Financial Overview

(in millions of JPY)

	FY2010	FY2009	Rate of Change (%)	Factors
Overall
Sales	32,294	27,753	16.4	-Although the Company suffered a loss from the impact of the Great East Japan Earthquake, its overall sales largely increased from the previous year’s result due to a recovery in demand for vehicles, strong overseas business, and the addition of one subsidiary to its consolidated financial statements.
Operating income	2,198	369	495.0	-Profits improved in Japan due to the effects of investment project, increased production volumes and improved sales. Profits also grew overseas supported by increases in production and sales.
Ordinary income	2,192	762	187.4
Current net income	565	(189)	-
Engine Valve
Sales	21,562	17,952	20.1	1)
Operating income	1,660	657	152.7	-

Factors
1)
<Small engine valves>
-Although the Company suffered a loss from the impact of the Great East Japan Earthquake in Japan, revenues increased year-on-year, thanks to greater sales of automotive engine valves, which were driven by a recovery in exports and the effects of the economic-stimulus packages. Sales of motorcycle engine valves were still slow, but climbed from the previous year's result.
-Production in Asia was strong spurred by growing domestic demand. Sales largely increased in Indonesia and Thailand, thanks to a sharp recovery in demand. Despite the negative effect of the exchange rate fluctuations, sales in North America also increased significantly, thanks to the recovery trend in the market.  
-Sales of general engine valves increased due to a recovery in demand for general-purpose products in North America.

<Variable cam phase, gears>
-Despite continued slumping sales in Japan, sales of precision forged gears increased year-on-year, thanks to growth in demand from overseas especially in China and other Asian countries where sales of auto parts grew. Sales in North America were also favorable due to a recovery in demand for industrial machinery parts.
-Although the Company suffered a loss from the impact of the Great East Japan Earthquake in Japan, sales of variable cam phase increased because of the effects of model changeovers and strong sales in North America.

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

R&D Expenditure

(in millions of JPY)

	FY2010	FY2009	FY2008
Overall	1,117	1,391	1,346

R&D Structure

-The Company will spend about 600 million yen over the next two years to enhance its R&D capability at its home plant in Hadano City, Kanagawa Prefecture. The investment will be used to install new evaluation and testing equipment, retool the laboratory, and revamp the production lines. The company will strengthen its development structure, focusing on auto parts for next-generation vehicles such as environmentally friendly cars. The first phase of the "Improvement Project for the Hadano Headquarters" already began in May this year, which will be followed by the launch of the second phase in April 2011. (From an article in the Nikkan Jidosha Shimbun on November. 10, 2010)

R&D Structure

 <Small engine valves>
-The Company continuously worked on developing low-cost and high quality engine valves for hybrid vehicles that are equipped with an electric motor. Some of its products are already used on mass production engines.
-In the area of engine valves for alternative fuel vehicles, including those that run on ethanol and gas, the Company is developing new materials that can withstand the properties of each fuel.
-The Company is developing lighter and more heat resistant valves for small displacement engines. It has engineered a technology to offer low cost hollow valves for charging refrigerant, preparing to start its mass production soon.

 -The Company plans to put its new automated system into practical application by the next fiscal year, for producing parts of low-priced vehicles targeted at emerging nations. As an advanced system of those installed at its plants including Sanyo Plant, Sanyo-Onoda, Yamaguchi Pref., the Company has established a highly efficient technology capable of engine valve extrusion forging in one process, which previously required several stages. Moreover, the forging facilities have been downsized to one third of the current line. The initial investment, therefore, should be reduced, which will make installation of the system in highly cost-competitive emerging nations tangible. The Company will make proposals on the strength of these production technologies, aiming to address the new needs including those of Japanese automakers trying to expand sales of their low-priced vehicles. (From an article in the Nikkan Jidosha Shimbun on Apr. 13, 2010)

<Variable cam phaser, gears>
-The Company is working on developing variable angle and quick response variable valve timing device to achieve low friction, highly efficient combustion cycle, and variable compression ratio, which contribute to improving fuel economy.

Technical Alliances

(As of Mar. 31, 2011)

Partner	Content of agreement	Project Period
Eaton Corporation (U.S.A.)	License agreement on small engine valves	Jan.1, 2011 - Jun.30, 2011
Eaton Corporation (U.S.A.)	License agreement on oil pressure valve lifters	Jan.1, 2011 - Jun.30, 2011
P.T. Federal Nittan Industries (Indonesia)	License agreement on small engine valves	5 years from Jun. 1, 2010
Shinwa Precision Co., Ltd. (Korea)	License agreement on oil pressure valve lifters	5 years from Aug. 1, 2010
Nittan (Thailand) Co., Ltd. (Thailand)	Technical assistance agreement on small engine valves	5 years from Feb. 1, 2007
Shinwa Precision Co., Ltd. (Korea)	License agreement on mechanical tappets	10 years from Dec. 5, 2002
Beijing Yoosung Shinhwa Automobile Parts Co., Ltd. (China)	License agreement on lash adjusters	10 years from Dec. 7, 2006
	License agreement on mechanical tappets	10 years from Jan. 1, 2008
Nittan Euro Tech sp.zo.o. (Poland)	License agreement on automobile  engine valves	5 years from Aug.　29, 2008 when delivery of licensed products started

Capital Expenditure

(in millions of JPY)

	FY2010	FY2009	FY2008
Overall	2,935	880	3,233
Engine Valve	2,322	-	-
Variable cam phaser	344	-	-

 

Capital Expenditure of the Automotive Components Business

(in millions of JPY)

Facilities	Amount of investment	Description of capitalization
Engine Valves
The Company	1,300	Modification and rationalization of equipment used to produce engine valves
U.S. Engine Valve (partnership) (NC, U.S.A.)	324	Installation of additional equipment to produce engine valves
Nittan (Thailand) Co., Ltd.	306	Installation of additional equipment to produce engine valves
Variable cam phaser
The Company	344	Modification and rationalization of equipment used to produce precision forged gears for industrial machineries

Investments Outside Japan
-The Company will tap into the Brazilian and Indian markets. The company is going to establish new facilities within the premises of Eaton Corporation of the U.S., which is Nittan Valve's largest shareholder, planning operation launch in 2012. With this move, Nittan Valve will respond to increased requirements from the local plants of Japanese automakers as well as prospected growth in demand in both countries. Production will be carried out by Eaton based on a consignment agreement, while Nittan Valve will send support engineers to each facility. Therefore investment in the project is expected to be held down to around 100 million yen. Although it will initially start through consignment, the company is looking to consider local subsidiaries if production volumes expand. (From an article in the Nikkan Jidosha Shimbun on November. 12, 2010)

Planned Capital Investments

(As of Mar. 31, 2011)

Plant	Equipment to be installed	Estimated amount of investment (in million JPY)	From	To	Increase in production capacity (%)
Headquarters (Kanagawa Pref., Japan)	Manufacturing equipment for engine valves, NT-VCP etc.	770	2011.04	2012.03	4 percent Other purpose is for rationalizing and retooling
	Manufacturing equipment for precision forged gears	630	2011.04	2012.03	The purpose is for rationalizing and retooling
Sanyo Plant (Yamaguchi Pref., Japan)	Manufacturing equipment for engine valves and valve lifters	1,240	2011.04	2012.03	The purpose is for rationalizing and retooling
U.S. Engine Valve(partnership) Headquarters (U.S.A.)	Manufacturing equipment for engine valves	800	2011.01	2011.12	25 percent
P.T. Federal Nittan Industries Headquarters (Indonesia)	Manufacturing equipment for engine valves	450	2011.01	2011.12	10 percent
Nittan Thailand Co., Ltd. Headquarters (Thailand)	Manufacturing equipment for engine valves	200	2011.01	2011.12	10 percent