Financial overview

In million JPY	FY2006	FY2005	Rate of Change (%)	Factors
Overall
Sales	428,059	383,096	11.7	An increase in the Company's sales volume, which resulted from its aggressive marketing activities, contributed to the sales increase.
Operating income	25,115	21,595	16.3	The Company earned a profit as a result of comprehensive productivity improvements; and rationalization, cost-reduction, and business efficiency initiatives; in addition to the increased sales volume.
Ordinary income	27,185	23,612	15.1
Net income	15,931	15,389	3.5
Suspension springs Division
Sales	104,482	94,266	10.8	Sales steadily increased due to greater vehicle production volume.
Operating income	1,204	2,011	(40.1)	Operating profit decreased as a result of poor performance at the Company's North America business.
Seat Division
Sales	144,597	136,593	5.9	Sales increased as a result of greater vehicle production volume and the division's sales promotion activities.
Operating income	6,074	5,720	6.2	-

Performance outlook for FY2007
The Company said that the company projects its suspension spring business in the U.S.A., which has been operating at a deficit for three consecutive years since fiscal 2004, to move into the black in the second half of 2007 on a monthly basis. The poor performance is attributed to shrinking demand from GM, sales to which account for over 30% of the company's revenue, as well as to soaring material prices. NHK's U.S. suspension spring business is conducted at New Mather Metals, Inc. (NMM, Toledo, Ohio), which manufactures stabilizers; and NHK of America Suspension Components Inc. (NASXO, Bowling Green, Kentucky), which manufactures coil springs. The company expects to halve the deficit at these two companies in fiscal 2006 from the level posted in fiscal 2005, and reduce them further by a large margin in the first half of fiscal 2007, although negative impact of price hikes of raw materials is probably yet to wither. While existing products will remain unprofitable because of difficulty in revising prices during the model life, there are signs of bottoming out in new businesses as a result of the company's streamlining initiatives. Although prospect is unclear yet on a yearly basis for fiscal 2007, business is expected to be back on track for recovery during the second half of 2007 after hitting the bottom in the current fiscal year. With the turnaround of the U.S. suspension business, which was the only loss-making operation of the company, the Company may be able to achieve the targeted profit in the medium term business ahead of schedule.(From an article in the Nikkan Jidosha Shimbun on Aug. 21, 2006)

Joint-venture
The Company has started feasibility studies on automotive seat production in Guangzhou, China to start as early as 2008. Faurecia-NHK Co., Ltd., its joint venture in Yokohama, Japan supplying Nissan Motor Co., Ltd. with automotive seats, is expected to manage the operation. The Company has two operations in Guangzhou to produce coil springs and stabilizers as well as two seat production plants in Chongging and Shensen, but no seat plant in Guangzhou, where major Japanese automakers have their operations. The Company, which wishes to enhance seat production in Europe and BRICS, and Faurecia S.A., which wishes to expand business with Japanese automakers, had successfully agreed to accelerate the joint seat production business even outside Japan. This Guangzhou plant will be the first project in line with this agreement. (From an article in the Nikkan Jidosha Shimbun on Feb.06, 2007)

R&D system
R&D activities are being conducted by the following functions: R&D Headquarters; Production Engineering Division of the Technology Development Department; development divisions of each production department; and the operational headquarters, technology department, designing, and development divisions at each subsidiary. There are 682 R&D personnel, accounting for 5.8% of the total number of employees.
- R&D expenses for FY2006 were 9,676 million yen, representing approximately 2.3% of total sales for the Group.

Suspension Spring Division
- R&D expenses were 1,307 million yen. 
- The Company is engaged in developing gas springs such as small and light-weight accumulators that protect the environment, save energy, and enhance riding comfort
- the Company developed accumulators for brakes, medical use, and stamping dies.
- Conducting R&D activities on springs and spring materials that can improve performance in terms of corrosion resistance and lowering manufacturing costs.

Seat Division
- R&D expenses were 3,220 million yen.
-Conducting R&D activities on system units used in active headrests that reduce whiplash injuries resulting from rear-end collisions.
-In FY 2006, the Company completed the R&D phase on the systems units and started  mass-producing them from April, 2007. The Company still needs to establish specifications (for this unit) that can reduce weight and lower costs, so that it can mass-produce the units, making them into a standard part for next-generation vehicles.
-Conducting R&D activities on a next-generation systems for improving the safety and comfort of seats.

Capital investment for FY2006 was34,661million yen.

Suspension Spring Division
-The Company made 8,202 million JPY in capital investments within the Group to win supply contracts for new products and to improve productivity for existing products.
The focus of investments was manufacturing facilities for suspension springs at New Mather Metals, Inc., Yokohama Plant, NHK of America Suspension Components, and NHK Spring (Thailand) Co., Ltd.

The Company will invest 1.5 billion yen to establish in 2007 a new facility in Nagano prefecture to manufacture springs used in automatic transmission (AT) systems. It will be located at the site of its Ina Plant, the company's core production base for precision springs. The Company currently manufactures precision springs at five plants in four countries, with other such factories located in Atsugi (Kanagawa prefecture, Japan), the U.S.A., Thailand, and China. The Ina Plant is positioned as a mother plant, from which the company supplies its products to AT suppliers such as Aisin AW and Jatco. The Company plans to launch a scrap-and-build plan for the whole Ina plant upon completion of the new building, which is expected to increase the plant's output by 20%, becoming the 11th building at the site.(From an article in the Nikkan Jidosha Shimbun on Aug. 8, 2006)

Seat Division
-The Company made 6,925 million JPY in capital investments within the Group in order to win business for new products and to improve the productivity of  existing products.
Its focus of investment was manufacturing facilities for seats at the Toyota plant and NHK Spring (Thailand) Co., Ltd.

The Company and Faurecia SA, France, have decided to increase production capacity of Faurecia-NHK Kyushu Co., Ltd. (FNQ) at Kanda-machi, Fukuoka Prefecture. Since the company has won orders from Nissan Motor Co., Ltd. for automotive seats of new models released in FY 2007, it will build another production line in the adjacent site to be purchased. With a total investment for the land and the building of approx. 1.5 billion yen, it will triple the current production capacity. FNQ is the Kyushu Plant of Faurecia-NHK Co., Ltd., an equally owned company of NHK Spring and Faurecia established in 2001. Its annual seat production capacity as of the end of 2006 was for 100,000 vehicles and it supplies them for the "Tida" compact sedan and the "Presage" minivan. Nissan plans to start production of several new models including the upper-class "Murano" SUV and the small "X-Trail" SUV at its Kyushu Plant later this year. As FNQ has received seat orders for these models, it has decided to reinforce the production capacity, which is expected to reach 300,000 units per year in 2008.(From an article in the Nikkan Jidosha Shimbun on Feb.15, 2007)

Installation of New Equipment (suspension springs and seating division)

Company Name	Plant	Segment	Major Equipment to be installed	Estimated amount of investment (million yen)	Project Period
					from	to
NHK Spring Co., Ltd.	Yokohama plant	Suspension springs	Manufacturing facilities for springs	1,575	Jul., 2006	Jul., 2007
	Yokohama plant	Suspension springs	Manufacturing facilities for springs	310	Jul., 2006	Jul., 2007
	Yokohama plant	Seats	Manufacturing facilities for automotive seats	526	Oct., 2007	Aug., 2008
	Yokohama plant	Seats	Manufacturing facilities for automotive seats	596	Aug., 2007	Apr., 2008
	Shiga plant	Suspension springs	Manufacturing facilities for springs	1,356	Apr., 2007	Mar., 2008
	Toyota plant	Seats	Manufacturing facilities for automotive seats	451	Apr., 2006	Sep., 2007
NHK Spring (Thailand) Co., Ltd.	Wellgrow Plant (Chachoengsao, Thailand)	Suspension springs	Manufacturing facilities for springs	1,337	Jan., 2007	Dec., 2007
	Bangpoo Plant (Chachoengsao, Thailand)	Seats	New facility	1,590	Mar., 2006	Dec., 2007
	Bangpoo Plant (Chachoengsao, Thailand)	Seats	Manufacturing facilities for automotive seats	1,571	Jan., 2007	Dec., 2007
	Samutprakarn, Thailand	Seats	Manufacturing facilities for automotive seats	588	Jan., 2007	Dec., 2007
NHK-Uni Spring (Guangzhou) Co.,Ltd.	Guangdong Province, China Guanzhou Economic and Technical Development zone	Suspension springs	Manufacturing facilities for springs	300	Apr., 2007	Mar., 2008
NHK Seating of America, Inc.	Indiana, U.S.A	Seats	Manufacturing facilities for automotive seats	1,642	Jul., 2007	Dec., 2008