Financial overview

(in millions of JPY)

	FY2007	FY2006	Rate of change(%)	Factors
Sales	65,382	60,881	7.4	-
Operating income	3,205	76	*1	Despite some negative factors such as escalating prices of materials, operating income and ordinary income increased significantly as a result of the following factors: -a rise in sales; -the Company's initiatives to improve efficiency through its NP-ll program*, which marked the third year of its launch; and -a 70 percent decrease in operating loss at its North American subsidiary. *The NP program: The Compan's drive to reduce procurement costs.
Ordinary income	3,112	143	*2
Net income	490	(1,397)	-	-Although there were special losses, which include added product warranty costs and losses incurred from the Company's reorganizing its subsidiaries and affiliates, net income rose year-on-year thanks to improved operating profit.

*1: up 3,129 million yen year-on-year
*2: up 2,969 million yen year-on-year


Domestic business
-In order to improve production efficiency, the Company integrated its body sealing production lines in the Kanto region into the Koriyama district. Before this consolidation, the Company had been manufacturing body sealing product also in the Moka district.

-The Company established the Precision Elastomer Division for the purpose of expanding sales of auto parts other than brakes as well as industrial components. The Company intends to develop these products by incorporating and upgrading its technology used in making precision rubber products and plastic parts.


Overseas business
<China>
-Kinugawa Rubber (Guangzhou) Co., Ltd. enjoyed greater sales, thanks to greater volume of production at Dongfeng Nissan, its major customer. Kinugawa Rubber (Guangzhou) was established in 2006.

-Fuzhou Fukwang Rubber & Plastic Co., Ltd. won new contracts from Volvo. It was also awarded increased business from Ford after having been given the automakers' Excellent Quality Award. The total revenue from these two companies grew 70 percent from what it was last year.

<Thailand>
-In June 2007, the Company acquired a 49.0 percent share in CPR of Thailand, which is listed on the Thai MAI market. The acquisition added the anti-vibration and molded rubber parts segments to the Company's operations, expanding its scope of business in the country.

R&D Expenditure

(in millions of JPY)

	FY2007	FY2006	FY2005
R&D	1,705	1,976	2,023
Body parts	1,296	1,531	1,561
Brake parts	160	176	200

The Company's R&D spending is focused on the following developments:
-The Company is working to develop products that meet the current and expected customer demand for high performance, high quality, and high value-added features, especially focusing on the development of environmentally friendly elastomer material and processing technology.  

-The Company is working on conducting research and development activities through a collaboration of industry, government, and academia in cooperation with research institutions including universities, in preparation for entry into new business areas.


Major developments
1.Body parts
-Development of coating material and adhesive which do not use organic solvent; in order to satisfy regulations which control the use of organic solvent. 

-Development of hybrid rubber materials which do not require reforming coating.

-Development of highly recyclable, highly functional  plastic materials 

-Development of low-density and highly foamable rubber materials in order to make lightweight products.

-Development of metallic luster exterior components that improve design.  

-Development of sealing components with high-performance insulating properties that improve sound reduction.

2.Brake parts
-Development of ultra-hard products that are aimed at improving the durability of brake cups exposed to high hydraulic pressure. 

-Developed new manufacturing methods for producing brake couplings and piston seals.


Technological Licensing Agreements (As of March 2008)

Partner	Country	Purpose	Contract period
Faltec Co., Ltd.	Japan	Window moldings and their manufacturing methods	From 20004.01 until the production terminates.

Technical Assistance Contracts (As of March 2008)

Partner	Country	Purpose	Contract period
Metzeler	UK	Manufacturing technology for automotive weather-strips	From 1988.11.25, until production terminates.
AIA	Korea	Technical assistant agreement for sealing products for automobile bodies.	From Sep. 2, 2003 to Sep. 1, 2008
Renault Samsung Mortors	Korea	Technical assistant agreement for sealing products for automobile bodies.	From March 1, 2003, until production terminates.

Investment Expenditure

(in millions of JPY)

	FY2007	FY2006	FY2005
Investment	About 1,700	About 2,300	About 3,300
Body parts	About 700	About 1,600	About 2,000
Antivibration parts	About 400	About 200	About 300
Brake parts	About 300	About 300	About 300

-Investment was focused on streamlining operations and revamping production lines in order to respond to model changes made by its customers. 


Plans for construction of new facilities (As of March 2008)

Company/Office Name	Location	Purpose	Planned amount of investment ( in millions of JPY )	Start	Complete	Remark
Kinugawa Koriyama Co., Ltd.	Fukushima Pref., Japan	Manufacturing facilities	134	Apr., 2008	Mar., 2009	*
Kinugawa Oita Co., Ltd.	Oita Pref., Japan	Manufacturing facilities	160	Apr., 2008	Mar., 2009	*
Kinugawa Antivibration Co., Ltd.	Tochigi Pref., Japan	Manufacturing facilities	232	Apr., 2008	Mar., 2009	*
Teito Rubber Ltd. Headquarter Plant	Saitama Pref., Japan	Manufacturing facilities	139	Apr., 2008	Mar., 2009	*
Kinugawa (Thailand) Co., Ltd.	Ayutthaya, Thailand	Manufacturing facilities	128	Jan., 2008	Dec., 2008	*

*No significant alteration as the investment is for rationalization and model changes