Dependence on the vehicle-related parts business and Japanese automakers

「Although major customers were affected by production declines associated with intensifying competition in China and Southeast Asia and by production adjustments related to the situation in the Middle East, the start of production of new products also contributed, and sales in this business came to ¥5,106 million, up 1.2% year on year.」

「Metal-related parts business sales ratio (%) 87.0 88.3 88.5」

「Sales increased as the impact of the certification problems experienced through the previous year subsided.」

「The automotive industry, the Company’s core market, remained generally firm, despite weak sales in the Chinese and Southeast Asian markets and the impact of U.S. tariffs, as production cuts associated with certification-related misconduct and other issues were resolved.」

「The automotive industry, to which the Company belongs, saw production decline because of production adjustments related to scandals and the loss of momentum among Japanese automakers in the Chinese market.」

「In response, we are pursuing the acquisition of vehicle parts that will remain necessary as the shift to EVs progresses, parts for non-vehicle applications and new businesses. The main business area of the resin parts business is also vehicle-related parts, but many of its products are outside the powertrain and transmission systems, and the business also sells into other fields, including medical applications. We intend to diversify the business by increasing these sales.」

「Although parts supply issues in the automotive industry, to which the Company belongs, had been resolved, production remained below expectations because of weak performance in the Chinese market, factory fires in Japan, fraudulent certification issues and other factors.」

「In the automotive industry, to which the Company belongs, parts procurement issues appeared to have been largely resolved and a path toward increased production appeared to be in place. However, production did not increase as much as expected because scandals, system failures, fires at suppliers’ factories and other incidents occurred frequently.」

「The automotive industry, to which the Company belongs, remained sluggish as parts supply issues continued unresolved and production cuts persisted.」

「The automotive industry, to which the Company belongs, remained sluggish as parts supplies failed to recover despite a large backlog of orders resulting from production cuts during the pandemic. A cycle in which planned production increases instead resulted in production cuts continued to recur.」

「The automotive industry, the Group’s main customer base, remained sluggish as it struggled more than in the second half of the previous fiscal year to procure semiconductors and other parts, partly because of supply chain disruption caused by the prolonged lockdown in Shanghai, China. As a result, factories around the world successively suspended operations.」

「Metal-related parts business sales ratio (%) 86.8 88.1 87.4」

「Although business remained strong in the first half, customers cut production from September onward because it became difficult to procure semiconductors and other parts amid supply chain disruption, resulting in lower sales in the third quarter than in the same period of the previous year.」

「The automotive industry, to which the Company belongs, had been producing at a rapid pace from the beginning of the fiscal year amid the economic recovery in the United States and elsewhere. However, production of semiconductors, wire harnesses and other automotive parts was disrupted by the suspension of operations at production bases following the spread of COVID-19 in Southeast Asia, forcing substantial production cuts from late August and bringing production to an abrupt halt.」

「Shortages in the supply capacity for semiconductors and other raw materials and parts, and more recently factory shutdowns resulting from the spread of infections in Southeast Asia, disrupted the supply of parts and led to situations in which production adjustments became unavoidable. The outlook remains uncertain.」

「Domestic production declined to 7,969 thousand units (down 1,519 thousand units, or 16.0%, from the previous consolidated fiscal year), overseas production from January to December declined to 15,376 thousand units (down 3,475 thousand units, or 18.4%), and worldwide production, the combined total, declined to 23,346 thousand units (down 4,995 thousand units, or 17.6%). As a result, among the businesses included in the consolidated results through the previous consolidated fiscal year, sales declined 11.4%, among other impacts.」

「The automotive industry, to which the Company belongs, was severely affected during the early and expansion phases of the pandemic, with automakers and others suspending factory operations for extended periods. During the subsequent recovery phase, demand returned, and although conditions varied by company, the industry as a whole was more active during the recovery phase than in the same period of the previous year.」

「Under these conditions, consolidated sales declined to ¥8,066 million, down 25.1% year on year, reflecting the impact of the downturn caused by customer factory shutdowns and other factors during the April–June quarter.」

「In the automotive industry, our group's major customer base, demand disappeared worldwide due to lockdowns, requests to refrain from going out and other measures. Companies were forced to suspend plant operations for extended periods and adjust production, resulting in steep declines in both production and sales. Consequently, the group's consolidated net sales for the three months ended 30 June also fell sharply to ¥3,631 million, down 32.7% year on year.」

「Metal-related parts business sales ratio (%) 95.3 95.3 86.8」

「Metal-related parts: Sales in this business during the cumulative third quarter contracted period amounted to ¥13,948 million, down 5.3% year on year. In Japan, sales declined due to lower sales to certain automakers and their affiliated unit manufacturers, truck manufacturers and some customers affected by production cuts in China. Overseas, sales at the U.S. subsidiary declined due to product discontinuations and other factors, resulting in an overall decline.」

「Net sales in this business for the six months ended 30 September declined 4.9% year on year to ¥9,256 million. In Japan, sales to truck manufacturers and certain automakers and unit manufacturers declined as a result of the customers' business performance and production adjustments at their overseas operations. Overseas, sales at the US subsidiary declined due to product discontinuations associated with customers' model changes, while sales at the Indonesian subsidiary declined due to production adjustments at customers.」

「During the nine months ended 30 June, sales declined at all consolidated companies in this business. The US subsidiary was affected by model changes and other factors, Indonesia by production adjustments at customers, and the other companies by the slowdown in the Chinese economy and other factors. As a result, net sales in this business were ¥4,622 million, down 6.5% year on year.」

「The principal business area of the Igari Group, which recently became a subsidiary, is also vehicle-related parts, but it has many parts outside the power and drivetrain systems. Accordingly, the Company believes that the Group’s addition will reduce the risk to some extent.」

「No new business or other risks arose during the cumulative first three quarters of the current consolidated fiscal year. In addition, there were no significant changes to the business and other risks described in the annual securities report for the previous fiscal year.」

「Sales in this business during the cumulative second quarter declined period increased to ¥9,735 million, up 3.0% year on year. In Japan, sales to automakers and unit manufacturers increased. Overseas, sales at the U.S. subsidiary declined due to product discontinuations and other factors.」

「No new business or other risks arose during the cumulative first quarter of the current consolidated fiscal year. In addition, there were no significant changes to the business and other risks described in the annual securities report for the previous fiscal year.」

「The parts supplied by the Group are primarily for conventional vehicles, including hybrid vehicles, that use an internal-combustion engine and transmission as their power and drivetrain. Accordingly, even if automobile production volumes do not decline, a change to a power and drivetrain consisting of a motor without an internal-combustion engine and direct drive using only a reduction gear without a transmission may affect the Group as the composition of parts changes. The Company recognizes these issues as important challenges in pursuing its business going forward.」

「Overseas production by Japanese automakers from January to September increased to 14,709 thousand vehicles, up 4.9% year on year. Accordingly, global production, combining domestic production from April to December and overseas production from January to September, increased to 21,851 thousand vehicles, up 4.9% year on year.」

「Overseas production by Japanese automakers from January to June increased to 9,856 thousand vehicles, up 5.3% year on year. Accordingly, global production, combining domestic production from April to September and overseas production from January to June, increased to 14,527 thousand vehicles, up 5.5% year on year.」

「The Group is an independent automotive parts manufacturer and is not highly dependent on any particular customer, but it has become highly dependent on the vehicle-related parts business, as shown in the table below. Accordingly, the Group’s performance may be significantly affected by the number of vehicles produced by Japanese automakers in Japan and overseas, and the Group considers this a challenge that must be addressed in pursuing its business going forward.」