Hitachi Chemical 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 (%)
Revenue 546,468 526,687 3.8 Revenue increased year-over-year (y/y) due mainly to the following factors:
-The effects of M&A and other investment projects outside Japan, which were carried out as part of Mid-term business plan for the period through March 2016
-Creation of new products and business
-Enhancement of business processes and cost structure to improve productivity
Operating Income 53,036 29,226 81.5 Operating income increased y/y due mainly to the following factors:
-Higher sales
-Continued cost reduction initiatives
-Lower fixed cost as a result of voluntary retirement program
Income before income taxes 53,682 34,692 54.7 -
Net income 39,152 22,867 71.2 -
Net income attributable to owners of the parent 38,512 22,587 70.5
-Functional Materials
Revenue 269,769 277,127 (2.7) -Inorganic materials: sales of carbon electrode material for automotive lithium-ion batteries decreased y/y
-Sales of polymer science materials increased y/y as a result of the Company's converting Taiwan First Li-Bond Co., Ltd. into its consolidated subsidiary in April 2015
Operating Income 38,574 23,494 64.2 -
-Advanced Components and Systems
Revenue 276,699 249,560 10.9 Revenue increased y/y due mainly to the following factors:
-Automotive components: sales grew in the area of molded plastic components and powder metallurgy components especially overseas. Sales of friction materials remained as the same level as the previous year: domestic sales decrease due to lower demand for mini vehicles; while overseas sales increased y/y.
-Energy storage devices and systems: sales of automotive batteries increased y/y due primarily to a rise in sales of replacement batteries in and outside Japan.
Operating Income 14,388 5,846 146.1 -


-January 2016: Absorbed Shin-Kobe Electric Machinery Co., Ltd. and established a foundation for growing the Energy Storage Devices and Systems division as the Company's third largest business.
-April 2015: Established Hitachi Chemical Company America, Ltd. as the regional headquarters in the U.S.
-April 2015: Merged its subsidiaries in Thailand to consolidate management resources in the market
-April 2015: Converted Taiwan First Li-Bond Co., Ltd. into the Company's consolidated subsidiary to strengthen its position in the Asian market.
-January 2015: Converted CSB Battery Co., Ltd. in Taiwan into the Company's consolidated subsidiary and acquired CSB's global operations and sales network.

Merger with Shin-Kobe Electric Machinery
-The Company announced that, in line with the merger of its wholly-owned subsidiary, Shin-Kobe Electric Machinery Co., Ltd. (SKEM), it has decided to absorb Shin-Kobe Techno Service Co., Ltd. (SKTS), effective January 1, 2016. SKTS is SKEM's wholly-owned subsidiary and is engaged in manufacturing battery-related products and logistics operations. Hitachi Chemical, as a surviving company, will absorb SKTS, which will be dissolved as a result of this merger. At the same time, Hitachi Chemical will merge Shin-Kobe Platechs Co., Ltd., SKEM's another wholly-owned subsidiary, into Hitachi Chemical's wholly-owned subsidiary, Hitachi Chemical Automotive Products Co., Ltd. Shin-Kobe Platechs manufactures synthetic resin products. (From a press release on August 25, 2015)

Recent Development Outside Japan

-The Company announced that it will use its U.S. sales subsidiary, Hitachi Chemical Company America, Ltd. (HCA), as its regional headquarters to oversee other subsidiaries in the United States, effective April 1 2015. The Company has a sales company, two manufacturing companies, and a research and development company in the country. As a result of this reorganization, Hitachi Chemical Diagnostics, Inc., which manufactures and sells diagnostic reagents, and Hitachi Powdered Metals (USA), Inc., which manufactures and sells powdered metal products, will become HCA's wholly-owned subsidiaries. Hitachi Chemical Research Center, Inc., which is engaged in the biotechnology-based research and development, will be absorbed by HCA. (From a press release on February 3, 2015)

-The Company announced that it will merge its four consolidated subsidiaries in Thailand in April 2015. Hitachi Powdered Metals (Thailand) Co., Ltd., as a surviving company, will absorb the Group's other Thai businesses excluding a local joint venture. The other three subsidiaries are Japan Brake (Thailand) Co., Ltd., Hitachi Storage Battery (Thailand) Co., Ltd., and Hitachi Chemical (Thailand) Co., Ltd. In line with this merger, the surviving company will change its corporate name to "Hitachi Chemical Asia (Thailand) Co., Ltd." and will move its headquarters to a new location in the same Chachoengsao Province. The company will hire about 1,300 people, the same as the total number of employees at the four subsidiaries. Its capital will be increased to THB 2.18 billion (approximately JPY 7.1 billion) from the current THB 764.45 million (approximately JPY 2.49 billion). By consolidating its management resources into a single company, Hitachi Chemical aims to enhance its overall operations, while strengthening its market position to expand its business in the growing Southeast Asian market. (From an article in the Nikkan Jidosha Shimbun on September 2, 2014)

-The Company announced that it has decided to team up with Taiwan PCB Techvest Co., Ltd. (TPT) to expand its printed wiring board business. Under this partnership, the Company plans to transfer 80 percent of the shares in its wholly-owned subsidiary, Hitachi Chemical Co., (Taiwan) Ltd. (HCT), to TPT, converting HCT into a joint venture between Hitachi Chemical and TPT. The transaction is expected to close on November 1, 2015. Prior to this transaction, HCT will transfer its photosensitive dry film business to Hitachi Chemical Electronic Materials (Taiwan) Co., Ltd. (HCET), another Hitachi Chemical's wholly-owned subsidiary. By collaborating with the TPT Group's facilities in Taiwan and mainland China, Hitachi Chemical aims to increase its production capacity and establish a stable supply structure of printed wiring boards, printed wiring boards, demand for which is expected to grow especially for automotive, industrial and IT applications. (From a press release on May 29, 2015)

-The Company has made its group company in Taiwan a subsidiary to strengthen its adhesive business in the Asian region. This merger is aimed at expanding Hitachi Chemical's business in the Greater China, the largest market of adhesives for construction and automobiles. Before the acquisition, Hitachi Chemical's subsidiary, Hitachi Kasei Polymer Co., Ltd., manufactured and sold adhesives through a local adhesive manufacturer, Taiwan First Li-Bond Co., Ltd. ("TLB"), and TLB's group companies. Hitachi Chemical group has owned 32 percent stake of TLB. This time, the Company newly acquired 24 percent of shares in TLB, making TLB its subsidiary. (From an article in the Nikkan Jidosha Shimbun on April 10, 2015)

Product Development

Back door modules (molded plastic exterior products)
-The Company released Japan's first plastic back door modules. The door modules are used on the Nissan "X-Trail". The module is made of an inner panel made of high-strength, high-stiffness glass-fiber reinforced thermoplastic resin and an outer panel made of engineering plastic that offers high-quality surface. The two panels are bonded together to create a lightweight module that contributes to reducing vehicle weight, improving fuel consumption, and enhancing vehicle styling.

Batteries for idling start-stop systems (ISS)
-Adoption of a new G3 separator increased the durability of ISS batteries by 50%. The new ISS battery carries product warranty of 38 months which is the longest in the industry. Tuflong G3 batteries for mini vehicles were released in June 2016. Batteries for non mini passenger vehicles are scheduled to be released in the fall of 2016.

Copper-free disc brake pads
-The Company developed a copper-free disc brake pads by replacing copper material with other metal or inorganic materials in order to prevent water pollution. The Company is aiming to release the environmentally friendly disc pads prior to the enactment of new regulations in the U.S. (Brake pads containing more than 5% copper will be banned from 2021, and those containing more than 0.5% copper will be banned from 2025.)

R&D Structure

-In order to improve its R&D capability, the Company separated its Research function and Development function under its new organization, which became effective on April 1, 2016.

  • Innovation Promotion Headquarters, Core Technology Innovation Center: covers base technology development needed for nonconsecutive growth in the future
  • Research and Innovation Promotion Headquarters: covers new product development that anchors the expansion of existing business

R&D Facilities

Name of Facilities Location
Tsukuba Research Laboratory Ibaraki Pref., Japan
Tsukuba Research Laboratory (Yamazaki) Ibaraki Pref., Japan
Tsukuba Research Laboratory (Shimodate) Ibaraki Pref., Japan
Tsukuba Research Laboratory (Saitama) Saitama Pref., Japan
Hitachi Chemical Research Center, Inc. California, USA
Hitachi Chemical - SJTU Research & Development Center Shanghai, China

Technology Licensing-out Agreement

(As of Mar. 31, 2016)
Company Other company Contract Details Period
The Company and
Japan Brake Industrial Co., Ltd.
Federal-Mogul Corp. (U.S.) Granting the working rights to the patent for disc brake pads. Providing technical information on disc brake pads. Mar. 31, 2007 -
Until the time production of vehicle models that use the subject products is stopped
The Company Brembo S.p.A. (Italy) Granting the working rights to the patent for disc brake pads. Providing technical information on disc brake pads. Aug. 31, 2009 -
Aug. 31, 2014
(The contract is scheduled to automatically renew every five years after the initial period ends.)
The Company Hung-A Forming Co., Ltd. (Korea) Approval to use technology that involves rear door modules (except for the inner panels) Mar. 11, 2013 -
Sep. 30, 2029
(The contract is scheduled to automatically renew every year after the initial period ends.)

Technology Licensing-in Agreement

(As of Mar. 31, 2016)
Group company name Other Party to the Agreement Contract details Period
The Company Hitachi, Ltd. Acquisition of patent rights and license to use technical expertise on μ-Chip tags. Apr. 20, 2007 -
Apr. 19, 2017

R&D Expenditure

(in million JPY)
FY ended March 2016 FY ended March 2015

FY ended March 2014

Overall 27,800 26,900 26,200
-Functional Materials 19,800 19,800 19,900
-Advanced Components and Systems 8,000 7,100 6,300

Major developments
-Functional Materials: Mica insulating tape with high thermal conductivity for large-capacity generators, Reactive hot melt adhesive for fine dispensing
-Advanced Components and Systems: Synchronizer hubs for manual transmissions, Wiring boards for high-frequency applications

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Overall 32,000 26,600 33,500
-Functional Materials 12,000 12,500 13,600
-Advanced Components and Systems 20,000 14,100 19,900

Major capital investment products for FY ended March 2016
-Functional Materials: installed test equipment for polishing materials used to flatten semiconductor circuits in Japan, and installed test equipment for conductive films used to connect displays
-Advanced Components and Systems: increased molded plastic parts capacity in Japan, increased friction materials capacity in Thailand, and increased powder metallurgy capacity in the U.S.

Capital expenditure for FY ending March 2017
-Capital expenditure for FY ending March 2017 is planned to be JPY 45,200 million. (JPY 23,600 million for Functional Material, and JPY 21,600 million for Advanced Components and Systems)

Outlook for FY ending Mar. 31, 2017

(in millions of JPY)
FY ending Mar. 31, 2017
FY ending Mar. 31, 2016
(Actual Results)
Rate of Change
Revenue 550,000 546,468 0.6
-Functional Materials 274,000 269,769 1.6
-Advanced Components and Systems 276,000 276,699 (0.3)
Operating profit 54,000 53,036 8.3
Profit before tax 55,000 53,682 2.5
Profit for the year 39,200 39,152 0.1
Profit for the year attributable to owners of the parent 38,500 38,512 0.0

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

-Functional Materials: the Company aims to increase sales of semiconductor packaging materials and functional plastic materials for growth markets such as next-generation semiconductors and in-vehicle equipment.

-Advanced Components and Systems: the Company aims to increase auto parts sales outside Japan by extending its sales network, enhancing operations, and releasing new products with added value. It will also work on increasing sales of energy storage devices and systems for both automotive and industrial use outside Japan.

Mid-term Business Plan (overview)

Mid-term business plan (April 2013 -March 2016) Mid-term business plan (April 2016 - March 2019)
Company Strengthen global business and reform business structure
-Sales revenue: CAGR 5.6% (FY 2012 → FY 2015)
-Operating margin: 9.7%
Strengthen global business and establish stronger management base
-Sales revenue: CAGR 7-8% (FY 2015 → FY 2018)
-Operating margin: 11%
Automotive components Expand overseas production
-Established new production and sales facilities in North America and China
-Sales increased in the areas of molded components in China and powdered metallurgy products in Thailand
-Overseas production ratio increased from 51.1% in FY 2013 to 58.3% in FY 2015

Strengthen production and R&D functions outside
-Full-fledged entry into the European market

Environmental strategies
-Reduce product weight: use resin for exterior panels and structural materials
-Improve fuel efficiency: parts for turbo charger systems, idling start-stop systems, and variable valve mechanisms
-Meet stricter regulations: copper free materials, components for electrified vehicles
-Electrification: heat management materials
Energy storage devices and systems Batteries for idling start-stop systems
-Released Tuflong series batteries that are 50% more durable than existing batteries
Expand share of the automotive battery market
-Japan: Expand sales of batteries for idling start-stop systems especially for mini vehicles, while increasing sales in the aftermarket
-Europe: Establish new development and production bases
-ASEAN: Expand production operations, and develop sales network for motorcycle batteries

-Over the next 10 years, the Company aims to become a globally active innovator transcending the boundaries of chemistry, with advanced functional materials as core and extending to devices, systems and services.