Financial Overview

(in million JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	Rate of Change (%)	Remarks
Overall
Sales	86,102	81,809	5.2	-
Operating income	3,219	3,565	(9.7)	-
Ordinary income	3,461	3,887	(11.0)	-
Net income	3,297	2,005	64.4	-
Automotive Component Business
Sales	72,365	70,905	2.1	-
Operating income	6,699	7,483	(10.5)	-

 

Major Contracts

-The Company has won a first contract for exhaust gas recirculation (EGR) valves for diesel passenger cars. The EGR valve will be supplied for a small diesel engine that a major Japanese auto manufacturer is currently developing to comply with Euro VI emission standards. Production of the valves is expected to start in the fiscal year 2015 at its Sasahara Plant in Toyota, Aichi Prefecture, Japan, with capacity of 15,000 units per month. The Company presently manufactures and supplies EGR valves only for heavy-duty diesel engines used in trucks. After the launch of production for passenger cars, it is also planning to manufacture valves at Taiho Gifu Corporation, its subsidiary in Mitake-cho, Gifu Prefecture. (From an article in the Nikkan Jidosha Shimbun on Nov. 15, 2012)

-The Company's subsidiary, Nippon Gasket, developed plastic gears, which began to be equipped on the Lexus "IS Hybrid" since May 2012. 

Acquisition

-The Company acquired Hengye Bearing Materials Co., Ltd (Changzhou), a major Chinese supplier of aluminum bearing materials. The Company, which already has its own plant for bearings in China, intends to establish a comprehensive local production structure by adding a materials supplier under its management. 

Revamping its production operations for engine bearings

-The Company has been reviewing and reorganizing its production activities in the engine bearing business in Japan. Currently, the Company has positioned its plants in Hosoya and Kyushu, as well as its subsidiary company's production facility Taiho Gifu as its main production facilities, rebuilding its production framework as outlined below. While predicting that future demand in the Japanese market will wane, the Company over the mid-term has set a policy to expand the production and sales of engine bearings in line with the growing demand worldwide for automobiles. (From an article in the Nikkan Jidosha Shimbun on September 24, 2012)

• Hosoya Plant: Engine-bearing plant set up for new products and new production technology
• Kyushu Plant: Production facility for supplying parts needed at other plants
• Taiho Gifu: Main mass-production facility

Outlook for FY ending Mar. 31, 2014

(in million yen)

	FY ending Mar. 31, 2014 (Forecast)	FY ended Mar. 31, 2013 (Actual Results)	Rate of Change (%)
Sales	90,000	86,102	4.5
Operating income	4,000	3,219	24.3
Ordinary income	3,700	3,461	6.9
Net income	2,300	3,297	(30.2)

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

Mid-term Management Plan

-The Company has initiated its VISION 2015 mid-term management plan that covers fiscal years 2013 through 2015. Its objective is to achieve gross operating revenue of 110 billion yen and a 6.5% operating profit margin by the end of March 2016.

• Global expansion of products and manufacturing regions: accurately understand the global bearing market and appropriately supply the right products to the right geographical regions.
• Redefining product and manufacturing technology: expand technological expertise gained from conducting its main bearing business, to lubrication systems centered on tribology. 
• Enhance human resources

- Expanding bearing business: Achieving a 20% share of the engine bearing market. Expand sales into other sectors besides the passenger-car market, achieving the top share (25%) of the global market in FY2015. In addition, adding seven to eight new production lines worldwide, increasing global production capacity to 40 million units.

-Expanding in sectors other than bearings

• EGR valves: Operating revenue at the end of the 2013 fiscal year was 1,600 million yen. While the Company is currently supplying EGR valves mainly to large-size vehicles, it plans to expand this business in the future to include diesel-engine vehicles, aiming to achieve operating revenue of 2,300 million yen in the 2015 fiscal year. 
• Vacuum pumps: Operating revenue in the vacuum pump business was 650 million yen for the 2013 fiscal year. The Company plans to expand its product line for low-fuel-consumption and diesel-engine vehicles. In the 2015 fiscal year, the Company plans to supply its products to new models of large-size passenger cars. By March 2016, the Company plans to supply vacuum pumps for low-cost vehicles designed for emerging markets by, for example, launching production in Thailand, aiming for operating revenue of 3,000 million yen. 
• Plastic gears: The Company started producing plastic gears in December 2012. Operating revenue in this business sector was 30 million yen in fiscal year 2013. Since May 2013 the Company has being supplying these gears to the Lexus "IS Hybrid", with plans to increase the types of vehicle models it will supply to so as to achieve operating revenue of 1,500 million yen at the end of March 2013. 

Awards

-The Company was awarded the 2012 Technical Development Award from Toyota, receiving recognition for reducing the number of production processes by 40% based on the production method used on its RR Production Line.

R&D Expenditure

(in million JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Overall	3,202	3,020	2,496
Automotive Component Business	2,910	2,810	2,398

R&D Structure

-The Company set up its R&D structure so that it can address diverse issues under a consolidated framework consisting of several divisions such as the basic research division dealing with tripology (friction/wear/lubrication technology) and other themes; the product development division; and the production technology development division, all working at the Main Technology Building.

-In addition to the above, the Company also has a friction technology research center, an engine experiment center, and a production technology development center.

R&D Activities

Automotive Parts Business
<Bearing Business>
-The Company is developing a next-generation bearing production technology that enables production of all types of bearings in an efficient manner. In 2012, the Company introduced a new production system called the RR Line, which has significantly increased production efficiency by eliminating molding and processing space by nearly 40 percent. Yet, only bearings for engines of 1,500cc or less can be made on the RR Line. The Company is now going to establish a general production line capable of manufacturing bearings used in heavy-duty engines as well. Unlike the previous RR Line project, which focused on streamlining the molding and machining processes, the new project will include redesigning of equipment used in all processes, from material feeding, preparations, molding, machining up to testing. Using a demonstration line already installed at Taiho Seiki Co., Ltd., its group company in Toyota, Aichi Prefecture, the Company is going to develop optimum specifications for the advanced technology. The new production line is expected to become operational by 2015. (From an article in the Nikkan Jidosha Shimbun on Jan. 25, 2013)

-In the area of special bearings designed for automotive air-conditioning compressors, the Company developed low-cost, new shoes and swash plates, launching commercial production of them and enhancing its cost competitiveness.

<Die-casting products>
-The Company has been mass-producing diecast products in which thin-walled-diecasting technology has been effectively applied to make the products lighter. In addition, it is making diecast products that are lower in cost as a result of eliminating the need for machining, and by optimizing cooling and fluidity through fluidity analysis based on CAE.

<Electronics assembly business>
-The Company has been mass-producing EGR valves that comply with the post New Long Term Exhaust Gas Regulations of 2009 in Japan, and with 2010 exhaust gas regulations in the U.S.A. These valves have been awarded the Technical Development Award two years in a row from Hino Motors.

<Engine lubrication management>
-Leveraging expertise it has accumulated from development of engine bearings, the Company will embark on developing technologies for engine lubrication management. The Company will enter the new business area, starting with development of a variable oil jet to control oil volume to be injected for cooling engine pistons. The Company expects this technology will optimize flow of lubrication oil in the internal combustion engine to improve fuel efficiency. (From an article in the Nikkan Jidosha Shimbun on Oct. 12, 2012)

<Other>
Plastic gears
-In 2012, the Company developed plastic gears that use "pulp mold technology" that was developed from producing gaskets. While these plastic gears provide the same level of durability as those produced by competitors, they are 10% less costly and reduce friction by 70%.

Capital Expenditure

(in million JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Overall	4,763	6,123	2,456
Automotive Component Business	4,397	4,789	2,391

Automotive Parts Business
-The Company made capital investments in order to increase its production capacity and facilities and also to migrate to producing new products. Capital investments in and outside Japan are outlined below.

• Affiliated companies in Japan: The Company made capital investments mainly to increase its production capacity and facilities and to migrate to producing new products at its affiliated companies in Japan, especially spending to increase the production capacity of facilities at Taiho Gifu to manufacture bearings.
• Facilities outside Japan: The Company made capital investments to increase its production capacity and facilities, migrate to producing new products, and install new equipment and facilities. The majority of spending was to expand the PT. Taiho Nusantara Plant.

Investment Outside Japan

<Thailand>
-Its subsidiary, Taiho Thailand Co., Ltd, will build a new plant for producing engine vacuum pumps. The new factory will be built at the 304 Industrial Park of Prachinburi in Thailand, at a site of around 40,000 square meters with the factory area of about 4,500 square meters. Construction cost, including for the land, will be approx. 700 million yen and the total investment, including equipment installation, will amount to about 1 billion yen by 2015. The factory will start operations in February 2014. Monthly production in the initial year will be 18,000 units, which is to be increased to 42,000 units by 2015. The Company hopes to boost its sales in the ASEAN markets centering on Thailand, by supplying cost competitive products with high quality. (From an article in the Nikkan Jidosha Shimbun on Oct. 31, 2012)  

Planned Capital Investments

-The Company plans to spend 9,500 million yen to make capital improvements during the 2014 fiscal year. The breakdown is according the projects listed below.

Plant	Facilities to be built	Planned investment (in million JPY)	Objective
Taiho Kogyo Co., Ltd. Headquarters and Headquarters plant (Aichi Pref., Japan)	Production facilities to manufacture die casting products, etc.	181	Respond to switching over to producing new products, and maintain and renew facilities
Taiho Kogyo Co., Ltd. Hosoya plant (Aichi Pref., Japan)	Production facilities to manufacture bearings, etc.	2,160	Respond to switching over to producing new products, and maintain and renew facilities
Taiho Kogyo Co., Ltd. Shinohara plant (Aichi Pref., Japan)	Production facilities to manufacture assembly products	1,752	Respond to switching over to producing new products, and maintain and renew facilities
Taiho Kogyo Co., Ltd. Kyushu plant (Kagoshima Pref., Japan)	Production facilities to manufacture bearings, etc.	112	Respond to switching over to producing new products, and maintain and renew facilities
Taiho Kogyo Co., Ltd. Koukai plant (Aichi Pref., Japan)	Production facilities to manufacture bearings, etc.	499	Respond to switching over to producing new products, and maintain and renew facilities
Taiho Seiki Co., Ltd. Headquarters and Headquarters plant (Aichi Pref., Japan)	Production facilities to manufacture bearings, etc.	15	Expand operations and increase production capacity
TET Co., Ltd. Kasugai plant (Aichi Pref., Japan)	Processing facilities	94	Respond to switching over to producing new products, and maintain and renew facilities
Taiho Gifu Co., Ltd. Headquarters and Headquarters plant (Gifu Pref., Japan)	Production facilities to manufacture bearings, etc.	318	Respond to switching over to producing new products
Nippon Gasket Co., Ltd. Shiga Plant (Shiga Pref., Japan)	Production facilities to manufacture gasket products	353	Respond to switching over to producing new products
Taiho Corporation of America Headquarters and Headquarters plant (Ohio, USA)	Production facilities to manufacture bearings, etc.	10	Maintain and renew facilities
PT. Taiho Nusantara Headquarters and Headquarters plant (Karawang, Indonesia)	Production facilities to manufacture bearings, etc.	23	Respond to switching over to producing new products
Taiho Corporation of Europe Headquarters and Headquarters plant (Ujhartyan, Hungary)	Production facilities to manufacture bearings, etc.	95	Respond to switching over to producing new products
Taiho Corporation of Korea Headquarters and Headquarters plant (Daegu, Korea)	Production facilities to manufacture bearings, etc.	111	Respond to switching over to producing new products
Taiho Kogyo Corporation of Yantai Headquarters and Headquarters plant (Yantai, China)	Production facilities to manufacture bearings, etc.	26	Maintain and renew facilities
Hengye Bearing Materials Co.,Ltd (Changzhou) Headquarters and Headquarters plant (Changzhou, China)	Production facilities to manufacture bearings, etc.	188	Respond to switching over to producing new products