The Furukawa Electric Co., Ltd. - Business Report FY2008

Business Highlights

Financial overview ( in millions of JPY )
- FY2008 FY2007 Rate of Change (%) Factors
Sales 1,032,807 1,174,247 (12.0) In the first half of the year, its information-communication system businesses in Asia, South America and other emerging countries were strong and sales of automotive products remained brisk. But in the latter half of the year, the Company was faced with controlling its inventory of electric components and automotive products, as well as dealing with a sharp decline in the prices of copper and aluminum. As a result, sales declined.
9,752 48,447 (79.9) In the first half of the year, income increased year-on-year, thanks to growing demand in emerging-market countries, even in spite of higher oil prices. But in the latter half of the year, sales suddenly dropped and income drastically went down.
(14,788) 40,831 - Due to the appreciation of the yen, the Company reported a 18.6 billion yen loss due to negative currency translation.
Current net income (37,405) 15,291 - The Company reported an extraordinary gain of 26.5 billion yen in total partly from liquidating its subsidiaries in Canada and the U.S. and their exchange conversion adjust accounts. On the other hand, it reported an extraordinary loss of 42.6 billion yen, which comes partly from the loss in value of its fixed assets and costs associated with environmental issues. The amount of its income taxes-deferred increased from liquidating its deferred tax assets.
Electronics and Automotive Systems
Sales 223,797 268,561 (16.7) Thanks to strong sales of mini- vehicles and other vehicles that use the Company's products, sales of wire harnesses remained brisk during the first half of the year. But in the sluggish electric component market seen in the latter half, sales decreased due to lower demand for magnet wires, aluminum blank materials for memory disks, and heat sinks, which are electric components used for releasing heat.
2,482 9,072 (72.6) -

Reorganization of electrical components and electronics business

The Company and Furukawa Automotive Systems Inc. announced they had acquired between them a majority stake (80%) in Lear Furukawa Corporation on April 6, 2009. Lear Furukawa was a joint venture between these companies and Lear Corporation headquartered in Michigan, USA (Lear), which held an 80% stake.

Name Furukawa Lear Corporation
Head office El Paso, Texas, USA
Controlling share The Furukawa Electric Group: 80% (The Furukawa Electric Co., Ltd.: 48%, Furukawa Automotive Systems Inc.: 32%); Lear: 20%
Paid-in capital 8 million US dollars (Approximately 800 million yen)
Sales for 2008 Approximately 100 million US dollars (Approximately 10 billion yen)
Number of employees Approximately 1,500 (As at the end of 2008)

Magnet wire business
In April 2009, the Company, Riken Electric Wire Company Limited and Totoku Electric Co., Ltd. agreed to consolidate their magnet wire operations under Furukawa Magnet Wire Co., Ltd. established by Furukawa Electric.

Capital investment plan
Segments FY2008 results FY2009 forecasts Major investment
Capital investment
(in millions of JPY
Capital investment (in millions of JPY Proportion
Electric components and electronics 7,300 18 6,200 20 Expansion of automotive parts production
Information-communication 6,200 15 5,200 17 Expansion of optic parts production
Energy and industry equipment 5,600 14 4,100 13 Expansion of electric power equipment production
Metals 9,200 22 4,000 13 Expansion of copper foil production
Light metals 10,100 24 8,100 26 Upgrade of rolling motors
Services etc. 2,900 7 3,700 11 -
Total 41,300 100 31,300 100  

Forecast of business results of electric components and electronics segment ( in millions of JPY )
  FY2008 results FY2009 forecasts Factors about operating income
Full year Sales 223,800 180,000 (+) Launch of glass substrate production
(-) Slowdowns in wire harness and ELC sales
(-) Batteries: The Company lowered prices in response to diminishing demand and the depressed market price of copper
Operating income 2,500 200
1st half Sales 123,100 82,000
Operating income 3,900 (2,300)
2nd half Sales 100,700 98,000
Operating income (1,500) 2,500


R&D Expense ( in millions of JPY )
- FY2008 FY2007 FY2006
Overall 19,789 19,789 19,976
Electronics and Automotive Systems
4,288 4,288 3,603

R&D Structure

Facility Location Overview
The Furukawa Electric Co., Ltd.
Automotive Research Center
Kanagawa Pref.
Automotive Research Center conducts R&D of technologies for in-vehicle power and information transmission systems.

Major development themes:
-Automotive electric source management system
-In-vehicle sensors
-Next generation wire harness systems
-Automotive parts simulation technologies

R&D activities (Electronics and Automotive Systems)

-The Company developed a new radar system, applying its ultra wide band (UWB) technology. The new radar system, which is capable of accurately locating the positions of small objects around vehicles, is expected to be used in anti-collision safety systems.
-The Company developed sensors that can check the amount of charge, and the amount of deterioration, of automotive batteries.
-The Company will work on developing multifunction automotive antennas with the aim of making antennas more compact and easier to assemble.
-The Company undertook R&D activities to make next-generation magnet wires, which will have more resistance to high voltage and also have thinner walls.
-The Company engaged in R&D activities on technology which will enable engineers to design lighter vehicles. This includes, for example, making aluminum wire harnesses and thinner electric wires.
-The Company developed GaN-based power devices which demonstrate greater performance in terms of of voltage resistance and their ability to use less electricity.

Investment Activities

Capital Expenditure ( in millions of JPY )
- FY2008 FY2007 FY2006
Overall 41,275 45,264 41,800

Capital investments (Electronics and Automotive Systems - FY2007)

The Company launched mass-production of automotive electric components, increasing its volume of production in this sector. It also made a capital investment so as to mass-produce substrates for hard disks.

Furukawa Automotive Systems Inc. (FAS), a subsidiary of the Company has established Furukawa Automotive Systems Vietnam Inc. (FASV), a producer of wire harnesses for the automobile industry, in Vietnam. FASV, a wholly-owned subsidiary of FAS, was capitalized at 5 million USD. FASV is FAS's second wire harness manufacturing operation in Vietnam after Furukawa Automotive Parts (Vietnam) Inc. and it will serve as a hub for exporting products to Japan and other regions. Operations are slated to begin in November 2009. Total investment is expected to be 16 million USD. The new facility will have an annual turnover of approximately 66 million USD in 2011. (From a press release on Dec, 12, 2008)