FALTEC 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 (%) Factors
Sales 84,155 79,739 5.5 -Sales were higher due to the launch of operations at new plants of subsidiaries in China and Thailand and due to greater new business at the USA subsidiary, in spite of lower sales in Japan.
Operating income 3,220 3,242 (0.7) -Income fell due to lower sales in Japan and expenses incurred for responding to the launch of a new model in the UK, in spite of favorable sales that were the result of production launches at two new plants of subsidiaries in China and Thailand.
Ordinary income 2,875 3,283 (12.4) -
Net income attributable to owners of the parent 1,022 2,397 (57.3) -
Sales 61,011 62,748 (2.8) -Sales fell because of lower unit production and sales of new vehicles in Japan, even though the Company received business from new customers.
Operating income 2,448 2,921 (16.2) -Income fell due to lower profit that resulted from a drop in sales and an increase in advanced R&D expenses to develop next-generation, added-value products.
Sales 11,728 7,955 47.4 -Sales increased, as a result of the launch of operations at subsidiaries in China and Thailand.
Operating income 513 (204) - -Income increased, thanks to positive production launches at new production plants.
North America and Others
Sales 11,415 9,035 26.3 -Sales increased, thanks to the new launch of business in roof-rails by the US subsidiary.
Operating income 222 539 (58.7) -Income decreased due to expenses incurred for responding to the launch of a new model in the UK, in spite of increased sales that resulted from the new launch of business in roof-rails by the US subsidiary.

Recent Development outside Japan

-The Company will increase its lineup of exterior parts to be produced in China one after another. The Company will introduce facilities for manufacturing roof rails at Hubei Faltec Automotive Parts Co., Ltd., its manufacturing subsidiary in Xiangyang City, Hubei Province. The subsidiary will start mass-producing them in the fall of 2015. The Company will also add a large press machine at Foshan Faltec Automotive Parts Co., Ltd., its manufacturing subsidiary in Foshan City, Guangdong Province, to manufacture stainless steel window moldings for sports utility vehicles. The Company started supplying the window moldings to FCA's joint venture through a local glass manufacturer in the fiscal year ended in March 2014 (FY 2013), in an effort to expand its sales to non-Japanese automakers and glass manufacturers. The Company's net sales in China in FY 2014 are expected to reach JPY 7 billion. The Company aims to more than double its net sales from the FY 2014 level to JPY 15 billion in FY 2017 by expanding production of cost-competitive and strategic products. (From an article in the Nikkan Jidosha Shimbun on April 15, 2015)

FY17 Mid-term Management Plan

Mid- and Long-term vision
-"Achieving profitability and quality of the highest level in the industry"
The Company has announced a new medium-term business plan. Under the new business plan, the Company aims to achieve net sales of JPY 90 billion and an ordinary income margin of 6% in the fiscal year ending in March 2018 (FY 2017). In other words, the Company aims to increase its net sales by 12.9% and improve its ordinary income margin by 1.9 percentage points from the FY 2014 results. The Company intends to improve its net sales and profitability primarily by expanding its business worldwide, reforming its earnings structure and promoting cost reduction. Under the new business plan for FY 2017, the Company aims to increase its operating income by 68.7% to JPY 5.4 billion and raise its net income by 33.3% to JPY 3.2 billion from the FY 2014 levels. In its efforts toward achieving these targets for FY 2017, the Company will promote a business model that promotes a product package that can cover a life cycle of a car. The package will promote products in its original equipment, accessory and conversion businesses. The Company will also concentrate its management resources on high value-added products such as conversion parts, roof rails and electric auto parts. (From an article in the Nikkan Jidosha Shimbun on May 26, 2015)

Financial targets

FY ended Mar. 31, 2015
(Actual Result)
FY ended Mar. 31, 2016
(Actual Result)
FY ended Mar. 31, 2017
FY ended Mar. 31, 2018
Sales (in billions of JPY) 79.7 84.2 83.7 90.0
Ordinary income (in billions of JPY) 3.3 2.9 3.1 5.4
Profit margin 4.1% 3.4% 3.7% 6.0%
Capital ratio 27.6% 29.5% - over 35%
Percentage of sales generated outside Japan - - 26% 32%

Major strategies
1) Expand global operations

-Positioning the Kitakanto Plant as the lead production plant to advance and head the transfer of product-creation and technological standards to plants worldwide.

-Recognition given for lead-plant initiative: Hubei Faltec (in China) was given an “Excellent Supplier Award for Stable Production & Delivery” by Dongfeng Honda in FY ended Mar. 2016, which was the result of the Company’s implementing lead-plant initiative. Radiator grills are being delivered to the Dongfeng Honda “XR-V”.

2) Reorganizing Sales and Profit Structure

-Combining the technology gained from working in the automotive parts business with the expertise in planning and designing obtained from working in the automotive products business, the Company is developing a business model designed around the Life Cycle Plan incorporating mass-marketed parts, conversions, and accessories.

*Conversion: Conversion: A way of changing the exterior appearance of vehicles by quickly grasping diversified needs so as to sell automobiles that have long model-life cycles.

Company Strengths

  • Short-term development/launches 6-month development lead time
  • Capability to deliver mass-marketed products/conversion accessories globally
  • Capability of producing a wide range of products in small lots.

-Out of total sales, increase the percentage of sales that the following five products account for, from 22% in FY 2014 to 32% in FY 2017.

  • Conversions: Continuously being equipped on the Nissan "X-Trail" special version.
  • Roof-rails: Increased in-house 3D bending process in Japan and China. In China, received orders from Honda, and new orders from European OEMs.
  • Window molding: Develop technology for joining molding to car body, achieving No. 1 share in Japanese market. The Company is considering in-house production in Thailand, following China. Mazda placed a sizeable new order.
  • Electrical products: High-speed Wi-Fi image-processing technology; acquiring CAN technology from the merger with Mitsubishi Cable Industries. Subaru placed orders for lamps and cameras, two new product areas.
  • Millimeter-wave radar covers: Metal like covers that enable millimeter-wave radar to pass through. The Company is considering in-house production in North America and Europe, following Japan. Honda and other Japanese OEMs continued to place orders.

  • Zero or low exhaust-gas emissions => Active grille shutters
  • Connected car => Connected car core products:TCU (Telematics Communication Unit)
  • Safety and autonomous driving => Millimeter-wave radar covers

3) Reorganization of cost structure

1) Making efficient use of space and lead time will reduce costs and increase profitability

  • Halving space: Eliminating outdoor warehouses (15 to 0) will open up factory space (2nd metal-plating; roof-rail; millimeter wave radar cover)
  • Halving lead time: Reducing development period for new models, from 14 months to 6 months

2) Launch activities to speed up the reduction of production costs and enhance productivity.
The Company has launched a major cost-cutting initiative in Japan by utilizing a method developed by TPR Co., Ltd., its parent company. The Company will cut headcounts and reduce process defect rates at its domestic plants in such a way that their cost-efficiency levels will become equivalent to those in low-cost countries. The Company has already pursued a cost-reduction initiative in accordance with its plan to reduce both production space and lead time by 50%. As the next step, the Company will drastically improve each production process at its all domestic plants, intending to introduce the new, efficient production lines to its future global operations. (From an article in the Nikkan Jidosha Shimbun on May 11, 2015)


-Major awards given in FY ended Mar. 2016 follow;

Award given by Awardee Name of award Reason
Dongfeng Honda Hubei Faltec Automotive Parts Co., Ltd. FY 2015
"Excellent Supplier Award for Stable Production & Delivery"
Radiator grill for the Dongfeng Honda “XR-V”; for stable production and zero failure
Daihatsu Faltec Co., Ltd.

"Award of Thanks" Radiator grill for the Daihatsu “Wake”; for shortened development time of 6 months
Subaru "Production Support Award" (Given in April 2016) Shortened development time to 6 months for the Subaru “Impreza Hybrid”
Honda "Award of Special Thanks" (given in February 2016) Roof-rail for the Honda “Vezel”; given in recognition for development of seamless production line, improved productivity based on in-house production; beautiful exterior looks, and high quality.

Outlook for FY ending Mar. 31, 2017

(in millions of JPY)
FY ending Mar. 31, 2017
FY ended Mar. 31, 2016
(Actual Results)
Rate of Change
Sales 83,700 84,155 (0.5)
Operating income 3,200 3,220 (0.6)
Ordinary income 3,100 2,875 7.8
Net income attributable to owners of the parent 1,500 1,022 46.6

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

R&D Expenditure

(in million of JPY)
FY ended Mar. 31, 2016 FY ended Mar. 31, 2015 FY ended Mar. 31, 2014
Automotive exterior parts 1,862 1,152 1,104
Automotive accessories/supplies 520 349
Automotive related equipment 301 303 274
Total 2,167 1,977 1,728

R&D Facilities

-R&D staff in Japan:

  • Automotive exterior parts and Automotive accessories/supplies: 129 staffs
  • Automotive related equipment: 34 staffs

-The Company has the Advanced R&D Center in Yokohama, Kanagawa Pref. and the Electrical/Electronics Systems R&D Center in Anjo, Aichi Pref., Japan.
-It has a China Development Center also.

Product Development

-The Company is working to expand and develop its capabilities in five main areas of technology (forming, decorative surface treatment, metal processing, electrical/electronics, and communications), by following three R&D policies (cost competitiveness, environmental protection, and ITS).

-As part of R&D activities on technology to reduce weight;

  • Development of forming technology to achieve highly rigid structures and thinner sheeting
  • Applying foam technology to products.
  • Development of light-weight products created by ultra-thin sheet injection molding

-Development of cost-competitive products based on making products single, structural units through forming using diversified plastic materials.

-Increase variations of plating and painting: Blue-black, lacquer black coating; metallic-look paint finishing

  • Development of highly decorative surface treatment technology
  • Development of new glossy designs based on coated plastics
  • Development of new glossy deigns based on vacuum deposition technology
  • Development of painting technology that achieves a 3D look
  • Development of highly corrosion resistant glossy surface treatment technology

-Color-window SUS molding (Stainless steel moldings)
-Development of more beautifully decorated aero mudguard exteriors, as well as interior products such as luggage under trays.
-Expanding globally by introducing new production methods for millimeter-wave radar covers

-Development of new technology for stamping, bending, pressing materials such as aluminum and SUS.
-Development of roof rails and crossbars

-Development of electrically/electronically controlled exterior parts
-Development of new functional LED products for interior, such as illuminations & illumi-kicking plates
-Development of front-finishers, daytime running lights, LED fog lamps
-Development of further advanced monitoring systems using cameras

-Development of remote-controlled engine starters, security systems, communications modules by using CAN communication.
-Creating next-generation security products by combining cameras with wireless communications technology
-Development of Telematics Communication Units (TCUs), which are the brains of connected cars, i.e. the brains that connect cars to the Internet.

-Develop and produce option mats globally to make it more cost-competitive products.

-Expand aerodynamic products: Grill shutter and control technology
-Alternative products to reduce environmental impact: Alternative plating (chrome-free), rare-metal replacements

Results of activities

  • Electronic device controlled grill shutter
  • Radio-wave-transmission grills (RADOM) based on sputtering method
  • Commercialization of LED fog lamps, illumination, various aero products
  • Development of post-painted parts based on colored plastic materials (Reduces CO2 emissions)
  • Low-temperature baked finish (Reduces CO2 emissions)
  • Recovery and reuse of paint emission gases (Reduces CO2 emissions)
  • Increase recycled products that make use of scrap plastic

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2016
Japan 2,678
Asia 1,364
North America and Others 665
Total 4,709

-In the fiscal year that ended in March 2016, the Company made capital investments in production facilities, dies, jigs and tools for manufacturing auto parts.

Planned Capital Investments

(As of Mar. 31, 2016)
Name Location Type of facility Planned total investment
(in millions of JPY)
Construction start month Planned completion month Capacity upon completion
The Company's
Kitakanto Plant
Iwaki-City, Fukushima Pref.
Automotive exterior parts
production facility
490 Apr. 2016 Nov. 2016 100% production capacity increase