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5. Toyo Tire & Rubber Co., Ltd. Business Report FY ended 2014

-Sales, operating income, ordinary income, and net income all reached new record highs.
-Operating profit margin reached 12.1%, and capital-to-asset ratio reached 37.0%.

Remarks
1) Tire Business
-OE tire business: vehicle production in Japan remained at the same level as the previous year, but unit sales and revenues decreased year-on-year, because production of models fitted with the Company's tires fell.

-Replacement tire business (Japan): unit sales increased year-on-year following new product releases, but revenues from the business remained at the same level as 2013 due to lower market values.

-Replacement tire business (overseas): unit sales and revenues increased year-on-year

• U.S.: Unit sales and revenues increased year-on-year due to releases of high value-added products in the booming automotive market. In addition, the Company enjoyed strong demand for its major products.
• Europe: Unit sales and revenues increased year-on-year thanks to strong demand for its passenger vehicle tires and to favorable business performances especially in Russia, where the Company drew new customers.
• China: Unit sales increased year-on-year, but revenues remained as the same level as the previous year due to a drop in market values.

2) DiverTech Business
-Revenues from the sale of automotive anti-vibration rubber and seat cushions decreased year-on-year, because production of models equipped with the Company's products fell, although vehicle production in Japan remained at the same level as the previous year.

Transferring Shares in Joint Venture

-The Company announced that it has sold its entire 60% stake in its Chinese joint venture, Toyo TGPM Automotive Parts Foshan Co. Ltd. (TAF), to its joint venture partner, Guangdong TGPM Automotive Industry Group Co., Ltd. The joint venture, which was established in December 2012, manufactures and sells urethane seat cushions for automobiles and other transportation application. (From a press release on November 20, 2014)

Gaining Design Rights in the U.S.

-The Company announced that the U.S. International Trade Commission (ITC) has found in favor of Toyo Tire in design infringement claim in the U.S. It is the first time that the Company's complaints against design patent infringement have been admitted. The ITC issued its orders to prohibit eight importers and distributors in the U.S. from importing and selling the infringing products in the country. The relevant products include passenger car and SUV tires produced by manufacturers in China and Thailand. (From an article in the Nikkan Jidosha Shimbun on July 31, 2014)

Certification

-The Company announced that its U.S. subsidiary, Toyo Tire North America Manufacturing, Inc. (TNA), has obtained the ISO/TS 16949:2009 certification for its automotive quality management system. Tires manufactured by TNA have been supplied to the North American aftermarket and have been selected as original equipment on vehicles from Ford and some Japanese automakers. (From a press release on November 18, 2014)

Changing Chinese corporate name

-The Company announced that it has changed how it writes its Toyo Tires brand name in Chinese characters, from "東洋輪胎" to "通伊欧輪胎." This was done in order to make the pronunciation of the brand name in Chinese similar to that in Japanese. (From a press release on January 28, 2015)

Contracts

-Major contacts received in FY ended Dec. 2014

Mid-term Management Plan

-The Company announced its management plan, called Vision 20, setting 2020 as the final year to achieve the objectives set forth under the plan. Vision 20 has set a target of JPY 600 billion for operating revenue and a 10% profit margin for operating profit.

- Mid-term Plan '14 has the following measures in place in order to achieve its objectives by Dec.2016. The objective are as follows: JPY 470 billion in operating revenue, JPY 52 billion in operating profit, 11.1% in operating profit margin and ROA 10% and more.

-Measures to achieve the target
Tire business

• Establishing a strong brand presence in the light truck and SUV tire market, the Company's area of expertise. (Targets for 2016: increase unit sales by 45% from the 2013 level; expand share in the North American market to 6.0% from 4.6% in 2014)
• Ensuring top-level product competitiveness by differentiating its products. (Developing high-performance and high-quality product by using "Nano Balance Technology")
• Improving product development capability in the area of truck and bus tires

DiverTech Business: Automotive rubber products

• Expanding business in Mexico and ASEAN countries
• Increasing percentage of sales generated outside Japan to 45% by 2016 from 38% in 2013.

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

R&D Facilities

R&D Activities

Nano Balance Technology
-"Nano Balance Technology" enables rubber materials designing based on nanotechnology. Integrating four nano-level elements of research, analysis, design and production into a technology development process will allow the Company to produce products with optimal performances that meat the required levels.

"T-Mode" Design Platform Technology 
-"T-Mode" simulation technology can dramatically improve tire development efficiency and reduce development lead-time. Simulating tire behavior, construction and car movement enables the Company to develop optimum tire designs for specific car types and use.

"e-balance" Environmentally friendly Truck & Bus Tire Technology Platform
-"e-balance" is a new environmentally friendly truck & bus tire technology platform to achieve "e" effect of ecology, energy, economy and endurance.

A.T.O.M. (Advanced Tire Operation Module)
-"A.T.O.M." is a highly scalable, proprietary system that can flexibly respond to changes in production plans in accordance with the demand levels. It features high-quality, multi-product small-lot production, a space-saving system, and a high level of automation.

Product enhancement of aftermarket tires

"Open Country A/T plus" all-terrain tire for AWD SUVs
-"Open Country A/T plus" is an all-terrain tire for four-wheel-drive SUVs. While featuring an aggressive sidewall design used in the Open Country series tires, the tire offers good traction and a high level of quietness that meets noise regulations in Europe. Its new tread compound provides excellent wet-grip performances and superior driving stability at high speeds, properties that are given particular importance on European roads. In addition, the tire achieves low rolling-resistance and long service life.

Premium tire for Passenger cars in Europe
-The Company will introduce the Proxes T1 Sport plus, the latest addition to its flagship Proxes tire series for passenger cars, into the European aftermarket. The Proxes T1 Sport plus bears an A label for its wet grip performance under the new tire labeling rule adopted in Europe. The new tire is the Company's first tire that has earned the A label. In Europe where tires need to offer high wet grip performance, the Company aims to increase its share in the tire market for high-performance cars. The new tire was developed based on the Proxes T1 Sport tires for high-performance cars. It uses a new tread compound that improved its label for wet grip performance from B to A. The new tire also meets noise regulations in Europe and achieves a high performance suitable for the flagship tire. The new tire has been developed specifically for Europe, where the driving speed is high and wet grip performance is highly valued. (From an article in the Nikkan Jidosha Shimbun on December 2, 2014)

Premium Fuel-efficient Tire for Truck and Bus
-The Company has launched its new M650 premium fuel-efficient tire in the U.S. The new M650 tire is for use in commercial trucks and buses in the country. The new M650 tire meets United States Environmental Protection Agency (USEPA)'s SmartWay verified requirements for fuel-efficient tires. The Company will market the new M650 tire by proposing the product's high economical efficiency. The new M650 premium tire is intended for use in medium range transport vehicles which are required to have superior traction performance. The new M650 tire incorporates the "e-balance," the company's core technology for tires in trucks and buses to achieve improved economy, durability, environmental friendliness and other basic performance. (From an article in the Nikkan Jidosha Shimbun on December 1, 2014)

Enhancement of Tire lineup for SUV/Pickup trucks
-The Company has doubled the number of sizes of its Open Country R/T aftermarket tires for sports utility vehicles (SUVs) and pickup trucks in the U.S. aftermarket. The Open Country R/T tires were originally released in eight sizes in September 2014. With the addition of seven sizes, the tire is now available in 15 sizes ranging from 16 to 22-inches. By expanding its tire lineup for SUVs, which are sold well in the U.S., the Company intends to capture a larger share in the aftermarket. (From an article in the Nikkan Jidosha Shimbun on February 7, 2015)

Tire Business
-The Company invested mainly to streamline production and improve product quality, and to enhance production facilities at Toyo Tire North America Manufacturing Inc. and Toyo Tyre Malaysia Sdn. Bhd.

DiverTech Business
-The Company invested mainly to streamline production and improve product quality.