Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	Rate of change (%)	Factors
Overall
Sales	535,779	556,914	(3.8)	-
Operating income	21,079	44,867	(53.0)	-Lower valuations were due to the depressed prices of raw materials. -The cause for the fall in profits was due to the loss resulting from revised valuations in line with the drop in prices for raw materials.
Ordinary income	21,251	44,288	(52.0)	-
Net income	12,955	17,886	(27.6)	-The Company recorded an extraordinary loss of 3,268 million yen for business reorganization costs.
High-grade Metal Products
Sales	219,920	229,211	(4.1)	1)
Operating income	17,655	17,710	(0.3)	-
Electronics and IT Devices
Sales	142,150	155,359	(8.5)	2)
Operating income	(864)	24,895	-	-
High-grade Functional Components
Sales	171,986	170,891	0.6	3)
Operating income	10,188	9,294	9.6	-

Factors
1) High-grade Metal Products
Sales of Major Products by Item
<Materials for dies and tools>
-Sales of steel for tools fell year-on-year due to the low demand for dies used for automobiles and construction equipment.

<Industrial equipment/energy-related materials>
-Sales of automotive materials contributing to better fuel consumption and less environmental impact were strong. However, sales for the year were lower because vehicle sales dropped after eco-car sales incentives in Japan ended, and because the economic stagnation in Europe still continued.

<Rolled steel>
-Sales were around the same level year-on-year because of waning demand in Japan for ships, automobiles, and industrial machinery, even though demand in developing countries, especially in China, remained stable.

2) Electronics and IT Devices
Sales of Major Products by Item
<Magnets>
-Rare-earth magnets: While sales of automotive cables and wiring were strong, they weren't high enough to offset the falling prices of raw materials and the slow demand for parts used in factory automation and household appliances.
-Ferrite magnets: While sales of automotive cables and wiring were strong, they weren't high enough to offset the falling demand for parts used in household appliances.

<Soft magnetic material>
-Sales of soft ferrite increased year-on-year because of higher volumes the Company delivered for solar-power-system parts and automotive parts.

3) High-grade Functional Components
Sales of Major Products by Item
<High-grade ductile steel>
-Sales were higher in Japan due to eco-car sales incentives and new-model vehicle launches. In addition, automotive demand in the U.S.A. continued to be extremely strong.

<Heat-resistant steel cast parts>
-Sales fell year-on-year, even though demand in Japan was strong due to the trend in making engines even more compact. On the other hand, the economy in Europe, one of the major market regions, continued to stagnate.

<Aluminum wheels>
-Sales of aluminum wheels grew due to several factors: increased vehicle sales resulting from eco-car sales incentives in Japan, increased production volumes of cars destined for export outside Japan, and strong demand that continued in the U.S.A. for passenger cars.

Merger with Hitachi Cable

-On July 1, 2013, the Company and Hitachi Cable merged their operations. The Company is the surviving company. Hitachi Cable became the Company's cable and wiring material business (company). Both companies are expanding their sales into a wide range of business sectors, from industrial and information infrastructures, to the automotive and electronics industries. In line with the merger, both companies are aiming to become a major, highly functional materials manufactures and enhance their competitive strengths worldwide.

Business Partnership

Partnership with Sumitomo Chemical on Exhaust-gas Filters
-The Company and Sumitomo Chemical Co., Ltd. announced on February 18 that they have signed a letter of intent to start a feasibility study for collaboration on their exhaust gas filter businesses. The two companies have jointly developed a new particulate filter with a high filtration efficiency and low pressure loss that help improve vehicle fuel efficiency. They are looking to further improve the performance of the particulate filter while considering setting up a testing line towards mass production. The final agreement is expected to be signed by the end of fiscal year 2013. (From an article in the Nikkan Jidosha Shimbun on Feb. 19, 2013)

Partnership with VIKAS of India on Automotive Casting Products

-The Company announced Nam Yang Metals Co., Ltd., a member of the Hitachi Metals Group, have entered into technical transfer and business collaboration agreement for automotive casting products with RPS VIKAS Castings Pvt. Ltd. and Garima Vikas Metals Pvt. Ltd. of the VIKAS Group in India. The tenacious ductile cast iron "HNM" for automotive parts produced by the Hitachi Metals Group is mainly used in suspension parts because of its high-strength and tenacious features. The Company has recently developed suspension parts that are more than 20 percent lighter than the existing parts, and they are being adopted by many automotive manufacturers in the world. Based on this agreement, technical assistance to the VIKAS Group and subcontracting of suspension parts production will start from February 2013. Annual sales for suspension products are expected to be 2 billion yen in FY2016. (From a press release on February 7, 2013)

Partnership with Taiwan-based Gloria Material Technology Corporation on High-grade specialty steel
-The Company has announced its decision to enter into a business tie-up with Taiwanese high-grade specialty steel manufacturer Gloria Material Technology Corporation (GMTC) for mutual cooperation in production, sales, technology, and investment. (From a press release on May 8, 2012)

Recent Development Outside Japan

U.S. Production of Low-content Dysprosium Magnet
-The Company announced its intention to mass-produce its low-content dysprosium magnets at Hitachi Metals North Carolina, Ltd., its production subsidiary in the U.S. Although use of dysprosium, a rare earth material, is reduced to less than 50 percent of that in existing dysprosium magnets, the new dysprosium magnets offer the same level of high performance as conventional products. Dysprosium, which is employed in hybrid and electric vehicle motors, is a significantly rare element produced almost exclusively in China. The Company is currently producing dysprosium magnets in Japan using materials procured from China. The Company is expecting demand for dysprosium magnets will increase in the U.S. where the government is tightening its environmental regulations, which is likely to boost production of hybrids and electric vehicles. The U.S.-made dysprosium magnets with low dysprosium content will be supplied to local Tier 1 suppliers and automakers. The Company will procure dysprosium locally in the U.S. to diversify risks from concentrated sourcing from China. By decentralizing its production base, the Company aims to mitigate currency exchange risks and to establish a stable supply network. (From an article in the Nikkan Jidosha Shimbun on Oct. 30, 2012)  

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

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
High-grade Metal Products	5,192	5,182	5,187
Electronics and IT Devices	3,514	4,299	4,707
High-grade Functional Components	2,370	2,672	2,330
Total	11,076	12,153	12,224
% of sales	2.1%	2.2%	2.3%

R&D Structure

-R&D Organizational Structure:

• Based on a divisional laboratory program the Company introduced, each business unit is responsible for developing its own products in line with its own strategy.
• Collaboration between Hitachi Ltd. and all the R&D sections is undergoing, with the aim of developing the next-generation, major, new products; new production methods, and fundamental technology.
• The Company is collaborating with external organization such as universities, including ones outside Japan, in order to sow the seeds for developing new materials and technology that lead to future, new products.

-The number of R&D staff is 653 as of the end of Mar. 31, 2013.

R&D Facilities

Facility	Location
Production System Laboratory	Saitama Pref., Japan
Metallurgical Research Laboratory	Shimane Pref., Japan
Magnetic Materials Research Laboratory	Osaka Pref., Japan
Casting Technology Research Laboratory	Tochigi Pref., Japan
Cable Materials Research Laboratory	Ibaraki Pref., Japan

Major Research and Development

Division	Development Activities
Electronics and IT Devices	-Low-loss reactors designed for EVs and photovoltaic generators.
High-grade Functional Components	-Expanding lineup of heat-resistant cast steel products for compact, fuel efficient yet high power engines -Expanding the line-up of ductile-steel products for lighter weight suspension parts.

Technology Licensed out Agreements

(As of Mar. 31, 2013)

Company (Location)	Contract item	Contract details	Period
Advanced Technology & Materials Co., Ltd. (China)	Fine crystal soft magnetic alloys	Granting of nonexclusive licenses on fine crystal soft magnetic alloys	From October 1, 2005 to the expiration date of patent covered by the contract.
-TDK Corporation (Japan) -Shin-Etsu Chemical Co., Ltd. (Japan)	Rare earth magnets	Granting of nonexclusive licenses on rare earth magnets	From March 24, 1988 (date of acquisition of the right to basic invention) to the date on which the right of patent application granted is determined.
MCP Canada Limited Partnership (Canada)	Rare earth magnets	Granting of exclusive licenses on rare earth magnets	From August 10, 2007 to the expiration date of patent covered by the contract.
Thinova Magnet Co, Ltd. (China)	Rare earth magnets	Granting of nonexclusive licenses on rare earth magnets	From November 14, 2012 to the expiration date of patent covered by the contract.
Beijing Zhong Ke San Huan High-Tech Co., Ltd. (China)	Rare earth magnets	Granting of nonexclusive licenses on rare earth magnets	From March 8, 2013 to the expiration date of patent covered by the contract.
Beijing Jingci Magnet Co. (China)	Rare earth magnets	Granting of nonexclusive licenses on rare earth magnets	From March 25, 2013 to the expiration date of patent covered by the contract.
Advanced Technology & Materials Co., Ltd. (China)	Rare earth magnets	Granting of nonexclusive licenses on rare earth magnets	From March 26, 2013 to the expiration date of patent covered by the contract.
Ningbo Yunsheng Co., Ltd. (China)	Rare earth magnets	Granting of nonexclusive licenses on rare earth magnets	From April 26, 2013 to the expiration date of patent covered by the contract.

Mutual Collaboration Technology Agreement

(As of Mar. 31, 2013)

Company (Location)	Contract item	Contract content	Period
MCP Canada Limited Partnership (Canada)	Rare earth magnets	Exchange of license on rare earth magnets.	From August 22, 2000 to the expiration date of patent covered by the contract.

Capital Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Overall	26,688	24,300	20,369
-High-grade Metal Products	10,336	11,191	8,272
-Electronics and IT Devices	8,368	6,848	6,560
-High-grade Functional Components	7,015	5,660	4,685

-Capital Investment Projects in FY ended Mar. 2013.

Segment	Objective of the investment
High-grade Metal Products	To create an organizational structure that can produce high-value added products and rationalize operations in Japan
Electronics and IT Devices	To create an organizational structure overseas to control production of rare-earth magnets; to make capital investments to continually improve production technology in Japan.
High-grade Functional Components	To make capital investments in order to increase production overseas of auto parts; to create a production structure overseas to manufacture piping equipment products.

Planned Capital Investments

(As of Mar. 31, 2013)

Segment	Planned amount of investment (in millions of JPY)	Objective of the investment
Overall	32,000	-
-High-grade Metal Products	16,000	Install new, streamlined facilities and enhance productivity on existing production lines
-Magnetic material	6,000	Install new, streamlined facilities and enhance productivity on existing production lines
-High-grade Functional Components	8,500	Install new, streamlined facilities and enhance productivity on existing production lines