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5. Toyoda Gosei Co., Ltd. Business Report FY ended Mar. 2019

Toyoda Gosei Co., Ltd. Business Report FY ended Mar. 2019

Financial Overview

(in millions of JPY)

Recent Development in Japan

-Toyoda Gosei announced that it will establish a Corporate Venture Capital Department in January 2019. This new department will serve as the company’s center for flexible and swift investment in startups and venture capital to accelerate open innovations for practical application and commercialization of new technologies and products. The Corporate Venture Capital Department will invest quickly in startups that are promising for synergy with Toyoda Gosei’s core technologies. Investment targets will be venture capital to gather information on the above startups, and startups with resources and technical abilities in the following four fields: Robotics, Semiconductors, Next-generation automotive parts, and Materials. The department will have an operating budget of 3 billion yen, and will invest it for a period of two years starting in January 2019. (From a press release on November 9, 2018)

Investments Outside Japan

<India>
-On July 13 Toyoda Gosei Co., Ltd. (Toyoda Gosei) formally announced that it will enhance its development operations for airbags in northern India. Toyoda Gosei Minda India Pvt. Ltd. (TGMIN), a joint venture between Toyoda Gosei and a local firm, has established a new office in Gurgaon, a suburb of New Delhi. Toyoda Gosei will create a system for locally developing and designing airbags, demand for which is expected to surge due to a law requiring installation of them. The company also announced plans to more than double its overall sales in India to JPY 35 billion from the current level by fiscal year 2025 (ending in March 2026). The new Gurgaon office is located near the head office of Maruti Suzuki India Limited, a major customer of TGMIN. The new office has ten permanently assigned engineering and sales employees, and undertakes operations like designing airbags, which has previously been carried out in Japan, to speed up business. The number of employees will be increased to 20 by 2020. In India, safety regulations on vehicle collision were tightened in 2017, and installation of airbags on new vehicles will be legally required from 2019 onward. (From an article in the Nikkan Jidosha Shimbun on July 14, 2018)

<China>
-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced that its Chinese regional headquarters, Toyota Gosei (Shanghai) Co., Ltd., will change its corporate form to an investment-based company (holding company) in December. The subsidiary will also change its name. Toyota Gosei (Shanghai) will able to hold shares of other Chinese subsidiaries, and speed up management decision making in order to expand its business in the country. (From an article in the Nikkan Jidosha Shimbun August 27, 2018)

-Toyoda Gosei announced that it will exhibit at the 15th Auto China 2018 in Beijing, China. The Toyoda Gosei booth will feature various products that contribute safer, more environmentally-friendly, and more comfortable vehicles, such as airbags, plastic fuel filler pipes and automotive LED products. The company will also exhibit next-generation concepts for the age of autonomous driving and electric vehicles. (From a press release on April 4, 2018)

-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced that it will make its Chinese automotive rubber parts joint venture, Tianjin Star Light Rubber and Plastic Co., Ltd., a wholly owned subsidiary in April. The company will acquire shares in the JV from Kinugawa Rubber Industrial Co., Ltd. (Kinugawa Rubber) and its Chinese holding company, Starlight Rubber & Plastic Development Ltd. (Starlight Rubber & Plastic Development). Toyoda Gosei will speed up management decision making. It intends to satisfy the needs of Japanese and local automakers in China and expand its business in growing markets. The JV produces weatherstrip products like glass runs in Tianjin City. It has dealings with Japanese and local companies, and estimated sales for the fiscal year that ended in March 2018 were about JPY 8 billion. Toyoda Gosei first invested in the JV in 2000. Toyoda Gosei owns 51%, Starlight Rubber & Plastic Development 42%, and Kinugawa Rubber 7%. (From an article in the Nikkan Jidosha Shimbun on April 2, 2018)

-Toyoda Gosei announed that the company will merge its two manufacturing subsidiaries in east China, Toyoda Gosei (Zhangjiagang) and Toyoda Gosei (Zhangjiagang) Plastic Parts. These two companies, both established in 2003, produce safety systems and interiors & exteriors, respectively. The merged company will continue under the name Toyoda Gosei (Zhangjiagang). With the merger, Toyoda Gosei aims to improve its management efficiency. The merger will be completed in July 2018. (From a press release on April 2, 2018)
 

R&D Activities

-Toyoda Gosei announced that the company is advancing its development of steering wheels with human-machine interface (HMI) functions for the exchange of information between humans and automobiles. Toyoda Gosei began selling truck steering wheels that warn drivers of inattention or drowsiness to TG Logistics in September of 2018. A camera in the steering wheel monitors the driver’s face and alerts the driver when inattention or drowsiness is detected. These steering wheels can be retrofitted and are expected to contribute to the prevention of accidents involving trucks, which are more likely to cause severe damage. Toyoda Gosei’s steering wheels with grip sensor, which can be used with today’s advanced driver assistance systems, also reached the stage of commercial application. Sensors in the grip portion of the steering wheel can detect with high sensitivity whether the driver is gripping the steering wheel. If a driver releases the steering wheel while driving, he or she is alerted with a sound and visual warning. (From a press release on November 27, 2018)

<Joint Development with Tokai Rika>
-Tokai Rika Co., Ltd. (Tokai Rika) has developed two automotive steering wheel switch sensors that improve safety and added value. Tokai Rika, in cooperation with Toyoda Gosei Co., Ltd., incorporated static electricity sensors into steering wheels in order to detect whether drivers are gripping steering wheels. These sensors can be used for gesture input by the movement of fingers. Tokai Rika also developed technology to achieve multifunctionality by changing switch displays with software. As automotive technology advances, the company aims to increase added value by providing connection between vehicles and users. (From an article in the Nikkan Jidosha Shimbun on July 12, 2018)

Product Development

-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced that it has developed a large-current vertical GaN power semiconductor using gallium nitride (GaN), a major material used in blue LEDs. The company improved the current flow direction by utilizing its know-how cultivated through LED semiconductor development, and achieved over 50A per chip. Toyoda Gosei plans to offer samples of products like power transistors to semiconductor manufacturers in 2020. The company is aiming to develop the GaN power semiconductor business as a new pillar. It will also consider use of GaN power semiconductors for automotive power control units and wireless power supply. (From an article in the Nikkan Jidosha Shimbun on April 19, 2018)

R&D Structure

-R&D activities are conducted globally through cooperation among several organizations within the Company: the R&D center; Production development technology department; 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

-Overall capital expenditure for FY ending March 2020 is planned to be JPY 54,000 million.

Contracts

-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced on March 27 that it has started to supply its first plastic turbo duct made for Toyota Motor Corporation’s new Hiace that will be sold overseas. The new plastic turbo duct weighs 800 g (half as much as turbo ducts made of metal and rubber), and is manufactured at a lower cost. Toyoda Gosei intends to promote the new turbo duct for other applications such as electric eco-car cooling pipes. (From an article in the Nikkan Jidosha Shimbun on March 28, 2019)

-On December 6 Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced that it has developed an air conditioner register with LED illumination that uses wireless power transfer technology on magnetic resonant coupling, the first of such applications in an automotive part. The new register has been chosen for Toyota Motor Corporation’s all-new Lexus UX. Wireless power transfer technology uses the physical phenomenon of resonance, in which a vibrating system drives another system to oscillate at specific frequencies. When electric current flows in the source circuit on the register circumference, a receiver circuit in the center of the register (knob body) resonates and a magnetic field with the same frequency is generated around it. A current is generated in the receiver circuit by the magnetic field, and the LED lights up. This prevents the wire harness from breaking and lets the knob that adjusts the air direction and volume of the air conditioner light up. (From an article in the Nikkan Jidosha Shimbun on December 7, 2018)

Investment outside Japan

<China>
-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced that its China headquarters, Toyoda Gosei (Shanghai) Co., Ltd., will invest in Hubei Rock Rubber and Seal Technology Co., Ltd. (Hubei Rock Rubber and Seal Technology), a weatherstrip manufacturer. The Chinese headquarters will pay about JPY 800 million to acquire a 60% stake in Hubei Rock Rubber and Seal Technology from Hubei Zhengao Automotive Accessories Co., Ltd. in December. The acquisition will add a fourth plant to manufacture weatherstrip in an inland region to its three existing plants in coastal areas. Japanese automakers such as Toyota Motor Corporation are expanding their China business, and Toyoda Gosei will strengthen its production system in the country. (From an article in the Nikkan Jidosha Shimbun on October 31, 2018)

<Mexico>
-Toyoda Gosei broke ground in Venado, Mexico to build its fifth production site in the country. The company plans to invest USD 30.5 million for the project, which is expected to employ 900 workers when it runs at full capacity. The plant is scheduled to start operations in 2020 producing sealing solutions for the automotive industry. Toyoda Gosei currently operates four manufacturing plants in Mexico, including a facility in Matamoros that produces airbags and other safety components, a plant in Mexquitic that manufactures weather strips and door glass runs, and two plants located in Guanajuato and Matamoros that produce tubes, hoses and other plastic components for fuel systems. The company’s customers include Toyota, Ford, Nissan and Honda. (From Mexico-Now article on March 22, 2019)

<India>
-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced on February 8 that its subsidiary, Toyoda Gosei Minda India Pvt. Ltd., held an opening ceremony for a new plant in Gujarat, India. The new plant is the subsidiary's third plant, and will supply airbags, steering wheels, and weatherstrips to Suzuki Motor Corporation’s automobile production subsidiary, Suzuki Motor Gujarat Pvt. Ltd. JPY 3 billion will be invested by the end of March 2022. Toyoda Gosei plans to expand its sales in India more than twice to JPY 35 billion by the fiscal year that ends in March 2026. At the ceremony held on February 4, Naoki Miyazaki, President of Toyoda Gosei, stated that the company intends to contribute to the development of the Indian automotive industry by supporting the Make in India policy advocated by Prime Minister Narendra Modi, who hails from Gujarat. (From an article in the Nikkan Jidosha Shimbun on February 9, 2019)

-Toyoda Gosei announced that the Gujarat Plant of Toyoda Gosei Minda India (TGMIN), an Indian subsidiary of Toyoda Gosei, began operations in October 2018. The Gujarat Plant will supply airbags, the demand for which is growing with the increasing automobile production and stricter safety regulations in India, plus supply steering wheels, weatherstrips and other parts to Suzuki Motor Gujarat. It has a ground area of 75,000 square meters and a total building area of 18,000 square meters. There will be approximately 330 employees as of end of March 2021. (From a press release on November 6, 2018)

<Indonesia>
-Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced that it will establish a joint venture for airbag production in Indonesia with PT. Astra Otoparts Tbk (Astra Otoparts), a major automotive parts supplier. About JPY 4.5 billion will be invested through the end of March 2026, and production is slated to start in November 2020. The joint venture will be Toyoda Gosei’s second production base in Indonesia. The company will establish an airbag production system to meet tightening local safety regulations. The new joint venture, PT. Toyoda Gosei Indonesia, will be located in Karawang Regency, West Java. Toyoda Gosei will own an 80% stake in the joint venture, and Astra Otoparts the remaining 20%. The joint venture will have USD 22 million (JPY 2.5 billion) in capital. Construction will start in February 2019, and the new plant is scheduled to start production in November 2020. The total land area will be 50,000 square meters. It will produce airbags and fuel system parts for Japanese automakers in the country, including Toyota Motor Corporation and Daihatsu Motor Co., Ltd. (From an article in the Nikkan Jidosha Shimbun on December 5, 2018)

*Since the Company switched to using the International Financial Reporting Standards (IFRS) from the fiscal year that ends in March 2019, the rates of change are not provided here.

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

Mid-and-Long Term Business Plans

-On May 22 Toyoda Gosei Co., Ltd. (Toyoda Gosei) announced its mid-and-long term business plans, in which the supplier aims to achieve sales revenue exceeding JPY 1 trillion in fiscal year 2025 (ends in March 2026), an increase of about 20% from that of FY 2017. To achieve this objective and tackle challenges in the automotive industry, the company will use its resources mainly for developing new products that respond to the spread of autonomous driving and automobile electrification, commercializing new technologies, expanding existing businesses for airbags and other products, and venturing into innovation. The targeted operating profit margin and ROE for FY 2025 are 8% (5.1% in FY 2017) and 10% (6.6%), respectively. The company is targeting the achievement of sales revenue amounting to JPY 170 billion in FY 2025 in the fields of new products and new technologies. (From an article in the Nikkan Jidosha Shimbun on May 23, 2018)