Sanoh Industrial Co. , Ltd. Business Report FY2006

Business Highlights

Financial overview
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FY2006

FY2005

R. C.(%) Factors
Sales 86,807 79,970 8.6 see note 1) below
Operating income 3,363 2,413 39.4 see note 2) below
Ordinary income 3,412 2,617 30.4 -
Net income 1,582 1,473 7.4 -
( R.C. : Rate of Change )
Factors
1) Sales of its major products including tubes and other automotive components increased from what they were last year. Among others, significant growth was seen in the area of automotive brake tubes and fuel pipe products, as well as plastic products such as quick connectors, nylon tubes, and multi-layer tubes. Some other products that contributed to the increase were brazed components, namely fuel injection rails, water tubes, and oil cooler tubes; and environmentally friendly fuel injection rails and other products designed to minimize environmental impact.

2) Operating income increased year-on-year as a result of improved productivity, reduced costs, and increased profitability in North America.


Overseas business
<North America, Central and South America>
The Company announced its mid-term business plan for the North, Central and South Americas to raise its sales in FY 2008 by 3 billion yen from FY 2005 to 30 billion yen and to achieve a turnaround in its operating profit from one billion yen loss in FY 2005 to 1.8 billion surplus, by more efficient production facilities and marketing efforts. HiSAN Inc., acquired in July 2005 as the Company's subsidiary, was renamed to Sanoh America, Inc. as of Nov. 1, 2006 and will serve as its core site in North, Central and South Americas. The regions will be consolidated for more efficient operation to erase the Company's chronic deficits. (From an article in the Nikkan Jidosha Shimbun on Dec.8 2006)

<Europe>
The Company announced that it had acquired stocks in its U.K. joint venture "Bristol Bending Sanoh" owned by the partner and made the joint venture its 100 percent owned subsidiary. The local maker manufactures and markets automotive brake tubes, fuel tubes and other products, and supplies them to the local production base of Honda, as well as German automakers. Its sales in fiscal 2005 amounted to 3,235 million yen. Devoting vigorously management resources of personnel and fund, the Company will reinforce production capacity of its leading products including brake and fuel tubes, aiming to boost sales to 3.9 billion yen by fiscal 2008, a 20.6 percent increase over the present level. (From an article in the Nikkan Jidosha Shimbun on Dec.26 2006)

R&D

R&D Expenditure( in millions of JPY )
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FY2006

FY2005

FY2004

R&D 1,539 1,600 1,340

<R&D>
- The Company conducts its R&D activities based on a strategy to deal with social issues such as environmental and safety problems on a global basis.
- In line with new environmental regulations under which the use of lead, mercury, cadmium, and hexavalent chromium is prohibited, the Company developed products using alternative materials and next-generation surface treatment technology. The new technology was introduced at all of its facilities in Japan, and plants overseas.
- The Company launched mass-production of piping for collision safety mechanisms such as airbags and pretensioners, using special manufacturing technology as a means to respond to safety regulations.

Automobile parts business
- The Company continued its development activities on products requiring steel tube applications, incorporating both elemental technology and applied technology. It also worked on developing new products using light-weight materials such as multi-layer resin tubes, aluminum tubes, and stainless pipes, to name a few.
- The Company developed and now produces fuel injection rails and EGR pipes to support fuel-efficient, low emission, and FFV vehicles. It also developed pipes for ultra high-pressure fuel injection systems.
- The Company develops piping and joints for fuel-cell and hybrid vehicles.
- The Company is working on developing high-performance, next-generation NiMH batteries.
- The Company's development focus is also set on enhancing various types of analysis equipment, evaluation facilities, and measuring instruments for environmentally harmful substances before conducting durability and reliability testing for new products under every type of environmental condition. In addition, the Company will introduce various types of analysis software to enhance simulation capabilities.

Investment Activities

Investment Expenditure( in millions of JPY )
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FY2006

FY2005

FY2004

Group 6,427 4,948 3,105
Automobile parts 5,849 4,437 3,030