Nichirin Co., Ltd. Business Report FY ended Dec. 2012

Business Highlights

Financial Overview

(in millions of JPY)
  FY ended Dec. 31, 2012 FY ended Dec. 31, 2011 Rate of change
Sales 37,652 33,463 12.5 1)
Operating income 1,172 649 80.6 -
Ordinary income 1,536 577 166.2 -
Net income 729 (10) - -

1) Sales
-In FY2012, sales increased 5.8 percent year-on-year to 27,644 million yen, which accounted for 73 percent of the Company's worldwide sales.
-The Company enjoyed strong sales in the first half of 2012 thanks to increasing demand from Japanese automakers, which raised their production volumes to offset the loss incurred from the Great East Japan Earthquake and the heavy flooding in Thailand. Sales were also buoyed by the reintroduction of the eco-car incentive scheme.
-Sales during the second half of 2012 decrease year-on-year mainly because of the termination of the eco-car incentive program and rising tensions between China and Japan.

<North America>
-Sales in North America in FY2012 increased by 31.4% year-on-year to 8,711 million yen.
-Sales increased thanks to the recovery of the North American market and an increase in production volume from the previous year, when production slowed due to the Great East Japan Earthquake and the heavy flooding in Thailand.

-Sales in China in FY2012 rose 2.0% to 6,259 million yen from the previous year.
-Following the strong first-quarter performance, vehicle production started to slow down in the second quarter. This was followed by a further decrease in production and sales due to the deterioration of Japan-China relations.

-Sales in Asia totaled 4,291 million yen in FY2012, recording a year-on-year increase of 134.1 percent.
-Despite the slow down of the ASEAN economy after July 2012, sales increased from the previous year thanks to the strong motorcycle market in the first-half period and the start of full-scale operations at the Indonesian subsidiary.

-Sales in Europe totaled 1,093 million yen in FY2012, up 7.9 percent from the previous year's result.
-In terms of profit, however, the Company posted an operating loss mainly because of the effects of the economic and financial crisis in the region.


-In 2012, the Company started supplying hydraulic brake hoses to Fiat, Land Rover and Renault.

Joint Ventures

-The Company said that it will establish a joint-venture company with France-based Hutchinson Group to expand its global brake hose business. The new company, Hutchinson Nichirin Brake Hoses, S.L., will be formed in January 2013 based on the brake hose unit of Palamos Hutchinson, S.A., Hutchinson's wholly owned subsidiary in Palamos, Spain. It will be capitalized at approximately 8 million to 10 million euros (approximately 800 million to 1 billion yen), of which 30 percent will be provided by Nichirin and 70 percent by Hutchinson. The joint venture unit will hire 170 people to manufacture and sell brake hoses, targeting sales of 18 million euros (approximately 1.8 billion yen) in the year ending in March 2014. (From an article in the Nikkan Jidosha Shimbun on Nov. 10, 2012)


-The Company announced that it plans to close and liquidate its Canada-based subsidiary, Nichirin Inc. (NNI), effective June 30, 2013. The subsidiary suspended its manufacturing operations in February 2011 in accordance with the Company's business strategy for the North American market, which includes streamlining operations in Canada as well as reorganizing its facilities in North America. NNI is currently engaged in the sale of automotive hoses. All of NNI's operations will be transferred to Nichirin Tennessee Inc. (NNT), a U.S.-based subsidiary. The Company will continue its sales activities in Canada by setting up a branch of NNT there. (From a press release on February 19, 2013)

Outlook for FY ending Dec. 31, 2013

(in millions of JPY)
  FY ending Dec. 31, 2013
FY ended Dec. 31, 2012
(Actual Results)
Rate of change
Sales 40,000 37,652 6.2
Operating income 2,200 1,172 87.7
Ordinary income 2,200 1,536 43.2
Net income 1,000 729 37.2

-Sales for 2013 are forecast to climb 6.2 percent from the 2012 result. The Company is expecting sales increases in North America and the fast growing ASEAN market, while anticipating slow demand in Japan.

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

Mid-term Management Plan

-In Phase ll (2010-2014) of the current mid-term business plan called the "Nichirin Progressive Globalization" for 2010-2014, the Company is focusing on the following objectives.
  • Strengthening and improving profitability of North American business: the Company will consolidate its management resources by closing down Nichirin Inc. in Canada.
  • Expanding business and improving the group's competitiveness in the ASEAN market: the Company will start to mass-produce new products at its Indonesian facility, while enhancing the functions of its Thai facility.
  • Stepping up global competitiveness of its brake hose business: the Company will further enhance its global alliance with Hutchinson S.A. in the areas of production, sales, and procurement through their joint venture business. It will also work on increasing sales by implementing optimum sales strategies for respective markets areas.


R&D Expenditure

(in millions of JPY)
  FY ended Dec. 31, 2012 FY ended Dec. 31, 2011 FY ended Dec. 31, 2010
Overall 824 794 844

R&D Facilities

-Major R&D activities are carried out at Nichirin R&D Center located on the premises of the Himeji Plant.

R&D Activities

Automotive hoses
-The Company developed hydraulic brake hoses for new customers overseas and started delivery of these products to Renault, Land Rover, and Fiat.
-The Company developed and started supplying advanced hoses with low moisture permeability for use in electric compressor systems.
-The Company engineered fuel hoses with low fuel permeability, planning to start supply of these products in 2013 or later. These products meet the requirements by the U.S California Air Resource Board (CARB).

Technology Licensed-out Agreement

(As of Dec. 31, 2012)
Company Country Content of Contract Period of Contract
From To
Hwaseung R&A Co.,Ltd. South Korea Manufacturing technology for air conditioner hoses used in automobiles Feb. 24, 2010 Mar. 4, 2013
Manufacturing technology for automotive brake hoses Mar. 3, 2010 Mar. 4, 2013
Manufacturing technology for automotive power steering hoses Jan. 1, 2012 Mar. 4, 2013

Investment Activities

Capital Expenditure

(in millions of JPY)
  FY ended Dec. 31, 2012 FY ended Dec. 31, 2011
Japan 517 516
North America 254 105
China 107 161
Asia 301 328
Europe 39 11
Total 1,219 1,121