Financial overview

( in millions of JPY )

-	FY2008	FY2007	Rate of Change (%)	Factors
Overall
Sales	329,262	387,080	(14.9)	Sales declined largely because of a sudden decline in demand in the automotive and construction machinery markets in the latter half of the year.
Operating income	49	18,271	(99.7)	The Company's efforts to reduce fixed costs ended without being able to offset: (1) higher material prices in the first half of the year and (2) the sudden drop in sales in the latter half.
Ordinary income	(1,395)	17,643	-	Income decreased partly because of negative currency translation resulting from the appreciation of the yen.
Current net income	(5,229)	8,397	-	The Company reported a loss in net income partly because of an extraordinary loss stemming from reorganization costs and an impairment loss on fixed assets at its subsidiaries outside Japan.
Hydraulic products
Sales	317,707	374,428	15.1	Refer to the explanations below.
Operating profit	6,391	23,812	73.2	-

Business results of hydraulic products used in four-wheeled vehicles

<Hydraulic shock absorbers>
- Business results in the first half of the year were strong, thanks to increased production in Japan and increased sales in Europe.
-In the second half, the global slump in auto sales caused a need for drastic inventory control, as well as a need to curtail auto production in almost all regions including Japan. As a result, its sales declined 15.7% year-on-year to 123,300 million yen.

<Hydraulic devices>
- Business results for hydraulic devices, mostly those used in power steering systems, for four-wheeled vehicles remained strong in the first half, thanks to increased needs for hydraulic pumps used in electric power steering systems and CVTs.
- In the latter half, its sales declined 19.6% year-on-year to 38,000 million yen, due to a significant cut in auto production.

 

R&D Structure

Facility	Location	Research Activities
Basic Technology Center	Sagamihara City, Kanagawa Pref.	Conducting basic research on hydraulic equipment and automobile devices and developing new products and technologies.
Product Engineering Center	Kani City, Gifu Pref.	In charge of development activities that improve product appeal such as enhancing performance and reducing costs, etc.

R&D Expense

( in millions of JPY )

-	FY2008	FY2007	FY2006
Hydraulic systems	3,268	3,264	3,636

R&D activities (FY2008)

Hydraulic snubbers

-The Company developed an accumulator, which is a core component of the Company's proprietary Relative Absorber System (REAS) that offers both a smooth ride and easily controlled driving. This accumulator, which comes with a damping valve, was jointly developed with KYB Suspensions Europe, S.A., an affiliate of the Company included in its consolidated financial statements. The Company is supplying these accumulators to PSA Peugeot Citoren, packaging them as a system combined with shock absorbers.

Fundamental technology

-The Company is conducting joint research activities with Nagano National College of Technology on the method of design theory analysis regarding warm gears used in electric power steering systems.
-The company completed joint research activities with Tokyo University and Toyota Motor Corporation on the control of four-wheel suspension systems by using electromagnetic power, when taking into consideration balanced energy. These activities achieved the desired outcome.

Automobile-related licensing agreements (as of Mar. 31, 2009)

Contract party	Country	Subject	Details	Term
Kayaba-UMW Malaysia Sdn. Bdn.	Malaysia	Shock absorbers for automobiles, front forks and oil cushion units for two-wheeled vehicles	1. Licensing of industrial property right 2. Licensing of manufacturing and distributorship rights 3. Provision of technical expertise, information and know-how	Oct. 13, 1993 - Oct. 12, 2010
P. T. Kayaba Indonesia	Indonesia	Shock absorbers for automobiles, front forks and oil cushion units for two-wheeled vehicles	1. Licensing of industrial property rights 2. Licensing of manufacturing and distributorship rights 3. Provision of technical expertise, information and know-how	Mar. 18, 1994 - Jan. 31, 2010
KYB (Thailand) Co., Ltd.	Thailand	Shock absorbers for automobiles, front forks and oil cushion units for two-wheeled vehicles	1. Licensing of industrial property rights 2. Licensing of manufacturing and distributorship rights 3. Provision of technical expertise, information and know-how	Feb. 01, 1996 - Jan. 31, 2010
KYB Manufacturing North America, Inc.	USA	Shock absorbers for automobiles	1. Licensing of industrial property rights 2. Licensing of manufacturing and distributorship rights 3. Provision of technical expertise, information and know-how	Oct. 01, 2001 - Sep. 30, 2009
KYB Steering Spain, S.A.	Spain	Automobile hydraulic equipment	1. Licensing of industrial property rights 2. Licensing of manufacturing and distributorship rights 3. Provision of technical expertise, information and know-how	Jan. 01, 2004 - Dec. 31, 2011
KYB Suspensions Europe, S.A.	Spain	Shock absorbers for automobiles	1. Licensing of industrial property rights 2. Licensing of manufacturing and distributorship rights 3. Provision of technical expertise, information and know-how	Oct. 01, 2004 - Sep. 30, 2009

Capital Expenditure

( in millions of JPY )

-	FY2008	FY2007	FY2006
Overall	24,968	23,564	19,735
Hydraulic systems	24,327	23,243	19,336

- The Company announced that it plans to create a new testing facility in Gifu Prefecture, Japan in order to develop and conduct testing of suspension systems and steering systems for vehicles and motorcycles. The new dedicated proving ground will enhance the Group's capabilities and efficiencies to develop products with improved levels of reliability, shortening development lead time. Construction of the new facility will begin this month and is scheduled to be completed in April 2010. It will be built on 595,000 square meters of land bordering Minokamo City and Kawabe-cho, Gifu Prefecture. The total investment is expected to reach around 2.7 billion yen. (From an article in the Nikkan Jidosha Shimbun on Aug. 5, 2008)

- The Company is working on its plan to start producing shock absorber brackets at KYB Manufacturing North America, Inc. in the US Switching from outsourcing to in-house production of these components will allow the company to reduce procurement costs and delivery expenses. Establishment of the additional production lines with stamping machines and other equipment will involve tens of millions of investments. KYB Manufacturing North America was established in 1986 in Franklin, Indiana. It will start producing junction parts including knuckle brackets, which connect the bottom of shock absorbers with axles, as well as harness brackets, which connect shock absorbers with ABS sensors and other systems. (From an article in the Nikkan Jidosha Shimbun on Feb. 4, 2009)