Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	Rate of Change (%)	Factors
Overall
Sales	464,655	473,069	(1.8)	-
Operating profit	23,559	24,495	(3.8)	-
Ordinary income	27,344	27,799	(1.6)	-
Net income	18,818	16,427	14.6	-The Company recorded an extraordinary profit of 4.9 billion yen that it received as compensation from Tokyo Electric Power Company due to the accident at the Fukushima Daiichi Nuclear Power Plant.
Functional Materials
Sales	245,157	244,855	0.1	1)
Operating profit	21,358	20,139	6.1	-
Advanced Components and Systems
Sales	219,498	228,214	(3.8)	2)
Operating profit	2,218	4,374	(49.3)	-

 

Factors
1)
Inorganic Material
-Sales of carbon cathode materials, which are used in lithium-ion batteries, fell year-on-year due to the low volume of sales to eco-cars.

Resin Material
-Sales of resin materials used in paint fell year-on-year due to lower demand in the automotive sector.
-Sales of adhesives were about the same as they were during the previous fiscal year because higher sales of adhesives for construction materials were offset by lower sales of adhesives to the automotive sector.

2)
Automotive Components
-Sales of plastic molded products were about the same level as they were the previous fiscal year. Although there was a drop in demand for exports sales, they were offset by the increase of sales of molded compound electrical products for eco-cars.
-Sales of frictional materials were higher year-on-year because a new plant, which was built to take over production from the one rendered inoperable due to the accident at the Fukushima Daiichi Nuclear Power Plant, was able to make up this fiscal year for the production volume that was lost the year before because of the operational stoppage at the original plant.
-Sales of powdered metal products remained around the same level as they were the year before. Although sales of products for variable valve timing systems were higher in North America, they were offset by the drop in demand for automobiles in China.

Energy storage devices and systems
-Sales of automotive batteries were lower year-on-year because of the drop in sales of batteries for new vehicles.

(Note) Taking the opportunity of turning Shin-Kobe Electric Machinery Co., Ltd. into a wholly owned subsidiary, the Company established an Industrial Energy Headquarters on April 1, 2012. In line with this, however, the product segments for some products changed. For example, "advanced products" and "systems" were changed to "functional materials", starting from FY ended Mar. 31, 2013. As a result, the comparisons and analysis for FY ended Mar. 31, 2013 results are based on results that were recorded after the segment changes took place.

Further functional integration with Shin-Kobe Electric Machinery Co., Ltd.

-The Company and Shin-Kobe Electric Machinery Co., Ltd. agreed on transferring the operations of Shin-Kobe to the Company as of April 1, 2013. The business areas to be integrated into the Company are sales, business planning, and R&D operations for industrial batteries and electric devices, automotive batteries, forklift batteries, capacitors and other products. The Company made Shin-Kobe a wholly-owned subsidiary last year, and Shin-Kobe's R&D operation for batteries was already transferred to the Company in October. Through the integration to maximize synergies of the acquisition, Shin-Kobe will be mainly engaged in product manufacturing with some development and designing functions. The Company is poised to enhance development and system engineering capabilities based on its manufacturing expertise. (From an article in the Nikkan Jidosha Shimbun on Feb. 22, 2013)

Recent Development Outside Japan

<China>
- The Company announced that Hitachi Chemical (Nantong) Co., Ltd., its new Chinese subsidiary at the Nantong Economic Technological Development Area, Jiangsu Province, has commenced production operations. The facility with approximately 80 employees produces functional resins and chemical materials used in automotive paints. Its products include epoxy resin hardeners, functional acrylic monomers, synthetic resins for paints, saturated polyester resins and acrylic resins. The Company established the Nantong subsidiary to meet increased requirements for these products in China where domestic demand is expanding. With the production launch at the newly built facility, the Company now operates four plants for the functional resins and chemical materials business, which include its facilities in Japan, Malaysia and Dongguan, China. The company aims to further strengthen its business in the sector by filling demand from East Asia and the ASEAN region. (From an article in the Nikkan Jidosha Shimbun on Mar. 9, 2013)

- The Company announced that Hitachi Powdered Metals (Dongguan) Co., Ltd., its subsidiary in China to manufacture powder metallurgy products, will build a new facility on the premises of its existing plant to boost production capacity.  In addition, it will begin to manufacture sintered bearings, demand for which is on the increase. Hitachi Powdered Metals is planning to double its sales of powdered metallurgy products in fiscal 2015 from fiscal 2010 by adding new production facilities and product items. The Hitachi Chemical Group not only manufactures powdered metallurgy products at Hitachi Powdered Metals, but also is engaged in the operations of friction materials and lead-acid storage batteries. Another production facility for interior and exterior molded parts is also being constructed. (From an article in the Nikkan Jidosha Shimbun on Jun. 2, 2012)

<North America>
- The Company has announced that, in order to meet increased North American demand for its powder metal products for automobiles, it will expand production capacity at its U.S. subsidiary Hitachi Powdered Metals (USA), Inc., as well as newly establishing a powder metal products machining facility on the site of its Mexican subsidiary. Both factories will begin production in autumn, 2014. These steps are expected to double the company's North American sales by fiscal year 2015. The Hitachi Chemical Group currently has powder metal products manufacturing facilities in Japan, the U.S., China, Singapore, Thailand, and Indonesia, and its production facilities in India will begin operation in April 2013. (From a press release on January 16, 2013)

<Thailand>
- The Company announced construction of the 2nd factory of Japan Brake (Thailand) Co., Ltd. to increase production capacity of friction materials used in automobiles. This is a measure taken to double production capacity in response to growing demand from its major customers, Japanese affiliated automakers in Thailand, as they advance production volumes of automobiles in the country. The new plant is slated to go into operation in February 2013. The new plant will produce friction materials, including disk brake pads, brake assemblies and shoe assemblies. Another objective of the new facility is to disperse risks from natural disasters for securing stable supply of products. In Thailand, a major South Asian country with a rapidly developing automobile industry, the Hitachi Chemical Group manufactures friction materials, powder metal products, interior/exterior molding parts and lead-acid batteries. (From an article in the Nikkan Jidosha Shimbun on May 18, 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
Overall	25,500	25,700	26,400
Functional Materials	18,700	18,900	18,400
Advanced Components and Systems	6,800	6,800	8,000

R&D Facilities

Name of Facilities	Location
Tsukuba Research Laboratory	Ibaraki Pref., Japan
Tsukuba Research Laboratory (Yamazaki)	Ibaraki Pref., Japan
Tsukuba Research Laboratory (Shimodate)	Ibaraki Pref., Japan
Tsukuba Research Laboratory (Saitama)	Saitama Pref., Japan
Hitachi Chemical Research Center, Inc.	California, USA
Hitachi Chemical - SJTU Research & Development Center	Shanghai, China

Joint Development

- The Company and Institute of Microelectronics (IME), a science and research institute based in Singapore, agreed on September 13 to collaborate on a joint research of high performance material technologies to support thin wafer processing for next-generation 3-dimensional integrated circuit (3D IC) packaging. IME has strong background technologies of microelectronics, especially in IC packaging. Through this collaboration, the Company will leverage IME's advanced 3D IC process capabilities to enhance material technologies suitable for thin wafer processing that will make possible volume production of next-generation 3D ICs, demand for which is expected to grow in the future. The two companies expect material technologies that they have gained from the joint research will accelerate use of next-generation 3D IC packaging widely in automobile, aerospace, mobile phone and other applications. (From an article in the Nikkan Jidosha Shimbun on Sep. 14, 2012)

R&D Activities

<Functional Materials>
-Molded micro-wiring materials for package circuit boards
-Transparent adhesive materials for panels, such those used on large, outdoor display screens.

<Advanced Components and Systems>

-Hybrid circuit boards for jigs used for inspecting semi-conductors

Technology licensing-out Agreement

(As of Mar. 31, 2013)

Company	Other company	Contract Details	Period
The Company and Japan Brake Industrial Co., Ltd.	Federal-Mogul Corp. (USA)	Granting the working rights to the patent for disc brake pads. Providing technical information on disc brake pads.	Mar. 31, 2007 - Until the time production of vehicle models that use the subject products is stopped
The Company	Brembo S.p.A. (Italy)	Granting the working rights to the patent for disc brake pads. Providing technical information on disc brake pads.	Aug. 31, 2009 - Aug. 31, 2014 (The contract is scheduled to automatically renew every five years after the initial period ends.)
The Company	Hung-A Forming Co., Ltd. (Korea)	Approval to use technology that involves rear door modules (except for the inner panels)	Mar. 11, 2013 - Sep. 30, 2029 (The contract is scheduled to automatically renew every year after the initial period ends.)

Technology licensing-in Agreement

(As of Mar. 31, 2013)

Group company name	Other Party to the Agreement	Contract details	Period
The Company	Hitachi, Ltd.	Acquisition of patent rights and license to use technical expertise on μ-Chip tags.	Apr. 20, 2007 - Apr. 19, 2019
Shin-Kobe Electric Machinery Co., Ltd.	Panasonic Storage Battery Co., Ltd. (Japan)	Acquisition of patent rights and license to use technical expertise on lead storage batteries	Jul. 1, 2004 - Jun. 30, 2014

Capital Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011
Overall	46,700	37,300	30,400
Functional Materials	22,400	17,700	14,100
Advanced Components and Systems	24,300	19,600	16,300

Major Capital Investment Projects
Functional Materials
-Installed new facilities and equipment for functional plastics, chemical materials, and conductive film for solar-powered batteries at Hitachi Chemical (Nantong) Co., Ltd.

Advanced Components and Systems
-Installed production line at Namie Japan Brake Co., Ltd. to produce frictional materials for automobiles; and increase production capacity of carbon cathode materials used in automotive lithium-ion batteries.