ended Mar. 2018

Kasai Kogyo Co., Ltd. Business Report FY ended Mar. 2018

Factor
1) While sales increased significantly due to brisk sales of new models in the Asia segment, this was offset by a decrease in the production of orders in the Japan and North America segments, resulting in a 0.7% increase.

2) Operating income decreased 12.1% y/y due to an increase iin the preparations for the production of new models and the deterioration of profitability in the areas where production volume declined.

Contracts

-The Company will strengthen its business in Europe. The company has won an order for door trims that includes design work for a new Jaguar Land Rover (JLR) SUV that will be assembled in Slovakia. The door trims will be supplied from Kasai Kogyo's factory that will go on stream in the country from 2019. The company will expand its design and development functions in Europe with an aim to win more new orders for JLR models that will be produced in Slovakia in the future. In addition, Kasai Kogyo wishes to expand businesses with other European carmakers operating vehicle manufacturing plants in the country including Volkswagen and Daimler. From 2019, the company will mass-produce door trims, body side trims, and trunk trims for the all-new Land Rover Defender. This is the first time that the company has received an order for door trims from JLR. The order is in the form of full-service support (FSS) including design. Land Rover Defender is the fourth JLR model Kasai Kogyo will supply parts for and the second in the FSS contract. (From an article in the Nikkan Jidosha Shimbun on November 16, 2017)


-The Company has won an order for the interior parts of the all-new Ascent three-row SUV to be released by Subaru Corporation (Subaru) in the U.S. in 2018. This is the first time the Company has received an order from Subaru's U.S. plant. The parts will be produced at Kasai Kogyo's Ohio Plant and supplied to Subaru of Indiana, an automotive assembly plant. Under its long-term business plan to achieve revenues of JPY 300 billion, Kasai Kogyo will focus on expanding its customer base outside Japan, including non-Japanese automakers. This time, the company will supply full sets comprising ceiling parts, door trims, side trims, and trunk trims. Subaru plans to sell 60,000 units of the Ascent yearly. (From an article in the Nikkan Jidosha Shimbun on October 19, 2017)

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

R&D Structure

-The Company's R&D activities are mainly conducted at the Advanced Product Development Division in Japan that works in collaboration with the Company's development operations overseas. All R&D costs are included in expenses for Japan.

-The Company added technical centers in Mexico in 2013 and in Tennessee, U.S., in 2017, to the existing centers in Ohio and Michigan, U.S.

-In Europe, the Company added a technical center in Paris, France, in 2015, to the existing one in the U.K.

R&D Activities

High quality
-Commercially produce a dense cross-stitch boasting a sophisticated sense of design.
-Commercially produce quilting with a sophisticated sense of design made by computerized sewing machines

Weight reduction
-Develop foam-injection molded products that emit a strong sense of quality and solid feel.
-Develop rigid but thin stamped plastic products made from recycled materials.
-Develop an ultra-lightweight urethane ceiling.

Safety
-Develop an extruded plastic door pad that increases the level of safety during lateral collisions.

Environment/Comfort
-Commercially produce the world’s first thermally insulated ceiling material.
-Reduce organic solvents that are used in paint.
-Develop technology to spin-dye shiny metallic materials that emit a metallic look without the need for paint, by using ejection molding technology.

Product appeal
-Develop new, next-generation, leather interior products based on the concept of interior user interface, of which the interior is the interface between car and occupants.

-In the fiscal year that ended in March 2017, the Company invested in new equipment and facilities, mainly in the automotive interior parts business, to respond to redesigned vehicle models.

-Planned amount of investment for FY March 2018 is JPY 12,000 million. It will be used mainly for installing and revamping major new facilities.


-The Company will construct a new plant in Slovakia to manufacture automotive interior parts. The Company has made use of its plant in the U.K. to run its European operations. It will establish the new plant in continental Europe in order to expand its operations there. The new company Kasai Slovakia s.r.o. will be established in Levice City, Nitra in September to manufacture and sell automotive interior parts. The new company will be capitalized at EUR 10 million (JPY 1.25 billion). Kasai Kogyo will own 100% of the new company's stock. (From an article in the Nikkan Jidosha Shimbun on June 27, 2017)

Business Plan

-The Company mapped out a new long-term management plan, KR10 (Kasai Realize 10), which covers the period between 2014 and 2023. Plans are to offer excellent quality to global customers by standardizing manufacturing methods and processes, to create its "only one" technology and develop it into a "number one" technology, and to generate new business targeted at the automotive industry. Following are financial targets for the final year of the plan:

• Sales: JPY 300 billion
• Operating profit margin: 8%
• Global market share (interior trim): 10%