Hitachi Chemical Co., Ltd. Business Report FY ended Mar. 2018
Financial Overview |
(in millions of JPY) |
| FY ended Mar. 31, 2018 | FY ended Mar. 31, 2017 | Rate of Change (%) |
Factors | |
| Overall | ||||
| Revenue | 669,234 | 554,144 | 20.8 | -Revenue increased due to higher demand for semiconductor materials, copper clad laminates, and carbon anode materials for lithium ion batteries, as well as the addition of new consolidated subsidiaries established through M&A. |
| Operating Income | 46,219 | 53,152 | (13.0) | -Despite positive factors such as an increase in sales volume and continuous cost-cutting efforts, operating income fell due to higher material cost, insufficient synergies with new consolidated subsidiaries established through M&A, and the cost to pay fines regarding a cartel formed in the past in the condenser business. |
| Income before income taxes | 48,941 | 54,380 | (10.0) | - |
| Net income | 37,121 | 40,704 | (8.8) | - |
| Net income attributable to owners of the parent | 36,324 | 40,186 | (9.6) | - |
Automotive-related Business Performance
ｰSales of carbon anode materials for lithium-ion batteries posted a year-over-year (y/y) increase due to a growth in sales of the material for environmentally-friendly vehicles.
ｰAutomotive parts
- Resin molded parts: sales increased y/y due to the acquisition of a 100% stake in ISOLITE GmbH of Germany in the 2Q FY 2018 and the release of new products.
- Friction materials: sales increased y/y by releasing new products containing less copper.
- Powder metallurgy products: sales increased y/y due to an increase of construction machinery parts sales.
ｰAutomotive and industrial batteries and systems: sales increased y/y by acquiring FIAMM Energy Technology S.p.A of Italy in the 4Q of FY 2017 and Thai Storage Battery Public Company Limited of Thailand in the 2Q of FY 2018, turning them into the Company's consolidated subsidiaries.
Electric vehicle-related business
To keep pace with the diffusion of electric vehicles, the Company is collaborating with or investing in companies with EV-related development capabilities.
The Company aiims to enhance battery performance for EVs further by improving its development capabilities of electrolytic solutions and solid electrolytes.
-The company announced that it has entered into a licensing agreement with Silatronix, Inc., a U.S.-based chemical startup company, (Silatronix) concerning the manufacturing, sales, and use of Silatronix's patented organosilicon compounds as electrolyte materials of lithium-ion batteries. The battery life will be longer and the battery storage stability better at high temperatures when the compounds are added to electrolytes. Hitachi Chemical aims to win the first order for the electrolyte material within the next three years from electrolyte makers working to improve the performance of electric vehicles. (From an article in the Nikkan Jidosha Shimbun on June 5, 2018)
-The company announced that it has taken a stake in Ionic Materials, a developer and manufacturer of solid electrolytes, based in Massachusetts, USA. Solid electrolytes are one of the key materials used for all-solid-state batteries. This investment will enable Hitachi Chemical to develop next-generation materials, including anode materials for solid-state batteries, by using Ionic Materials’ technologies. (From a press release on February 22, 2018)
Aquisition
-The company announced that it has completed the acquisition of Thai Storage Battery Public Company Limited (Thai Storage Battery) shares through a tender offer to make the company its consolidated subsidiary. Hitachi Chemical acquired somewhere in the neighborhood of 8.6 million shares for about JPY 7.7 billion. Hitachi Chemical Group's total stake in Thai Storage Battery, including a 43.9% stake acquired from the founder and major shareholder of the subsidiary, accounts for about 87% of shares. (From an article in the Nikkan Jidosha Shimbun on October 4, 2017)
-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)
Contracts
-The company announced that Ford Fusion selected Hitachi Chemical’s "copper-free friction materials” which includes less than 0.5% copper. The backgrounds of "copper-free friction materials” developed by Hitachi Chemical in 2015, are the U.S. Environmental Protection Agency’s regulations on copper use in friction materials which are used for brake parts for preventing water pollution. Europe is also likely to introduce similar regulations. "Copper-free friction materials” is organized by phenol resin, organic fibers etc. on the basis of NAO (Non Asbestos Organic) material. Hitachi Chemical produces and supplies friction materials in Japan, China, Thailand and Mexico. Hitachi Chemical plans to enforce friction material business including "copper-free friction materials”, and to target share expansion. (From a press release on July 24, 2017)
R&D Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2018 | FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | |
| Overall | 30,800 | 28,200 | 27,800 |
| -Functional Materials | 21,300 | 20,100 | 19,800 |
| -Advanced Components and Systems | 9,500 | 8,100 | 8,000 |
Technology Licensing-out Agreement |
(As of Mar. 31, 2018) |
| 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 Activities
-The company announced that it developed a new foaming technology for automotive exterior plastics. The new foaming technology is based on existing injection-molded foaming technology for plastics, and is added by Hitachi Chemical’s original technologies of compound design, molding design and shaping. The new technology satisfies the strength and quality required by exterior parts. Nissan new Serena launched in August 2016 selects the new technology for side sill protectors. The side sill protector keeps quality, strength equal to the traditional plastic exterior parts, and achieves about 30% weight savings. The new technology is also selected for new SUV, Subaru XV front rear fenders and side garnishes, which was launched in May 2017. The side garnish contributes to about 33 % weight savings of the car compared to the last Subaru cars. (From a press release on July 13, 2017)
Patents
-The company announced its decision to maintain its patents for oilless sintered bearings, which regulate the occurrence of noises in motors for automobile electrical parts. The bearings assist with motor rotation and are produced by impregnating the metal structure with lubricating oil. When motors only operate for a short time, an insufficient amount of lubricating oil is exuded between shafts and bearings, and this causes metal parts to contact each other resulting in noise. Hitachi Chemical has developed techniques to adjust the amount of oil exuded between the components by regulating the size of the holes in the bearings and their distribution, which prevents friction and thereby reduces noise. (From an article in the Nikkan Jidosha Shimbun on February 8, 2018)
Capital Expenditure |
(in millions of JPY) |
| FY ended Mar. 31, 2018 | FY ended Mar. 31, 2017 | FY ended Mar. 31, 2016 | |
| Overall | 42,600 | 39,900 | 32,000 |
| -Functional Materials | 16,800 | 22,100 | 12,000 |
| -Advanced Components and Systems | 25,800 | 17,800 | 20,000 |
Capital Investments in the Fiscal Year that Ended March 2018
-Functional materials: Capital investments to increase production capacity of carbon anode materials for lithium-ion batteries and installing facilities for R&D of semiconductor mounting materials and processes in Japan
-Advanced parts & systems: Capital investments to develop a production method of the products used in regenerative medicine and install manufacturing facilities for outsourcing in Japan; to increase production capacity for industrial batteries in Taiwan; and to increase production capacity for resin moldings for automobiles in Thailand.
Business Plan
-The Company aims to provide innovation beyond chemical based on high-performance materials on a global scale 10 years from now. (with operating income exceeding 14%)
For FY 2018, the Company aims to achieve operating income ratio of 11% with ROE of 12%. Overall sales are projected at JPY 710 billion, including automotive parts sales of JPY 146.2 billion.
ｰIn consideration of strong demand for anode materials for EVs in FY 2017, the Company will establish a supply system of anode materials to respond to the needs for the material in the global market.
ｰIn the high-performance resin business, the Company will continue focusing on automotive applications to increase sales in the global market.
-Advanced parts & systems segment: As a step to strengthen its business base to be a global leading supplier, the Company will meet the needs for lighter products in the moldings and powder metallurgy business and expand sales of insulation materials in Japan by M&A and other measures to meet the needs to comply with the environmental regulations.
ｰIn the automotive battery business, the Company expanded distribution network and established Hitachi Chemical brand in the ASEAN and European markets, with the ratio of sales outside Japan exceeding 60% in FY 2017. The Company's targets for FY 2018 are: price optimization and technological development in Japan; and increasing its market share in Europe through technology licensing of its idle-stop system used in Japan.
<2021 mid-term="" plan="">
In consideration of the advancement of AI in the automotive market, digitization, the change of the market structure by the autonomous driving technology and the advancement of ICT, the Company set the following strategies for the term of the plan: further improvement of fuel efficiency, focus on the development of EV-related products, and advancement of autonomous driving/ADAS technologies. The Company will meet the needs for safety and longer range generated with the diffusion of EVs by developing anode materials and electrolytes.
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)