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for our Shareholders and In

Pursuing Sustainable Growth

-Review of FY2016 and Outlook-

 

Looking back on FY2016, our domestic production volume rose, but net sales declined, reflecting a fall in market prices of aluminum ingots against a backdrop of a stronger yen. At the Tochigi plant, two large casting machines, which we added in response to growing demand from major customers, came online. Domestic demand for large die casting components remained strong, and the Tokai plant, which has large casting machines, remained busy.

In North America, sales remained roughly flat. On the profit front, the Mexico plant recorded an improved profit on the back of stable productivity. The U.S. plant strove to improve productivity from FY2014 but fell short of reaching the expected profit. The plant will continue to take steps to improve.

Looking at Asia, demand at the Guangzhou plant, which had been weak for more than two years, recovered. At the Hefei plant, production increased steadily. As a result, earnings in China improved significantly. We have faced tough conditions in India since commencing operations there. Earnings, however, have improved gradually.

At the Kumagaya plant, where aluminum alloy ingots are produced, both sales and profits exceeded the initial forecasts despite a fall in market prices, reflecting an increase in production associated with a rise in domestic demand and an improvement in productivity.

In the Proprietary Products business, which produces, sells, and installs free access floors made using aluminum for clean rooms and data centers, manufacturing takes place primarily at the Hefei pant, with the floors sold in Japan and China. The business contributed to earnings in the entire Group due to an increase in share in the domestic aluminum free access floor market and orders for large-scale projects in China.

 

We are executing our medium-term management plan, the 1618 Plan, from FY2016. Under its 10-Year Vision “Winning absolute customers’ trust 2025,” we are taking steps to achieve improvements, primarily in quality and productivity, in the 1618 Plan. Productivity has improved, and the number of complaints about quality has been declining with each year. The pace of improvement, however, varies at different plants. To facilitate improvements at all plants, we hold quarterly evaluation meetings in Japan from FY2011. Overseas, meetings for evaluating improvement activities are held in each region from FY2016. At these meetings, plants in the same region learn from each other, sharing best practices. We are strengthening our infrastructure so that all plants will achieve the same level of productivity and quality, and have produced results in this respect. We are systematically moving forward with standardization and human resources development globally.

 

We are actively engaged in activities to improve the environment and contribute to society. In environmental conservation, we are working to reduce CO2 emissions. To achieve our target basic manufacturing unit (kg-CO2/t), seven of our eleven domestic locations achieved their target. We also achieved our target for all domestic locations. The waste generation target was achieved at nine of the eleven locations, and the water consumption target was achieved at five of seven relevant locations. Almost 80% of the employees have obtained the Ahresty eco License for raising awareness of the environment.

Many of our employees (60% to more than 90% depending on location) are actively involved in social contribution activities, including local forest development and community cleaning activities.

 

Finally, with regard to the environment surrounding our mainstay Die Casting Business,  demand for automobiles is expected to continue to rise worldwide, especially in emerging countries. As environmental regulations are being tightened in each country and region, hybrid vehicles and plug-in hybrid vehicles are expected to increase. There may be a shift to electric vehicles and fuel cell vehicles, which do not use any internal-combustion engines. There are many challenges involved, including improvements to batteries’ electricity storage capabilities and prices, charging time, and charging infrastructure. The challenges for fuel cell vehicles include prices and building hydrogen fuel stations. We thus expect that internal-combustion engines will remain the mainstream for some time to come. In the long term, however, energy will definitely change to electricity. We believe that aluminum die casting products, which are light and feature superior recyclability, design freedom and productivity, will be able to contribute to reducing vehicle weight. To respond to the needs for reducing the weight of vehicle bodies and suspension components, in addition to engines and transmission parts, we established a task force in January this year and launched sales and market research. We are gearing up to respond to changes in the demand structure, understanding the parts the weight of which companies are seeking to reduce and the functions of parts that companies need, and strengthening our MONOZUKURI capabilities to meet their needs.

 

As we pursue this approach, we hope that we can continue to count on the understanding and support of our shareholders.

President & CEO Arata Takahashi

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