Nippon Piston Ring (6461)
Akira Yamamoto, President
Akira Yamamoto, President
Corporate Profile
Nippon Piston Ring Co., Ltd.
Code No.
TSE First Section
Machinery (Manufacturing)
Akira Yamamoto
HQ Address
5-12-10, Honmachi Higashi, Chuo-ku, Saitama City, Saitama, Japan
Stock Information
Share Price Shares Outstanding Market cap ROE (Actual) Trading Unit
¥1,684 8,374,157shares ¥14,102 million 5.4% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (actual) PBR (actual)
¥65.00 3.9% ¥218.98 7.7x ¥3,229.49 0.5x
* The share price is the closing price on November 15. The number of shares outstanding was taken from the latest brief financial report.
ROE and BPS are the values for the previous term.
Consolidated Earnings Trends
Fiscal Year Sales Operating Profit Current Profit Net Profit EPS (¥) DPS (¥)
Mar. 2013 47,018 2,225 2,184 2,013 24.50 5.00
Mar. 2014 50,430 1,759 1,733 1,352 16.45 5.00
Mar. 2015 51,657 1,946 2,172 2,173 264.45 6.00
Mar. 2016 52,199 2,549 2,442 1,605 195.28 60.00
Mar. 2017 Est. 51,000 2,600 2,500 1,800 218.98 65.00
* Estimates are those of the Company.
* The definition for net profit has been changed to net profit attributable to parent company shareholders (Abbreviated as parent net profit)
* EPS and DPS have been adjusted to reflect the reverse stock split of 1 for 10 conducted on October 1, 2015.
* A commemorative dividend of ¥1.00 per share in addition to the normal dividend of ¥5.00 was conducted to commemorate the 80th year of Nippon Piston Ring's operations in FY March 2015,.
(The reverse stock split is considered.)
This Bridge Report provides Nippon Piston Ring Co., Ltd.'s the first half of fiscal year March 2017 earnings results, interview with President Akira Yamamoto and so on.
Key Points
Company Overview
Nippon Piston Ring manufactures and sells piston rings and valve seat inserts which are important parts for automobile engines. The Company boasts of a market share just under 30% of piston rings supplied to Japanese automobile manufacturers, and supplies its products to all Japanese automobile manufacturers and many prominent overseas automobile manufacturers.
Nippon Piston Ring boasts of strengths in metallic materials, surface quality improvement and precision processing technologies. New products are being developed to expand the range of its businesses into the metal injection molding products, dental implant, and other realms not related to automobile engine parts.
<Corporate History>
Nippon Piston Ring was founded by Tomonori Suzuki in 1931 in Kawaguchi City, Saitama Prefecture just prior to the start of mass domestic production of automobiles by manufacturers such as Toyota and Nissan, following the Government program for "establishment of an automobile industry" adopted in August 1935. The company name Nippon Piston Ring Co., Ltd. was officially adopted along with the establishment of the factory in Kawaguchi City in 1934.
During the Second World War, the Company began mass production of chrome plated rings for airplanes. At the end of the War in 1945, the factory was temporarily closed, but the company began operations along with the listing of its shares on the Tokyo Stock Exchange in 1949.
Nippon Piston Ring's earnings expanded rapidly along with the rapid expansion in Japanese automobile exports, and the strong demand for vehicles due to economic growth in the post-war reconstruction within Japan.
Beginning to provide products to German and American motor vehicle manufacturers in the 1970s, the Company has continued organizing a global manufacturing and sales structure, establishing overseas manufacturing facilities in Thailand, Indonesia, China and some other countries since 2000.
The metal injection molding products business and dental implants business were acquired in 2014 as part of the strategy of expanding its product lineup outside of the motor vehicle engine parts realm, and the Company has started to operate the business by its own facility since 2015.
<Market Environment>
◎ Global Automobile Production Volume
According to the research company "IHS Automotive", the production volume of light vehicles of less than six tons in gross weight is expected to continue to increase from 89.00 million units in fiscal year 2015 to over 100 million in 2020, and to eventually reach 105 million in 2022.
Looking at the details of these estimates, light vehicles manufactured in Europe, North America, Japan and other developed economic regions are expected to see only slight increases. However, stronger growth in China, ASEAN countries, South America, India and other developing economic regions is expected to allow their share of light vehicles to rise from 49.3% in 2015 to 57% in 2022. And while overall average growth is expected to be 2%, it is expected to reach 4% in developing markets.
At the same time, production estimates by power train (Drive system) call for a slight decline in the share of gasoline and diesel engines due to the rise of environmental awareness, and an increase in the share of hybrid (HV) systems, using gasoline engines and electric motors, and plug-in hybrid (PHV) systems. However, the share of gasoline, diesel, ethanol/compressed natural gas, PHV&HV and EV drive train vehicles of the total 105 million units of light vehicle production expected in 2022 is expected to be 59%, 17%, 6%, 16% and 2%, respectively. Consequently, demand for piston rings and valve seat inserts is expected to continue to trend strongly based upon this estimate for gasoline and diesel engine drive trains to continue to be the main power trains for light vehicles in the future.
* Sales, operating profit are estimates of the respective companies. ROE is based upon actual data. Market capitalization, PER, and PBR are based upon closing share prices of the respective companies as of November 15, 2016.
There are three publicly traded companies that manufacture piston rings, including Nippon Piston Ring, and the companies are operating other businesses respectively. Riken Corporation (6462) boasts of a top share of the piston ring market of close to 50%, but TPR Co., Ltd. (6463) boasts of much larger earnings than the other two companies.
Nippon Piston Ring is the only one with increased profit estimation of this fiscal year, but its stock price index is at the lowest among them in addition to the operating profit margin and ROE. Improvement of both market awareness and profitability needs to be tackled.
<Business Description>
◎ Main Products
As reflected in the Company name, piston rings are one of the main products manufactured. In addition, valve seat inserts and various other automobile parts are manufactured and sold. In fiscal year March 2016, automobile related parts accounted for 86.3% of total sales.
At the same time, metal injection molding products business and the dental implant products business were acquired in 2014. New product development is being promoted as a means of expanding its business in the non-automobile engine components realm.
(Please Refer to "Reference. Sixth Midterm Business Plan" for further information about new businesses and products)
Piston rings are fitted in grooves that run around the circumference of pistons and have spring-like characteristics to act as a seal for ideal combustion within the combustion chamber of the engine cylinders and control lubrication of the piston and cylinder walls by forming precise circles. Moreover, three piston rings are normally used, to form a seal to prevent leakage of oil, allow heat to escape and reduce both friction wear and baking.
Smooth movement of pistons will be impeded and fuel consumption will be negatively impacted should the tensional force of the piston ring placed on pistons be too high. Conversely, loss of power and increased oil consumption will result if the tensional force of the piston ring placed on pistons is too low.
Consequently, optimization of the tensional forces of piston rings is crucial in ensuring the optimum performance of internal combustion piston engines.

An oil film is formed between the cylinder wall and pistons to reduce friction wear and baking, which could be caused by the high speed movement of pistons within a high-heat condition of cylinders. However, it's not thicker the better; piston oil rings need to be designed to ensure that an optimal thickness of oil film is formed.
Piston rings are required to provide wear resistance, material strength, heat resistance, heat conductivity, and oil retention capacity to ensure the optimal performance and durability of engines.
In recent years, with the rapid rise in awareness of environment issues, a swift response is vital to adjust to a system that certifies vehicles with low output levels of nitrous oxides and hydrocarbons, and regulations to enforce reductions in a carbon dioxide emission. Consequently, the need for high performance piston rings that respond to these developments and the need for improvements in fuel consumption are on the rise.

With regards to the characteristics required to piston rings, development of piston rings with low friction construction, thinner width, new surface treatment processes, highly durable and low- cost materials is being conducted. At the same time, development and proposal of optimal design technologies using its tuning technic is also being promoted.

Nippon Piston Ring is one of only few companies that have the ability to stably manufacture and supply piston rings, which, as you may see, require extremely advanced technological capabilities, and are able to consistently develop revolutionary technologies.
<Valve Seat Inserts>
Valve seat inserts are parts which are press fitted into the valve seating portion of cylinder heads. Valve seat inserts are a very important part made from sintered alloys that boast of high resistance to wear and deterioration under high heat conditions, and ensure that a tight seal is formed for clean and efficient combustion. Nippon Piston Ring boasts of quality valve seat inserts that meet the needs of automobile manufacturers at a high level, using a wide range of material variation, leveraging its superior materials development capabilities. Consequently, the Company boasts of a top share of slightly less than 40% of valve seat inserts provided to Japanese automobile manufacturers, and it is expanding its sales to overseas motor vehicle manufacturers.
Camshafts are a part designed to open and close the valves for each cylinder in piston engines. Nippon Piston Ring has the original technology for a special camshaft called assembled sintered camshafts, which are lightweight, high resistance to contact pressure and capable of adopting a wide variety of designs. They are used by Fuji Heavy Industries in all of its self-manufactured engines, as well as used by truck manufacturers, which require highly durable products. Most recently, Honda Motor Co., Ltd. has selected Nippon Piston Ring camshafts to be used in its new model of NSX sports car.
◎ Customers
Nippon Piston Ring supplies piston rings and valve seat inserts to all Japanese automobile manufacturers.
The products supplied by the Company are extremely important in improving the performance of engines and require high levels of technical expertise. In recent years, the need to improve fuel consumption and to seek alternative fuels due to the growing importance of environmental issues has contributed to expanded sales to Audi/VW, Ford, General Motors and other non-Japanese automobile manufacturers. Most recently, the company has started to supply piston rings to Harley Davidson.
<Manufacturing and Sales Facilities>
Nippon Piston Ring maintains four manufacturing facilities and seven sales offices (Tokyo [head office: Saitama City], Nagoya, Osaka, Hiroshima, Fukuoka, Sendai, Sapporo) within Japan.
Nippon Piston Ring maintains both manufacturing and sales facilities for piston rings, valve seat inserts and other products in the United States, China, ASEAN countries, and India. The company has sales bases in Germany, Singapore and Malaysia ,too.
<Characteristics and Strengths>
Nippon Piston Ring's highly advanced technologies and ability to consistently supply highly reliable functional automobile parts maintained throughout its history over 80 years of operations has allowed it to become the choice of both Japanese and overseas automobile manufacturers. In recent years, development of major products, which can contribute to reductions in exhaust gases, low output levels of carbon dioxides and the achievement of "over 50% thermal efficiency rates" in internal combustion engines, is being conducted.
With regards to product development, the ability to combine the said technologies and its forte of simulation technologies applied to engines is one of Nippon Piston Ring's strengths.
In addition, automobile manufacturers, to whose business the Company's high levels of technological expertise are critical, are what the Company calls its "client assets," which are an important part of its corporate value.
The ROE for fiscal year March 2016 has fallen by 2.5% in comparison to fiscal year March 2015, but the main cause of this is the reduction of net profit following the reduction of extraordinary profit.
As stated in the aim of the 6th Midterm Business Plan, improvement of profitability will need to be pursued.
1H of Fiscal Year March 2017 Earnings Results
Main products performing well with sales and operating income increasing. Sales and profit to exceed expectation.
Despite the global increase trend of manufactured automobiles, the impact of the strong yen, etc. led to sales for the first half of fiscal year 2016 dropping 2.3% yoy to 25.7 billion yen. Overseas sales increased 1.4% yoy to 14.8 billion yen. The overseas sale ratio saw further growth from 55% in fiscal year 2015 to 57%. Business continued to be extended to non-Japanese manufacturers, selling piston rings to Ford, etc. and valve seat inserts to GM, etc. This caused the non-Japanese automobile manufacturer sales ratio to rise from 10.3% in fiscal year 2015 to 11.5%. Meanwhile, domestic sales in Japan decreased 6.8% yoy to 10.9 billion yen. On the profit and loss side, although they were impacted by prior costs in R&D and the strong yen, decreases in cost and depreciation burden led to operating income increasing 1.5% yoy to 1,473 million yen. Ordinary income decreased 12.9% yoy to 1,260 million yen due to exchange losses caused by the strong yen. A drop in the adjustment for corporate income tax caused net income to increase 7.4% yoy to 961 million yen.
Capital investment, including strategic projects, progressed soundly, however the strong yen caused property, plant and equipment to drop to 1,265 million yen, and total assets to decrease by 1,528 million yen to 62,218 million yen.
An increase in short-term interest-bearing debts, etc. caused current liabilities to increase by 2,158 million yen yoy, while a decrease in long-term interest-bearing debts caused noncurrent liabilities to drop by 1,364 million yen to 9,196 million yen. As a result, total liabilities increased by 794 million yen to 35,184 million yen.
Total interest-bearing debts (short-term and long-term) augmented by 419 million yen yoy to 17,625 million yen.
An increase in retained earnings led to equity rising by 476 million yen, while the strong yen led to a foreign currency translation adjustment shifting to a deficit of 1,296 million yen, which caused net assets to decrease by 2,323 million yen yoy to 27,034 million yen.
As a result, equity ratio decreased by 2.5% from 45.2% at the end of the previous term to 42.7%.
Retained earnings reached the 10 billion yen mark and a record high of 10,327 million yen.
Trade receivables increased compared to the same period of the previous year, while amount payable, such as corporate tax, decreased, and the surplus of operating CF grew.
Expenditure increased due to acquisition of property, plant and equipment, which caused the deficit in investing CF to grow. As a result, free CF shifted to a deficit.
An increase in short-term debt and other factors caused financing CF to shift to a surplus.
The cash position declined.
(4) Topics
◎ Initiative towards New Manufacturing Business (Motor Core)
Nippon Piston Ring is developing motor cores as an initiative for keeping up with the trend of motorization.
Motor cores are installed in motors and have a large impact on power performance.
Commonly used motor cores are laminated with magnetic steel sheets, but Nippon Piston Ring forms resin insulated iron powder into 3D shapes, which reduces magnetic field losses, achieving higher efficiency.
A solar car with a motor, which had the company's motor core installed, placed second in a solar car race.
Furthermore, they have manufactured a monitoring device for vehicles with the motor installed, and started testing it outside of the company.
◎ Building the Company's Own Factory in India
Nippon Piston Ring built a company-owned valve seat insert factory in India. They built their own factory near an existing rented plant in Karnataka States and transferred their production, in order to strengthen the production capacity.
Presently, the building has completed construction, and operations began at the start of 2017.

Their existing rented plant has the production capacity of 2 million valve seat inserts a month in a regular operation, however orders from Japanese two-wheel vehicle manufacturers have increased beyond expectations, which has led to the need to upgrade their production capacity.

Their company-owned factory will have a production line of a capacity of producing 3 million products per month at the start of production, and they plan to expand their facilities to manufacture 7 million per month in the future.
Fiscal Year March 2017 Earnings Estimates
No changes to the earnings forecast. A decrease in sales due to the exchange rate and an increase in profit due to the impact of reduced costs.
No changes to the earnings forecast. Despite the revision to the assumed exchange rate (from 110 JPY per 1 USD to 100 JPY, and 120 JPY per EUR to 110 JPY), sales are expected to be 51 billion yen as initially forecasted (2.3% yoy decrease).
On the profit and loss side, operating income is estimated to increase 2.0% yoy to 2.6 billion yen through the strengthening cost reduction in main products and expanding overseas manufacturing bases; ordinary income to increase 2.4% yoy to 2.5 billion yen. Net income is estimated to increase 12.1% yoy to 1.8 billion yen.
The dividend amount is expected to increase by 5 yen to 65 yen per share; payout ratio is projected to be 29.7%.
Interview with President Yamamoto
We asked President Yamamoto about his review of the sixth mid-term business plan, now at its midpoint, and their initiatives for the future.
Q: "How do you personally evaluate the sixth mid-term business plan, now that it has reached the halfway point?"
A: "Despite the strong yen and economic slowdown in emerging countries, the actual situation is not that bad."
In the sixth mid-term business plan, we have downwardly revised the sales forecast for fiscal year 2016 from the initial 54 billion yen to 51 billion yen, and dropped operating income margin from 5.7% to 5.1% due to the continuing strong yen and economic slowdown in emerging countries, however the actual situation is not that bad.
The global output of automobile manufacturers, primarily in the US and China, is increasing favorably. We have been constantly improving the overseas production system since some time ago, which has resulted in our company's stable overseas output, and supply to Japanese automobile manufacturers and non-Japanese automobile manufacturers steadily expanding.
Although the prospects of US monetary policy and its possible effects on the global economy remain unclear, we aim to continue expanding our business overseas, and achieve our target of over 55 billion yen in sales and 7.0% in operating income margin in fiscal year 2017.
Q: "We would like to ask you about the current state of main initiatives enforced in the sixth mid-term business plan. First, how is your Strengthening of Human Resources Development progressing?
A: "We will continue placing focus on human resources (our assets) development to improve manufacturing capabilities."
Integrating platforms for automobile manufacturers has led to an increase in our orders received for each model and requests for improvements in cost cuts. Within which, in order to secure more orders, it is essential for us to sell our manufacturing capabilities and especially innovation in manufacturing.
Efforts need to be made in human resources (our assets) development in order to evolve our manufacturing capabilities, and I recognize that is one of my greatest missions as president.
For that, we opened "Manufacturing School" in 2010, where selected employees who show strong potential to become key staff in the future learn various practical skills for half a year. Presently, we have had 70 graduates from the school. The graduates are currently conducting improvement activities through operations analyses of work and also manufacturing with fresh ideas at our major factories in Japan. Some of them are working as the driving force to improve manufacturing processes at our overseas production bases.
We intend to continue placing focus into human resources development via the Manufacturing School in the future as well.
Also, we are implementing human resources (assets) development for the entire company not just for manufacturing site alone, by introducing a language study abroad system and also setting up teams consisting of young supervisory staff and female supervisory staff with the purpose of improving employee awareness and jumpstarting activities for the future.
It is also essential to further raise the awareness of each employee in human resources (assets) development. We have set up special days to think about each theme: Quality Day, Safety Day, Disaster Day, etc.
This is so that employees become more conscious of each theme, and to individually think about past experiences and the current state in terms of what the company is lacking, what we should do, as well as to lead them towards confronting their work with more autonomy and proactivity through voluntary discussions with their colleagues. It is also an initiative to instill and put into practice our corporate action guideline: We strive for the prosperity of our company and our welfare by combining our ingenious attempts and diligence through close teamwork of the employees in the realms of manufacturing, sales and engineering.
Q: "How is the Promotion of Revolutionary Manufacturing progressing?"
A: "Initiatives to achieve standardization, shortening of lead-time, and flexible manpower production line in each major product are progressing at a steady rate."
We are currently working on Concurrent Engineering, which aims to reduce development time and costs by simultaneously conducting multiple procedures that are used in the process of developing products, and Smart Factory, which plays a role in high productivity and stable production of high quality products. We are steadily taking steps to ensure the realization of both of them.
These initiatives were appreciated, and a major Japanese manufacturer employed the use of our piston rings. This will lead to expand overseas sales in the future.
As for valve seat inserts, we will complete our revolutionary manufacturing line by this spring, and as for assembled sintered camshafts, as the first step, we will construct a production line which covers processes from assembly to final inspection, aiming to ultimately cover all process from the initial process.
In this manner, initiatives to achieve standardization, shortening of lead-time, flexible manpower production line, and automatization in each major product are progressing at a steady rate.
Q: "Next, please tell us about your commercialization of non-automobile engine parts."
A: "Each business is progressing smoothly for early commercialization."
Ideally in the future, we envision that non-automobile engine parts will account for 30% of sales.
Firstly, the metal injection molding (metamold) business has become extremely intriguing. There are increasing inquiries as to whether products traditionally made by forging (deformation processing which transforms solid materials, such as metals and plastics, into the intended shape by applying external force with a hammer or press at high temperatures) can be made instead by metamold, from a cost and efficiency perspective.
We want to aim for early commercialization while proceeding with marketing and innovation in parallel.
Next concerns the dental implant business; we consulted as many dentists as possible, and are moving forward on building a following for IAT-brand*. We have acquired an overall grasp of the customers' needs through surveys, etc. and are in the middle of constructing more explicit product strategies.
(*IAT: Intelligent Artificial Teeth)
Additionally, we are looking at entering the new medical field and not just dental implants, as we have acquired a permit in accordance with the Pharmaceutical and Medical Device Act by entering the dental implants business.
The Ti-Ta Alloy that we are currently developing is not only highly biocompatible, it is non-magnetic, which means it will not interfere with MRI (magnetic resonance imaging) scans. We are considering expanding into pacemaker leads, electrodes, embolization coils and stents, all of which are placed inside the body for a long duration of time.
By combining technology acquired through M&A with our company's unique know-how in metal technologies and high-precision processing technology gained in the automobile engine parts business, we would like to create products with a competitive edge unique to our company.
In our motor core development, we are engaged in developing products that will cope with motorization of the future.
Parts inside of a motor have a major impact on power performance. Conventional parts are laminated with steel sheets, however our company's original technology has enabled us to form fine powder into 3D shapes, which reduces magnetic loss, achieving higher efficiency. Presently we are conducting practical trials on open roads using a one-seater moped mini car equipped with direct-drive, in-wheel motors for micro electric vehicles in Nogi-machi (Shimotsuga District, Tochigi Prefecture) as an external monitor.
Q: "How will you proceed with your sales strategies towards non-Japanese automobile manufacturers?"
A: "Using our highly regarded technology to our advantage, we will proceed by making joint proposals with other parts manufacturers."
Our company's technology has been tempered by Japanese automobile manufacturers, and it is extremely well-regarded.
By using this to our advantage, we will increase our share of deliveries to Ford and GM. Additionally, with our ties to Nissan, we would like to expand our business with Renault and Mitsubishi Motors as well.
For non-Japanese automobile manufacturers, there are many cases where piston rings and valve seat inserts are supplied to engine manufacturers as modules through Tier-1 suppliers such as piston manufacturers or manufacturers of other parts. We intend to make joint proposals to engine manufacturers with these Tier-1 suppliers, and have repeated successful experiences, creating a win-win relationship.
Q: "Lastly, could you please give a message to your shareholders and investors?"
A: "We will strive to achieve the goals of our midterm business plan. We would like you to support us in the medium and long term."
Although the continued presence of the strong yen caused a decline in our projection of sales for fiscal year 2016, and veer away from our mid-term business plan, the situation is not that bad. The reformation of manufacture, including improving the overseas production system, is progressing smoothly, and I feel the improvements will lead to further profit.
The estimated operating income margin of 5.1% for fiscal year 2016 was a checkpoint, and we will strive to meet the target of sales over 55 billion yen and operating income margin over 7.0% in fiscal year 2017, the final fiscal year of the sixth mid-term business plan.
Regarding shareholder returns, we are aiming for a balance with investments, and looking to a payout ratio of 30%.
We would like you to support us in the medium and long term as our company aims for further sustainable growth, making efforts to continuously reduce costs by proceeding with revolutionary manufacturing while building a deeper relationship of trust with Japanese automobile manufacturers and starting new business with non-Japanese automobile manufacturers.
Despite experiencing a drop in sales, the situation itself is not entirely bad, with sales to non-Japanese manufacturers increasing, and the establishment of an overseas production system as the basis for the business lineup steadily developing, as well as the progress rate for the full financial forecast being healthy along with sales at 50.4% and operating income at 56.7%.
Moreover, steps have been taken for mid-term initiatives: Innovative Revolutionary Manufacturing, and Expansion in Non-automobile Engine Parts Business.
The projected sales growth rate and profit growth rate for this term, which are 7.8% and 48.1%, respectively, imply that reaching sales of 55 billion yen and an operating income margin of 7.0% will not be a simple task, however, we would like to draw attention to the extent of their earnings for the current term.
<Reference1: 6th Midterm Business Plan>
① 6th Midterm Business Plan Overview
Nippon Piston Ring celebrated its 80th year of operations in December 2014. The company is striving to achieve the 6th Midterm Business Plan, which is scheduled to be completed in fiscal year March 2018, aiming to expand sales of existing products and cultivate new markets to "establish the foundations for Nippon Piston Ring to prosper for 100 years."
Investments will be made, and efforts to further reduce cost and improve technology development will be conducted to achieve operating profit margin of 7% or more in fiscal year March 2018, the final year of the current 6th Midterm Business Plan.
The overseas sales ratio is expected to rise to 59% in the final year of the Plan based upon the outlook for increases in sales to overseas automobile manufacturers.
Sales are expected to grow by 6.6% from fiscal year 2014 to fiscal year 2017.
By products, piston rings and valve seat inserts will grow by 5.5% and 35.2% respectively. While the scale of its sales is still small, including the metal injection molding products business, is expected to grow by 20.0%.
Sales of piston rings and valve seat inserts to overseas manufacturers are expected to rise from 8.1% in March 2015 to 11.9% in March 2018, the final year of the Plan.
The company plans to make high-level investment from fiscal year March 2017 onward.
The projected investment amount in Japan exceeds overseas investment. The company is progressing the investment for developing new products as well as the investment for rationalization to increase profit margin. The production capacity of piston rings in fiscal year 2017 has balanced figure between domestic and overseas, while 70% of the figure is accounted by overseas for valve seat inserts.
◎ Efforts in the Realm of Existing Business
<Expand Sales to Overseas Automobile Manufacturers>
Nippon Piston Ring already supplies all of the Japanese automobile manufacturers, but the potential to begin supplying other overseas automobile manufacturers which it does not currently conduct business with is large.
In many instances, piston rings used by non-Japanese automobile manufacturers are supplied to engine manufacturers in modules assembled through tier one suppliers (Piston suppliers). Consequently development support and individual proposals are conducted to each tier one supplier on a project base. In particular, development support proposals to piston manufacturers that do not possess evaluation technologies to assess engines are considered to be an effective marketing strategy.
<Gasoline Engine Use Piston Rings>
The automobile manufacturers' needs for "lighter parts" and "improved thermal efficiency" of engines are on the rise.
While reducing friction and improving combustion are issues to be properly dealt with when enhancing thermal efficiency, and reductions in the distance between cylinders and various issues associated with material changes require detailed attention regarding lightening of engines, Nippon Piston Ring has effectively addressed these issues with the combination of its proprietary technologies, resulting in its expanding business with both Japanese and overseas automobile manufacturers.
<Valve Seat Inserts>
Development of high output, low fuel consumption, and low exhaust gas output engines is being conducted against the backdrop of stricter exhaust gas regulations. Nippon Piston Ring's ability to provide thin and large diameter valve seat inserts have come to be regarded highly and consequently being further adopted by manufacturers. The sales in fiscal year March 2016 exceeded ¥10 billion and reached ¥10.3 billion compared to ¥8.8 billion in fiscal year March 2015.
◎ Efforts to Commercialize New Products
New technologies and technologies maintained by companies acquired through M&A activities have been added to the Company's own fundamental technologies. Various efforts to validate tentative theories and to leverage existing technologies to commercialize new products in non-automobile engine applications are being conducted.
At the current point in time, efforts are being focused upon developing products for metal injection molding products and dental implant products businesses, in addition to medical use materials and motors parts.
<Metal Injection Molding Products Business>
With the goal of expanding the non-automobile engine parts business, the metal injection molding products business of Sumitomo Metal Mining Co., Ltd. was acquired and sales of products began in May 2014.
While Nippon Piston Ring had mass produced automobile engine parts made from various metallic materials by this metal injection molding technique, the acquisition of this business will allow it to expand its sales channels by fortifying its product lineup and strengthening its materials and production technologies.
<Dental Implant Business>
Nippon Piston Ring acquired the dental implant business from Ishifuku Metal Industry Co., Ltd. in October 2014.
This IAT () dental implant system uses electric discharge machining to improve the surface conditions for more favorable bone structure affinity and it received pharmaceutical law certification in October 2014 with subsequent shipments being started from November 2014.
The metallic materials and precision processing technologies built up in the main automobile engine parts business will be leveraged in the dental implant business to develop various medical related products.
In addition to the high levels of biological compatibility of the "Ti-Ta alloy" medical product materials currently being developed, it can be used in magnetic resonance imaging (MRI) because it is non-magnetic in character. Therefore, usage of this material in pace maker lead wires, electrodes, embolization coils, stents and other products which are placed in the body for prolonged periods of time is being considered.
Furthermore, Nippon Piston Ring is participating in exhibitions to display its products as a means of cultivating the United States market, the world's largest market.
Nippon Piston Ring acquired ISO13485 certification to ensure that products made within the dental implant products (highly regulated medical devices) business pass strict requirements for high quality levels. Subsequent to this certification, the Company established a Medical Device Center (MDC) within its Tochigi Plant and began operations.
IAT: Intelligent Artificial Teeth
<Reference2: Corporate Governance>
◎ Corporate Governance Report
The company submitted the Corporate Governance Report on December 24, 2015 after the Corporate Governance Code was introduced. In addition, the company renewed the report on June 29, 2016.
The company appreciates the need for foreign investors to understand the business models better and plans to proceed with more active publishing in English.
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However, we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and/or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.
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