PIOLAX, INC. Business Report FY2006

Business Highlights

Financial overview
In million JPY FY2006 FY2005 Rate of
Change (%)
Sales 42,418 41,083 3.2 - Revenue increased year-on-year, supported by strong sales overseas. 
Operating income 2,340 2,337 0.1 - Despite greater revenue, operating income and ordinary income remained at the same level as  what they were last year. The positive factors from the gain in sales were nearly all offset by negative factors such as soaring materials prices and increased depreciation costs in association with vigorous capital spending by the Company. 
Ordinary income 3,114 3,081 1.1
Current net income 1,981 1,645 20.4 -

<Business Performance by Region>
Sales amounted to 34,176 million yen, an increase of 679 million yen year-on-year which mainly consists of increased revenue at Piolax and a medical subsidiary. 
Operating income was down by 3 million yen from that of the previous year, to 1,920 million yen, as a result of material price hikes and greater fixed costs.

(North America)
Sales increased 79 million yen to 6,215 million yen, thanks to its U.S. subsidiary's marketing efforts targeting major Japanese carmakers, the Big Three of the USA, and Tier-1 suppliers. Despite this significant increase in sales, operating income stood at 199 million yen, up by only 68 million yen compared to what it was last year due to soaring prices of materials and special costs incurred for expanding the Company's plant in Mexico. 

(Other regions)
Increased sales volumes at subsidiaries in other regions boosted sales to 4,682 million yen, an increase of 989 million yen compared with those of last year. Operating income was up by 102 million yen from the previous year to 177 million yen, mainly due to an increase in sales at subsidiaries in other regions. 

Strengthening its production structure
In Japan, the Company worked on integrating production of precision springs and augmenting its production volume of fuel system components and open-close mechanism parts. Major investment activities outside Japan included a plant expansion project in Mexico and the purchase of a piece of land in China prior to the expansion and relocation project started at its China facility in the first half of 2007. 

Increasing supply to the foreign OEM market
In the business term ending March 2006, sales to Hyundai Motor Co. of Korea and Ford Motor Co. of U.S.A. were raised by 1.5-fold compared to the previous term. From the period of Nissan Revival Plan, when 90% of its sales were from business with Nissan and that for the domestic market, its overseas sales have been more than doubled. 15% of its sales were from North America, while the sales from Europe and Asia totaled to two-digit percentage for the first time. The overseas sales amount has doubled the 2000 results. In its medium-term business plan which started this fiscal year, the Company plans to expand its sales in the Asian region by 2.2-fold from 2005 to 4 billion yen in the next three years. The Company especially expects large demand increase in Korea, with which this year marks the 10th year of its business, and targets at 1 billion sales for this business term ending March 2007. (From a story in the Nikkan Jidosha Shimbun on Jun 9)

New subsidiary
2007-02 Piolax, Inc. has decided to acquire all stocks of Sankyo Hatsujo Co., Ltd. (Oume City, Tokyo), its equity method affiliate, making Sankyo Hatsujo its wholly-owned subsidiary and then merging Sankyo Hatsujo with its 100% subsidiary, P.N.S Co., Ltd. (Yokohama City, Kanagawa Pref.). Piolax intends to improve production efficiency within the group by consolidating the production of precision springs through this merger. This change will become effective on Apr. 1, 2007. The merger of the aforementioned subsidiaries will have only a negligible effect on the company's consolidated and non-consolidated operating results. (From a press release by the company on Feb. 6)


R&D Section
-The major sections conducting R&D are the Development Groups of each SBU, the Design Division, Development Divisions of  Piolax OC Systems and Piolax Medical Devices, both subsidiaries.
-Conducted joint development with universities.
-R&D expenses were 421 million yen in FY2006.
-For automotive products, the R&D expenditure was 306 million yen.

Automotive related R&D

(1) R&D on Precision Springs
-The Company made progress on developing materials such as compression coil springs, which are used in engines and transmissions.  By using the most optimal designs and employing analysis technology such as that relating to stress and product behavior, the Company is able to mass produce smaller and lighter products.
-The Company further developed composite springs that are easily assembled to units. 
-The Company worked on application development activities to eliminate the use of hexavalent chromium in surface treatments for spring materials. The Company developed and switched over to using hexavalent-chromium-free surface treatment technology in order to meet the End-of-Life Vehicle Directive in Europe. It is also working on implementing similar technology that meets other regulations, including the Restriction of Hazardous Substances (RoHS) in Europe; Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH); and voluntary environmental regulations introduced by the Japan Automobile Manufacturers Association, Inc. to eliminate the use of hazardous materials, namely hexavalent chromium, vinyl chloride, and volatile organic compounds. 
-Along with furthering its existing joint-development activities with Japanese carmakers, the Company is reinforcing technological ties with a Korean car maker. It is also working on joint development activities with Japanese automakers in China, to the point of starting mass-production.   

(2) R&D on Industrial Fasteners
-The Company developed a product range that can accommodate a variety of sheet thicknesses, from thick to thin. It also developed products that can be easily assembled to auto bodies, products that demonstrate exceptional strength, and those that can be easily scrapped. The Company has expanded the application of these products, starting first by applying them to new vehicle models, and then gradually to existing vehicle models as well.   
-The Company examined the possibility of replacing current materials with ones capable of reducing odor within the interior cabin.
-The Company also works on developing high-strength and easy-to-use net hooks for interior parts, winning an increasing volume of business in this sector.

(3) R&D on Compact Units
-New lock mechanisms for glove boxes started being mounted on new vehicles launched in January 2003. Since the, the Company has continued its development activities, working on improving the mechanisms' performance and operation. Also, the Company knows that by winning more supply agreements, a greater number of new vehicles will be equipped with these mechanisms.   
-Piolax developed new type dampers. Development activities in this field not only increased in Japan with domestic manufactures but also with overseas manufacturers as well, mainly in Europe, the U.S. and Korea. 
-The Company develops hinge mechanism parts to open and close console box lids and floor boards in the rear luggage compartment. It developed hinges using oil dampers to improve smoothness in terms of fastening/unfastening, provide a more luxurious feel, and enhance user friendliness, allowing users to fasten the hinge at any point along the board. 

-The Company is developing better performance filtering elements. In addition, it is also working on analysis technologies for visualizing oil flow in oil filters and also oil flow resistance. Plus, the Company is working to make these elements more compact and more responsive to diversified applications related to transmissions.

(4) R&D on Fuel Systems
-The number of clients installing in-tank evaporator systems for metal tanks (and the number of vehicle models on which these systems are being installed) is increasing.  The Company developed these systems in response to evaporator regulations in the USA. Overseas fuel-tank makers are also currently evaluating these systems, as they are effective in improving safety and reducing costs.  
-The Company developed valves, mainly rollover vales and inlet check valves, for plastic tanks to improve performance and to reduce costs. It is expected that these products will be applied to new models.
-Business is growing in the area of  fuel supply units, as the application of fuel injection systems is increasing in the motorcycle market. 
-In response to environmental issues, the Company developed products for vehicles powered by alternative fuels such as bio diesel oil and alcohol fuel, turning these products into practical business solutions. 

Licensing of technology from other companies (As of March, 2007)

Company Product Contract Detail Term
Norma Germany GmbH Automotive fuel delivery components Approved use of patent From August 18, 1995. This contract will be renewed every 5 years
Norma Germany GmbH Plastic fuel tank components Approved use of patent Added to the contract above
Norma Germany GmbH Plastic fuel tank components Approved use of patent From December 13, 2001. This contract will be renewed every 5 years 
Note: Norma Germany GmbH was called Rasmussen GmbH before May, 2007.

Licensing of technology to other companies  (As of March, 2007)
Company Product Contract Detail Term
Sanjia Industrial Co., Ltd. 
Metallic and plastic fasteners Manufacturing technology From October 6, 1987 through October 5, 1992. To be renewed every 10 years. 
Taiwan Houmu Industrial Co., Ltd. (Taiwan) Automotive clutch pressure springs, torsion springs and engine valve springs Manufacturing technology From November 1, 1978 through October 31, 1983.
To be renewed every 5 years.  
Piolax Corp.(USA) Precision plastic slips, precision springs, and related assembly products for the automotive and electronics industry.  Manufacturing technology For an indefinite period from April 1, 1993.  
Piolax Ltd. (UK) Precision plastic slips, precision springs, and related assembly products for the automotive and electronics industry.  Manufacturing technology
For an indefinite period from August 8, 1995. 
Piolax Co., Ltd. (Korea)  Precision plastic slips, precision springs, and related assembly products for the automotive and electronics industry.  Manufacturing technology From June 20, 1995 through June 19, 2006. To be renewed each year. 
Piolax (Thailand) Ltd. (Thailand) Precision plastic slips, precision springs, and related assembly products for the automotive and electronics industry.  Manufacturing technology For an indefinite period from August 10, 2000.
Dongguan Piolax Co., Ltd. (China) Precision plastic slips, precision spring, and related assembly products for the automotive and electronics industry.  Manufacturing technology From July 1, 2004 through June 30, 2014. To be renewed each year. 

Investment Activities

Capital Expenditure
-In FY 2006, its capital investments totaled 3,986 million yen, mainly in automotive  parts production facilities. 
-The Company spent 3,006 million yen in Japan and 980 million yen overseas.

New Facilities (automobile related facilities)
Location Business Expected Investment (Thousands of yen) Started in: Expected to Complete in:
Piolax Inc.
Yokohama Technical Center
Yokohama City, Japan Design and development 49,811 Apr., 2007 Mar., 2008
Molds 441,100
Piolax Inc.
Mooka Plant
Tochigi Pref., Japan Plant 100,750 Nov., 2007 Mar., 2008
Production facilities 459,973
Molds 434,500
Piolax Inc.
Fuji Plant
Shizuoka Pref., Japan Plant 1,000 Apr., 2007 Mar., 2008
Production facilities 188,950
Piolax Inc.
Kyushu Plant
Fukuoka Pref., Japan Plant 114,400 Apr., 2007 Mar., 2008
Production facilities 150,555
Molds 53,900
Piolax Corp.
Head Office/ Plant
Georgia, USA Plant 9,900 Jan., 2007 Dec., 2007
Production facilities 185,460
Molds 91,850
Piolax Ltd.
Head Office/Plant
Lancashire, UK Plant 88,400 Jan., 2007 Dec., 2007
Production facilities 19,700
Piolax Co., Ltd
Head Office/Plant
Inchon, Korea Production facilities 55,200 Jan., 2007 Dec., 2007
Molds 83,000
Piolax (Thailand) Ltd.
Rayong, Thailand Buildings 360 Jan., 2007 Dec., 2007
Production facilities 106,607
Molds 112,226
Dongguan Piolax Co., Ltd. Dongguan, China Plant 30,339 Jan., 2007 Dec., 2007
Production facilities 280,610
Molds 193,943