Nittan Valve 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 (%)
Factors
Overall
Sales 35,493 32,950 1.7 -
Operating income 1,008 658 53.3 -In North America, the region incurred higher costs to respond to the sudden sharp rise in production volume, which had fallen the previous year because of the Great East Japan Earthquake and the flooding in Thailand.
-In Japan, profits rose, supported by the recovery from the Great East Japan Earthquake and effective cost-cutting initiatives.
Ordinary income 1,479 836 76.9
Current net income (1,018) (895) - -
Engine Valve
Sales 26,071 21,709 20.1 1)
Operating income 1,046 351 198.3 -
Variable cam phase, gears
Sales 4,674 6,010 (22.2) 2)
Operating income (211) 28 - -

Factors
1)
Small engine valves
-In Japan, sales of vehicle-engine valves destined for sale in Europe and China decreased. Nevertheless, sales for the year increased due to the recovery from the Great East Japan Earthquake, the launch of production of products for compact-vehicle engines, and strong sales of products destined for sale in North America.

-In Asia, even though there was a delay in launching production and the demand in Indonesia for motorcycles slowed down because of changes to consumer-financing terms, the region's sales increased because of favorable currency translation from the low valuation of the yen.

-In North America, sales increased significantly year-on-year because of favorable currency translation due to the low valuation of the yen and the sudden and strong rise in production volumes that happened in line with the economic recovery.

2)
Variable cam phase, gears
-Sales of variable valves were lower year-on-year due to a drop in product orders because of model changes, even though production had recovered from the aftermath of the Great East Japan Earthquake.

-Sales of precision-forged gear wheels fell year-on-year because of the drop in gear wheels for sale in China, even though strong sales were recorded for products designed for mid- and large-sized equipment for sale in developing countries and production volumes in Japan for some products increased in line with the recovery that took place after the Great East Japan Earthquake.

Recent Development Outside Japan

<India>
-In March 2013, the Company established Nittan Valve Co., Ltd. in Andhra Pradesh, India, a new subsidiary to produce small engine valves. Since use of motorcycles and vehicles is prevailing in India, production of these products is expected to increase further. The new company will be capitalized at approximately 600 million yen, of which 99 percent will be invested by Nittan Valve and 1 percent by Konan Tsusho. Nittan Valve is looking to position the new operation as a supply base for the Japanese market as well, by taking advantage of the Free Trade Agreement signed between Japan and India. (From an article in the Nikkan Jidosha Shimbun on Sep. 1, 2012)

<USA>
- The Company is increasing 40 percent its yearly production capacity of engine valves for automotive applications in the U.S. from the current 50 million to around 70 million valves by 2015. To meet new orders expected from Japanese automakers, the company will search for the possibility of adding production volume at its local joint venture or setting up a second facility. The current capacity is not sufficient to comply with growing demand in North America. It is being satisfied in part by imports from Japan. In preparation for boosting capacity at the joint venture plant in the U.S., the Company will send a productivity improvement team from Japan and step up training of local employees in an attempt to reduce their turnover and improve productivity by the end of fiscal year ending March 2013. (From an article in the Nikkan Jidosha Shimbun on Dec. 7, 2012) 

High-mix small-volume production of engine valves - Hadano plant in Japan

- The Company will install a new production line at the Hadano Plant adjacent to its headquarters office in Kanagawa Prefecture for high-mix small-volume production of engine valves and put it into operation in spring 2013. The company manufactures valves not only for general use, but also for high performance engines requiring specific processing, and for natural gas and ethanol-engine vehicles. Expecting growing demand for multiple-type and small-volume production valves, the Company is set to enhance productivity by installing a new line capable of flexible production in a bid to expand sales. (From an article in the Nikkan Jidosha Shimbun on Oct. 5, 2012)

Issues to Be Resolved

-Positioning "enhancing technological development strengths" and "developing global operations" as its main issues to be resolved, the Company is implementing the following initiatives.
  • Creating an efficient business structure
  • Ensuring its technological strengths
  • Reorganizing management structure
  • Developing human resources for globalization
  • Developing organizational framework in developing markets, for example, establishing subsidiaries in Vietnam and India.
  • Creating the largest procurement network in the world by collaborating with Nittan Global Tech Co., Ltd.

Outlook for FY ending 2014

(in millions of JPY)
  FY ending Mar. 31, 2014
(Forecast)
FY ending Mar. 31, 2013
(Actual Results)
Rate of Change (%)
Sales 37,300 35,493 5.1
Operating income 1,800 1,008 78.6
Ordinary income 2,100 1,479 42.0
Net income 650 (1,018) -

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

R&D

R&D Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 FY ended Mar. 31, 2011
Overall 716 696 1,117
Engine Valve 365 174 -
Variable cam phaser 244 379 -

R&D Activities

Small engine valves
-The Company completed development of materials, which are compatible with various types of fuel properties, for valves in engines using alternative fuels such as ethanol and natural gas. It launched production of them for motorcycles.

-The Company is developing valves for smaller-built engines that reduce exhaust gas, making them lighter in weight and more heat resistant. In addition, the Company is verifying the performance, durability, and manufacturability of valves, developing next-generation coolant filled hollow enclosure valves designed to improve fuel efficiency.

Variable cam phaser, gears
-The Company is developing variable valve timing mechanisms in order to increase their content ratio on new-type engines designed to continually improve fuel efficiency and comply with stricter exhaust-gas-emission regulations that will go into effect from 2015.

-The Company is working to meet customer requirements for wheel gears, working on new forging simulations and structural analysis.

Valve lifters
-The Company developed a low-friction, DLC coated, mechanical valve lifter that improves wear and abrasion resistance covering a wider range.

Technical Alliances

(As of Mar. 31, 2013)
Partner Content of agreement Project Period
Eaton Corporation plc
(U.S.A.)
License agreement on small engine valves July 1, 2012 - Jun. 30, 2013
Eaton Corporation plc
(U.S.A.)
License agreement on oil pressure valve lifters July 1, 2012 - Jun. 30, 2013
PT. Federal Nittan Industries
(Indonesia)
License agreement on small engine valves 5 years from Jun. 1, 2010
Shinwa Precision Co., Ltd.
(Korea)
License agreement on oil pressure valve lifters 5 years from Aug. 1, 2010
Nittan (Thailand) Co., Ltd.
(Thailand)
Technical assistance agreement on small engine valves 5 years from Feb. 1, 2012
Shinwa Precision Co., Ltd.
(Korea)
License agreement on mechanical tappets 5 years from Dec. 5, 2012
Beijing Yoosung Shinhwa Automobile Parts Co., Ltd.
(China)
License agreement on lash adjusters 10 years from Dec. 7, 2006
License agreement on mechanical tappets 10 years from Jan. 1, 2008
Nittan Euro Tech sp.zo.o.
(Poland)
License agreement on automobile  engine valves Five years from the day on which the products under agreement are first shipped.
(agreement signed August 29, 2008)

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY ended Mar. 31, 2013 FY ended Mar. 31, 2012 FY ended Mar. 31, 2011
Overall 4,660 4,158  2,935
Engine Valve 4,049 3,292 2,322
Variable cam phaser 403 506 344

 

Capital Expenditure of the Automotive Components Business

(in millions of JPY)
Facilities Amount of investment Description of capitalization
Engine Valves
The Company 2,116 Installation of additional equipment and Modification and rationalization of equipment to produce engine valves
Nittan (Thailand) Co., Ltd.
(Thailand)
624 Installation of additional equipment to produce engine valves
Guangzhou Nittan Valve Co., Ltd.
(China)
541 Installation of additional equipment to produce engine valves
Variable cam phaser 
The Company 403 Modification and rationalization of equipment to produce precision forged gears for industrial machinery

Planned Capital Investment (Automotive Parts Business)

(As of Mar. 31, 2013)
Plant Equipment to be installed Estimated amount of investment
(in million JPY)
From To Increase in production capacity
Headquarters
(Kanagawa Pref., Japan)
Manufacturing equipment for engine valves. 630 2013.04 2014.03 Mainly to rationalize and renew facilities
Manufacturing equipment for precision forged gears
120 2013.04 2014.03 Mainly to rationalize and renew facilities
Sanyo Plant
(Yamaguchi Pref., Japan)
Manufacturing equipment for engine valves 450 2013.04 2014.03 Mainly to rationalize and renew facilities
PT. Federal Nittan Industries
Headquarters
(Indonesia)
Manufacturing equipment for engine valves 630 2013.07 2013.09 Mainly to rationalize and renew facilities, increasing production capacity by 13%
U.S. Engine Valve (partnership)
Headquarters
(U.S.A.)
Manufacturing equipment for engine valves 1,760 2013.01 2013.12 Mainly to rationalize and renew facilities, increasing production capacity by 16%
Guangzhou Nittan Valve Co., Ltd.
(China)
Manufacturing equipment for engine valves 750 2013.01 2013.10 Mainly to rationalize and renew facilities, increasing production capacity by 38%
Nittan Euro Tech sp.z o.o.
(Poland)
Manufacturing equipment for engine valves 520 2013.01 2013.10 Mainly to rationalize and renew facilities, increasing production capacity by 16%