Toyoda Gosei Co., Ltd. Business Report FY ended Mar. 2016

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 Rate of
Change
(%)
Factors
Overall
Sales 781,886 727,846 7.4 Sales increased year-over-year (y/y) due to the following factors:
-increased vehicle production in North America
-growth in sales at the Automotive Components division mainly because of a weak yen.
Operating income 42,824 41,603 2.9 Increase factors:
-growth in sales at the Automotive Components division
-results of operational streamlining efforts

Decrease factors:
-increased fixed costs including expenses for product development and costs for preparing production lines for new products
-soaring start-up costs in Europe
Ordinary income 41,490 43,792 (5.3) -Ordinary income decreased y/y mainly due to exchange losses
Net income 20,255 21,155 (4.3) -
Automotive component business
Sales 747,089 687,516 8.7 Increase factors:
-increased vehicle production in the Americas and China
-exchange gains

Decrease factors:
-decreased vehicle production in Thailand
Operating income 43,045 40,209 7.1 Increase factors:
-Increased sales in the Americas and China
-exchange gains
-results of operational streamlining efforts worldwide

Decrease factors:
-Increased development costs in Japan
-Increased depreciation costs as a result of the Company's expanding global production capacity
-soaring start-up costs in Europe



Mid-to Long-term Business Plan "TG2020 VISION"

Sales target
-The Company is aiming to increase the percentage of sales to customers other than the Toyota Group of its total revenue to 50% by FY ending March 2021 (the percentage was 35% in FY ended March 2016)

Technical development
-Driving safety products: airbags, emblems that support millimeter-wave radar collision prevention systems, steering wheels with a truck driver warning system that prevents drowsy and inattentive driving
-Lightweight and environmentally friendly products: plastic fuel filler pipes (inlet pipes)

Enhancing global supply structure

Facility Country Details Project period
Toyoda Gosei Co., Ltd., Inazawa Plant Japan Retooling plating and painting lines Mar. 2015-
TG East Japan Co., Ltd., Miyagi Plant Japan Launch of operation Jun. 2015-
Toyoda Gosei (Shanghai) Co., Ltd. (Regional Headquarters) China Enhancing technical capacity Jan. 2015-
Toyoda Gosei (Foshan) Auto Parts Co., Ltd. China Plant expansion Jun. 2015-
Toyoda Gosei Minda India Pvt. Ltd. India Launch of operation Sep. 2015-
TG Fluid Systems USA Corporation (TGFSUS) U.S. New plant Nov. 2014-
TG Missouri Corporation (TGMO) U.S.

Plant expansion

Aug. 2015-
Toyoda Gosei Rubber Mexico, S.A. de C.V. (TGRMX) Mexico Launch of operation Feb. 2015-
Toyoda Gosei Irapuato Mexico, S.A. de C.V. (TGIMX) Mexico Launch of operation Apr. 2016-
Pecval Industria Ltda. Brazil Capital participation Nov. 2015-
GDBR Industria e Comercio de Componentes Quimicos e de Borracha Ltda. Brazil

Launch of operation

Jan. 2015-
Toyoda Gosei Meteor GmbH Germany Launch of operation May 2014-
Toyoda Gosei South Africa (Pty). Ltd. South Africa Local production Dec. 2015-



Investments in Japan

TG East Japan Co., Ltd., Miyagi Plant
-TG East Japan Co., Ltd., the Company's manufacturing subsidiary based in the Tohoku region, announced that it has held a ceremony to celebrate the completion of its new facility called Miyagi Plant. The new plant started its operations in June 2015. (From a press release on November 6, 2015)

-The Company announced that it has integrated its Iwate Plant, which produces handles and weatherstrips in Iwate Prefecture, into its subsidiary, TG East Japan Co., Ltd. (From a press release on April 2, 2015)

Investments Outside Japan


-Toyoda Gosei (Shanghai) Co., Ltd., a Chinese subsidiary of the Company, held a ceremony to celebrate the opening of its new facility on May 11, 2015. The subsidiary's previous facility had only offices but the new facility has testing facilities as well. This allows the Company to fully evaluate products and materials locally in China. Total investment in the new facility amounts to CNY 18 million or JPY 300 million. By strengthening its local operations, the company intends to develop products that meet the needs of customers in China, the world-largest automotive market. (From an article in the Nikkan Jidosha Shimbun on May 20, 2015)


-The Company announced it will construct a new airbag plant in Bawal, Haryana, India. New operations are expected to begin in March 2017. The Company will invest approximately INR 550 million (approximately JPY 900 million) in this project. Safety regulations have been tightened in India, and airbags are expected to become required. The facility will serve as the company's fourth plant in India and the second plant of Toyoda Gosei Minda India Private Limited, a subsidiary established in 2008 that currently operates a plant in Alwar, Rajasthan. The two plants, although located in different states, will be conveniently located in relation to each other. In addition to producing driver airbags and passenger airbags, the new plant will also manufacture products like steering wheels and weatherstrips, mainly for Japanese OEMs' plants in India. (From an article in the Nikkan Jidosha Shimbun on July 15, 2016)

-The Company will open a new automotive rubber hose plant in India in autumn 2015. The Company and Uno Minda (Minda), a major Indian automotive supplier, will establish a joint manufacturing company, Minda TG Rubber Pvt. Ltd., in the state of Haryana, northern part of India. A total investment is JPY 1.2 billion. The Company has been supplying rubber hoses including brake hoses and fuel hoses from its plants in Japan and Thailand to India. By producing these components locally, the Company intends to boost its competitiveness in India. The new plant is scheduled to start operations and supply the products to automakers including Toyota Motor Corporation and Suzuki Motor Corporation in September 2015. It also hopes to receive orders from Indian car manufacturers in the mid-to long-term. The new company is expected to generate revenue of JPY 1.7 billion per annum by the fiscal year ending in March 2020 (FY2019). (From an article in the Nikkan Jidosha Shimbun on December 9, 2014)


-The Company announced that its North American subsidiary, TG Fluid Systems USA Corporation (TGFSUS), has held an opening ceremony for a new plant called Big Brighton Plant in Brighton, Michigan, USA. Approximately USD 10.6 million (JPY 1.3 billion) will be invested in the new plant, which manufactures plastic fuel tubes for fuel tanks and engine-related parts. It covers a land area of approximately 76,900 square meters and a floor area of 16,600 square meters. TGFSUS have been producing plastic fuel tubes at its two plants in Brighton and Howell. The Company plans to integrate production operations at the two plants into the Big Brighton Plant by 2017. (From a press release on May 13, 2015)


-The Company announced that it will increase weatherstrip production capacity in Mexico to approximately 1.5 times the current level by 2020. The Company is aiming to meet an increase in automobile production in North America including Mexico. The Company will invest USD 34.5 million (JPY 3.45 billion) in the project. The number of employees will grow to 1,450 in 2020, an increase of 540 from the headcount at the end of March 2016. Weatherstrip production capacity will be increased at Toyoda Gosei Automotive Sealing Mexico, S.A. de C.V. (TGASMX), a wholly-owned sub-subsidiary of the Company. TGASMX will add production facilities at its plant in San Luis Potosi City, Central Mexico. It will also acquire adjacent land to introduce prototype fabrication equipment for smooth production preparation. (From an article in the Nikkan Jidosha Shimbun on August 25, 2016)

-The Company announced that its new Mexican subsidiary Toyoda Gosei Irapuato Mexico, S.A. de C.V. (TGIMX) began operating and held an opening ceremony. TGIMX will provide components like radiator grilles, console boxes, and plastic fuel filler pipes to automakers in the Americas. In addition, the subsidiary plans to manufacture plated products, starting in the summer of 2017. The Company has three other production subsidiaries in Mexico. Its Mexican operations now cover all four categories in the Company's automotive parts business with TGIMX's inauguration. (From an article in the Nikkan Jidosha Shimbun on May 25, 2016)


-The Company announced on April 14 that GDBR Industria e Comercio de Componentes Quimicos e de Borracha Ltda. (GDBR), a subsidiary of the Company in Brazil, held an opening ceremony on April 13, Brazil time. GDBR, The Company 's first production facility in South America, produces rubber sealing parts like door weatherstrips, interior and exterior parts like plastic instrument panel components, and safety systems like side airbags. It is located in Itapetininga, Sao Paulo, where it has a facility with a floor area of 18,000 square meters and employs about 260 people. GDBR started producing automotive parts in January 2015. Moreover, the Company acquired a stake in a Brazilian producer of plastic automotive parts in November 2015. These two Brazilian facilities provide local parts supply to Toyota Motor Corporation and other automakers. (From an article in the Nikkan Jidosha Shimbun on April 16, 2016)

-The Company will purchase a 30% stake in Pecval Industria Ltda., a Brazilian manufacturer of automotive plastic interior and exterior parts in October 2015. Pecval produces plastic components for instrument panels and radiator grilles. Pecval is a wholly owned subsidiary of Shimizu Industry Co., Ltd., based in Kariya, Aichi Prefecture, Japan. Shimizu Industry itself is a subsidiary of Denso Corporation. The Company already has a plant in Brazil that produces airbag parts and rubber sealing products. Through the equity participation, the Company will increase the items and the quantity of parts which are locally supplied for OEMs in an effort to strengthen its business foundation in Brazil. (From an article in the Nikkan Jidosha Shimbun on August 6, 2015)


-The Company announced that it will cease its manufacturing operations at its Australian subsidiary, Toyoda Gosei Australia Pty. Ltd. (TGAU), as its customer plans to withdraw from vehicle production in the country. The timing of the closure will be determined based on the customer's schedule. TGAU currently employs approximately 150 people and manufactures steering wheels, driver airbags, weatherstrips, and instrument panel components. (From a press release on October 13, 2015)

R&D Activities

Development focus is set on the following areas:
-Advanced products and technology for next-generation vehicles such as bio-fuel vehicles, hybrid vehicles, electric cars, and fuel cell vehicles
-Materials, products, and technology that comply with various environmental regulations

Product Development

-Capless fuel filler: production of this product began in North America. The capless structure allows users to refuel without opening and closing the fuel cap.
-"Platinum-like plating": features subdued metallic luster like platinum and is used on the radiator grilles of the Lexus RX
-Steering wheel with a warning function: prevents drowsy and inattentive driving

  • Steering wheels with a vibrating system: adopted for the Lexus RX, the steering wheel vibrates to alert the driver when the vehicle is drifting out of its lane unintentionally
  • Steering wheels with a driver warning system: a camera system on the steering wheel monitors the driver's eye movements/face angles and provides an alarm via a dedicated smartphone application when it detects dangerous situations.

-Variable depth cup holder: received the Lexus RX project award
-Plastic fuel filler pipe: received the Excellent TNGA promotion award
-"Flesby" small mobility concept equipped with an airbag: exhibited at the Tokyo Motor Show 2015
-All-composite high pressure hydrogen tank for fuel cell vehicles
-Power semiconductor device chip

Steering wheel with a warning function
-The Company announced that it has developed a steering wheel with a warning function that can alert drivers to dangerous situations by vibrating the steering wheel itself. A vibration unit with a small motor is solidly connected with the metal core of the steering wheel, and is activated when the vehicle is drifting out of its lane unintentionally. This original connecting method leads to quiet performance, offering a 50% reduction in vibration noise and better performance compared with those of competing products. The new steering wheel is already used on the new Toyota Lexus RX SUV that was launched on October 22, 2015. (From an article in the Nikkan Jidosha Shimbun on November 4, 2015)

-The Company announced that it has developed a truck driver warning system that can be retrofitted to vehicles currently on the road. The system prevents drowsy and inattentive driving by monitoring the driver's eye movements and face angles with a steering wheel camera. Similar kinds of warning systems currently available are primarily for factory installations and few of them can be retrofitted. The Company's new system features the world's first camera built into a steering wheel, and provides an alarm via a dedicated smartphone application when it detects dangerous situations. The Company aims to release this product in the second half of FY 2016, hoping that it will help prevent truck accidents that often become more serious than car accidents. (From an article in the Nikkan Jidosha Shimbun on March 23, 2016)

Power semiconductor device chip
-The Company has utilized gallium nitride (GaN) to develop the world's first 1.2 kV class power semiconductor device chip. The new chip is capable of large current operation that exceeds 20 A. GaN is a key material in blue LEDs. Since 2010, the Company has conducted research to develop power semiconductors that use GaN. The technology can be applied to the power controllers of hybrid vehicles, which handle large amounts of power. The Company is aiming to achieve commercial application by around the period 2018 - 2020. The Company used the GaN crystal growth technology it has cultivated in the development and manufacturing of blue LEDs in the development of the power semiconductor. (From an article in the Nikkan Jidosha Shimbun on July 9, 2016)

-The Company has developed low loss semiconductor device technologies for high power applications in switching transistors and rectifiers. These technologies use gallium nitride, which is a key material in blue LEDs and shows superior property in withstanding high voltage. The Company's new low loss metal-oxide-semiconductor field effect transistor allows electric current to flow only when a signal is given to the switch; otherwise no current flows even under high voltage of 1200 V. Application of the new technologies to devices such as power control units used in hybrid vehicles is expected to reduce the size and improve efficiency of the units. (From an article in the Nikkan Jidosha Shimbun on May 23, 2015)

R&D Structure

-R&D activities are conducted globally through cooperation among several organizations within the Company: the R&D center; Production technology development center; Opto Electronics business engineering department, and Engineering departments at each business segment outside Japan, namely Toyota Gosei North America Corporation, Toyoda Gosei Asia, Toyoda Gosei (Shanghai), and Toyota Gosei Europe (Europe & Africa).

R&D Facilities

Kitajima Technical Center Aichi Pref., Japan
Miwa Technical Center Aichi Pref., Japan
TGR Technical Center, LLC Plymouth, MI, USA
Toyoda Gosei North America Corporation Troy, MI, USA
Toyoda Gosei Europe N.V. Belgium
Toyoda Gosei Asia Co., Ltd. Chomburi, Thailand
Toyoda Gosei (Shanghai) Co., Ltd. Shanghai, China



Technology Licensing-in Agreement

(As of Mar. 31, 2016)
Company
(Country)
Contract Period
Autoliv Development AB
(Sweden)
A patent license agreement for curtain airbags. Feb. 5, 2001 -
Feb. 20, 2016
Intier Automotive Interiors of America
(USA)
A patent and expertise license agreement for urethane spray surfaces Nov. 18, 2002 -
May 10, 2019
Daimler AG
(Germany)
A patent for a cover used in millimeter-wave radar Nov. 10, 2011 -
Sep. 23, 2019



Technology Licensing-out Agreement

(As of Mar. 31, 2016)
Company
(Country)
Contract 契約期間
Contract period
Stant Manufacturing, Inc.
(U.S.)
An expertise license agreement for conductive fuel caps Nov. 17, 1998 -
Dec. 21, 2018
Magna Steyr Fuel Systems
(Germany)
A patent license agreement for conductive fuel caps Feb. 26, 2004 -
Dec. 21, 2018
Pong Codan Rubber (M) Co., Ltd.
(Malaysia)
A technological licensing agreement on weatherstrips Jul. 16, 2007 -
Jul. 15, 2017



R&D Expenditure

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Automotive Parts Business 25,600 26,600 25,700
Non-Automotive Parts Business 2,700 2,900 3,400
Total 28,300 29,500 29,100


-Overall R&D expenditure for FY ending March 2017 is expected to be JPY 29,000 million.

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Automotive Parts Business 53,500 63,400 41,600
Non-Automotive Parts Business 800 1,100 1,400
Total 54,400 64,700 43,000


-Overall capital expenditure for FY ending March 2017 is planned to be JPY 47,000 million (JPY 45,500 million for Automotive Parts Business).

Outlook for FY ending Mar. 31, 2017

(in millions of JPY)
FY ending Mar. 31, 2017
(Forecast)
FY ending Mar. 31, 2016
(Actual Results)
Rate of Change
(%)
Sales 710,000 781,886 (9.2)
Operating income 36,000 42,824 (15.9)
Ordinary income 36,000 41,490 (13.2)
Net income 20,000 20,255 (1.3)

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

-Sales and operating income are expected to decrease y/y due to a strong yen.
-Despite the Company's ongoing and bolder initiatives to streamline its operations, operating income is expected to decline y/y as a result of the Company's realigning product mix and adjusting product prices, and the effects of currency translation.