Financial Overview

(in millions of JPY)

	FY2007	FY2006	Rate of Change(%)	Factors
Overall
Sales	345,584	344,891	0.2	-
Operating income	35,039	52,401	(33.1)	-
Ordinary income	34,938	53,855	(35.1)	-
Current net income	22,144	34,072	(35.0)	-
Automotive
Sales	209,393	185,601	12.8	-Driven by the growth in demand in emerging markets where the number of vehicles in use is increasing, parts to be mounted on new vehicles, as well as aftermarket parts, sold well enough to offset stagnant sales in Japan and the U.S.A. Among other things, shipping quantity of aftermarket parts increased in Eastern Europe, Russia and Asia. In response to the worldwide movement to adopt environmental measures and improve fuel economy, which includes the increased production of diesel vehicles mainly in Europe, shipping volume of spark plugs, highly ignitable spark plugs, and sensors for exhaust emission control was strong.
Operating income	36,110	33,199	8.8

Domestic Business
-The Company announced that it will make Ceramic Sensor Co., Ltd. its wholly-owned subsidiary as of Sep. 28, through acquiring 50% of shares outstanding from NGK Insulators, Ltd. Ceramic Sensor is its affiliated company producing automotive oxygen sensors in Komaki city, Aichi prefecture. The Company aims to achieve highly efficient operations in the sensor business by establishing an integrated system from manufacturing through sales. The total acquisition cost will be 11.3 billion yen. In the medium to long term business plan, the company has set an objective of further enhancing its world-leading product and announced a policy to actively promote its sensor business. As a part of this scheme, Ceramic Sensor will be fully acquired to strengthen its automotive oxygen sensor business. (From an article in the Nikkan Jidosha Shimbun on Sep. 27, 2007)


Overseas Business
-The Company opened on April 11 the Beijing Liaison Office to strengthen its spark plug and automotive oxygen sensor business in China. Its objectives include information collection on automakers' technology and business trends and negotiations with local authorities on patent and imitation issues. (From an article in the Nikkan Jidosha Shimbun on Apr.12, 2007)

R&D Expenditure

(in millions of JPY)

	FY2007	FY2006	FY2005
Overall	17,444	16,253	14,691
R&D expenditures, excluding costs for upgrading current products; and  applied research	2,972	2,841	2,844
Automotive	1,652	1,629	1,587

-The major sections conducting research and development activities are the multidiscipline laboratory, which is a part of the head office, and the technical divisions at each department. R&D personnel participate also in academic conferences as well as associations in both Japan and overseas, in addition to conducting joint research with universities and national research institutes.


R&D
-The Company has established a new technology to downsize the Solid Oxide Fuel Cell (SOFC) by reducing the thickness (or height) of a power generator fuel cell stack to approximately a half of the conventional product. Through development of material compounding technology, mainly for ceramics, sensors for automobiles and control systems utilizing electronic circuits, the power density of the world-highest level, twice as high as the previous product, has been achieved. With these advantages, the company has set the first target of the new SOFC at application in the small-size cogeneration systems of 700 watts through several kilo watts, which are expected to be widely spread for household use. Product development of auxiliary power units (APUs) for automobiles will be targeted at heavy-duty trucks for the U.S. market, where reduction of CO2 emission from air-conditioners during truck drivers' work breaks has been an issue. (From an article in the Nikkan Jidosha Shimbun on Oct. 12, 2007)

-The Company announced that it has succeeded in developing the MEMS (Micro Electro Mechanical Systems) thermal conduction hydrogen sensor, capable of detecting hydrogen under the high-humidity environment as in the fuel cell's gas piping. As this newly developed sensor is free from catalyst poisoning, the wide range of applications including gas piping in fuel cells is possible. The company will further explore its applications, aiming at fuel cell vehicles whose mass production is expected to start as early as 2015. It will make a presentation of the new sensor at the "Hydrogen & Fuel Cells 2007, International Conference and Trade Show," starting on April 29 in Vancouver, Canada. (From an article in the Nikkan Jidosha Shimbun on Apr.21, 2007)

Capital investment

(in millions of JPY)

(in millions of JPY)	FY2007	FY2006	FY2005
Overall	63,231	29,271	26,919
Automotive	24,840	17,667	18,534

Domestic Business
-The Company announced that they would acquire a lot to build a plant in Kani City, Gifu Prefecture. The Company has reinforced its production capacity while achieving a healthy growth in automotive and semiconductor segments. All the sites owned by the company has already been utilized and its intention to acquire the land for a new production facility, in preparations for further growth in the future, has remained unfulfilled until now. The Company finally chose Kani City Nino Industrial Park as the construction site for a new plant because of its geographical closeness to the service areas covered by its own outlets and its group companies, land development programs under way in the region which allow future expansion, the significance in having a presence in Industrial Zone, and advantageous condition for recruiting. The purchased land extends to 11.5 hectares in total, with the purchase price of about 4.1 billion yen. (From a press release on June 18, 2007)


Overseas Business
<USA>
-The Company announced that NGK Spark Plugs (USA) Inc. (West Virginia) will set up new lines to manufacture spark plugs. Approximately 20 million units will be produced annually on the new line in West Virginia starting in the summer of 2008, which will increase the number of spark plugs that the group makes in the U.S. each year from the current level of 40 million units to 60 million units. The West Virginia plant currently focuses on the production of oxygen sensor, while the Irvine (California) plant of the U.S. operation assembles spark plugs. As demand for spark plugs in the country is growing, the company decided to assemble the products also at the West Virginia plant, which is in the closer proximity to the hub of the auto industry. (From an article in the Nikkan Jidosha Shimbun on May.8, 2007)


New facilities for the automobile related business etc. (As of March 2008)

Name Name of the business (Location)	Type of facility	Planned amount of investment  (million JPY)	Start	Planned completion	Increased capacity after the investment
Head Office factory (Nagoya-city, Aichi)	Spark plug manufacturing facilities	1,879	2007.12	2009.03	Note 1
	Research facilities	412	2008.04	2009.03	-
Komaki factory (Komaki-city, Aichi)	Plug and sensor-related parts manufacturing facilities	2,819	2007.07	2009.03	Note 1
	Research facilities	1,576	2007.07	2009.03	-
Miyakonojo Factory (Satsuma-gun, Kagoshima)	Spark plug insulator manufacturing facilities	6,806	2007.05	2008.06	Note 2
	Spark plug manufacturing facilities	1,146	2007.12	2009.03	Note 1
Ceramic Sensor Co., Ltd. (Komaki-city, Aichi)	Oxygen sensor production facilities (lease)	936	2007.07	2009.03	Note 1
Subsidiaries
NGK Spark Plugs (U.S.A.), lnc.	Spark plug and sensor manufacturing facilities	1,700	2007.04	2008.06	Note 3
Ceramica e Velas de Ignicao NGK do Brasil Ltda (Brasil)	Spark plug manufacturing facilities	1,720	2008.01	2008.12	Note 1
NGK Spark Plug(Shanghai)Co.,Ltd. (China)	Plug and sensor manufacturing facilities	777	2008.01	2008.12	Note 4

Note 1: The increase in capacity is minimal, as the purpose of the capital investment is to renovate some production facilities and either eliminate or reduce some processes. As a result, it is difficult to estimate any increase in production capacity.
Note 2: Annual production capacity of spark plug insulators will increase by 60 million units.
Note 3: Annual production capacity of assembled spark plugs will increase by 20 million units.