Financial Overview

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	Rate of Change (%)	Factors
Overall
Sales	74,543	66,221	12.6	1)
Operating income	7,292	6,383	14.2
Ordinary income	8,084	7,046	14.7	-
Net income	4,694	3,975	18.1	-

Factors
1) Sales and Operating income
<Japan>
-Sales totaled JPY 45,614 million, a decrease of 1.6% year-on-year. Operating profit reached JPY 4,684 million, up 2.9% year-on-year. 

<Americas>
-Sales reached JPY 9,304 million, up 57.1% year-on-year. Major contributing factors to the significant gain included the launch of full-scale operation in Mexico and a production increase by the Company's major customer.    

-The Company posted an operating loss of JPY 705 million due to large expenses incurred in setting up a new plant in the region, where demand is growing. (Operating loss reached JPY 1,030 million during the previous fiscal year.)   

<Asia>
-Sales reached JPY 19,623 million, up 40.9% from the previous year. Some of the reasons for the increase were growth in production at a major customer's plant in China, greater sales to foreign automakers based in Europe, the U.S. and China, and an increase in vehicle models built at customer's plants in Malaysia and Indonesia.

-Operating profit reached JPY 3,197 million, up 15.3% year-on-year.

New Factory

<Brazil>
-In November 2013, the Company found the third production location in Americas in Resende, Rio de Janeiro, Brazil. The name of the  Company is KINUGAWA BRASIL Ltda. Overview of this location is as follows;

• Sales for 2016 (Estimated) JPY 1,400 million. Employees about 100. Total investment of JPY 1,000 million is planned.
• Land area: approximately 15,000 square meters, Building area: approximately 5,000 square meters
• Major customers: Nissan, Volkswagen
• The Company is poised to boost the local content ratio of its products in order to become more competitive in the market, as its major customer plans to increase its annual production volume to 200,000 vehicles. It also aims to expand business with European and U.S. automakers.

<Russia>
-In June 2013, the Company found the first production location in Russia in Izhevsk, Udmurt, Russia. The name of the Company is Limited Liability company Kinugawa RUS. Overview of this location is as follows;

• Sales for 2016 (Estimated) JPY 1,000 million. Employee about 40. Total investment of JPY 200 million is planned.
• Building area: approximately 1,500 square meters
• Major customers: Nissan
• The Company tapped into the growing Russian market ahead of other Japanese auto parts suppliers. It is poised to establish a strong footprint in the country by utilizing its partnership with Japanese customers and by forming collaboration with local manufacturers. It will also upgrade and expand its facilities.

Contracts

-The Company has won its first order from Mazda Motor Corporation for auto body seals on the all-new Mazda "Axela". The supplier will start delivering the parts to Mazda's plant in Mexico, which will start production of the "Axela" in January 2014. The Company was able to become Mazda'ss supplier in Mexico due to its solid production basis in the country. The Company will also start supplying parts to Mazda's plants in Japan, which are producing "Axela" knockdown kits to be assembled in Thailand. (From an article in the Nikkan Jidosha Shimbun on December 20, 2013)

Mid-term Management Plan "Kinugawa Challenge 2015"

-Management target for FY ending Mar. 2016

• Sales: Over JPY 100,000 million
• Operating profit: Over JPY 12,000 million
• Operating profit ratio: 12%

-Current status: The Company expects to achieve the sales target one or two years after the original plan, given some negative factors such as changes in customer's production plans.

-Sales expansion: The Company aims to increase the ratio of sales to automakers other than Nissan, its major customer. Targeted customers include those based in Europe, the U.S., China and Japan. The Company also plans to increase sales to Nissan.

-The Company will triple its sales in China in the fiscal year ending March 2016 (FY2015) over FY 2012 level. The Company is expecting an increase in local demand from Japanese, U.S., and European automakers which are expanding production in China and will increase local production of auto body seals mainly. The Company will establish a satellite plant in Dalian, Liaoning Province, in order to deal with an increase in order from its major customer, Nissan Motor Co., Ltd. The Dalian plant is scheduled to start operations in 2015. (From an article in the Nikkan Jidosha Shimbun on April 24, 2014)

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	76,500	74,543	2.6
Operating income	8,600	7,292	17.9
Ordinary income	8,600	8,084	6.4
Net income	5,000	4,694	6.5

>>>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	1,074	995	998
Body seal parts	605	594	562
Brake and molding parts	329	235	308

R&D Activities

-R&D focus is set on increasing use of plastics and making smaller products to reduce weight. By 2014, the Company aims to reduce product weight by 30% compared with the level in 2005.

Body seal parts
-Development of materials and a new cross section structure with an aim to reduce a number of attachments. Development of weather strip seals with higher price competitiveness.
-Expansion of application of lighter sealing parts made of low specific gravity rubber for auto bodies.
-Expansion of application of combining interior components with more attractive design.
-Expansion of application of TPV (Thermoplastic vulcanizate) glass run made of high-function elastomer with higher recycling efficiency.
-Building up revolutionary production method and local content of material globally that reflect the particular characteristics of each market, and which at the same time are cost-competitive.
-Development of glass run modules offering added values in terms of design, water-tightness and sound-insulating properties.

Brake and molding parts
-Expanding use of thermoplastic vulcanizate (TPV) in intake and exhaust systems in order to reduce product weight and to extend service life.
-Procuring all tools locally to become more cost competitive in the global market.
-Shifting to in-house production from outsourcing some processing work (multiple kneading, welding, production of metal fittings)
-Developing next-generation brake cylinder cups, new production methods, and new materials
-Reducing the time needed to develop new products by utilizing FEM analysis

Product Development

Glass run module made of Thermoplastic material
The Company developed a glass run module that integrates partitions and weather strips. The integration is expected to enhance visual appearance, reduce wind noise, improve water tightness, while cutting down on overall cost. In addition, the 100% plastic product is lighter and is easier to recycle than existing glass runs. The Company aims to commercialize this product during the fiscal year ending March 2015 or later.

Technological Licensing Agreements

(As of Mar. 31, 2014)

Partner	Country	Purpose	Contract period
Faltec Co., Ltd.	Japan	Window moldings and their manufacturing methods	From Apr. 1, 2000 until the production terminates.

Technical Assistance Contracts

(As of Mar. 31, 2014)

Partner	Country	Purpose	Contract period
Metzeler	UK	Manufacturing technology for automotive weather-strips	From Nov. 25, 1988 until production terminates.
Renault Samsung Mortors	Korea	Technical assistant agreement for sealing products for automobile bodies.	From Mar. 1, 2003 until production terminates.

Investment Expenditure

(in millions of JPY)

	FY ended Mar. 31, 2014	FY ended Mar. 31, 2013	FY ended Mar. 31, 2012
Overall	3,700	2,700	1,100
-Body seal parts	3,200	2,200	600
-Anti vibration parts	200	200	200
-Hose parts	100	100	-
-Brake and molding parts	100	100	200

-The Company's main purposes for making capital investments were to set up production lines for modules and rationalize operations.
-Investment expenditure for FY ending Mar. 2015 is expected to be JPY 4,100 million.

Investments Outside Japan

<Mexico>
-The Company announced that it will increase production capacity at Kinugawa Mexico, S.A. de C.V.'s site in Irapuato, Guanajuato, Mexico. It will be the biggest production site of the Company in Americas. Overview of this location is as follows;

• Sales for 2016 (Estimated) JPY 6,000 million. Employees about 450. Total investment is expected to be JPY 2,000 million.
• Land area: approximately 74,000 square meters, Building area: approximately 20,000 square meters
• Major customers: Nissan, Volkswagen, Mazda, Honda
• The subsidiary will increase local souring of materials and metal fittings to become more cost competitive. It thereby aims to expand sales to local automakers.
• The plant will also serve as a cost-efficient supply hub for components, especially those with high transport efficiency, for the U.S. market.

Planned Capital Investments

(As of Mar. 31, 2014)

Company/Office Name	Location	Equipment to be installed	Planned amount of investment (in millions of JPY)	Start	Complete	Remark
Kinugawa Koriyama Co., Ltd.	Fukushima Pref. Japan	Production facilities of body seal parts	59	Apr. 2014	Mar. 2015	*
Kinugawa Oita Co., Ltd.	Oita Pref. Japan	Production facilities of body seal parts	137	Apr. 2014	Mar. 2015	*
Kinugawa Antivibration Co., Ltd.	Tochigi Pref. Japan	Production facilities of anti vibration parts	79	Apr. 2014	Mar. 2015	*
Kinugawa Brake Parts Co., Ltd.	Tochigi Pref. Japan	Production facilities of brake and molding parts	119	Apr. 2014	Mar. 2015	*
Head Office	Chiba Pref. Japan	Test and research facilities	243	Apr. 2014	Mar. 2015	-
Teito Rubber Co., Ltd.	Saitama Pref. Japan	Production facilities of hose parts	129	Apr. 2014	Mar. 2015	*
Kinugawa Mexico, S.A. de C.V.	Guanajuato, Mexico	Production facilities of body seal parts, anti vibration parts and hose parts	1,121	Jan. 2014	Dec. 2014	Purchase of new equipments of anti vibration parts and hose parts
Kinugawa Rubber (Wuhu) Co., Ltd.	Wuhu, China	Production facilities of body seal parts and anti vibration parts	660	Jan. 2014	Dec. 2014	New plant building of anti vibration parts

*No significant change will take place, as the investment is for rationalizing operations and readying equipment to handle model changes.