Start-Up and Demand Volatility in Overseas Operations and Country Risk

「While demand for automotive electrical equipment and other products remained firm in India, demand in the automotive electrical equipment field stagnated in China due to the economic slowdown.」

「When making capital investments, we decide on investments after considering investment efficiency based on forecasts of future demand and other factors. However, fluctuations in orders associated with conditions in the Middle East and China’s economic stagnation, as well as difficulties in procuring raw materials, including petroleum-related products, may prevent us from securing the sales volume initially planned.」

「The business environment surrounding our group remains challenging, including declining exports of automotive parts from Vietnam to the United States and the impact on India of the Chinese government’s restrictions on rare-earth exports.」

「In India, calls for “Make in India” are growing, which is a tailwind for the company. However, export restrictions on rare earths imposed by the Chinese government amid US-China trade friction have also adversely affected production activities in India, resulting in a decline in sales during the interim consolidated accounting period.」

「The business environment was particularly challenging due to stagnant domestic automobile production stemming from inspection issues that began at the end of the previous fiscal year, sluggish consumption growth amid an economic slowdown in China, and depressed procurement prices resulting from overproduction of electric vehicles.」

「To strengthen the Group’s ability to respond, we are strengthening the overseas business structure at headquarters and improving our information-gathering capabilities. We are also expanding production capacity at the Philippines subsidiary to diversify the risk of constraints being imposed on production activities at the Group’s factories.」

「In the wire harness business, revenue declined 9.8% year on year to ¥17,749 million due mainly to lower sales of wire harnesses for motorcycles and marine vessels, primarily in overseas markets. However, operating profit increased 5.3% to ¥1,365 million as operations at overseas plants stabilized.」

「Under these circumstances, in the third year of the medium-term plan (VISION2025), the Group commenced operations at the Hamamatsu Factory, a production and development base for products that contribute to achieving a low-carbon society. It also accelerated the expansion of production capacity at the Philippines Factory, which commenced operations to support BCP, and pursued initiatives to achieve the medium-term plan.」

「Under these circumstances, in the third year of the medium-term management plan (VISION2025), the Group commenced operations at the Hamamatsu Factory, which serves as a production and development base for products that contribute to achieving a low-carbon society, and at the Philippines Factory, an overseas base supporting business continuity planning (BCP). The Group is steadily advancing initiatives to achieve the medium-term management plan.」

「No new business or other risks arose during the nine months ended 31 December. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「Under these circumstances, the Group worked to normalise the temporary production system, including backup production implemented in response to the lockdown at its Vietnamese subsidiary in the previous fiscal year, while also pursuing initiatives to achieve the priority objectives of the medium-term plan (VISION2025) in its second year.」

「Production losses caused by difficulties in procuring raw materials associated with lockdowns in China and elsewhere」

「To strengthen the Group’s ability to respond, we will strengthen the overseas business structure at headquarters and improve our information-gathering capabilities. We will also establish a new subsidiary in the Philippines and strengthen our production backup system to diversify the risk of constraints being imposed on production activities at the Group’s factories.」

「In Vietnam, restrictions on factory operations imposed by the government as an infection-control measure continued, but were finally lifted in mid-October, and production activities began to recover. During the period when production activities in Vietnam were restricted, alternative production was carried out at facilities in Japan, India and China.」

「The Group also experienced a situation in which production volumes at its Vietnam factory fell substantially due to an operating shutdown associated with a lockdown. We mobilised all available resources in Japan and overseas to conduct production activities and minimise the impact on product supplies to customers.」

「However, the spread of infections remains uncontrolled in some emerging-market regions, and the Group’s subsidiaries have also been significantly affected.」

「Amid unstable economic conditions caused by the spread of COVID-19, we restrained some investments and took other measures. We are promoting production rationalisation and labour-saving through the use of IT, and working to build factories that can remain profitable even under conditions of declining demand.」

「No new business or other risks arose during the nine months ended 31 December. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「In the wire harness business, a decline in sales of wire harnesses for two-wheel vehicles and outboard motors in the Japanese and Vietnamese markets due to the impact of COVID-19 resulted in net sales of ¥5,329 million, down 26.3% year on year, and an operating loss of ¥244 million, compared with operating income of ¥284 million in the same period of the previous year.」

「In the wire harness business, a decline in sales caused by weak demand in the four-wheel and two-wheel vehicle markets in Japan and Vietnam due to the impact of COVID-19 resulted in net sales of ¥2,089 million, down 41.0% year on year, and an operating loss of ¥220 million, compared with operating income of ¥167 million in the same period of the previous year.」

「The contraction in economic activity caused by the spread of COVID-19, which began in China, was an unforeseen event. We have suspended facility expansion for the time being, while promoting production rationalisation and labour-saving through the use of IT, and working to build factories that can remain profitable even under conditions of declining demand.」

「No new business or other risks arose during the nine months ended 31 December. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「No new business or other risks arose during the six months ended 30 September. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「No new business or other risks arose during the three months ended 30 June. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「The political and economic conditions of the relevant countries, changes in laws and regulations, foreign exchange trends, labour issues, epidemics, war, terrorism and other factors may affect the Group’s operating results and financial position.」

「No new business or other risks arose during the nine months ended 31 December. There were also no material changes to the business and other risks described in the securities report for the previous fiscal year.」

「When making capital investments, we decide on investments after considering investment efficiency based on forecasts of future demand and other factors. However, production may fail to ramp up as initially planned, or changes in demand for finished products may prevent us from securing the sales volume initially planned. Overseas operations may also be affected by the political and economic conditions of the relevant countries, changes in laws and regulations, foreign exchange trends, labour issues, epidemics, war, terrorism and other factors, which could affect the Group’s operating results and financial position.」