Furukawa Electric Co., Ltd. Business Report FY2012
Business Highlights
Financial Overview - The Furukawa Electric Co., Ltd. |
(in millions of JPY) |
| FY ended Mar. 31, 2012 | FY ended Mar. 31, 2011 | Rate of Change (%) | Factors | |
| Overall | ||||
| Sales | 918,808 | 925,754 | (0.8) | - |
| Operating income | 15,947 | 35,144 | (54.6) | 1) |
| Ordinary income | 12,872 | 31,422 | (59.0) | - |
| Current net income | (11,123) | 12,213 | - | 2) |
| Electronics and Automotive Systems | ||||
| Sales | 204,461 | 202,507 | 1.0 | 3) |
| Operating income | 5,106 | 7,801 | (34.5) | 4) |
Factors
1) Overall: Operating income
-Even though the Company made efforts to reduce costs, its operating profit was lower year-on-year due to the stagnant demand in Japan and the lower selling prices of its products.
2) Overall: Current net income
-The Company, on September 29, 2011 (US Eastern time), concluded a plea agreement with the United States Department of Justice under which the Company acknowledges the allegations in the criminal proceeding relating to cartel activities with certain competitors for the automotive wire harness and related products and pays a fine of 200 million US dollars. Furukawa Group Companies have been fully cooperating with the US Justice Department's investigation into the manufacturers of the automotive wire harness and related products. After analyzing the applicable laws and facts as a whole, Furukawa Electric has decided to enter into a plea agreement with the US Department of Justice. In accordance with the decision, Furukawa Electric will account for the special loss of 15,296 million yen in the second quarter of fiscal year 2012. (From a press release on September 30, 2011)
3) Electronics and Automotive Systems: Sales
-Sales at the Electronics and Automotive Systems slightly increased, by 1% year-on-year, as a result of greater sales in the second half of the year of automotive products such as wire harnesses. This was fortunate, since sales had drastically fallen temporarily right after the Great East Japan Earthquake, demand for electronics products such as coils continued to stagnate, and the Company was further impacted by production stoppages at its customers who had suffered damage from the flooding in Thailand.
4) Electronics and Automotive Systems: Operating income
-While sales of automotive products continued to be strong, the financial results at the Electronics and Automotive Systems were lower year-on-year due to the drop in sales combined with the lower selling prices of the Company's electronics products.
Business Plan
-The Company will commence in early 2012 commercial production of its wire harness using aluminum wires. A Japanese automaker has informally ordered the new wire harness and Furukawa plans to produce materials, process and assemble them into wire harnesses abroad and import them to Japan. Switching the conductor from copper to aluminum alloy should greatly reduce the weight of the wire harness and therefore will meet the automaker's needs for lighter components. (From an article in the Nikkan Jidosha Shimbun on June 24, 2011)Recent Development Outside Japan
<China>-The Company announced that its 100% subsidiary Furukawa Magnet Wire Co., Ltd. (FMGW) will obtain shares of Jung Shing Wire Co., Ltd., a Taiwan-based company which develops, manufactures and sells enameled wire. The two companies will start collaborating in the fine enameled wire business in the Chinese market. FMGW will acquire about 31 million shares of Jung Shing Wire held by Totoku Electric Co., Ltd. This is equivalent to a little over 20% of all outstanding shares. Manufacture of fine enameled wire shipped in China is to be consigned to Jung Shing Wire's manufacturing bases in Suzhou, Jiangsu province and Dongguan, Guangdong province, China. Shipment of samples will start in sequence this September. Two types of products will be manufactured - self-bonding wire (SV, LOCK) and ultrafine polyurethane enameled wire (UEW). Targeted monthly production of 500 metric tons is to be attained within a few years. (From a press release on July 20, 2011)
New Company
-Furukawa Automotive Systems Inc. (FAS), a wholly-owned subsidiary of the Company, said on January 26 that it will establish a manufacturing facility for wire harnesses in the Philippines called "Furukawa Automotive Systems Lima Philippines Inc. (FALP)." The wholly-owned subsidiary of FAS with a building space of about 21,000 square meters will be established at the site of about 50,000 square meters in Lipa, Batangas Province, the Republic of the Philippines, and is expected to go into operation in March 2013. It will be the Company's first wire harness production plant in the Philippines serving as an export base primarily for Japan. (From an article in the Nikkan Jidosha Shimbun on January 27, 2012) -Furukawa Electric Co., Ltd. has established Furukawa Management Shanghai, Ltd. as a management company in Shanghai, China. The company commenced operations on November 1, 2011. The new company, in which 2 million USD was invested, provides operational support and management, etc. for Group companies in fund management, finance and accounting, production engineering, research and development, and other aspects. The Furukawa Electric Group has established more than 40 companies in China and has been operating business in that country. (From a press release on November 1, 2011)
Acquisitions
-The Company announced that it will acquire the automotive connector business of Mitsubishi Cable Industries, Ltd. effective February 29, 2012. With the acquisition, Furukawa aims to improve its connector development capabilities to step up its automotive wire harness business, which has a high growth potential in the global market. The expansion will also enhance the Company's automotive connector lineup. Furukawa Electric will engineer new connector technologies for aluminum wire harness applications, as well as for high voltage cables used in EVs and HVs. It will also focus on development of connectors that will lead to massive cost savings. (From an article in the Nikkan Jidosha Shimbun on December 13, 2011)
Restructuring
-Shinchang Electrics Co., Ltd. announced that it will increase its investment in STF Co., Ltd., raising its shareholding in the company from 40.0 percent at present to 100.0 percent. STF, based in Cheonan, Chungcheongnam-do, manufactures and sells automotive electronics components. The company was established in 2002 as a joint venture company with Japanese companies, Tokai Rika Co., Ltd. and Furukawa Electric Co., Ltd. The transaction is expected to close in April 2012. (From a press release on March 2, 2012)
-The Company announced that it will underwrite a capital increase through a private placement of common shares in its equity-method affiliate, Totoku Electric Co., Ltd., to turn it into a subsidiary. In accordance with this transaction, Furukawa Electric's ownership interest in Totoku Electric will increase from 33.11% to 56.5%. Totoku manufactures and sells fiber-optic products, electric wires, devices, and IT equipment for information and telecommunications, electronics and automobile markets. (From a press release on February 7, 2012)
-The Company and Furukawa Automotive Systems Inc. announced on September 15 that their two wholly-owned subsidiaries in the U.S. will be merged. The two companies are American Furukawa, Inc. (AFI) engaged in manufacture and sales of electric auto parts and Furukawa Wiring Systems America Inc. (FWSA) engaged in manufacture and sales of wire harnesses for automobiles. They will be merged effective September 30 with AFI a surviving company to absorb FWSA. The new company will be owned 70 percent by Furukawa Electric and 30 percent by Furukawa Automotive Systems. (From an article in the Nikkan Jidosha Shimbun on September 16, 2011)
-The Company announced on June 20 that it will enhance its auto parts production structure in China. Furukawa Auto Parts (HK) Limited (FAHK), the Company's subsidiary, now has a 50 percent ownership in Chongqing Changhua Auto Harness, a wire harness joint venture in Chongqing. FAHK is going to purchase additional shares in this facility from its local partner, which also has a 50 percent stake, thus acquiring the management right of the Chongqing facility. At the same time, the Company will review and enhance its distribution operations, product quality and cost, and delivery timing in China for the purpose of achieving an overall improvement of its business. (From an article in the Nikkan Jidosha Shimbun on June 21, 2011)
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)
R&D
R&D Expenditure - The Furukawa Electric Co., Ltd. |
(in millions of JPY) |
| FY ended Mar. 31, 2012 | FY ended Mar. 31, 2011 | FY ended Mar. 31, 2010 | |
| Overall | 18,949 | 18,296 | 17,270 |
| Electronics and Automotive Systems | 4,306 | 3,807 | 3,659 |
-The Company plans to spend 20.6 billion yen in R&D activities during the fiscal year that ends March 2013.
R&D Structure
| Facility | Location |
| R&D Center for Automotive Systems & Devices | Kanagawa Pref. Japan |
| Yokohama R&D Laboratories | Kanagawa Pref. Japan |
| Metal Research Center | Tochigi Pref. Japan |
| FETI (Furukawa Electric Institute of Technology Ltd.) | Hungary |
R&D Activities
Electronics and Automotive Systems-The Company successfully developed technology in the area of automotive wire-harnesses that use aluminum wires, already delivering the harnesses for installation on mass-marketed vehicle models. The use of aluminum wire in wire-harnesses reduces their weight by 15%.
-The Company will begin producing automotive battery sensors for delivery to OEMs in 2012. Controlling battery-power will increase the efficiency of energy-use by vehicles.
-The Company is continually conducting R&D activities on ultra-wide-band (UWB) technology, working on effective and useful vehicle-monitoring sensors that are anticipated to raise the safety of automobiles, discussing them with systems makers and OEMs.
-The Company developed and is now producing and selling coils that enable hybrid-vehicle motors to be made more compact but which can produce an exceptional level of power that until now wasn't possible. This was made possible by eliminating the need for the phase-to-phase insulating paper. Furthermore, the Company is continuing its R&D activities in this area, working to develop phase-to-phase membranes that make it possible to create even more compact motors with greater efficiency.
-The Company is continuing to conduct R&D activities on transistors and diodes, researching gallium nitride at the Advanced Power Device Research Association that it jointly established with Fuji Electric.
-Under an outsourcing arrangement with NEDO, the Company is continuing to develop innovative, ultra-lightweight electrical wires that use carbon-nanotubes.
Light Metals
-In working on lithium-ion batteries, the Company developed, and now is manufacturing, aluminum sheets for square external cladding and aluminum foil for laminated external cladding, both having positive-electrode-collecting bodies and batteries, delivering them to customers both in and outside Japan.
-The Company developed a new type of air-cooled cooler (VL fin) for next-generation vehicles such as electric vehicles, which significantly improves cooling performance compared to that of conventional coolers. It still is working to develop a cooler that achieves even better performance.
-The Company is developing materials that are even thinner and that offer more features than conventional materials; for automotive heat-exchangers.
New Business Sectors (Service Sector, etc.)
-The Company worked on a project outsourced from NEDO, taking part in developing next-generation automotive, high-spec, storage battery systems. Since the initial objective of developing negative electrode materials for lithium-ion batteries was achieved, the project was completed. However, in continually researching this field, the Company aims to develop negative electrode materials that achieve greater output and have longer product lives.
Patent
-The Company announced on February 28 that a decision was made by the Patent Office on February 17 to uphold the Company's basic patent on electrolytic copper foil for lithium-ion batteries, which had been under invalidation trial. Furukawa Electric developed the electrolytic copper as the negative-electrode material of lithium-ion batteries, which helps improve battery performance, and was awarded a patent on the technology in 2005. The proprietary NC-WS electrolytic copper now achieves the world's largest, some 40 percent share of the market. The validity of the patent, however, has been challenged since demand for invalidation trial was filed in 2010. (From an article in the Nikkan Jidosha Shimbun on February 29, 2012)Product Development
Aluminum litz wire-Kyowa Electric Wire Co., Ltd., a company of the Furukawa Electric Group, said on January 23 that it has developed "KANZACC-ALC-fine-Litz77," an aluminum litz wire used for secondary coils in electric vehicles. The new litz wire based on aluminum material, the first product in the industry, is light-weight and also can drastically reduce soldering process. Kyowa Electric Wire will begin its sample deliveries in February and commercial production in the second half of fiscal 2012, in hopes of generating 100 million yen in sales in fiscal 2013 and hundreds of millions of yen after 2014 when demand for aluminum wires in EV components is expected to grow significantly. The Company is also aiming to supply products for other onboard devices, such as light-weight coils for the non-contact type charging system, high frequency devices, motors and generators. (From an article in the Nikkan Jidosha Shimbun on January 24, 2012)
Copper alloy strip, which offers high strength and superior bending performance for use in ultra compact connectors
-The Company announced that it has developed the EFCUBE-ST copper alloy strip, which offers high strength and superior bending performance for use in ultra compact connectors, including those used around high power batteries. The Company is going to propose the new technology as an alternative to titanium copper and beryllium copper alloy strips. The Company has already started providing its samples to some major connector suppliers, planning to manufacture 300 tons of Cu-Ni-Si (Corson) alloy a month including the existing EFCUBE-820 in the year ending in March 2014. The new, EFCUBE-ST copper alloy strip was developed by improving the strength level of the high concentration Cu-Ni-Si alloy, while largely lifting the otherwise limited bending workability. The Company was able to achieve this by changing the crystal orientation leveraging its proprietary texture control technology. (From an article in the Nikkan Jidosha Shimbun on December 24, 2011)
Buried high frequency current supply cable
-Furukawa Electric's group company Kyowa Electric Wire Co., Ltd. has recently developed a buried high frequency current supply cable called KANZACC-EMIC-One for use in non-contact battery-charging systems for electric vehicles (EVs). The KANZACC-EMIC-One is a cable that supplies high frequency strong current from a power panel of the non-contact battery-charging system to the primary coil on the side facing the ground. It utilizes multicore insulated wires as a conductor to ensure efficient supply, and controls the increase in AC resistance caused by the skin effect. The first examples will be shipped from this November, with the aim of achieving sales of 100 million yen in fiscal 2013. (From a press release on November 11, 2011)
Investment Activities
Capital Expenditure - The Furukawa Electric Co., Ltd. |
(in millions of JP ) |
| FY ended Mar. 31, 2012 | FY ended Mar. 31, 2011 | FY ended Mar. 31, 2010 | |
| Overall | 33,582 | 27,947 | 25,433 |
Electronics and Automotive Systems
-The Company invested mainly in facilities and equipment to both launch and increase commercial production of automotive electrical parts and functional electrical parts.
Metals
-The Company invested mainly in facilities and equipment to increase the production volume of copper foil/sheets used in the automotive, IT, and electronics markets; and to maintain and upgrade facilities and equipment used to produce copper and copper-alloy strips.
Light metals
-The Company invested to install more production facilities for making precision-casted parts for turbochargers, and to improve the hot-rolling capacity for making metal sheets.
Planned Capital Investment |
(As of Mar. 31, 2012) |