Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	Rate of Change (%)	Factors
Overall
Sales	241,780	214,282	12.8	-
Operating Income	(896)	712	-	-
Ordinary Income	253	300	(15.6)	-
Net Income	1,084	1,204	(9.9)	-
Automotive systems business
Sales	152,697	140,901	8.4	-Operating revenue increased due the Company’s winning more new orders and expanding its existing business operations. In addition, the markets recovered in the U.S.A, Asia and Japan. However, demand in Europe decreased due to the economic slowdown there.
Operating Income	(2,761)	1,687	-	-Due to the delay in procuring parts in LCCs (low-cost countries) and localizing production operations outside Japan, as well as to the problem of downward production adjustments due to lower demand in Europe, operating income decreased year-on-year.

Business Partnership

- The Company and Keihin Corporation announced on June 6 that they have signed a letter of intent to collaborate on their automotive air conditioning system businesses. The two companies are poised to integrate their development and sales capabilities to become a "megasupplier" in the area of heating, ventilation and air conditioning (HVAC) systems and air conditioning heat exchangers. In accordance with this contract, the suppliers will establish a joint venture in April 2014, aiming to jointly develop new air conditioning systems and enhance their production and sales structures. In the global automotive air conditioning market, the Company currently has a 4 percent share, while Keihin owns a 3 percent share. By strengthening their competitiveness through this alliance, the two companies aim to gain a combined share of 10 percent in the market. (From an article in the Nikkan Jidosha Shimbun on Jun 8, 2013)

Sales Plan

- The Company has set a target of increasing its sales of automotive air conditioning compressors to over 20 million units a year by FY2015, up 33.3 percent from the amount sold in FY2012 (15 million units). Demand for compressors is expected to increase not only in the U.S., China and ASEAN countries where vehicle production is growing, but also in Japan and Europe. In efforts to become more competitive in the global market, the company will step up local production and raise its local procurement ratio to reduce costs. Sanden is poised to gain new customers especially in Europe and North America to supply its advanced, fuel-efficient compressor series. At the same time, it will boost its global production capacity to meet growing requirements. Its plans include operation launch at a new plant in Mexico and its second factory in Poland, plant expansion in China and capacity enhancement in Thailand, Indonesia, Malaysia and India. (From an article in the Nikkan Jidosha Shimbun on May 14, 2013)

Procuring/Producing More Parts Outside Japan

- The Company is going to increase the local content ratio of its PX series compressors for car air conditioning systems from the current approximately 30 percent to 75 percent by March 2013. For their high performances in noise, vibration and harshness (NVH) as well as superior fuel economy, sales of the PX series compressors are growing significantly in Europe and the U.S. Currently, the percentage of Japan-made components in these compressors is as high as 70 percent, which is impairing the business profitability with the value of the yen remaining high. In order to reduce components shipment from Japan, the company is intending to transfer necessary production equipment for these components from Japan to the local markets. By minimizing the effects of exchange rate fluctuations with this move, the company aims to ensure stable profitability. Local content ratio of the Company's other compressor series now stands at 80 to 90 percent. By continuing its initiatives to increase local sourcing, the company is looking to achieve the same level with the PX series, targeting 80 percent by fiscal year 2014-2015. (From an article in the Nikkan Jidosha Shimbun on Oct. 30, 2012) 

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Group	6,890	7,431	6,138
Automotive systems business	4,555	4,816	3,936

R&D Activities

Automotive systems business
-The Company strengthened its cooperation with Sanden's technical centers in Japan and Germany in terms of developing compressors and car air-conditioners compatible with new types of vehicles such as plug-in hybrid, and electric vehicles. The Company also cooperated with the R&D Department in France.

-In facing the two greatest issues in the automotive industry, namely developing products that are eco-friendly and more energy efficient, the Company developed electric compressors, hybrid compressors, compressors with integrated inverter and small form factor heat exchanger.

Capital Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Group	15,500	13,900	9,800
Automotive systems business	11,100	10,900	7,800
-Japan	2,800	4,700	3,900
-Europe	4,200	2,500	1,300
-North America	1,200	1,200	700
-Asia	2,700	2,300	1,700

- In FY2012, the Company invested a total of 15.5 billion yen in facilities and equipment to strengthen production operations, increase local procurement, and conduct more manufacturing in-house.

Planned Capital Investments

- In FY2013, as in FY2012, the Company plans to invest in facilities and equipment to strengthen production operations, increase local procurement, and conduct more manufacturing in-house, spending a total of 12.0 billion yen. The breakdown by region in the Automotive Products sector is as follows:

• Europe: 2.2 billion yen
• North America: 1.5 billion yen
• Asia: 1.5 billion yen
• Japan: 2.5 billion yen
• Total: 7.9 billion yen

Investments Outside Japan

<Mexico>
- The Company announced that it will establish a new company, Sanden Manufacturing Mexico (SMM), which will be engaged in manufacturing key components of compressors for automotive air conditioners. The new company, which will be located in Saltillo, Mexico, is expected to become fully operational in April 2013. Currently, Sanden International USA (SIA), based in Wylie, Texas, supplies automotive air conditioner compressors to the North American market. The components which will be produced by SMM are to be supplied to SIA. SMM will cover a land area of 33,000 square meters and a floor area of 20,000 square meters. The Company plans to invest approximately 3.5 billion yen (approximately 37.5 million USD) in SMM by 2014. (From a press release on February 5, 2013)

<Thailand>
- The Company announced that its local subsidiary Sanden (Thailand) Co., Ltd. constructed a new die-casting plant for compressors, which will start production on December 12. The Company has invested approximately 1.4 billion yen, approximately 16 million USD, in the new plant with a total floor area of 1,700 square meters. (From a press release on December 11, 2012)

- The Company announced that its local subsidiary Sanden (Thailand) Co., Ltd.(STC) has installed a new production line for compressors, which will become operational from November 1, 2012. The construction of the new production line began in April 2011, but it had been suspended since October 2011 due to the flood damage. The project was resumed in August 2012. The Company has invested 2.2 billion yen in this production line. (From a press release on October 29, 2012)

<India>
- The Company announced that its local company Sanden Vikas (India) Limited (SVL) has installed a new production line for compact scroll-type (TR) compressors. The new line will become operational on November 5, 2012. The Company initiated a feasibility study for adding the new production line in summer 2011, and began its construction work in January 2012. The investment amounts to 500 million yen. SVL presently manufactures 400,000 sets-a-year of major components of the air conditioning system such as HVAC and 500,000 units-a-year of wobble plate type fixed displacement compressors and variable displacement compressors mostly to global car manufacturers in India. (From a press release on November 1, 2012)