Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	274,786	241,780	13.7	-
Operating Income	4,858	(896)	-	-
Ordinary Income	4,976	253	1,866.8	-
Net Income	5,843	1,084	439.0	-
Automotive systems business
Sales	182,207	152,697	19.3	-Sales increased year-on-year due to the impact of the Company's introducing environmentally friendly new products to the global market.
Operating Income	3,762	(2,761)	-	-The division returned to profitability. It made upfront investments in developing environmentally friendly and energy-saving technologies to meet market needs. At the same time, it cut down on procurement costs by leveraging its global procurement network, improved productivity at home and abroad, and enjoyed considerable exchange gains due to weaker yen.

Business Partnership

- The Company and Keihin Corporation announced 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 "mega supplier" 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% share, while Keihin owns a 3% share. By strengthening their competitiveness through this alliance, the two companies aim to gain a combined share of 10% 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 FY ending March 2016, up 33.3% from the amount sold in FY ended March 2013 (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. The Company 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)

Outlook by Segment for FY ending Mar. 31, 2015

(in millions of JPY)

	FY ending Mar. 31, 2015 (Forecast)	FY ended Mar. 31, 2014 (Actual Results)	Rate of Change (%)
Sales	290,000	274,786	5.5
-Automotive systems business	188,000	182,207	3.2
Operating income	7,000	4,858	44.1
Ordinary income	7,000	4,976	40.7
Net income	5,000	5,843	(14.4)

-Sales at the Automotive systems business are forecast to increase 3.2% year-on-year. European sales are projected to fall, but the drop is expected to be more than offset by expected sales increases in North and South America, Asia and Japan.

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

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Group	7,095	6,890	7,431
Automotive systems business	4,908	4,555	4,816

R&D Facilities

-Major development activities are performed at Sanden technical centers in Japan, the U.S. and Germany, and a development division in France.

R&D Activities

Automotive systems business
-The Company strengthened development of compressors and car air-conditioners compatible with new types of vehicles such as plug-in hybrid, and electric vehicles.

-In facing the two greatest issues in the automotive industry, namely developing products that are eco-friendly and more energy efficient, the Company developed hybrid compressors, electric compressors, and compact and lightweight HVAC systems.  

Product Development

HVAC using CO2
-The Company will develop a heating, ventilation and air conditioning (HVAC) unit that uses CO2 refrigerant for car air conditioners. In 2017, German automakers will start to use carbon dioxide (CO2) as refrigerant of car air conditioner for new models to be released in Europe. In response to this, the Company will commercialize the new HVAC unit by 2017. The Company aims to expand business by utilizing its expertise in developing CO2 refrigerants for automatic beverage vending machines. The CO2 refrigerant has very low global warming potential (GWP) rated at 1.0. In addition, the refrigerant improves cooling and heating capacity. However, the CO2 refrigerant should be compressed at high pressure, and existing compressors of car air conditioners cannot be used. Therefore, development of new compressors is required. In European countries, refrigerant with GWP at 150 or higher is not allowed to be used for some of new models, and its use will be totally banned on all of new models to be launched in 2017 or later. One of the alternatives for existing refrigerants is the HFO1234yf, which was jointly developed by Honeywell International Inc. and E.l. du Pont de Nemours and Company. The HFO1234yf also has very low GWP at between 4 and 6. However, Daimler announced it will not use the refrigerant as there is a concern for its inflammability. Volkswagen and BMW are expected to follow Daimler, which means that three major car makers in Germany will choose nonflammable CO2 refrigerant. (From an article in the Nikkan Jidosha Shimbun on May 15, 2014)

High efficiency Heat pump system
-The Company is developing a heat pump system for electric vehicles (EVs). The system consists of a highly efficient electric compressor and other components, which save power and extend the cruising range. EVs without a secondary engine utilize batteries to warm up the cabin in winter. This shortens the cruising distance. Improving efficiency of the heating system will extend the cruising distance without having to install additional batteries. The Company will join hands with automakers to commercialize the heat pump system in the next two to three years. (From an article in the Nikkan Jidosha Shimbun on December 17, 2013)

Rankine cycle system
-The Company has developed a Rankine cycle system that uses a vehicle's engine exhaust heat to drive its air conditioning compressor. This system can significantly reduce fuel consumption. Engine exhaust heat is regenerated with a pump-integrated expander to drive the compressor. The exhaust heat is recovered by the radiator and the muffler, which is then converted to electricity that is stored in the battery. The stored power can then be used to activate an auxiliary electric heater. During long highway drives, exhaust heat is continuously generated, which leads to an increase in regenerated power, thus improving fuel efficiency. The Company will propose a fuel-efficient air conditioning system that combines the Rankine cycle system and a lightweight and compact compressor for automakers. The Company will work with automakers in the vehicle development stage to optimize the system design, so that the commercialization of the system can occur at an early stage. (From an article in the Nikkan Jidosha Shimbun on November 28, 2013)

Capital Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Group	16,600	15,500	13,900
Automotive systems business	13,600	11,100	10,900
-Japan	3,400	2,800	4,700
-Europe	4,300	4,200	2,500
-North America	2,500	1,200	1,200
-Asia	3,200	2,700	2,300

-In the fiscal year ended March 2014, the Company invested heavily in order to increase production capacity and to conduct more manufacturing in-house. 

Planned Capital Investments

-In the fiscal year ending March 2015, the Company plans to invest a total of JPY 12,000 million in facilities and equipment in order to strengthen production operations, increase local procurement, and conduct more manufacturing in-house. It plans to invest JPY 10,000 million in the automotive systems business. The breakdown by region in the sector is as follows:

• Japan: JPY 3,500 million
  
• Europe: JPY 3,000 million
• North America: JPY 1,000 million
• Asia: JPY 2,500 million

Investments Outside Japan

<Poland>
-The Company announced that it has constructed a second plant at its Polish subsidiary, Sanden Manufacturing Poland SP.Z.O.O. (SMP). The subsidiary's first plant manufactures Sanden's PX series compressors for car air conditioning systems. With a floor area of 26,000 square meters, the plant has a production capacity of 1.6 million units per year. The new second plant, with a floor area of 13,000 square meters, will be engaged in casting and manufacturing components for the PX series compressors. Operation is scheduled to start in February 2014. The plant is expected to employ about 300 people at full production in fiscal year 2016. (From a press release on November 13, 2013)