Financial Overview

(in millions of JPY)

	FY2009	FY2008	Rate of change (%)	Factor
Overall
Sales	466,358	517,262	(9.8)	-
Operating income	21,454	12,808	67.5	-
Ordinary income	18,744	371	4952.3	-
Current net income	11,486	(5,654)	-	-
Tire Operations
Sales	367,565	399,801	(8.1)	-Sales volume, in terms of both amount and monetary figures, of tires for new vehicles fell short of those of the previous fiscal year. This was the result of a significant decline in automobiles produced   for export at automakers compared to the volumes that they had produced the previous fiscal year, especially in the first half.
Operating income	20,462	9,890	106.9	-

Contracts

-The Company announced that it has delivered its "ADVAN Sport" tire as original equipment for the large-size Audi SUV "Q7." The tire was selected for its well-balanced performance in stability and comfort at high speeds, as well as excellent braking performance. The Q7 is the third Audi model to be fitted with the Company's tires, following the "S6" and "S8." Two sizes of the tire will be available for both front and rear, 275/45R20 and 265/50R19. (From an article in the Nikkan Jidosha Shimbun on June 1, 2009)

-The Company has announced that its ADVAN Sport tires have been selected as original equipment for the Mercedes-Benz C-Class produced by Daimler AG. The tires in three sizes are chosen for the C-Class: 205/55R16 91V, 225/45R17 91W, and 245/40R17 91W. This latest award marks the fifth nomination of Yokohama tires as original fitment for Mercedes-Benz models after CL65AMG, CL63AMG, C63AMG and ML63AMG. (From a press release on Jul. 1, 2009)

Joint Venture

-The Company and ITOCHU Corporation will jointly establish a company for the manufacturing and sales of tires, called Yokohama R.P.Z. L.L.C, in Russia. The new company will be capitalized at 3.76 billion ruble (approximately 11.7 billion yen). The Company will hold a controlling 80% equity share while the remaining 20% will be held by ITOCHU. The new business will be investing 4.8 billion ruble (approx. 14.8 billion yen) and build a new plant in the Special Economic Zone (SEZ) in the state of Lipetsk. The facility will have an annual production capacity of 1.4 million passenger-car tires. The construction work is due to begin in Mar. 2010 with the anticipated start of operations for Sep. 2011. (From a press release on Aug. 21, 2009)

Business Plan

-The Company announced the second phase of its Grand Design (GD) 100 medium-term business plan, which ends in fiscal year 2011. The Group's major financial targets in the second phase include increasing its net sales to 550 billion yen, which compares with its record high revenue achieved in fiscal year 2007, and raising its operating profit to 38.5 billion yen. The targeted operating profit margin is 7 percent, up 1 percent from the level in fiscal year 2007. The Tire Group will focus its growth strategy on emerging markets such as China and Russia, while strengthening sales of sport tires outside Japan. The Multiple Business Group, which manufactures and sells diversified products including industrial components, will strengthen its European business through its new subsidiary in Germany. In addition, the company will further step up its all-out cost-reduction initiatives in an effort to achieve its targets. (From an article in the Nikkan Jidosha Shimbun on May 13, 2009)

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

Outlook for FY2010

(in billions of JPY)

	FY2010 (forecast)	FY2009	Year-on-year Fluctuation
Sales	520.0	466.4	53.6
-Tire Operations	412.0	367.5	44.5
Operating income	18.0	21.5	(3.5)
Ordinary income	14.5	18.7	(4.2)
Net income	8.0	11.5	(3.5)
Investment Expenditure	30.9	17.5	13.4

 

Sales by Geographic Area

(in billions of JPY)

	FY2010 (forecast)	FY2009	Year-on-year Fluctuation
Japan	358.0	324.0	34.0
North America	98.0	90.6	7.4
Asia	28.0	22.0	6.0
Other regions	36.0	29.8	6.2
Total	520.0	466.4	53.6

 

Tire Production Volume and Operating Ratio (Number of tires)

(unit: ten thousand tires)

	FY2010 (forecast)	FY2009	FY2008
Japan	3,350	3,110	3,420
Overseas	2,050	1,670	1,720
Total	5,400	4,780	5,140
Operating ratio	98%	85%	88%

Tire Production Capacity (Number of tires)

(unit: ten thousand tires)

	FY2010 (forecast)	FY2009	FY2008
Japan	3,630	3,590	3,590
Overseas	1,929	1,859	1,835
Ratio of overseas capacity	34.7	34.1	33.8
Total	5,559	5,449	5,425

R&D Expenditure

(in millions of JPY)

	FY2009	FY2008	FY2007
Overall	13,280	15,277	15,289
Research Headquarters	1,517	1,829	1,936
Tire Operations	7,944	9,098	8,993

R&D Structure

Research facilities
-RADIC, a research and development center at the Hiratsuka factory, is the main facility. The Company is working on developing new technology through using equipment such as supercomputers, electronic microscopes, ESCA (surface analysis device for materials) and centrifugal separators.

-The Company conducted tests using real vehicles at its integrated tire testing facility D-PARC and another tire testing facility for the winter T*MARY.

-The Company announced that it held an opening ceremony at the Tire Test Center of Asia, its new comprehensive tire proving ground in Rayong Province, Thailand. Construction of the new facility began in Sep. 2007 and completed at the end of 2008, with a total investment of 2.5 billion yen. Some tire evaluation operations already began in Jan. The 1.69 million-square-meter facility, which is 36 times larger than Japan's Tokyo Dome stadium, has a 4.1-kilometer high-speed track with a long stretch of 1 kilometer. It also has a 100,000-square-meter multi purpose testing track. The Company currently evaluates tires at its two proving grounds in Japan and some contract test courses in and outside Japan. The new facility in Thailand is expected to greatly expand the Company's testing capacity. (From an article in the Nikkan Jidosha Shimbun on May 11, 2009)

R&D Profile
-The R&D Division is developing not only new materials but also advanced simulation techniques capable of analysing the structures and multiple reactions of materials to various elements, making use of the Company's accurate and sophisticated analysis technology. Its development focus is set on engineering environmentally friendly tire materials as well as conducting studies to find where these materials can be further applied, such as in the fields of electronics, new energy, and energy saving technologies.

-In the tire business, the Company is working to achieve the target it set, which is for all of its products to be environmentally friendly by FY2017, which will end in March 2018.

Product Development

-The Company announced that it has developed a new inner liner for tires, which will further improve fuel efficiency of vehicles equipped with eco-friendly tires. An inner liner is a piece of rubber sheet attached to the inner side of the tire for preventing air leakage. The Company says the new product will be featured on tires scheduled to go on sale in 2010 or later. The liner is made of a rubber compound, which was developed based on the material of existing inner liners. In addition to offering a significant reduction in natural air leak from tires, the new technology achieves an 80 percent reduction in product thickness compared with conventional technology, contributing to making lightweight tires. (From an article in the Nikkan Jidosha Shimbun on Oct. 22, 2009)

Capital Investment

(in millions of JPY)

	FY2009	FY2008	FY2007
Overall	17,500	43,300	27,300
Tire business	14,800	38,400	23,000

-The Company invested 6.5 billion yen to enhance production facilities and improve productivity and product quality in order to produce new products. This enabled the Company to produce high-performance products.

-The Company invested 3.8 billion yen to construct additional facilities to produce passenger-car and light-duty-truck tires; and to build a new, large proving-ground at Yokohama Tire Manufacturing (Thailand).

Investments Outside Japan

<Emerging countries>
-The Company announced that it will step up the fourth phase of the plant expansion project at Hangzhou Yokohama Tire Co., Ltd., its subsidiary producing and selling passenger-car tires in Hangzhou, Zhejiang Province, China. The Company, which announced in July its plan to increase the annual production capacity at the subsidiary by 1.1 million tires, is adding extra 1 million tires to the original plan, since vehicle production and sales are projected to increase further in China. The Company is investing 7 billion yen in the fourth phase of the expansion project, which is now intended to bring up the annual production capacity from 3 million tires to 5.1 million tires. Production at the expanded facility is scheduled to begin in January 2011. (From an article in the Nikkan Jidosha Shimbun on Oct. 31, 2009)

-The Company revealed that it will revive facility investment of over 30 billion yen per year for two years from the next fiscal term. It will be used to increase the global production capacity including construction of two new plants in emerging countries. The investment will maintain the equivalent level of the depreciation cost, unlike the heavy investment the Company made until 2008, when spending largely exceeded the depreciation cost. During the two fiscal years through March 2012, the Company will start the new plant construction in the suburbs of Moscow, Russia in the middle of 2010 and the Phase IV expansion work at its plant in Hangzhou, China. Planned investment in the two years will total approx. 15 billion yen in Russia and approx. 7 billion yen in Hangzhou. (From an article in the Nikkan Jidosha Shimbun on Nov. 6, 2009)

Planned Capital Investments (Tire business)

(As of Mar. 31, 2010)

Facility (Location)	Business	Expected Investment (millions of yen)	Start	Planned completion	Increased capacity after completion
The Company
Hiratsuka Plant (Kanagawa, Japan)	Manufacturing	1,785	Apr. 2009	Mar. 2011	-
Mie Plant (Mie, Japan)	Manufacturing	2,486	Apr. 2009	Mar. 2011	-
Mishima Plant (Shizuoka, Japan)	Manufacturing	1,983	Apr. 2009	Mar. 2011	-
Shinshiro Plant (Aichi, Japan)	Manufacturing	5,859	Apr. 2009	Mar. 2011	-
Onomichi Plant (Hiroshima, Japan)	Manufacturing	853	Apr. 2009	Mar. 2011	-
Yokohama Tire Corporation Salem Plant (Virginia, USA), etc.	Manufacturing and other business	3,011	Apr. 2009	Mar. 2011	-
Yokohama Tire Manufacturing Thailand Headquarters and Plant (Rayong, Thailand)	Manufacturing and other business	16,267	Jun. 2007	Apr. 2011	2.8 million passenger car/light truck tires
Hangzhou Yokohama Tire Co., Ltd. Headquarters and Plant (Zhejiang Prov, China)	Manufacturing and other business	6,974	July, 2009	Jan. 2011	2.1 million passenger car tires
Yokohama R.P.Z. L.L.C Headquarters and Plant (Lipetsk, Russia)	Manufacturing and other business	14,828	July, 2009	Sep. 2011	1.4 million passenger car tires