CHUO SPRING CO., LTD. Business Report FY2006

Business Highlights

Financial overview

In million JPY FY2006 FY2005 Rate of Change (%) Factors
Sales 92,972 89,717 3.6 -Sales in the suspension springs business increased 6.0%, compared with those of the previous fiscal year, mainly due to a 25.9% increase in sales of leaf springs.
-In the precision spring business, year-on-year sales increased as follows: 4.1% for wire springs and 11.4% for flat springs. These increases raised the total overall sales by 7.7%.
-In the cable business, sales of control cable increased 6.8% year-on-year. As a result, total overall sales increased 4.3%, compared to that of the previous year.
Operating income 1,379 1,797 (23.3) Operating income decreased due to higher steel prices and greater depreciation charges and expenses.
Ordinary income 1,881 2,095 (10.2) Ordinary income decreased as a result of higher raw materials costs and lower selling prices; despite factors that raised earnings such as an increase in sales of value-added products, and rationalization and improvement activities.
Current net income 1,275 1,222 4.3 Current net income decreased because the Company posted an extraordinary loss for reserves to cover product-warranty expenses connected with products it sold in the past few years. This was in spite of gains achieved from selling securities held for investment and profits resulting from selling fixed assets.

Business development
As to its overseas operations, the Company made preparations to start production at its new plants in California, U.S.A. and in the Tianjin area of China. In Japan, it made preparations to establish new subsidiaries in Nagasaki Prefecture and Aomori Prefecture.
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R&D expenses were 349 million yen in FY2006.

Main Achievements in FY 2006
Suspension Springs Business
Side Action Spring by CHKK (SASC): More passenger vehicles, especially high-end luxury vehicles and cars destined for sale in the global market, are being equipped with SASCs. To deal with the rising demand for these springs, the Company began producing them at its domestic and overseas facilities. Production volume of the SASCs is increasing significantly, and the Company is working on developing production technology to ensure the quality of these mass-produced springs. To gain a competitive edge in technology on chassis springs in the future, the Company is also developing new technology in the areas of lateral force control and surface treatment.

Precision Spring Business
-To make valve springs suitable for higher performance and higher speed automobile engines, the Company had been developing new high-intensity valve springs made of new material it developed. The Company has now completed the development of these springs and some car makers have decided to equip them on their vehicles.
- For heat-resistant spring parts used in exhaust systems, the Company completed development of a new super-heat resistant material, which offers the highest level of heat-resistance properties. The Company also is focusing on activities to reduce the use of rare metals.
- The Company is working to improve the capability of spiral springs used to bring seats to their upright positions, develop a new manufacturing technology for its new flat springs, and increase the number of trial productions it conducts on precision stamped products.

Cable Business
-The Company was able to smoothly launch the development phase for conducting R&D activities on cables used in motor parking braking systems for the most high-end domestic Japanese passenger cars, based on strong collaboration with its customer's designing department.
- The Company conducted new development activities, starting from basic theoretical research on stranded wires up to the development of simulation technology on cables, successfully resolving major technical issues.

Technology Licensing (as of March 2007)

Suppliers Country Contents of contract Contract period
Supreme Spring (A Division of Metindustrial (Property) Ltd.) South  Africa Chassis springs for automobiles and railroad cars.   5 years from May 1994. (automatically renewable)
Metex Corporation USA Knitted wire meshes 5 years from June 1, 1994. (automatically renewable)
Knitmesh Limited UK Knitted wire meshes 5 years from April 1, 1991. (automatically renewable)
Dura Automotives Limited UK Control cables 10 years from June 2, 1995. (automatically renewable)

Investment Activities