Financial Overview

(in 100 million JPY)

	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011	Rate of Change (%)	Factors
Overall
Sales	31,546.3	31,314.6	0.7	-Production levels had recovered to what they were prior to the Great East Japan Earthquake. As a result, operating revenue posted a year-on-year increase.
Operating income	1,616.8	1,891.8	(14.5)	-The Company’s profits posted lower year-on-year performance because of the high evaluation of the yen. This was in spite of the Company’s initiatives to improve its profit margins in line with increased operating revenue and its efforts to rationalize.
Ordinary Income	1,807.5	2,072.3	(12.8)	-
Net Income	893.0	1,430.3	(37.6)	-
Japan
Sales	16,399.6	15,482.0	5.9	-Performance improved year-on-year as a result of the recovery in production volume during the second half of the year, even though the Company had to reduce production during the first half of the year because of the Great East Japan Earthquake.
Operating income	838.7	633.9	32.3	-Better performance year-on-year was attributed to improving profit margins in terms of production output, reducing fixed costs, and rationalizing operations.
North America
Sales	5,040.8	5,288.7	(4.7)	-The production volume of vehicle units increased. Nevertheless, profits were down due to the impact of the Great East Japan Earthquake during the first half of the year and to the strong yen.
Operating income	87.7	253.6	(65.4)	-Profits decreased because of lower profit margins caused by reduced operating revenue and by the high evaluation of the yen.
Europe
Sales	3,732.1	3,895.8	(4.2)	-Operating revenue increased due to greater sales of products sold to European OEMs experiencing strong export sales. Nevertheless, performance was down year-on-year due to the continued high evaluation of the yen.
Operating income	63.8	109.3	(41.6)	-Profits were down due to the region’s worsening product mix.
Asia/Oceania
Sales	5,797.5	6,046.5	(4.1)	-While the Company experienced increased sales attributed to the recovery in production volume by Japanese OEMs, the gain was offset by the negative impact of the earthquake in Japan and the flooding in Thailand.
Operating income	594.9	830.2	(28.3)	-Profits were down due to the region’s worsening product mix.

-The Company concluded a plea agreement with the United States Department of Justice (DOJ) on January 30, 2012 (U.S. Eastern Standard Time), agreeing to pay a fine of 78 million USD (approximately 6.1 billion yen) based on charges that it violated antitrust laws in connection with sales of certain automotive components (specifically, certain body electronic control units (body ECUs) and heater control panels) to one of its customers. Since learning of the DOJ's investigation in February 2010, when the DOJ conducted an onsite investigation at the offices of Denso International America, Inc. (DIAM), Denso's North American headquarters, both Denso and DIAM have cooperated fully with the investigation. The payment will be recorded as an extraordinary loss in the third quarter of the fiscal year ending March 2012. (From a press release on January 31, 2012)

Contracts

-The Company's EGR coolers designed for gasoline engines are being mounted on the new-model "Camry" and the compact, hybrid vehicle (HV) "Aqua".

-The Company developed a new radiator that is more compact and lighter in weight by 40% than conventional radiators. This new radiator is being mounted on the new "Lexus GS".

-A more compact but powerful double-sided cooling inverter has been equipped on the "Camry" since August 2011.

-The Company's first motor-generator is being mounted on the "Aqua".

-OEMs based in Japan, the U.S.A. and Europe are mounting the Company's injectors and high-pressure pumps, which are designed for new-generation gasoline injection systems, on their engines such as the Skyactiv-G engine on Mazda's highly efficient direct-injection gasoline engine.

-As an idle-stop system, the Company developed a tandem-solenoid starter. The Company started delivering the starter to global OEMs such as Daihatsu and Jaguar.

Development in Japan

-Toyota Group parts suppliers said they are reviewing inventory levels of certain parts, materials and finished products in case of disruptions of supply chains due to future natural disasters and other unintended happenings. Denso said "Inventory levels of components, in particular electronic parts like semiconductors, will be raised from the current one-two weeks to two months." (From an article in the Nikkan Jidosha Shimbun on February 6, 2012)

-The Company announced 27 that it has commercialized an exhaust gas recirculation (EGR) cooler for gasoline-fueled engines as its new product of the heat exchange systems business. Its shipment to Toyota Motor Corp. has already started. It is incorporated in the new "Camry" and the compact HV "Aqua", both launched last year. Its features, including approx. 30% downsizing compared to competing products achieved by its unique processing technique, have been highly evaluated. As the Company had never provided exhaust system products in the heat exchange systems business, it has successfully entered the new field. It has won new contracts with several other manufacturers and will supply to them to non-Toyota customers, as well. The Company will approach other manufacturers at home and abroad and will develop this EGR cooler into its strategic product in its heat exchange systems business. (From an article in the Nikkan Jidosha Shimbun on January 28, 2012)

-The Company said that Denso East Japan Corporation, its subsidiary based in Tamura City, Fukushima Prefecture, will start production of car air conditioning systems in early October. Part of production processes will be transferred from the Nishio Plant in Aichi Prefecture. Denso's first production site in the Eastern Japan region will get into operation after a delay of about 21 months from a previously planned schedule due to a series of unfortunate events like the Lehman shock and the earthquake. (From an article in the Nikkan Jidosha Shimbun on June 30, 2011)

Acquisition

-The Company announced that it has agreed with I-Net Corporation to acquire its 3D Business Unit, which provides software and services based on its technologies to create and analyze 3D images. The acquisition will be complete on April 1, 2012, and upon completion of ownership, the business unit will become a subsidiary of Denso and begin operation as 3D Corporation. The Company expects that the total sales of 3D Corporation will be 400 million yen in 2012. Denso will use the technologies of I-Net's 3D Business Unit develop the new in-vehicle displays, such as instrument clusters, car navigation systems, and head-up displays. (From a press release on March 22, 2012)

Restructuring

-The Company announced on December 21 that it will restructure its organization effective January 1, 2012. Changes will be made to the Electric Systems Business Group, which handles HV and electronic control system business. The Engine Electrical Systems Business Unit and the EHV Components Business Unit will be incorporated into the Powertrain Control Systems Business Group. At the same time, the Electric Control Components Division will be integrated into the Information & Safety Systems Business Group. The reorganization will reduce the number of the Electric Systems Business Group's operating units from the current five to four. Up until now, the Electric Systems Business Group has been covering all ranges of electrification technologies. By dividing the functions by area such as the powertrain related techniques and the electric vehicle control techniques, the company aims to enhance its capabilities to develop, propose and manufacture products that better meet customers' needs, as use of electric vehicles is expected to prevail. (From an article in the Nikkan Jidosha Shimbun on December 22, 2011)

Outlook for FY ending Mar. 31, 2013

(in 100 million JPY)

	FY ending Mar. 31, 2013 (Estimate)	FY ended Mar. 31, 2012 (Result)	Rate of change (%)
Sales	34,200	31,546	8.4
Operating income	2,050	1,607	27.6
Ordinary income	2,150	1,808	18.9
Net income	1,500	893	68.0

-In looking at each operating region, performance in each region except Europe improved year-on-year for the fiscal year ending March 2012. Performance in the European operations was down by 1.1% year-on-year, while performance improved 7.4% in the Other regions, and double-digit growth is expected going forward in Japan, North America and Asia/Oceania.

-Operating profit in Japan is forecast to increase 54.4% year-on-year, while that in Europe is expected to significantly improve by 64.6% year-on-year in relation to the fiscal year that ended March 31, 2012. However, North American operating profit is predicted to drop by 43.0%.

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

2015 Mid-term Management Plan (FY ending Mar. 31, 2016)

(in 100 million JPY)

	FY ending Mar. 31, 2016 (Estimate)	FY ended Mar. 31, 2012 (Result)	Rate of change (%)
Sales	40,000	31,546	26.8
Operating income	3,200	1,607	99.1
Sales by segment
Japan	25,400	21,976	15.6
North America	6,600	5,121	28.9
Europe	5,200	3,872	34.3
Asia/Oceania	9,400	6,267	50.0
Other	800	577	38.6

R&D Expenditure

(in 100 million JPY)

	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011	FY ended Mar. 31, 2010
Japan	2,638	2,567	-
North America	124	133	-
Europe	79	73	-
Asia/Oceania	129	117	-
Other	12	9	-
Overall	2,983	2,900	2,700

-Out of the total R&D expenses the Company incurred during the fiscal year that ended March 2012, R&D expenses outside Japan accounted for around 12%. In line with the Company's reorganization of its R&D framework, this percentage is anticipated to increase in the future.

-For the fiscal year ending March 2013, the Company plans to increase its R&D expenses by 3.9% year-on-year, to 310 billion yen.

R&D Structure

-As a means to quickly grasp customer needs in each region and respond to those needs with new product developments, the Company is strengthening its R&D capabilities in China, India and Brazil, as well as in the U.S.A, Europe, and Oceania/Asia. In doing this, the Company will build an R&D framework based on seven technical centers, including the one in Japan. This will promote closer collaboration among them.

-The Company has chosen a versatile analytic tool "ANSYS" developed by U.S-based ANSYS, Inc. as its standard software for mechanical analysis. It was announced by Cybernet Systems Co., which is engaged in sales and service of the ANSYS software in Japan. ANSYS is a multi-physics analytic tool capable of analyzing various physical phenomena, such as mechanical, heat transfer, electromagnetic field and thermo hydrodynamic, or issues combined, flexibly depending on each purpose. By using this software, Denso will promote standardization of design and analytic software for product design and development conducted at facilities in and out of Japan in a bid to improve product quality and enhance efficiency in design and development. (From an article in the Nikkan Jidosha Shimbun on August 12, 2011)

R&D Activities

-The Company, in collaboration with Tongji University (Shanghai), will begin testing vehicle-to-vehicle and vehicle-to-infrastructure (V2X) technology on public roads in Taicang, Jiangsu Province, China on March 22, 2012. While this is the Company's first V2X technology field test on public roads in China, the company has been conducting field tests in Japan, the U.S. and Europe for the past several years. V2X technology will be used to wirelessly communicate the vehicle position and speed of emergency vehicles - like ambulances and fire engines - to the surrounding vehicles and roadside infrastructure. When an emergency vehicle is approaching, the technology will change the traffic light at intersections and alert surrounding vehicles to switch lanes. The experiments are intended to give the right of way to authority vehicles in case of emergency and to help prevent vehicle collisions. (From a press release on March 13, 2012)

-As for product development focused on China, India, and the ASEAN Region, the Company is grasping the local needs and narrowing down the functions needed to develop and produce products at lower costs.

Product Development

Radiator
-The Company announced on January 26 that it has developed a new "global standard radiator (GSR)," which is 40 percent smaller and lighter than the Company's prevailing products. A redesigned fin pattern has improved heat radiation efficiency by 10 percent, and newly developed thinner, yet high-strength materials also allow the new radiator to maintain the same level of durability as that of conventional products. The new radiator is 16 mm wide instead of 27 mm for current products, which is another contribution to weight reduction. The compact light-weight radiator will be supplied to Toyota vehicles, starting with the new "Lexus GS" that was put on the market on the same day. The Company will expand the application of the new technology to all ranges of radiators and also step up its marketing efforts targeting other automakers. A finer louver pattern and a 30 percent increase in the number of louvers on the surface of the fin are combined to improve efficiency in heat radiation. New thin and high-strength materials that are available around the world can be used for global production of the Company's radiators. (From an article in the Nikkan Jidosha Shimbun on January 27, 2012)

Application software "ARPEGGIO"
-The Company announced on December 8 that it has developed an application software "ARPEGGIO," which allows a smartphone to be operated on the car navigation display. In addition to making a call, a smartphone has other functions such as for navigation and reproduction of music, but using a handy device on the wheel can cause safety problems. The Company has thus developed an app for operating the smartphone on the car navigation display. The software will be made available in Japan starting in 2012 and then worldwide by stages. (From an article in the Nikkan Jidosha Shimbun on December 9, 2011)

Home energy management system: HEMS
-The Company announced that it has developed a home energy management system (HEMS) jointly with Toyota Housing Corporation and Misawa Homes Co., Ltd. The HEMS, the first product of this kind by Denso, has optional functions to work with plug-in hybrid (PHV) and electric vehicles (EV). The three companies and an additional partner Shin-Kobe Electric Machinery Co., Ltd. have also developed a household storage battery system that can be connected to the HEMS. The system can show real-time power consumption to enhance awareness for energy conservation and also enables the user to set charging time for PHV and EV remotely from the smartphone. The HEMS will go on sale starting in February next year. (From an article in the Nikkan Jidosha Shimbun on December 9, 2011)

Tandem Solenoid (TS) starter
-The Company announced on September 14 that it has developed a Tandem Solenoid (TS) starter, a new starter for stop/start systems. The product uses the world's first mechanism to separately control the forward shift of the pinion gear and the motor rotation. The technology shortens waiting time when restarting the engine by up to 1.5 seconds, offering a smoother engine feel at start-up. (From an article in the Nikkan Jidosha Shimbun on September 15, 2011)

Technical Alliance

-The Company announced on February 29 that it will develop jointly with U.S-based Intel Corporation next-generation in-vehicle information and communication systems. Combining the Company's expertise in the in-vehicle application business with Intel's information and communication technologies, the two partners will develop a viable next-generation system. This is the first time for Denso to tie up with other companies in a wide range of areas on development of in-vehicle information and communication systems. While the in-vehicle information display is currently used mainly for the car navigation system, the Company is aiming to develop a new feasible platform that expands functions of the on-board terminal from display of only vehicle information to connection to the Internet, navigation and audio devices. It also envisages an intuitive interface similar to mobile devices like smartphones and tablets, which makes it important to have partnership with Intel that holds accumulated knowhow in the information technology area. Hereafter, the two companies will go into discussions on details of the collaboration, including the development schedule. (From an article in the Nikkan Jidosha Shimbun on March 1, 2012)     

Capital Expenditure

(in 100 million JPY)

	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011	FY ended Mar. 31, 2010
Japan	1,030	954	-
North America	121	90	-
Europe	186	121	-
Asia/Oceania	382	228	-
Other	72	55	-
Overall	1,793	1,450	1,144

-The Company invested in predominantly in R&D facilities in order to respond to production increases, prepare for next-generation products, be able to switch over to new products, and develop new products.

Investments in Japan

-The Company will establish an innovative new production system in Japan for aluminum die-casting products. Manufacture and assembly processes will be directly connected based on the new system, which contributes to enhanced production efficiency and cost cutting. In addition to reducing the space needed for aluminum melting, heating and surface treatment to only one fifth of the existing operations, the company has developed significantly compact equipment, which requires neither a dedicated pit nor a tall building. By linking this facility directly to the assembly and inspection processes, the Company will be able to improve the feeding and distribution efficiency within the plant and largely save labor. The company says, "A thorough realignment of layout for each function from processing up to inspection may be effective enough to half our production cost". The Company is going to introduce the new system to its Nishio Plant (Nishio City, Aichi Prefecture), Daian Plant (Inabe City, Mie Prefecture) and other group facilities over the medium term. (From an article in the Nikkan Jidosha Shimbun on January 6, 2012)

Investments Outside Japan

<Mexico>
-The Company announced on January 10 that Denso Mexico S.A. de C.V. (DNMX) will establish a new plant in Silao, Guanajuato in central Mexico in 2013. The Company is going to invest 4.5 billion yen in the DNMX's third factory, which will start manufacturing car air conditioners in October 2013. The new facility will initially produce products for Ford and Honda. In the future, it is expected to become a supply hub for a wide range of vehicle manufacturers operating in Mexico. (From an article in the Nikkan Jidosha Shimbun on January 11, 2012)

<China>
-The Company said on November 17 that Guangzhou Denso Co., Ltd., its Chinese subsidiary for production of automobile air-conditioners based in Zengcheng, Guangzhou, will relocate its plant to expand its production capacity. The plant will be moved to another location in the same city with an investment of 6.3 billion yen at the request of the Chinese government, which is planning to redevelop the area where the existing plant is located. With an increased capacity after relocation, Guangzhou Denso is expecting to raise its sales 28.5 percent to 45 billion yen by 2015 from the level in 2010. The Company already has nine production facilities for air-conditioners in China. It is planning to add a new plant in Changchun, Jilin Province, which is slated to go into operation in December 2011. This will bring the number of production sites in China to ten in total by the end of this fiscal year March 2012. The additional capacity at a relocated Guangzhou Denso will contribute to boosting total production capacity in China. Construction of the new plant is scheduled to start in February 2012, and the building will be completed in January 2013. The moving is scheduled for the period from March 2013 to the end of December. Relocation will be conducted step by step while production is continued. (From an article in the Nikkan Jidosha Shimbun on November 18, 2011)

Capital Expenditure for FY ending Mar. 31, 2013

(in 100 million JPY)

	FY ending Mar. 31, 2013 (Estimate)	FY ended Mar. 31, 2012 (Result)	Rate of change (%)
Japan	1,170	1,031	13.5
North America	130	122	6.6
Europe	190	187	1.6
Asia/Oceania	510	382	33.5
Other	90	72	25.0
Total	2,090	1,794	16.5