Kinugawa Rubber Industrial Co., Ltd. Business Report FY ended Mar. 2013

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 Rate of Change
Sales 66,221 70,612 (6.2) -
Operating income 6,383 8,340 (23.5) -
Ordinary income 7,046 8,555 (17.6) -
Net income 3,975 5,300 (25.0) -

Recent Developments in Japan

Launched Production of Anti-vibration Rubber at Kyushu Plant
- The Company is beginning to produce anti-vibration rubber at its plant in Kyushu, western Japan, in fiscal 2012. This is a step toward localizing production of anti-vibration rubber that is now being transported from the Kanto area to cope with a growing tendency for its customers to shift their production to the Kyushu area. Taking advantage of the stronger yen, automobile manufacturers having production facilities in Kyushu are increasing purchase of auto parts from Korea and China, which are geographically closer than the Kanto and Chubu areas of Japan. By switching production to a facility closer to customers, the Company intends to keep its products competitive in cost with imports from Korea and China. (From an article in the Nikkan Jidosha Shimbun on Jun. 6, 2012)

Recent Developments Outside Japan

Expanded Production Overseas of Automotive Hose
- The Company is going to expand production of automotive hoses outside Japan, starting in the second half of FY2013. Plans are to double its production capacity in China, while establishing new production lines in Thailand, Mexico and India. Although the company has been stepping up sealing production overseas, its Fuzhou Plant in China has been the only facility making hose products overseas. The Company, however, has now decided to increase the number of hose plants overseas to meet rising requirements for local sourcing by automakers, which are accelerating their global business expansion plans. With this move, the company is expecting to raise sales especially in the emerging markets, where demand for new vehicles is rapidly growing. Up until now, the company has been producing hose products like air ducts, air inlet hoses and filler hoses mainly in Japan, while making some at the Fuzhou Plant. The expansion project is intended to respond to its major customer’s advancement into the newly developing countries. In the second half of this fiscal year, hose production is scheduled to begin at the company’s plant in Thailand and Mexico, as well as the Indian plant of a Korean manufacturer, with which the Company has formed a technology alliance. Meanwhile, the Fuzhou Plant is doubling or tripling its production space for hoses to boost capacity significantly. (From an article in the Nikkan Jidosha Shimbun on Jan. 17, 2013)

Established Supply Center in Russia
- The Company will establish facilities to supply in Russia in FY 2013. As Japanese OEMs, including its major customer Nissan, plan to expand production in Russia, the company will set up operations there to manufacture and supply body seal parts and other products to them. Details such as forms of production and business are yet to be discussed. The Company also plans to start plant operations in Indonesia and Wuhu, Anhui, China in June. It will commence production in India in November as well by entrusting the operation to its Korean alliance partner Hwaseung R&A Co., Ltd. For 2013, it plans to expand the Mexico plant and to inaugurate a plant at Zhengzhou, Henan, China in May. In addition to Russia, the rubber product supplier is exploring an appropriate timing and forms for local production in Brazil. The Company thus plans to improve and increase its supply capacities in most of the areas where Nissan plans to expand production operations. (From an article in the Nikkan Jidosha Shimbun on Jun. 4, 2012)

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


R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 FY ended Mar. 31, 2011
Overall 995 998  1,052
Body parts 594 562  661
Brake parts 235 308  269

Major Activities

Body Parts
-Development of materials and a new cross section structure with an aim to reduce a number of attachments. Development of weather strip seals with higher price competitiveness.
-Expansion of application of lighter sealing parts made of low specific gravity rubber for auto bodies.
-Expansion of application of combining interior components with more attractive design.
-The Company launched worldwide initiatives designed around revolutionary product creativity that focuses on developing products that reflect the particular characteristics of each market, and which at the same time are cost-competitive in the global market. It also worked to build its R&D framework so as to be able to procure materials locally.
-Expansion of application of TPV G/RUN made of high-function elastomer with higher recycling efficiency.

Brake Parts

-The Company worked at procuring new materials to lower costs and at developing new production methods in order to create parts for next-generation rubber components for brake.

Technological Licensing Agreements

(As of Mar. 31, 2013)
Partner Country Purpose Contract period
Faltec Co., Ltd. Japan Window moldings and their manufacturing methods From Apr. 1, 2000 until the production terminates.

Technical Assistance Contracts

(As of Mar. 31, 2013)
Partner Country Purpose Contract period
Metzeler UK Manufacturing technology for automotive weather-strips From Nov. 25, 1988
until production terminates.
Renault Samsung Mortors Korea Technical assistant agreement for sealing products for automobile bodies. From Mar. 1, 2003
until production terminates.

Investment Activities

Investment Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 FY ended Mar. 31, 2011
Overall 2,700 900 900
Body parts 2,200 400 400
Antivibration parts 200 200 200
Brake parts 100 200 200

-The Company's main purposes for making capital investments were to set up production lines for modules and rationalize operations.

Planned Capital Investments

(As of Mar. 31, 2013)
Company/Office Name Location Equipment to be installed Planned amount of investment
(in millions of JPY)
Start Complete Remark
Kinugawa Koriyama Co., Ltd. Fukushima Pref.
Auto body components production facilities 50 Apr. 2013 Mar. 2014 *
Kinugawa Oita Co., Ltd. Oita Pref.
Auto body components production facilities 38 Apr. 2013 Mar. 2014 *
Kinugawa Antivibration Co., Ltd. Tochigi Pref.
Anti vibration parts production facilities 58 Apr. 2013 Mar. 2014 *
Kinugawa Brake Parts Co., Ltd. Tochigi Pref.
Brake parts production facilities 55 Apr. 2013 Mar. 2014 *
Head Office Chiba Pref.
Test and research facilities 100 Apr. 2013 Mar. 2014 -
Kinugawa (Thailand) Co., Ltd. Ayutthaya, Thailand Auto body components production facilities 250 Jan. 2013 Dec. 2013 *
Kinugawa Mexico, S.A.De C.V Guanajuato,
Auto body components production facilities 893 Jan. 2013 Dec. 2013 *
*No significant change will take place, as the investment is for rationalizing operations and readying equipment to handle model changes.