Financial Overview

(in millions of JPY)

	FY2010	FY2009	Rate of Change (%)	Factors
Overall
Sales	320,082	252,020	27.0	-Making it a policy to focus on optimizing operations globally, the company established headquarters in China, following those it opened in Europe the previous year. -The Company worked on reorganizing its production and sales structures both in and outside Japan, and implemented initiatives to reduce the cost of goods.
Operating income	24,151	3,896	519.9
Ordinary income	23,972	5,530	333.5
Current net income	17,014	661	2474.0
Automotive Components Unit
Sales	186,962	168,631	10.9	1）
Operating profit	10,181	4,890	108.2	-

Factors
1) AC （Automotive Components) Business
-The AC Business is responsible for hydraulic shock-absorbers for four- and two-wheel vehicles, hydraulic equipment for four-wheel vehicles, and other products.

Hydraulic Shock-absorbers for Four-wheel Vehicles
-Due to the benefits of economic stimulation initiatives implemented worldwide, four-wheel-auto sales increased both inside and outside Japan. Sales of hydraulic shock-absorbers were 119.0 billion yen, a year-on-year increase of 5.8%.

Hydraulic Shock-absorbers for Two-wheel Vehicles
-After customers in and outside Japan stopped adjusting their inventory of hydraulic shock-absorbers designed for two-wheel vehicles, production volume started to rise. Sales were 22.2 billion yen, a 15.6% year-on-year increase.

Hydraulic Equipment for Four-wheel Vehicles
-Products used in power-steering systems comprise the main hydraulic equipment products for four-wheel vehicles, among which were hydraulic pumps for CVTs. Sales of these showed a significant increase year-on-year, reaching 38.5 billion yen, or a 24.2% rise.

Acquisitions

-The Company will will turn its group subsidiary Yanagisawa Seiki Mfg. Co., Ltd. (YS), a supplier of hydraulic equipment and engine components based in Nagano Prefecture, into its wholly-owned subsidiary in stock swap in an attempt to strengthen its group management structure and competitive edge. A stock exchange contract will be signed as of October 1, taking effect on November 15. The swap ratio is set at one stock for KYB to14.85 stocks for YS. (From an article in the Nikkan Jidosha Shimbun on September. 25, 2010)

New Company

-The Company announced establishment of a subsidiary for overseeing operations in China, with the aim of seeking optimal management of the China business and reinforcing the operating structure. A wholly-owned subsidiary will be set up in Zhenjiang, Jiangsu Province in December. KYB (CHINA) Investment Co., Ltd., which will be capitalized at 30.5 million U.S. dollars, will have functions to unify and reinforce the overall China operations by putting several existing KYB-affiliated companies in China under its control. (From an article in the Nikkan Jidosha Shimbun on Jul. 26， 2010)

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

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 Expenditure

(in millions of JPY)

	FY2010	FY2009	FY2008
Overall	3,218	2,816	3,268
AC(Automotive Components) Operations	1,733	-	-

R&D Activities

 AC (Automotive Components) Operations
Shock-absorbers
-The Company’s shock-absorbers for four-wheel vehicles provide a good balance in terms of riding comfort, offering just enough tension with the right amount of spring. The Company is supplying single-cylinder shock-absorbers for Toyota vehicles. These products are being equipped on the Lexus LFA.
-The Company developed highly-functional shock-absorbers with 40-step or stage adjustable damping force; and low-cost, compact strut-type shock-absorbers

Steering equipment for four-wheel vehicles
-The Company developed 4KS vane pumps for hydraulic steering systems that improve the discharge volume compared to what existing products do, supplying them to Mazda.

Vane pumps
-The Company is supplying its 4KW2 vane pump to General Motors do Brasil Ltda.
-The Company is supplying its vane pumps to US-based Chrysler for use in its V6-engines designed for D segment vehicles.

Production Technology
-The Company automated the welding process used on slide-shock-absorbers and developed an inspection assistance system.
-The Company completed developing technology that automates the assembly of vane pumps designed for CVTs.
-The Company developed technology that automatically inspects oil seals used in shock-absorbers.

Automobile-related licensing agreements

(As of Mar. 31, 2011)

Contract party (Country)	Subject	Details	Term
Kayaba-UMW Malaysia Sdn. Bnd. (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, 2012
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	Feb. 1, 2010 - Jan. 31, 2014
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. 1, 2011 - Jan. 31, 2012
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. 1, 2010 - Sept. 30, 2011
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, 2011 - Dec. 31, 2015
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. 1, 2011 - Sept. 30, 2012

Capital Expenditure

(in millions of JPY)

	FY2010	FY2009	FY2008
Overall	8,915	10,081	24,968
AC(Automotive Components) Operations	3,988	-	-

 

Investment Activities

-The Company is aiming to increase application of its products to German automakers as factory-installed genuine parts, as its subsidiary to oversee European operations started operations. KYB Advanced Manufacturing Spain, which went onstream at the end of last year, manufactures shock absorbers for the Audi RS6, Citroen C5 and other makes, in addition to those for the BMW 5-series, the first contract awarded by BMW. "Starting with the business with BMW, we are eager to enter into business with new customers, targeting automakers that manufacture shock absorbers in-house," says an official of the company. The new plant in Spain has improved quality of products in process by preventing intrusion of dust. One of the products manufactured at the plant is capable of connecting shock absorbers on each wheel by hydraulic control. They are used for high-performance suspension systems that automatically control damping force and stroke. The new company to oversee operations of the KYB group in Europe was established to contribute to speedy decision makings in areas such as production and sales. By utilizing this function, KYB intends to enhance its capability to present its new concept and products to automakers in Europe.(From an article in the Nikkan Jidosha Shimbun on September. 17, 2010)

-The Company will expand its production capabilities at KYB Industrial Machinery (Zhenjiang) Ltd., its 100% subsidiary in China. The unit, headquartered in Zhenjiang, Jiangsu Province, makes products including automotive suspension systems and hydraulic pumps for power steering systems. KYB is constructing a new manufacturing annex at this site in response to the growing demand in the Chinese market for automotive hydraulic pumps. The new building is expected to become operational in April 2012. The Company also intends to strengthen the manufacturing structures at another 100% subsidiary which is also based in Zhenjiang. The total investment by the end of FY2012 in the two Chinese units will amount to 5.8 billion yen. (From a press release on May 13, 2010)