Toyo Tire & Rubber Co., Ltd. Business Report FY2012

Business Highlights

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 Rate of
change (%)
Sales 320,569 294,092 9.0 -
Operating income 12,893 12,182 5.8 -
Ordinary income 10,754 9,193 17.0 -
Net income 6,704 521 1,186.8 -
Tire Business
Sales 241,693 216,578 11.6 1)
Operating income 10,325 8,863 16.5 -
DiverTech Business
Sales 78,795 77,314 1.9


Operating income 2,073 3,197 (35.2) -

1) Tire Business
-Sales during the first half of the year were significantly lower because of the tremendous drop in auto production in Japan caused by the Great East Japan Earthquake. In the second half, however, sales were higher due to robust sales of automotive tires, with the volume of new-vehicle production recovering because of the re-introduction of eco-car sales incentive programs. As a result, unit sales for the year remained on par with those of the previous year, while operating revenue increased year-on-year due to greater sales of higher priced value-added products.

2) DiverTech Business
-Sales generated from automotive anti-vibration rubber were higher year-on-year due to the general recovery in demand and greater production of vehicles being mounted with the Company's products. This was in spite of lower revenue in the first half of the year because a drop in auto production by OEMs, following the Great East Japan Earthquake and the flooding in Thailand.

-Sales of automotive seat cushions were lower year-on-year due to a drop in production during the second half of the year of vehicle models being equipped with the Company's products. This was in addition to the impact on business caused by the Great East Japan Earthquake.


-The Company announced on August 18 that it is supplying its "Proxes R35" tires to Toyota as the originally installed brand for the "Prius α" that was put on the market last May. The Company's tires have been chosen for factory installation on three upgraded versions of the "Prius α", which are "G Touring Selection Skylight Package," "G Touring Selection" and "S Touring Selection." The Company says its tires have contributed to meeting high performance levels required of the upgraded models, such as riding comfort, quietness and stable maneuverability. (From an article in the Nikkan Jidosha Shimbun on August 19, 2011)

-Toyo Tire U.S.A. Corp., a U.S. subsidiary of the Company, announced that the all-season Proxes A20 has been selected as original equipment (OE) on the all-new 2012 Toyota "Prius v" hybrid which will go on sale in fall 2011. The tire size is P215/50R17 90W. The Proxes A20 features a low rolling resistance design for reduced fuel consumption, while also providing excellent dry and wet braking. (From a press release on August 18, 2011)

Recent Development in Japan

-The Company announced on August 10 that it will consolidate almost all functions at its Tokyo Office housed in an office building in Toshima ward to its Osaka headquarters based in Nishi ward by the end of April 2012. With an aim of establishing a global headquarters in the future, the Company will concentrate the headquarters' function of the sales division to Osaka. It is also expecting to reduce costs by office integration, eliminate redundant functions and make decision-makings faster, which it hopes will lead to creating a more speedy and agile management. (From an article in the Nikkan Jidosha Shimbun on August 12, 2011)

Recent Development Outside Japan

-The Company will accelerate its global sales expansion project for the Nitto tires. The company is going to increase in Asia sales of the Nitto brand, which has gained strong popularity for large-diameter tires in North America. It has formed a sales alliance with YHI International Limited, China's major manufacturer of aluminum wheels. The plan is to start selling the Nitto tires in China by the end of this year, following their introduction to Hong Kong and New Zealand. With the expansion work at Toyo Tire North America, Inc. (TNA) already being completed, and a new plant in China scheduled to begin operation in December, Toyo Tire has decided that it is now ready to enlarge its market outside North America and increase its supply volumes. (From an article in the Nikkan Jidosha Shimbun on October 19, 2011)

-The Company is accelerating tire business in Asia. Following an acquisition at the end of 2010 of a Kuala Lumpur-based Silverstone Berhad (SS) having the second largest market share in Malaysia as its wholly-owned subsidiary, Toyo Tire & Rubber turned the Chinese subsidiary of SS to its subsidiary as well in June this year. Furthermore, it is now constructing a new plant, which is slated to go into operation in spring 2013. The plant is expected to have production capacity of 5 million tires a year in fiscal 2015, which will be expanded to 10 million by 2020 at the latest. In China Toyo is now building its own plant in Zhangjiagang, Jiangsu Province with a production capacity of 2 million tires a year. The plant is slated to go into operation at the end of this year, with a gradual expansion of capacity planned. A series of aggressive business expansions is based on the company's midterm business plan, which calls for an increase of sales to 45 million tires a year by 2015 up more than 50 percent from the level in 2010. Focusing on Asia with a high growth potential in sales as its key market, Toyo is committed to enhancing production capacity to meet market needs in the area. (From an article in the Nikkan Jidosha Shimbun on August 8, 2011)

Joint Ventures

-The Company has announced that it has agreed to establish a joint venture company in Foshan, Guangdong province, China to manufacture and distribute urethane seat cushions for transportation machinery such as automobiles, with Guangdong TGPM Automotive Industry Group Co., Ltd. of China. TGPM manufactures and distributes body sealers, car dealerships and so on. The new company, Toyo TGPM Automotive Parts Foshan Co., Ltd., will be capitalized at 50 million RMB (approximately 600 million yen), 60 % of which will be provided by Toyo Tire & Rubber and the remaining 40 % provided by TGPM. Production is scheduled to begin in April 2013. The annual sales for 2017 are estimated to be 1.3 billion yen. (From a press release on January 27, 2012)


<Silverstone in China>
-The Company announced that its has completed acquisition of a 75 percent equity for 1,795 million yen in Shandong Silverstone Luhe Rubber & Tyre Co., Ltd., which is a Chinese manufacturer of truck and bus tires and a subsidiary of Malaysia based Silverstone that was purchased by Toyo Tire last year, pursuant to the decision of the purchase announced in April. With the acquisition completed, its company name was changed to Toyo Tire (Zhucheng) Co., Ltd. Toyo Tire intends to use this plant for production of Toyo brand tires with the aim of enhancing supply capability in the overseas market focused on China. (From an article in the Nikkan Jidosha Shimbun on July 2, 2011)

-The Company announced it will acquire a majority 75 percent equity in Shandong Silverstone Luhe Rubber & Tyre Co., Ltd. (SSLRT), a Chinese tire manufacturer in Shandong Province wholly owned by Malaysia-based Lion Rubber Industries SDN. BHD. The Chinese company will become a subsidiary of Toyo Tire & Rubber. This is a move to enhance supply capacity of tires in overseas markets, including China. SSLRT, which was established in 2004, manufactures about 400,000 truck and bus tires a year with the workforce of about 500. In addition, Toyo Tire & Rubber is now constructing its own plant of passenger car tires in Jiangsu Province, which is scheduled to go into production by the end of 2011. Combined with this project, the acquisition of another production facility is meant to boost production capacity of truck and bus tires. (From an article in the Nikkan Jidosha Shimbun on April 14, 2011)

Mid-term Management Plan

-The Company announced its management plan, called Vision 20, setting 2020 as the final year to achieve the objectives set forth under the plan. At the same time, the Company is also operating under a five-year management plan called "Mid-term Plan 11", which set 2015 as the final year. Also, 2015 is the midway point under its newest management plan, Vision 2020, which has set a target of 600 billion yen for operating revenue and a 10% profit margin for operating profit.

- Mid-term Plan 11 has the following four main strategies in place in order to achieve its objectives by March 2016. The objective are as follows: 400 billion yen in operating revenue, 30 billion yen in operating profit, and a 7.5% operating profit margin.
  • Concentrate management resources in strategic businesses in growing markets.
  • Build a business model that improve revenue and profits
  • Develop new customer demand based on proprietary technologies
  • Continuously create corporate innovation
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income, etc.)


R&D Expenditure

(in millions of JPY)
FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Tire Business 4,999  5,459 5,327
DiverTech Business 2,457  2,249 2,102
In common 856  847 886
Overall 8,312  8,556 8,315

R&D Facilities

Tire Technical Center Hyogo Pref., Japan
R&D Center Osaka, Japan
Automotive Parts Technical Center Aichi Pref., Japan
Miyazaki Tire Proving Ground Miyazaki Pref., Japan
Saroma Tire Proving Ground Hokkaido, Japan

-The Company announced that it has established a new technical center at the site of Automotive Parts Technical Center in Miyoshi City, Aichi Pref., to which it has transferred and merged the functions of Automotive Components Technical Center in Chiba City, Chiba Pref. With this move, the Company aims to enhance technology development capability for the anti-vibration rubber business. By consolidating knowledge and know-how in technology development, separated east and west, the tire supplier aims to reinforce its overall capabilities in element technology, information gathering and analysis/evaluation technology in order to accelerate development operations. (From an article in the Nikkan Jidosha Shimbun on September 15, 2011)

R&D Activities

Tire Business
-The tire technical center focuses on developing new tires by developing fundamental technology on tire design that incorporates analyzing the behavior of both the tires and the vehicles.

-The Company built a production technology workshop on the premises of its tire technical center in order to develop elemental technology involved in production processes as a means toward improving its production technology.

-The Company is carrying out R&D activities on elemental technology, which it will introduce in its new plant to be built in China.

-The Company announced it has offered customized tires based on the low fuel consumption tire to the testing project of the "TGMY EV Himiko" manufactured by TGMY, and contributed to making the project successful. This electric vehicle is aimed at achieving a range of 550 km, which is equivalent to the distance from Osaka to Tokyo, on a single full charging. The vehicle was manufactured in collaboration with Shigehara Manufacturing and the EV development center of Osaka Prefecture University as a development project of an EV made in Osaka. When it was tested on the proving ground of the Ministry of Land, Infrastructure, Transport and Tourism in Tsukuba, Ibaraki Prefecture, the vehicle recorded a range of 587.3 km on a single full charge. (From a press release on October 11, 2011)

DiverTech Business
<Transportation equipment>
-The Company has won a considerable number of orders from OEMs for highly functional parts such as engine mounts for high-end, luxury vehicle models.

-In the area of advanced technology, the Company is working to develop new products designed for eco-friendly vehicles, aiming to expand its business in this market sector.
-Environment: The Company had been focusing on developing hexahydric-chrome-free products. But its recent focus is on reducing VOC (volatile organic compound) emissions in its production lines as well as in its products by increasing the use of alternative materials.

-Fuel Economy: The Company is trying to develop parts that are not only lighter but also have higher performance, by making use of aluminum and resin materials; and by also developing new methods and new materials.

Product Development

-The Company has developed a tire that boasts a rolling resistance performance rating of "AAA" and wet grip performance rating of "b" under the Guideline for Tyre Labeling to Promote the Use of Fuel Efficient Tyres (Labeling System) released by the Japan Automobile Tyre Manufacturers Association (JATMA). The Company has created a separate brand for the passenger car tire called NANOENERGY, based on the concept of Toyo Tires nanotechnology. NANOENERGY tires will be available starting in the domestic market and moving into overseas territories including Europe. The product line-up is divided into two categories: NANOENERGY 1, with an "AAA-b" rating, will be available in the domestic market in February 2012. NANOENERGY 2, boasts the "AAA-c" rating, was developed for a broad range of hybrid vehicles and will be introduced gradually. (From a press release on December 1, 2011)

-The Company announced an eco-friendly tire for the first time in the U.S. The new tire sold by the name of "Versado Eco" delivers low rolling resistance, long life and riding comfort. For this environmentally friendly product, the Company uses technology called "Green Powder", which is based on the technology for eco-friendly tires like "Eco Walker" in the Japanese market. The Company aims to sell the new eco-tire targeting users of green vehicles, including hybrids. (From an article in the Nikkan Jidosha Shimbun on July 7, 2011)

Investment Activities

Capital Expenditure

(in millions of JPY)
FY ended Mar. 31, 2012 FY ended Mar. 31, 2011 FY ended Mar. 31, 2010
Tire Business 26,564  26,299 10,842
DiverTech Business 2,800  1,814 2,372
Others 402
Overall 29,767  28,324 13,215

Tire Business
-The Company made a capital investment mainly to streamline production, improve product quality, enhance production facilities at tire plants in North America, and prepare for starting up of new factories in China and Malaysia.

DiverTech Business
-The Company made a capital investment mainly to streamline production and improve product quality.

Investment Outside Japan

-The Company held an opening ceremony at Toyo Tire (Zhangjiagang) Co., Ltd in Zhangjiagang, Jiangsu Province on December 8. The new facility will manufacture tires for passenger vehicles and light-duty trucks. Kenji Nakakura, president of the Company said in his speech, "Though we've become the last among major Japanese tire suppliers to locate a plant in China, we are poised to offer high value-added products that no other company can achieve. A new chapter in the Company's history will now begin." The company aims to ensure the capacity to manufacture 2 million tires a year at the plant as early as possible to meet brisk demand in the market. (From an article in the Nikkan Jidosha Shimbun on December 10, 2011)

-The Company announced that it will establish a new plant to manufacture passenger vehicle tires in Malaysia. The company is investing approximately 20 billion yen in the project, planning production launch in April 2013 with a yearly production capacity of 2.5 million tires. The plant's production scale is expected to double to 5 million tires by the year ending March 2016. In April 2011, the Company established a wholly owned subsidiary, Toyo Tyre Manufacturing (Malaysia) Sdn. Bhd. Its plant will be constructed on 480,000 square meters of land the Group has already purchased in Perak. (From an article in the Nikkan Jidosha Shimbun on August 4, 2011)

Investment in Japan

-The Company announced that it has developed a new tire inspection system, which can automatically detect flaws using a CCD camera and an image processing system. The optical-cutting image processing technology is designed to capture detailed images of the tire surface to discover failures, which are quite hard to find by visual observation. The Company will initially introduce the new inspection system to its Kuwana Plant in Mie Prefecture, and then to its plants outside Japan, including its new facility in China scheduled to be established this year. (From an article in the Nikkan Jidosha Shimbun on June 11, 2011)

Planned Capital Investments

(As of Mar. 31, 2012)
Planned amount of investment
(in million JPY)
Objective of the investment
Tire Business 19,937 Streamlining production and improving product quality; enabling operations to respond to the Company's global supply structure
DiverTech Business 4,173 Streamlining production and improving product quality; enabling operations to respond to the Company's global supply structure
In common 562 Strengthening research on fundamental technology
Total 24,672 -