Financial overview

( in millions of JPY )

-	Mar. 2007	Mar. 2006	R.C.	Factors
Overall
Sales	34,656	31,972	8.4%	see note 1) below
Operating income	3,879	4,151	(6.6%)
Ordinary income	4,335	4,374	(0.9%)
Current net income	2,273	2,076	9.5%
Automotive components
Sales	28,057	25,362	10.6%	see note 2) below
Operating income	3,278	3,503	(6.4%)

( R.C. : Rate of Change )

Factors

1)
As a result of the Group's continuous efforts to improve the efficiency of its equipment, reduce costs, and increase sales, its revenue increased year-on-year. Sales were supported also by rising market demand and gains from favorable exchange rate translation.
In terms of income, its operating income decreased due to soaring materials prices and rising depreciation costs, resulting from the Company's revamping its production facilities. Its net income, however, rose thanks to a gain in non-operating income. 

2)
Although sales weakened in some segments in line with the lower popularity of some car models fitted with the Company's products, overall business remained strong enough to achieve a year-on-year gain in global sales. Some of the contributing factors to this increase are greater demand outside Japan; buoyant overseas business, thanks to the growing Asian economy, and the Company's initiatives to win more supply contracts. 

Sales by Product
- Despite falling sales of some products due to decreased production of car models, in which the Company's products are installed, overall sales of automotive engine valves grew, thanks to increased orders for export, stable demand from diesel engine manufacturers, and strong sales of valves for gas engines. 
- Although the pace of growth in the motorcycle engine valve business in Asia partially slowed due to soaring prices of crude oil, the Company achieved greater sales of these products worldwide by adding titanium valves for large motorcycles and other new products to its product lineup. 
-Sales at the automotive precision forged gear segment rose, thanks to increased orders for additional model vehicles. 
- Production and sales of valve lifers outside Japan were strong. The overall revenue from valve lifters fell, however, mainly because of decreased sales of vehicles using its products in North America; and a shift in demand caused by consumers buying new model vehicles in order to cope with soaring prices of crude oil.
- The revenue generated from sales of NT-VCPs jumped, following the launch of a new a model vehicle. 

R&D Expenditure

( in thousands of JPY )

-	Mar. 2007	Mar. 2006	Mar. 2005
Group	1,007,336	1,004,947	966,429
Automotive components	N.A	452,674	449,955

Major R&R Activities
- The Company continuously worked on developing components for valve operating systems, improving their performance and reducing their weight. It also conducted development activities on heat-resistant alloys and new materials.   
- The Company was engaged in improving forging methods and forging processes for precision forged parts, particularly automotive drive parts.
- The Company conducted R&D activities to improve the performance of  the NT-VCP (an electromagnetic continuous cam phase variation mechanism), which is compatible with exhaust emission regulations; in addition to improving fuel efficiency and manufacturing methods.

New Products
Nittan New Technology Variable Cam Phaser  (NT-VCP)
- The company has developed a continuous variable cam phaser that uses an electromagnetic clutch to control the helical mechanism, a first in the world. The NT-VCP achieves a greater control range and responds more quickly, features which weren't considered possible with hydraulic clutches that until now have been the mainstream for variable cam phase mechanisms. The NT-VCP offers high torque at a low revolution speed, smooth acceleration and deceleration, exceptionally clean exhaust gas and high fuel-economy. Moreover, it enables variable control to occur easier at lower temperatures since it does not require the use of any additional pumps, unlike hydraulic clutches.

Major features of the NT-VCP
1. Minimum impact on engine speed and operating temperature with the use of electromagnetic control.
2. High torque and fuel-economy at a low revolution speeds.
3. Optimum valve timing is instantaneously possible under a wide range of operating conditions.
4. No need for additional pumps or greater pump capacity, unlike hydraulic clutches.  

Product Under Development
ULV (Ultra Light Valve)
- The company is currently developing an Ultra Light Valve (ULV) in efforts to reduce the weight of engines. It is a next generation engine valve based on a completely new way of being formed. Reducing the engine weight as much as possible will contribute to lessening friction and NVH and optimizing the valve temperature. 

Technical Alliances ( as of March 2007 )

Partner	Country	Content of agreement	Project Period
			From	To
Eaton Corporation	U.S.A.	License agreement on small engine valves	Sep.1, 1996	Dec.31, 2010
Eaton Corporation	U.S.A.	License agreement on oil pressure valve lifters	Sep.1,1996	Dec. 31, 2010
Eaton Est Spa	Italy	Contract on sales of automotive engine valves and technical assistance for production within specified regions.	Oct. 23, 1993	the date specified in the contract
P.T. Federal Nittan Industries	Indonesia	License agreement on small engine valves	Jun. 1, 2005	5 years from the  aforementioned date
Shinwa Precision Co., Ltd.	Korea	License agreement on oil pressure valve lifters	Aug. 1, 2005	5 years from the aforementioned date
Nittan (Thailand) Co., Ltd.	Thailand	Technical assistance agreement on small engine valves	Jan. 1, 2003	10years from the aforementioned date
Eaton Corporation	U.S.A.	License agreement on Nittan New Technology Variable Cam Phaser (NT-VCP)	Dec.18, 2000	Dec.9, 2007
Shinwa Precision Co., Ltd.	Korea	License agreement on mechanical tappets	Dec. 5, 2002	10years from the aforementioned date

 

Investment Expenditure

( in millions of JPY )

-	Mar. 2007	Mar. 2006	Mar. 2005
Group	3,647	4,777	2,037
Automotive components	2,633	4,223	1,645

Breakdown of capital investment by affiliate company of the automotive components business (for the year ended March, 2007) (in millions of JPY)

-	Amount of investment	Description of capitalization
Nittan Valve Co., Ltd.	1,912	Modification and rationalization of production equipment for engine valves
P.T. Federal Nittan Industries	342	Expansion of manufacturing equipment for engine valves
Shinwa Precision Co., Ltd.	316	Expansion of manufacturing equipment for valve lifters

Installment of New Equipment

( in millions of JPY )

Plant	Equipment to be installed	Estimated amount of investment	From	To	Increase in production capacity (%)
Nittan Valve Co., Ltd.
Headquarters (Kanagawa Pref., Japan)	Manufacturing equipment for engine valves, NT-VCP etc.	1,287	2007.04	2008.03	No effect on production capacity, as the purpose is for rationalization, updating, and research & development.
Sanyo Plant (Yamaguchi Pref., Japan)	Manufacturing equipment for engine valves and valve lifters	1,019	2007.04	2008.03
Headquarters (Kanagawa Pref., Japan)	Manufacturing equipment for engine valves and gears	694	2007.04	2008.03
Nittan Thailand Co.,Ltd
Headquarters (Thailand)	Manufacturing equipment for engine valves	286	2007.01	2007.12	No effect on production capacity, as the purpose is for rationalizing and revamping its operations as well as enhancing its   research & development capabilities.
Shinwa Precision Co., Ltd.
Headquarters (Daegu, Korea)	Manufacturing equipment for valve lifters	269	2007.01	2007.12	10% increase in production capacity