The NSG group recently released its consolidated business results for the 2015 fiscal year. Conditions in the group’s major markets were mixed, with improvements in some regions and reductions in others. European markets were weak, although signs of improvement were seen in Western European automotive markets during the fourth quarter. In Japan, architectural volumes were negatively affected by the increase in indirect taxation at the start of the year, although automotive volumes held up relatively well. North American markets showed further growth, particularly in architectural sectors. South American markets were affected by difficult economic conditions. Overall, technical glass markets were mixed, with improvements in some areas and reductions in others.
The full-year operating profit represents an improvement on the previous year due mainly to reduced costs levels following the group’s restructuring program. The group recorded a trading profit (before exceptional items and amortization relating to the acquisition of Pilkington) of ¥25,270 million (~ $204 million). Profit attributable to owners of the parent improved to ¥1,668 million (~ $14 million) due to the increased trading profit and the credit recorded in exceptional items.
The group’s business segments cover three core product sectors: architectural, automotive, and technical glass. Architectural, representing 40% of the group’s annual sales, includes the manufacture and sale of flat glass and various interior and exterior glazing products within the commercial and residential markets. It also includes glass for the solar energy sector. Automotive, with 50% of group sales, supplies a wide range of automotive glazing for new vehicles and for replacement markets. Technical glass, representing 10% of group sales, comprises a number of discrete businesses, including the manufacture and sale of very thin glass for small displays, lenses and light guides for printers, as well as glass fiber products, such as battery separators and glass components for engine timing belts.
Operating results in the architectural business were better than the previous year due to cost savings arising from the group’s restructuring program and improved market conditions in North America. Revenues increased due to the translational impact of the weakened Japanese yen, and improved market conditions in North America. In Europe, representing 37% of the group’s architectural sales, low levels of economic activity continued to depress construction and refurbishment activity. Cumulative local currency revenues fell slightly, due to soft market conditions and the mothballing of underused production facilities during the previous year. While the difficult market conditions prevented any sustained upward selling price pressure, the group’s restructuring actions generated an improved level of asset utilization, enabling an improvement in profitability. In Japan, representing 27% of architectural sales, cumulative volumes fell following the increase in consumption taxes earlier in the year. Revenues fell due to the reduced volumes. In North America, representing 13% of architectural sales, architectural glass markets continued to perform strongly. The group’s revenues and profits improved from the previous year. Volumes increased, with strengthening domestic demand and higher dispatches of solar energy glass. Domestic price levels were above the previous year. In the rest of the world, markets in Southeast Asia were strong, with improving domestic demand and increased dispatches of solar energy glass. Expressed in U.S. dollars, revenues in South America were similar to the previous year. The architectural business recorded revenues of ¥ 252,914 million (~ $2,049 million) and an operating profit of ¥ 17,020 million (~ $138 million).
In the automotive business, revenues were slightly better than the previous year due to the translational impact of the weaker Japanese yen. Profits fell slightly, with market conditions remaining challenging across many regions. Europe represents 46% of the group’s automotive sales. Cumulative light-vehicle sales were ahead of the previous year, with year-on-year increases during the fourth quarter potentially indicating a meaningful recovery. In the OE sector, the group’s cumulative local currency revenues were similar to the previous year. Automotive glass replacement (AGR) revenues were below the previous year with weather-related sluggish demand, although profitability increased with an improved mix of products. In Japan, representing 17% of the group’s automotive sales, cumulative OE volumes were stronger than the previous year. Domestic demand was generally robust despite the consumption tax increase earlier in the year. Vehicle sales weakened slightly during the fourth quarter, however. The group’s cumulative revenues improved with the increased demand, although profitability was impacted by increased input costs. AGR markets were below the previous year. In North America, representing 26% of the group’s automotive sales, cumulative revenues and profitability improved. OE market volumes continued to increase, and the AGR business benefited from robust demand. In the rest of the world, revenues and profits fell. Market conditions in South America continued to be challenging. The automotive business recorded sales of ¥ 313,956 million (~ $2,545 million) and an operating profit of ¥ 9,372 million (~ $76 million).
Revenues in the technical glass business were below the previous year due partly to reduced price levels for certain products. Profits fell, largely due to the reduced prices, although this was partly offset by improved asset use and cost savings. Increased competition negatively affected revenues from thin glass for displays. On June 10, the group started its new ultra-fine flat (UFF) glass production line in Vietnam. This line commenced production during the third quarter. Demand for components used in multi-function printers improved from the previous year. Volumes of glass cord used in engine timing belts were similar to the previous year. The technical glass business recorded revenues of ¥ 58,741 million (~ $476 million) and an operating profit of ¥ 4,922 million (~ $40 million).
The group expects a gradual improvement in market conditions during fiscal year 2016. In Europe, architectural markets are likely to be broadly flat. Automotive markets should benefit from a continuation of the positive vehicle sales experienced during the fourth quarter of the 2015 fiscal year, but will still be significantly below pre-recession levels. Architectural markets in Japan are likely to register a modest improvement. Automotive markets in Japan are expected to be generally flat, although tax changes could impact sales in the short-term. Volumes in North America are expected to be robust, although volumes in South America will continue to suffer from a challenging economic environment. Market conditions in Southeast Asia are likely to improve further, and demand for solar energy glass should continue to recover. Technical glass markets are generally expected to improve. Taking account of the above factors, the group expects to record a further improvement in operating profitability.
Total assets at the end of March 2015 were ¥ 920,106 million (~ $7,458 million), representing a decrease of ¥ 6,102 million (~ $49 million) from the end of March 2014. Total equity was ¥ 186,008 million (~ $1,508 million), representing a decrease of ¥ 7,478 million (~ $61 million), mainly due to the re-measurement of retirement benefit obligations during the fourth quarter.