Hitachi Chemical Co., Ltd. Business Report FY ended Mar. 2017

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 Rate of
Change (%)
Revenue 554,144 546,468 1.4 -Revenue, which was about the same as last year, slightly increased year-over-year (y/y) due to an increase in demand.
Operating Income 53,152 53,036 0.2 -Operating income was on the same level y/y due to an increase in demand and effective and continuous cost reductions.
Income before income taxes 54,380 53,682 1.3 -
Net income 40,704 39,152 4.0 -
Net income attributable to owners of the parent 40,186 38,512 4.3 -
-Functional Materials
Revenue 272,994 269,769 1.2 -Inorganic materials: Revenue increased y/y due to higher sales volumes of negative electrode material for lithium-ion batteries used in environmentally friendly vehicles.
Operating Income 44,241 38,574 14.7 -
-Advanced Components and Systems
Revenue 281,150 276,699 1.6 -Automotive parts: Revenue generated from the sale of plastic molded parts, friction materials, and power metallurgy products decreased y/y because of the effect of negative currency translation, even though the Company launched new product proposals.
-Storage devices & systems: Revenue generated from the sale of automotive batteries and industrial-use batteries and systems increased y/y as a result of turning FIAMM Energy Technology S.p.A. into a consolidated subsidiary in the fourth quarter.
Operating Income 8,824 14,388 (38.7) -

Business Reorganization

Acquisition of German Insulation Parts Maker ISOLITE
-The Company announced that the conclusion of a contract to acquire a 100 percent stake in ISOLITE GmbH (Head Office: Rhineland-Palatinate, Germany), a manufacturer/distributor of thermal insulations for automobiles, aircraft and other industrial applications, from Equita GmbH & Co. Holding KGaA, a private equity fund and other shareholders. This share acquisition will allow Hitachi Chemical to expand the sales of ISOLITE’s thermal insulations to Japanese automakers through its existing domestic sales network, while taking advantage of ISOLITE’s sales network and manufacturing bases in Europe to accelerate the promotion of Hitachi Chemical’s automotive products in the European market. (From a press release on April 27, 2017)

Acquisition of FIAMM’s Automotive and Industrial Battery Business
-The Company announced that it will acquire 51 percent of the shares of FIAMM Energy Technology S.p.A. in Italy. FIAMM group will separate the automobile and industrial lead storage battery business (excluding some of the Chinese business) and Hitachi Chemical will take over the business. Both companies will sign contract during December 2016 and plan to transfer shares during February 2017. Total price of the transaction is estimated about JPY 10.2 billion (EUR 90.3 million). This contract will allow Hitachi Chemical to utilize FIAMM's brand value, manufacturing bases and sales network with a view to further strengthening its lead-acid battery business in Europe, the United States and Southeast Asia. For automotive lead-acid batteries in particular, Hitachi Chemical will enhance its product capabilities by introducing the company's battery storage technology for vehicles with an idling stop system (ISS) to FIAMM Energy Technology in order to boost its shares in major European markets. (From a press release on November 28, 2016)

-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 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.

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

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

Technology Licensing-out Agreement

(As of Mar. 31, 2017)
Company Other company Contract Details Period
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, 2017)
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 2017 FY ended March 2016 FY ended March 2015
Overall 28,200 27,800 26,900
-Functional Materials 20,100 19,800 19,800
-Advanced Components and Systems 8,100 8,000 7,100

-Machinery materials: highly reliable, semiconductor sealing materials for automobiles, ultra-thin multilayer material for semiconductor packages
-Advanced parts and systems: lead-free disk-brake pads, wiring boards that can handle a high number of layers

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 FY ended Mar. 31, 2015
Overall 39,900 32,000 26,600
-Functional Materials 22,100 12,000 12,500
-Advanced Components and Systems 17,800 20,000 14,100

Capital Investments in the Fiscal Year that Ended March 2017
-Functional materials: Capital investments to install production facilities in Japan to manufacture materials for wiring boards; and install production and development facilities to launch quantum dot film business.
-Advanced parts & systems: Capital investments to increase production capacity of industrial-use batteries, enhance productivity of plastic-molded automotive parts in Japan, and increase production capacity of power metallurgical products in the USA.

Planned Capital Investment Amounts in the Fiscal Year Ending March 2018
-Functional materials: JPY 29,000 million
-Advanced parts & systems: JPY 31,000 million
-Total: JPY 60,000

Outlook for FY ending Mar. 31, 2018

(in millions of JPY)
FY ending Mar. 31, 2018
FY ending Mar. 31, 2017
(Actual Results)
Rate of Change
Revenue 610,000 554,144 10.1
-Functional Materials 280,000 272,994 2.6
-Advanced Components and Systems 330,000 281,150 17.4
Operating profit 58,000 53,152 9.1
Profit before tax 60,000 54,380 10.3
Profit for the year 44,000 40,704 8.1
Profit for the year attributable to owners of the parent 42,500 40,186 5.8

>>>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)

2018 Mid-term Plan
Company Technology: strengthen processing and evaluation technology.
-Compound Average Growth Rate (CAGR) of sales: 7-8% (FY2018-FY2018)
-Operating profit margin: 11%
Automotive components Build foundation to become a global supplier.
-Formed products: Advance reliability of evaluation to launch business in Europe.
-Friction materials: Further expand applications to new-generation vehicle models.
-Powder metallurgy alloys: Establish a design center in Thailand; increase sales of high value-added products.
-Turn ISOLITE (based in Germany) into a consolidated subsidiary.
Energy storage devices and systems Win the global demand by enhancing production facilities.
-Build an operating framework based on FIAMM Energy Technology for idling stop systems (ISSs), battery technology, and commercial production.
-Enhance product creation based on technological support from Japan.

-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.