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5. NOK Corporation Business Report FY ended 2015

Production Development

-The Company will shift production of castings for anti-vibration rubber products for the Japanese market to Japan, starting at the beginning of 2017. Currently, NOK imports most of the castings from its plant in China. However, cost competitiveness of the China-made castings has declined due to the appreciation of the Chinese yuan. Shifting production to Japan is to improve the cost competitiveness. Currently, NOK produce castings for anti-vibration rubber products at its plants in China and Thailand. The Company will increase its global production capacity by 20 to 30% by adding production in Japan, and hope to bolster the sales of anti-vibration rubber products. (From an article in the Nikkan Jidosha Shimbun on May 14, 2015)

Business Plan

-The Company plans to increase its sales of sealing products in China by 40 percent by FY 2016 that ends in March 2017 from the level of FY 2013. In addition to increasing its supply volumes to Japanese, U.S., and European automakers and suppliers operating in the country, NOK aims to win more orders from local companies. As demand for high-quality products is growing among consumers in China, moves are made by Chinese automakers, which have been placing the highest priority on cost savings, to use high performance and more durable products. The Company is poised to expand its Chinese business by enhancing sales activities to meet the needs in the local market. (From an article in the Nikkan Jidosha Shimbun on October 21, 2014)

Mid-term Management Plan (FY ending March 2015 - FY ending March 2017)

Reinforcing investment activities within Japan
-The Company announced its plan to enhance automated operations at its oil seal plants in Japan. The intention is stated in the Company's three-year business plan started in April 2014. Over the next three years, the Company will invest a total of JPY 65 billion globally in its seal business. Of this amount, JPY 45 billion will be spent on raising the ratio of fully automated operation in Japan from the current 20-30% to 50% by FY ending Mar. 2017. This will allow the Company to improve its cost competitiveness in Japan where demand for oil seals is forecast to decline. In order to boost profitability of the seal division as a whole, the Company also intends to promote automated production and save labor costs at its plants in emerging countries as well. During FY ended Mar. 2012 - FY Mar. 2014, the Company invested a total of JPY 62.5 billion in plants and equipment of its seal business. As the fund was primarily appropriated for production capacity expansion projects outside Japan, the Company has decided to shift its focus to improving productivity in both Japan and emerging markets. (From an article in the Nikkan Jidosha Shimbun on May 16, 2014)

-Slogan: "Strengthen corporate foundation for attaining sustainable growth". This will be achieved through creating new products and business by setting the foundation for ensuring a strong workplace environment.
-Policies:

• Re-examine capabilities for achieving true product creation
• Re-challenge commitment to achieve superior level of quality
• Create new products, technology, and businesses
• Develop and make optimum use of human resources

-Financial objectives: (by end of FY2016 that ends March 2017)

• Sales: JPY 700,000 million
• Operating profit: JPY 55,000 million
• Profit margin: 7.9%

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

R&D Activities

Seal
-The Company worked to develop environmentally friendly products such as products contributing to lower energy use by lowering frictional loss; and other eco-friendly products for hybrid, electric, and fuel-powered vehicles.

-In the automotive safety and IT segment, the Company is developing high, value-added products by integrating automotive braking products and electronic parts.

-In the oil-seal segment, in addition to developing and launching sales of conventional coated seals, the Company has developed and launched sales of low-friction seals designed to reduce friction force while still maintaining reliability, by combining low-friction rubber materials and torque grease, which was jointly developed by the Company and a subsidiary, NOK Klueber Co., Ltd. Also, the Company developed and launched products designed for emerging countries. The products, which have improved anti-dust performance, are designed to respond to tough road conditions.

-In its O-ring business, the Company launched material that can handle new coolants and which are environmentally friendly; and coating material that makes assembly easier. In addition, it conducted R&D activities to develop a material that is workable with hydrogen gas used in fuel cells.

-As part of its activities designed to create seals for use in EVs and HEVs, the Company developed smaller and low-reaction force gaskets and integrated seal parts of flexible printed circuit boards (FPCs) for next-generation vehicles, launching commercial production of some of them.

-The Company is advancing preparations to start producing and supplying sealing products for cars running on fuel-cell battery stacks.

Electronic Device Product
-In the LED field, in which heat radiation is needed, the Company is developing technology on metal FPCs (flexible printed circuit boards), some of which are already being equipped on vehicles.

-Developing and presenting to customers technology that joins FPCs and cables, and FPCs to devices, with a high degree of reliability.

-The Company is developing electrostatic touch sensors involving environmentally friendly processes achieved by using printed electronics (PE), considering the idea of using them on vehicles by enhancing their reliability even more.

R&D Facilities

Sealing business
-The Company mainly invested in its operations in Japan and at Wuxi Nok-Freudenberg Oilseal Co., Ltd. and Thai NOK Co., Ltd.