Sanoh Industrial has evolved with the growth of the global automotive market. In 30 years from 1990 to 2020, our production and sales locations have expanded from 7 to 20 countries, and our consolidated sales have increased from JPY40 Billion to approximately JPY140 billion.
Over the past five years, we have undertaken bold structural and governance reforms, centered on our Board of Directors, a job-based results-oriented HR system, and a customer-first approach. As a result, our ROE has exceeded 10% from just over 3%, many new leaders have emerged throughout the group, and we have transformed ourselves into a lean, dynamic, and self-supporting organization.
However, the global automotive market, which had seen growth for more than half a century, entered an adjustment phase in 2018 and is showing signs of stagnation. In addition, reducing the negative impact on the environment in all industries has become a global concern in recent years, and the revolution of CASE (*1) mobility has been sweeping through the automotive industry as well. As Japanese automobile manufacturers expanded their operations around the world, we, automotive component manufacturers, had taken advantage to grow and scale our business for internal combustion engine vehicles, but we are now under pressure to rethink our policies. The growth model that had been successful for the last 30 years, will not apply for the next 30 years.
The world where it was once easy to forecast and plan supply and demand is now shifting towards a VUCA (*2) society where the future is uncertain. On the other hand, in a world of COVID-19 and post COVID-19, where uncertainty and risks are high, new opportunities and social demands are beginning to emerge.
Since our foundation in 1939, we at Sanoh Industrial, Co., Ltd. have continued to provide our customers with important safety-related products that meet rigorous safety requirements, based on our technical and quality assurance capabilities, as well as our leadership and teamwork. Sanoh Industrial’s strengths are in our ability to solve Market-in problems and create peace of mind for all our stakeholders. Sanoh shall continue to leverage these strengths over the next 30 years, boldly taking on the challenge of major business reforms and achieving further growth in this new world that will come after the COVID-19 pandemic, leading to our Third Epic Era.
*1：CASE = Abbreviation for Connected, Autonomous, Shared, and Electric
*2：VUCA = Abbreviation for Volatility, Uncertainty, Complexity, and Ambiguity
Sanoh Industrial was founded in 1939 as Omiya Aviation Industry. After WWII, we took on the challenge of various businesses, such as brewing and home appliances, venturing into the automotive industry in the 1960s and have grown to the be the world’s second largest vehicle tubing manufacturer.
To meet the demands of our customers, we have the capability to use a wide variety of materials, including steel, plastic, stainless steel, and aluminum, and deliver products and services to every major automobile manufacturer in the world.
In 2010, after the Lehman Brothers financial shock, we launched a mid-term growth strategy, Goal 15 (*3). Through aggressive overseas investments, including the acquisition of Geiger Automotive GmbH in Germany, consolidated sales exceeded JPY140 billion in FY2018. In the 10 years from FY2008 to FY2018, consolidated sales nearly doubled.
However, global automobile production (*4) has slowed down since 2017, falling below 80 million units per year in 2020 due to the COVID-19 pandemic. As a result, Sanoh Industrial’s sales have decreased to JPY113.7 billion. Domestic automobile production volumes have been on a downward trend for the past 10 years due to a shift to production overseas.
To achieve further growth, we will work to further enhance our globalization activities and create new high value-added businesses.
*3：Goal 15 = Sanoh Group’s global mid-term plan from FY2010 (not disclosed outside the company)
*4：Production figures are taken from the Japan Automobile Manufacturers Association website.
Currently, approximately 80% of our products are components for internal combustion engine vehicles. We estimate that global automobile production will remain at more than 70 million vehicles per year for the next decade.
However, the shift to electric vehicles by 2030 is inevitable, which also includes hybrid (HEV) and plug-in hybrid (PHEV) vehicles. The markets for batteries, motors, inverters, and power control units (PCUs) (*5) are projected to grow towards 2030.
*5：Power Control Unit (PCU) = A control device used in power-driven vehicles
*6：Projected sales volume of only passenger cars with a gross vehicle weight of 6 tons or less excluding commercial vehicles (Source: LMC Automotive Ltd.)
*7：FCV = Fuel Cell Vehicle
Our existing automotive products (brake lines, fuel & cooling lines, seat belts and other safety products) will continue for the next 10 years.
We will further improve profitability obtained through the structural reforms implemented as a countermeasure to the COVID-19 pandemic. The keys are DX (*8) and reliability engineering (*9). We shall develop a system to completely ”Visualize” the status of our in-house production process and supply chain in real time; and establish a highly profitable structure and high-quality production system that reaches the next level.
*8：DX = Digital transformation
*9：Reliability engineering = An engineering method for statistically analyzing the reliability of products and systems
Sanoh Industrial has been developing, selling, and producing heat exchangers and cooling tubes for automobiles for several decades. In recognition of this expertise, our cooling tube system has been adopted in Fujitsu’s supercomputer Fugaku.
The shift to electrification of automobiles will create an increase in the market for motors, batteries, inverters and PCUs. All these electric vehicle components will require high-performance cooling capabilities. In addition, data centers and communication equipment industries are expected to grow and will also require optimal cooling systems.
Sanoh will aim to expand our thermal solutions business, including thermal dissipation, heat recovery and effective use of heat, by leveraging our strengths in design and production of products from tubing to heat exchangers.
*10：HPC = High performance computer
We are focused on the new social issues and needs that will emerge after the COVID-19 pandemic. This is why we have continuously invested in research and development as well as in VC (*11) with the potential for future growth. In the future, we will further expand new businesses, not only in the automobile industry, by utilizing M&A. Keywords are active utilization of M&A, achieving a society that reduces environmental impact, contributing to the revitalization of local economies, and creating a sense of purpose in life and work.
*11：VC = Venture capital
Global supply chains have been fractured by frequent natural disasters and the COVID-19 pandemic. Small and medium-sized subcontractors worldwide are in financial trouble, struggling with day-to-day fluctuations in orders and demands. However, when looking at the overall supply chain, there is still high inventory and scrap waste. The market as a whole, is producing, buying, and disposing at an excessive rate, even though no company can afford to do so.
Sanoh Industrial produces processing equipment, assembly equipment, and inspection equipment in-house. Our integrated design process covers everything from upstream products, processes, and equipment to downstream final inspection. We have started to provide these production solutions to external companies. We are committed to assist the world’s manufacturers to reduce waste, shorten lead times, and restore their financial integrity and vitality. Sanoh Industrial will continue to develop businesses that provide production solutions to small and medium-sized companies.
At Sanoh Industrial, we have over 20 professionals with PhDs that conduct day-to-day research on next-generation technologies such as All Solid-State Batteries, thermoelectric power generation (*12), lasers, and advanced medical care in partnership with universities and research institutions worldwide. We also actively investing in start-up companies with advanced technologies on a routine basis.
In preparation for the upcoming shifts in the market, we will continue to conduct fundamental research on and invest in technologies that can make contributions to local communities and reduce environmental impact, regardless of the industry.
*12：Thermoelectric power generation = Power generation utilizing thermoelectric elements to convert thermal energy into electric energy
Since the 1980s, Sanoh Industrial has been making contributions to reducing the weight and improving the fuel efficiency of automobiles through the establishment of our Lightweight Division. We have also taken early steps to reduce CO2 emissions in the production process, including the use of in-house power generation and LED lighting. However, our current environmental improvement activities are still at an average level in the industry as a whole.
Over the next 10 years, we will prioritize investment in thoroughly reducing CO2 emissions in our production processes, reducing waste heat and energy consumption, and expanding our thermal solutions business in order to establish the Eco-Friendly Sanoh brand.
Sanoh Industrial has been quick to respond to changes in the social environment and has been contributing to the ease of work for our employees by instituting a flextime system in 1989 and a telework system in 2017. These systems have also helped us to swiftly respond to the prevention of the spread of COVID-19 from last year.
We operate a childcare facility next to our Koga Factory in Ibaraki Prefecture to address the needs of our employees and the local community. As for regional and social contributions, we have been active in supporting the recovery from the Great East Japan Earthquake, the Kumamoto Earthquake, and other disasters, as well as participating in volunteer activities in the areas where our businesses are located. In recent years, we have introduced the TABLE FOR TWO (*13) system in hopes of making contributions to society. However, there are still many social contributions that we need to make for the future, and we will continue our activities in order to create a foundation of a global company with close ties to the community and society.
*13：TABLE FOR TWO = An NPO that works with people in developed countries to share meals with children in developing countries.
Sanoh Industrial strives to achieve transparent management with an awareness towards our customers, shareholders, employees and all stakeholders.
In terms of corporate governance, we plan to shift to a system in which independent outside directors account for a majority of Sanoh’s Board in June 2021, in order to improve the effectiveness of our Board of Directors. We are also planning to appoint women as full-time corporate auditors to promote diversity.
In addition to disclosing information required by laws, we will continue to proactively provide non-financial information, such as our sustainability initiatives, as well as financial information such as our financial standing and business performance. Through proactive IR activities, Sanoh Industrial will further develop a relationship of mutual trust with our stakeholders and fulfill our social responsibility by focusing on social issues.