Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	493,766	464,655	6.3	-
Operating profit	27,775	23,559	17.9	-
Ordinary income	32,081	27,344	17.3	-
Net income	24,103	18,818	28.1	-
Functional Materials
Sales	260,800	245,157	6.4	1)
Operating profit	24,400	21,358	14.2	-
Advanced Components and Systems
Sales	232,966	219,498	6.1	2)
Operating profit	3,379	2,218	52.3	-

 

Factors
1)
Inorganic Material
-Business performance improved year-on-year because of greater sales of carbon electrode material for lithium-ion batteries due to strong sales of products to eco cars.
-Business performance improved year-on-year because of greater sales of carbon products such as automotive brushes for emerging countries.

2)
Automotive Components
-Business performance ended up being on par with that of the previous year because the favorable currency translation was offset by lower demand of resin products by some of its customers.
-Business performance improved year-on-year because of strong sales of friction products at subsidiaries overseas.
-Business performance improved year-on-year because of greater demand for powder metallurgy products in North America and Japan.

Energy storage devices and systems
-Business performance was higher year-on-year because of greater sales of automotive batteries for eco-cars equipped with environmentally friendly features such as idle-stop function; and production launches at plants overseas.

Recent Development in Japan

-The Company will absorb its wholly owned subsidiary, Hitachi Powdered Metals Co., Ltd. (HPM), effective April 1, 2014. HPM is a manufacturer of powder metal products and chemical products. Hitachi Chemical has prioritized its automotive-related business as an area for business expansion. As a part of this strategy, Hitachi Chemical made HPM its wholly owned subsidiary in April 2008. In April 2010, HPM's sales and business planning functions were transferred to Hitachi Chemical. After discussing future business enhancement initiatives, the two companies finally determined that further sharing of management resources and unified operations would be necessary to facilitate the development of new products, strengthen production technology, and enhance the companies’ supply systems. (From an article in the Nikkan Jidosha Shimbun on December 28, 2013)

Recent Development Outside Japan

<Indonesia>
-The Company will increase production capacity of powder metal products for automobiles at its manufacturing subsidiary in Indonesia. The name of the subsidiary was changed from PT Hitachi Powdered Metals Indonesia to PT Hitachi Chemical Indonesia (HCID). HCID had been producing powder metal products mainly for motorcycles in Indonesia since 2012. However, the decision was made to increase its production lines within the premises of its existing plant, in order to deal with the expansion of automobile production in the country. The new lines will begin operations in spring 2015 and will mainly produce powder metal products for automobiles. By expanding production of the powder metal products for both automobiles and motorcycles, Hitachi Chemical Group aims to increase its sales in Indonesia by 50% in the fiscal year ending March 2016 (compared to the result of the fiscal year ended March 2013). (From an article in the Nikkan Jidosha Shimbun on December 7, 2013)

<India>
-The Company announced that it has held opening ceremonies at its two manufacturing subsidiaries, Hitachi Chemical India Private Limited (HCIN) and Allied JB Friction Private Limited (AJF), in Neemrana Industrial Area, Rajasthan State, India. HCIN, a wholly-owned subsidiary of the Hitachi Chemical group, started manufacturing powder metallurgy products in August 2013. AJF, in which 51 percent is owned by the Hitachi Chemical group and 49 percent is owned by Indian joint venture Allied Nippon Limited (ANL), will be engaged in manufacturing friction materials for automobiles and motorcycles. Production is scheduled to begin in November 2013. (From a press release on October 21, 2013)

<China>
-The Company held a ceremony on September 9 for the opening of its subsidiary, Hitachi Chemical Automotive Products (Zhengzhou) Co., Ltd. The subsidiary, located in Zhengzhou, Hunan, China, produces molded products for the automotive industry. The subsidiary was established in May 2011 as a local supply base of molded interior and exterior parts for automotive use within China. The total investment into the facility is approximately JPY 1.9 billion. The plant is expected to have a workforce of 220 and is scheduled to start operations in January 2014. (From an article in the Nikkan Jidosha Shimbun on September 12, 2013)

Business Plan

-The Company will increase production of automotive powder metallurgy and molded plastic parts overseas. Japanese automakers and Tier 1 suppliers, the company's main customers, are accelerating their initiatives to transfer their manufacturing bases outside Japan despite the weakening yen. In response to such moves, Hitachi Chemical will also enhance its global production operations, while expanding its sales network to serve foreign automakers. Through these efforts, the company aims to raise the overseas production ratio of its total auto parts sales by 1.4 times in the next three years. (From an article in the Nikkan Jidosha Shimbun on May. 23, 2013)

Outlook for FY ending Mar. 31, 2015

(in millions of JPY)

	FY ending Mar. 31, 2015 (Forecast)	FY ended Mar. 31, 2014 (Actual Results)	Rate of Change (%)
Sales	525,000	493,766	6.3
Operating income	36,000	27,775	29.6
Ordinary income	36,000	32,081	12.2
Net income	24,000	24,103	(0.4)

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

R&D Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	26,200	25,500	25,700
Functional Materials	19,900	18,700	18,900
Advanced Components and Systems	6,300	6,800	6,800

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

R&D Activities

<Functional Materials>
-Development of photosensitive transparent materials for sensors, and transparent materials for touch panels.

<Advanced Components and Systems>

-Development of silent sprockets for CVT oil-pumps, ultra-think built-up circuit boards for smart phones.

Product Development

Hands-free power liftgate
-The Company has developed a hands-free power liftgate made of plastic. The new liftgate system was developed jointly with Germany-based Brose Fahrzeugteile GmbH & Co. KG. Hitachi Chemical already supplies plastic liftgate modules for the Nissan X-Trail, offering significant weight-saving feature to the SUV model. This time, the company has added sensor solutions to provide extra advantages for loading and unloading. The new liftgate module uses capacitive sensors that are designed to respond to a simple movement, while preventing trapping of body parts or other objects. Users can open and close the liftgate by simply moving their foot near the sensor even without touching anything. This hands-free function gives a great convenience especially when the user is carrying many things. The plastic liftgate is expected to offer excellent sensing properties, as it doesn't contain metals that affect sensing performances. Compared with a conventional steel liftgate, the new liftgate module is 30 percent lighter. The lightweight system also increases the power motor efficiency and improves safety performances. (From an article in the Nikkan Jidosha Shimbun on March 20, 2014)

Technology licensing-out Agreement

(As of Mar. 31, 2014)

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, 2014)

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, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	33,500	46,700	37,300
Functional Materials	13,600	22,400	17,700
Advanced Components and Systems	19,900	24,300	19,600

Major Capital Investment Projects
Functional Materials
-Invested to increasing production capacity of photosensitive film for touch panels in Japan.

Advanced Components and Systems
-Invested to expand its powder metallurgy business in the U.S.A.; and increase production capacity of lithium-ion batteries for industrial use.