NICHIRIN Business report FY2006

Business Highlights

Financial overview
in million JPY FY2006 FY2005 Rate of Change(%) Factors
Sales 40,997 39,468 3.9% - Although there were few new model launches in Japan, sales increased from the previous year, thanks to strong sales and exports of models in which the Company's products are installed. The Company was also able to post greater operating income despite surging material prices, by improving productivity, reducing costs, and bringing down selling prices of its products. The increase was partly due to gains from exchange rate translation. 

- On the other hand, both sales and income fell in North America in spite of the Company's efforts to boost sales, reduce costs, improve productivity, and manufacture in-house more components used in its products. Some of the major reasons for the drop is the declining sales of heavy-duty vehicles amid hovering oil prices, and a production cutback by its major customer. 

- Sales were favorable in China, Asia, and Europe, supported by stronger performance by Japanese automakers. 
Ordinary income 1,486 1,723 (13.8%)

Strengthening the Chinese business operations
In December 2006, Nichirin Co., Ltd. decided to increase the equity stake in its subsidiary, Shanghai Nichirin Automobile Accessories Co., Ltd. Nichirin established the subsidiary in 1996 as a joint venture with two Chinese companies, positioning it as a hub for its production and assembly of automotive hoses. Nichirin intends to strengthen its control over Shanghai Nichirin Automobile Accessories Co., Ltd., as the subsidiary's operations have expanded and its strategic position within the Nichirin Group has been upgraded over the years. Nichirin will raise its stake in the subsidiary from the current 52%, to 72%. (From a press release by the company on Dec. 22)

Targets for 2007
- To enhance its production lines in response to the changing global market, and to improve profitability by having its subsidiaries supply each other with parts and products they've each manufactured.  
- To establish a global quality assurance system, and achieve topnotch and uniform quality levels worldwide.
- To improve its production structure based on the NNP (Nichirin New Production) initiative, and reduce costs by diversifying its purchasing methods. 
- To strengthen its technical development capabilities by integrating its R&D and technological functions into the Nichirin R&D Center.


R&D Expenses (in thousand yen)
FY2006 FY2005 FY2004
994,411 850,024 726,658

Technology Transfer (as of December 2005)
Company Country Content of Contract Period of Contract
From To
HS R&A South Korea Manufacturing technology for air conditioner hoses used in automobiles Feb.24, 2004 Feb. 23, 2007 (The contract will be renewed automatically  every three years)  
Manufacturing technology for automotive brake hoses Nov. 3, 2004 March 4, 2007
March 5, 2007 March 4, 2010
Manufacturing technology for automotive power steering hoses  Oct. 28, 2002 Oct. 27, 2007
PT.Mitra Metal Perkasa Indonesia Assembling technology for automotive brake hoses Oct. 26, 2006 Oct. 25, 2007

New Product Development
R&D focus is set on the following areas; 
Automotive hoses
- Automotive hoses that improve the safety of vehicles such as ABS hoses and brake hoses with higher braking performance and durability. The Company has started supplying hoses for electronic stability control systems. 

Car air conditioning hoses
- Its environmentally friendly EF-Tubes, which are CO2 piping hoses, are used in some fuel cell vehicles. The Company also supplied prototypes of the products to manufacturers of air conditioning systems inside and outside Japan. It intends to promote sales of this highly flexible and impermeable tubes to other markets as well.  

Other hoses
- The Company developed suspension system hoses to improve the stability of vehicles, and started mass-production of hoses used in common rail systems that enhance fuel efficiency of diesel engines. It is also working on developing hoses for the urea selective catalytic reduction (SCR) system, which is aimed at reducing NOx emissions from diesel engines. 

Investment Activities

Capital Investment
 (in thousand yen) FY2006 FY2005 FY2004
Japan 1,170,103 608,920 414,035
North America 455,492 437,180 401,849
Asia, Europe 132,156 206,655
Total investment 1,757,751 1,252,756 815,885