Nippon Light Metal Company, Ltd.

ANNUAL REPORT 2004

NYK Tennoz Building,2-20, Higashi-Shinagawa 2-chome

Year Ended March 31, 2004

Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Printed in Japan

PROFILE

CORPORATE DATA

Since its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly
involved with aluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with activities ranging from alumina smelting to fabrication ofvarious products.
Nippon Light Metal comprises four business segments: Aluminum Ingot andChemicals concerning the production of alumina and related chemicals and aluminum ingot; Aluminum Sheet and Extrusions involving the production of sheets andshapes; Fabricated Products and Others including the production of transportationrelated products, electronic materials, foil and powder; and Building Materials covering the production of residential and office building materials. Through thesesegments, Nippon Light Metal is actively engaged in a wide range of fields such as
automobiles and railroads, electric machinery and electronics, industrial products,
construction, and living necessities.
The NLM Group—the preeminent source of products and services combining
aluminum’s excellent characteristics with new functionality and added value that caterto pressing customer needs—delivers customer satisfaction and contributes to environmental protection.

Head Office

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 03-5461-9333
Fax: 03-5461-9344
E-mail: nlmmaster@nikkeikin.co.jp
EstablishedMarch 30, 1939
Paid-In Capital¥39,085 million
Shares of Common Stock

Authorized: 1,600,000,000
Issued: 543,350,370
Number of Shareholders

48,092

The Light Metal Educational
Foundation, Inc.
(2.8%)

Nikkei Products Co., Ltd.
Household utensils(100%)

Namekawa Aluminium Co., Ltd.
(2.7%)

Nikkei Extrusions Co., Ltd.
Aluminum extruded products(100%)

Nikkei-Keiyu-Kai(2.1%)

Nikkei Aluminium Core Technology
Co., Ltd.
Aluminum extrusions and fabricatedproducts(100%)

Japan Trustee Services Bank, Ltd. (trust
accounts for Mitsui Asset Trust andBanking Company, Limited and CMTB
Equity Investment Co., Ltd.)(1.8%)

Nikkei Panel System Co., Ltd.
Panel for pre-fabricated freezer/refrigerator and cleanroom(100%)

Mizuho Trust employee pension trust
Mizuho Corporate accounts(1.6%)

Major Domestic Subsidiaries

Shin Nikkei Company, Ltd.
Aluminum sashes, construction materials *1

Stock Exchange Listings

Contents
Consolidated Six-Year Summary................................................. 1
To Our Shareholders ................................................................. 2
Special Feature ......................................................................... 4
Basic Stance on Corporate Governance ..................................... 6
NLM Group Topics .................................................................... 7
Review of Operations ................................................................ 8
Financial Review ....................................................................... 10
Consolidated Balance Sheets ..................................................... 12
Consolidated Statements of Income ........................................... 14
Consolidated Statements of Shareholders’ Equity ...................... 15
Consolidated Statements of Cash Flows ..................................... 16
Notes to the Consolidated Financial Statements ......................... 17
Report of Independent Auditors ................................................ 28
Overseas Network ..................................................................... 29
Directors and Officers ............................................................... 30
Corporate Data ......................................................................... 31

Cautionary Statement
This annual report contains various projections and estimates. Important factors that could alter these projections and estimates include changes in the balance of aluminum supply and demand, fluctuations in the price of aluminum ingot andforeign exchange rates, as well as shifts in Japanese government policies and regulations. The Company cautions, therefore,that the projections and estimates contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.

Tokyo, Osaka and three otherdomestic stock exchanges
Transfer Agent of Common Stock

Nippon Fruehauf Co., Ltd.
Aluminum vans, trucks, trailers,
containers(66%)

Aluminium Wire and Rod Co., Ltd.
Aluminum rough drawing wire
(58.3%)The Chuo Mitsui Trust & Banking Co., Ltd.
Last Shareholders’ Meeting

June 29, 2004

Matsuo Industry Co., Ltd.
Aluminum castings and forgings *Toyo Aluminium K.K
Aluminum foil, powder and paste(100%)

4

Riken Light Metal Industrial Co., Ltd.
Aluminum construction materials *2Major Shareholders(Percentage of Total Voting right)

Japan Trustee Services Bank, Ltd.
(trust accounts)(15.3%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(7.2%)The Dai-ichi Mutual Life Insurance
Company(3.7%)
Mizuho Corporate Bank, Ltd.
(3.4%)
Asahi Mutual Life Insurance Co.
(2.8%)NLM ECAL Co., Ltd.
Housing for cellular and mobile
telecommunications base stations(100%)

Nippon Electrode Co., Ltd.
Carbon for iron and steel blast furnaces
and for aluminum smelting, and othertypes of carbon(100%)*1 98%; Direct interest by NLM
2%; Interest held by Nikkei Sangyo Co., Ltd.
*2 98.5%; Direct interest by NLM
1.5%; Interest held by Nikkei Logistics Co., Ltd.
*3 46%; Direct interest by NLM
44%; Interest held by Shin Nikkei Co., Ltd.
10%; Interest held by Nippon Fruehauf Co., Ltd.
*4 99.1%; Direct interest by NLM
0.1%; Interest held by Nikkei Sangyo Co., Ltd.

Nikkei Sangyo Co., Ltd.
Aluminum welding rods, various kindsof contract work
(98.6%)
Nikkei Information System Co., Ltd.
Development, maintenance and operation of computer software(100%)(As of March 31, 2004)

Nikkei Logistics Co., Ltd.
Transport, warehousing *3

On the Cover:
From top to bottom: Mt. Fuji viewed from the bauxite yard of Shimizu Plant, a rolling machine at Nagoya Plant,
photosensitive drum materials, an aluminum truss at Miyazaki Agricultural Experiment Station

31

CONSOLIDATED SIX-YEAR SUMMARY
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
1999

2000

2001

2002

2003

2004

2004

For the year:
Net sales ..................................... ¥569,036 ¥549,194 ¥565,223 ¥521,861 ¥514,042 ¥532,201 $5,035,490
Operating profit (loss) ...............
(4,153)
2,150
12,205
11,723 20,086 26,355
249,361
Net income (loss)....................... (19,248) (14,096) (21,905)
1,518
7,116 11,525
109,045
At year-end:
Total assets .................................
Shareholders’ equity...................
Short-term borrowings andlong-term debt .........................

640,989
93,481

605,346
100,509600,373
81,478564,287 525,761 520,585 4,925,584
83,314 89,346 102,458
969,420

340,445

310,891

298,256

289,872 254,759 229,682 2,173,167

Per share data (yen and dollars):
Net income (loss)....................... (¥ 40.98) (¥ 31.01) (¥ 41.22) ¥ 2.79 ¥ 13.34 ¥ 21.24 $Cash dividends............................
2.00
2.00
—
1.50
2.00
2.50
Shareholders’ equity...................
232.18198.45149.96
153.36 167.01 188.84

0.20
0.02
1.79

Stock information (TSE) (yen and dollars):
Stock price:
High...................................... ¥199 ¥Low.......................................
112

2.77
0.99

199 ¥
66

116 ¥
69

147 ¥
59

126 ¥
72

293 $
105

Note: U.S. dollar amounts have been translated, for convenience only, at the exchange rate of ¥105.69 = U.S.$1.00. See Note 2 of the Notes to the Consolidated
Financial Statements.

Net Sales
600

Operating Profit (Loss)30

Total Assets
750

25
600
450

20
450

15
300
10

300

5

150

150
0
0

1999 2000 2001 2002 2003 2004

Billions of yen

Years ended March 31-51999 2000 2001 2002 2003 2004

Billions of yen

Years ended March 31

01999 2000 2001 2002 2003 2004

Billions of yen

As of March 31

1

TO OUR SHAREHOLDERS

I am pleased to report on the operating results for
Nippon Light Metal Company, Ltd. (NLM) and its consolidated group companies for fiscal 2003, the year from
April 1, 2003, to March 31, 2004, and explain the business issues confronting the NLM Group.
Shigesato Sato President and CEO

Operating Results
During the year under review, it became apparent that a modest recovery of the Japanese economy was afoot. Although thecontinuing harsh employment and income situation led to sluggish personal consumption, strong private-sector capitalspending and exports underpinned the modest recovery. In the aluminum industry, growth in sales of food-related products
such as aluminum for cans was lackluster owing to the unusually cool summer. However, sales in the transportation sector
and other demand sectors were generally strong, and total product demand exceeded the previous year’s level.
In these trading conditions, the NLM Group steadily improved its business performance. Consolidated net sales increased
3.5% year on year to ¥532,201 million. Consolidated ordinary profit increased by ¥3,767 million to ¥16,092 million. Net
income rose sharply by ¥4,409 million to ¥11,525 million as the Company booked special gains of ¥4,930 million on thesale of investment securities and the sale of the site of the former Osaka Plant and a special loss of ¥1,914 million on devaluation of investment securities such as shares of Nippon Asahan Aluminium Company, the investment vehicle for an
Indonesian smelting project.
NLM declared a ¥0.5 per share increase in the dividend to ¥2.5. Management is aware that the dividend remains at aninsufficient level and will continue to work to improve the operating results and meet the expectations of our shareholders.
Discussion of Business Performance
The year under review was the second year of the NLM Group Mid-Term Management Plan (effective from fiscal 2002
through fiscal 2006). On the basis of action plans incorporated in the management plan, the NLM Group worked toincrease enterprise value by enhancing competitiveness through initiatives to improve business efficiency and develop businesses that have good potential for growth.
Among noteworthy developments during the year under review, the van and truck outfitting business performed strongly,
fueled by robust truck replacement demand owing to the tightening of emissions regulations for diesel vehicles in the Tokyo
Metropolitan area. Also, sales of aluminum plate products increased and contributed to the higher earnings; shipments of2

plate for semiconductor and liquid crystal manufacturing equipment developed favorably owing to a recovery in demandfor digital appliances and other IT-related products.
Rebuilding the Group’s extrusion operations and building materials operations has been an urgent priority since the Midterm Management Plan was formulated in 2001. Nikkeikin Aluminium Core Technology Company, Ltd., spun off in October
2002 and responsible for the Group’s extrusion operations, recorded ordinary profit for the year under review that greatly
exceeded the target. Following restoration of profitability in fiscal 2002 for the first time in six years on a non-consolidated
basis, Shin Nikkei Company, Ltd., a subsidiary responsible for building materials operations, posted its first net income innine years in fiscal 2003 on a consolidated basis, owing to thorough reduction of costs, rationalization of operations, and thelaunch of the chemical blast-treated CB Series of window sashes, doors, etc. in the housing construction materials sector.
Business Issues Facing the GroupThe NLM Group is steadily implementing management measures aimed at achieving the targets in the Mid-termManagement Plan. Management considers it important to continue to address the medium- to long-term issues the Groupwill face after completion of the Mid-term Management Plan in order to prevail against increasingly fierce global competition and to continue to achieve higher earnings.
In fiscal 2004 management will draw up plans outlining a vision for a future NLM Group comprising a greater number of
powerful products and powerful businesses and commence the basic research, materials development, product development, process development, and human resources development necessary to make the vision a reality.
Furthermore, to achieve continuous corporate growth and increase enterprise value, we will fulfill our corporate social
responsibility with respect to the environment, quality assurance, workplace safety, and disaster prevention. We recognizethat enhancing corporate governance is an important management issue, and will further strengthen systems to ensure thatour business activities are in compliance with the law and informed by sound corporate ethics.
Outlook for Fiscal 2004
The current forecast for fiscal 2004 is for consolidated net sales of ¥540 billion and consolidated ordinary profit of ¥17 billion. Although an unstable business environment is expected to continue for some time on account of runaway growth inraw materials prices and geopolitical risk factors, notably the situation in the Middle East, we intend to increase profitability
and deliver higher revenue and earnings by implementing various cost-cutting measures, developing new products, andexpanding sales.
I would greatly appreciate the continuing support and understanding of our shareholders in the coming years.
June 2004

Shigesato Sato
President and CEO
3

SPECIAL FEATURE

Business Performance in Fiscal 2003
and Profile of the Future NLM
To achieve the targets in the Mid-term Management Plan, NLM made strong businesses stronger
while raising the profitability of less dynamic businesses
The great strength of NLM lies in the accumulation in a single business group of expertise spanning everything in the world of aluminum from materials to fabrication. By taking full advantage of this expertise andcreating synergy, the Group aims to make strong businesses stronger, to create new products and new businesses more efficiently and more rapidly than competitors can, and to effect a transformation to a more
profitable business structure.
In fiscal 2003 the Group achieved results that far exceeded initial plans. In this Special Feature we provide an overview of achievements in fiscal 2003 and report on the NLM Group’s initiatives to establish abusiness structure geared to achieving the objectives in the Mid-term Management Plan and its efforts toincrease profits.
Nippon Fruehauf and Toyo Aluminium Drive Revenue Increases
Benefiting from the tightening of emissions regulations for diesel vehicles, the van and truck outfitting business of Nippon
Fruehauf Company, Ltd. increased its market share amid an overall increase in demand in the market. Strengthening
alliances with chassis manufacturers Nissan Diesel Motor Co., Ltd. and Isuzu Motors Ltd. made it possible to increase theproportion of vehicles outfitted by Nippon Fruehauf, and this subsidiary posted business results that substantially exceeded
the previous year’s level and initial targets.
The aluminum foil operation of Toyo Aluminium K.K. posted a year-on-year increase in net sales owing to favorable salesof high-purity aluminum foil for capacitors, general-purpose foil for food products and pharmaceuticals packaging applications, and newly developed products such as antenna coil for smart card and shielding material of electromagnetic–interference for plasma display panels. In aluminum powder and paste operations, profits increased owing to favorable sales inJapan and overseas of aluminum paste for automobile paints and higher sales of aluminum paste for cellular phones andhome appliances and new products such as aluminum pigments for chrome-like finishes and functional aluminum ink forcrystalline silicon solar cells.
High Profits Achieved in All Business Segments
The NLM Group delivered a high level of profitability in all business segments. Consolidated operating profit in fiscal 2003
increased by ¥6.3 billion year on year from ¥20.1 billion to ¥26.4 billion.
In the Aluminum Ingot and Chemicals Segment, although sales remained at the previous year’s level, profits decreasedslightly. The fall in profits was due to a combination of factors such as a downward trend in selling prices of alloy ingots, anincrease in raw materials (scrap) prices, high prices of heavy oil, and soaring ocean freight charges for bauxite. Nevertheless, the Group offset thesefactors through increased sales of high value-added products and factory
cost reductions and recorded operating profit of ¥4.7 billion.
In the Aluminum Sheet and Extrusions Segment, although aluminum sheet
operations experienced lower demand for foil stock and exports slumped, arecovery in demand in the electronics equipment industry fueled sales ofheavy plate for semiconductor and liquid crystal manufacturing equipment.
The Group also secured an increase in unit selling prices in negotiations
with customers to return roll margins (processing charges) to previous levels, thus achieving a profit increase. In extrusion operations (businessresults for Nikkeikin Aluminium Core Technology Company, Ltd., which was
spun off and is responsible for sheet and extrusion fabricated products),
4although growth in sales of building materials
and industrial materials was sluggish, sales oftruck components and automobile components
were favorable, and recovery in demand brought
about increased sales of pipe stock and printing
rolls. As a result, the Group achieved a sharp
increase in profit for this segment: operating
Consolidated Basis
Result for fiscal 2003 Planned for fiscal 2006
income rose 3.7-fold to ¥3.7 billion.
Net sales............................................. ¥ 532billion¥ 590billion
In the Fabricated Products and Others
Operating profit ................................. ¥ 26billion¥ 32billion
Segment, as mentioned previously Nippon
Fruehauf and Toyo Aluminium’s aluminum foil,
Ordinary profit................................... ¥ 16billion¥ 23billion
powder, and paste operations continued to delivROCE(Return on capital employed) .........
7.0%
Greater than 8%
er higher revenues and earnings. Operating
Interest-bearing debt.......................... ¥ 232billion¥ 200billion
income for the segment increased for the third
consecutive year, surging 27% to ¥14.1 billion.
In the Building Materials Segment, although the number of housing starts increased for the first time in four years, business conditions remained generally adverse. In the housing construction materials sector, sales increased owing to reinforcement of the direct sales structure targeting leading local construction contractors and new products such as the CB
Series—an application of the Group’s superb surface treatment technology—and insulated front entrance doors that provide enhanced security. In the commercial building construction materials sector, the Group steadily completed work on
major projects in Tokyo and elsewhere, while working to increase sales and profits by engaging in sales activities thatemphasize profitability. Furthermore, we implemented cost-cutting projects, focusing on Shin Nikkei, and worked to
improve quality and delivery times. As a result, operating profit from this segment increased 14% year on year to ¥6.7 billion.
The Group also greatly exceeded its initial targets with respect to the balance of interest-bearing debt, reducing debt by¥27.0 billion from the fiscal 2002 year-end to ¥231.8 billion.
Continuation of the Upward Trend in Profit in Fiscal 2004
Two years have passed since the start of the NLM Group Mid-Term Management Plan. The building materials operations andextrusion operations, businesses targeted for increased profitability when the plan was formulated, have already moved into
profit. We have also increased the competitiveness of the aluminum foil, powder, and paste operations, businesses thatenjoy competitive advantage in the market and were targeted for expansion as profit-making operations. These and othermeasures have greatly improved overall profitability for the Group. These achievements notwithstanding, management recognizes that sales expansion through the creation of new products and new businesses is an important issue and a necessary condition for the NLM Group to continue to develop as a highly profitable business group. In fiscal 2004 the Group will
accelerate the launch of new products and new businesses that are intended to fuel continuous growth and sustain the
upward trend in profits.
Profile of the NLM Group after Completion of the Mid-Term Management Plan
As we have seen, the NLM Group plans to steadily achieve the objectives in the Mid-term Management Plan by developing
and commercializing a number of new products and creating new businesses.
At the same time, management regards fiscal 2004 as an important year for grappling with medium- to long-term management issues in preparation for the period after completion of the Mid-term Management Plan; we consider fiscal 2004
to be a year for laying the groundwork for growth and transformation of the NLM Group into a much more powerful enterprise after achievement of the management plan. During fiscal 2004 management will draw up a profile of the powerfulenterprise we envisage and begin work on the basic research, materials development, product development, process development, and human resources development necessary to transform the NLM Group into that enterprise. We are determined
to ensure that the NLM Group will be a source of continuing growth in the coming years.
5

BASIC STANCE ON CORPORATE GOVERNANCE

NLM is striving to establish a management system that wins the confidence of its shareholders, business partners, employees, local communities and all other stakeholders by ensuring transparency andfairness in its business activities satisfying international standards and to respond to changes inJapan and overseas precisely and swiftly amid ongoing globalization of the economy and society.
NLM’s corporate governance structure and improvement of the internal control system
1) In June 2000, NLM introduced an executive officer system with the aim of separating execution and supervision, andclarified the responsibilities of executive officers concerning execution of operations. At the same time, we are committed to achieving a swift response to critical issues concerning execution of operations by convening the management committee consisting of senior executive officers and higher echelons at least twice a month.
2) The board of director’s meeting is held once a month and is responsible for major decision-making on management
items and supervision of execution of operations. At present, the board of directors consists of 11 directors of whomfour are outside directors (two of the outside directors satisfy the requirement for outside directors provided for in
Article 188, Paragraph 2, Item 7-2 of the Commercial Code of Japan) to ensure fair management in the interest ofshareholders. Although no staff are assigned exclusively to provide support for outside directors, the Auditing Office,the General Affairs Dept., Legal Dept., Corporate Planning Dept. and other relevant organizations provide support, as
necessary.
At the general meeting of shareholders held in June 2003, a resolution was made to effect revisions to the articles ofincorporation so as to reduce the tenure of a director from two years to one year, thereby ensuring greater responsibility of directors by providing an opportunity to elect directors every year.
3) NLM has established the auditors committee as a system for auditing execution of operations. NLM has four auditors ofwhom two are outside auditors provided for in Article 18, Paragraph 1 of the Law for Special Exceptions to theCommercial Code concerning Audit etc. of Joint-stock Companies. We have established a system that enables stringent
audit practices in which auditors check compliance and appropriateness of business execution from their neutral
positions.
Risk control system
In a bid to strengthen the system for ensuring compliance, in November 2003 we held a seminar that included a training
session led by outside instructors for management of the NLM Group companies. Also, we established the Compliance
Committee chaired by a senior executive officer in July 2004.

6

NLM GROUP TOPICS

NLM and ITOCHU Corporation Jointly Devise Scheme for
Flexible Retail Store Construction

Nippon Light Metal Company
Ltd., jointly with ITOCHU
Corporation, has developed ascheme for flexible retail store
construction that utilizes the
new Matching Build Construction Method. ITOCHU has been
considering establishing a flexible store construction business for franchise chains, and has now reached the stage oflaunching operations owing to the availability of this new
construction method developed by NLM. We have alreadydelivered stores constructed using the method for
FamilyMart, a major convenience store chain, and for
Gulliver International, a leading used-car dealer.
The Matching Build Construction Method is a retail store
construction method based on the use of panel units. The
product (building materials) is supplied in modular panels,
simplifying and greatly reducing the time required for store
construction and dismantling. The product structure accommodates differences in the size and shape of franchise chain

stores through different combinations of modules.
The average life of a franchise chain store, now estimated to be about ten years, isdecreasing year by year.
Furthermore, the disposal of
scrap and waste material generated in connection with thedemolition of buildings has become a pressing social problem that has led to enactment of the Construction Materials
Recycling Law. In order to contribute to the realization of arecycling society, NLM is moving forward with the development of mechanisms for reusing the building materials collected when retail stores are dismantled to make way for theconstruction of new stores.
NLM is engaged in discussions with franchise chains invarious industries and business categories to ascertain
demand trends and aims to obtain orders for between 50
and 100 stores per year to be constructed using the
Matching Build Construction Method.

NLM Develops the World’s First Ultra-Hard Metallic Color
Surface Treatment Technology

Nippon Light Metal Company Ltd. hasdeveloped the world’s first ultra-hard
metallic color surface treatment technology. The technology is a combination of a
special surface treatment for aluminum
and an independently developed hardcoating. The technology is an evolution of
Nikkei Super Hard Coat developed in
1995, which was the first aluminum coating material to realize coating film scratch
hardness* of 7H and has delivered a solid record of performance in train car interior applications.
The technology can be used with all metallic colors
applied to aluminum material and combines impact resis-

tance and bending workability unavailable
from previous hard coats with stain resistance and UV resistance. These outstanding properties greatly expand the scope of
application for aluminum materials, particularly for outdoor use.
NLM and NLM Group companies plan
to apply this metallic ultra-hard surface
treatment technology in a broad range ofapplications, including railcars, interior
and exterior decoration, electrical products, and furniture.
* Scratch hardness: JIS K5600. A scale for indicating coating hardness corresponding topencil hardness/softness ratings

7

REVIEW OF OPERATIONS

Aluminum Ingot and Chemicals

Aluminum Sheet and Extrusions

In Alumina andChemicals Operations, overall sales ofalumina and aluminum hydroxide
increased as favorable shipments ofproducts for use inflame retardants andfor export to China
and buoyant sales ofdifferentiated products such as low-soda alumina used for semiconductors andelectronic materials and white aluminum hydroxide used in
artificial marble offset slumping exports to South Korea andshipments of products for use in coagulants.
Sales of chemicals decreased year on year. Although shipments of general-purpose products such as sodium chloride
and hydrochloric acid developed favorably, shipments of chloride decreased owing to a temporary production stoppage due
to a fire that broke out in August 2002 at the dichlorobenzene
plant in the Kambara Complex. Shipments of hydrofluoric acid,primarily shipments to major users, fell sharply.
As a result of these developments, sales for Alumina andChemicals Operations were roughly the same as the previous
year. However, high prices of heavy oil, soaring ocean freightcharges for bauxite and other factors resulted in higher manufacturing costs, and downward pressure on profitability continued.
In Aluminum and Aluminum Alloy Operations, intensificationof competition among Japanese producers to secure sales volume in the mainstay automotive sector brought about sluggish
growth in sales volumes and continuation of the downward
trend in selling prices. In addition, an unexpectedly deep slump
in demand in the electric cable sector resulted in lower sales
volume. Consequently, we were unable to avoid a sharp yearon-year decrease in revenues from these two market sectors.
Implementation of aggressive measures to expand sales in theiron and steel sector enabled us to achieve overall sales on apar with the previous year’s level. Nevertheless, profits
remained elusive as the upward trend in raw material prices
continued, due in part to a tight supply situation brought about
by increased demand for Japanese scrap against a backdrop ofhigh raw materials costs worldwide. Although the Company
strove to reduce factory costs, the reductions did not keep pacewith the increase in raw materials prices.
As a result, sales in the Aluminum Ingot and Chemicals
Segment increased 1.7% year on year to ¥82,851 million.
Profits fell from the previous year’s level.

In Aluminum Sheet
Operations, sales
increased year on
year. Althoughdemand for foil
stock and exports
slumped, sales ofprinting plates
recovered and salesof aluminum platefor semiconductor
and liquid crystal
manufacturing equipment increased thanks to an increase incapital spending-driven demand from those industries. In addition, revenues from the transport sector increased, supported
by robust demand from the truck industry in connection withdiesel truck emission regulations.
During the year under review Nikkei Siam Aluminium Ltd.
became a consolidated subsidiary.
The Group achieved its sales target for Aluminum Extrusion
Operations. Although stagnant market conditions led to sluggish
growth in sales of building materials and industrial materials,
sales of truck components surged as tightening of emissions
regulations for diesel vehicles spurred demand. Sales of pipe
stock, automobile components, and printing rolls also developed favorably.
As a result, sales in the Aluminum Sheet and Extrusions
Segment increased 11.1% year on year to ¥64,860 million. Profitsrose substantially from the previous year, in part due to the effectof a return to prior levels for roll margins (processing charges).

8

Fabricated Products and Others
An overview of principal operations in
the FabricatedProducts and Others
Segment is as follows.
In Aluminum Foil
Operations, sales ofhigh-purity aluminum foil forcapacitors and general-purpose foil forfood products and pharmaceuticals packaging applications
developed favorably, fueling a year-on-year increase in sales ofaluminum foil. In Aluminum Powder and Paste Operations,sales rose year on year owing to favorable sales in Japan andoverseas of aluminum paste for automobile paints, strong sales

of aluminum paste for home appliances, and buoyant exports
and robust sales of new products.
In Transportation-related Operations, sales from the van andtruck outfitting business rose sharply year on year, fueled by robust truck replacement demand stemming from the tightening ofemissions regulations for diesel vehicles. In the automotive components sector, shipments of air conditioner capacitors for lightmotor vehicles increased substantially and shipments of those fortrucks increased owing to the tightening of emissions regulations. However, delays in the start-up of mass production of
products for model changeovers at mainstay customers and sluggish growth in shipments for export resulted in a year-on-year
decrease in sales. With regard to the shaped parts business, salesof mainstay brake calipers increased sharply in line with minorchanges to models in which they are installed, and shipments ofautomobile engine components also developed favorably. As forforged products, shipments of scroll compressors for automobile air conditioners increased in line with increases in automobile production volumes. As a result, overall sales of the shaped
parts business substantially exceeded the previous year’s level.
Regarding Electronic Materials Operations, volumes ofanodized aluminum foil for electrolytic capacitors turned
upward during the second quarter, fueled by increased demandfor digital appliances and robust production of electronic andelectrical equipment owing to strong capital spending for infrastructure development in China. However, full-year sales fell
short of the previous year’s level, having been dealt a severe
blow by the weaker demand for electronic and electrical equipment and electronic components from fiscal 2002 into the firstquarter of the year.
In Panel Systems Operations, although sales of panels forcommercial freezers and refrigerators for small projects
increased during the first half, reductions in capital spending
continued and sales for major projects fell below the previous
year’s level. During the second half, liberalization of liquor sales
licenses did not lead to the anticipated surge in demand fromconvenience stores and supermarkets, and price competition
for major projects and intensification of competition to win
orders that continued throughout the year caused sales to fall
below the previous year’s level. Full-year sales of clean rooms
increased year on year; although sales fell short of the previous
year’s level during the first half, the second half brought signs ofa partial recovery of demand in the electric equipment andpharmaceuticals sectors, and liquid crystal and plasma display
projects in particular spurred sales.
Regarding other fabricated products and related businesses,
sales of 2-liter and 3-liter mini-kegs for beer fell sharply below
the previous year’s level as beer shipments plummeted owing toan increase in the proportion of sales accounted for by low-maltbeer and the record unusually cool summer. Following the pattern of the previous year, shipments of mini-kegs and beer

servers for Kirin Tarunama System were buoyant during the first
half, but unavoidably fell during the second half.
Regarding landscaping products, sales of mainstay aluminum
bridge railings decreased in an adverse trading environment
characterized by contracting demand associated with public
works projects. However, an increase in shipments of the brazed
honeycomb panels used for the roofs of shelters outside train
stations coupled with the effect of launching new aluminum
moveable covers used as anti-terror devices at water purification
plants brought sales to nearly the previous year’s level.
As a result, sales in the Fabricated Products and Others
Segment increased 5.5% year on year to ¥215,461 million.
Profits rose sharply year on year.
Building Materials
In the Building
Materials Segment,
business conditionsin the housing construction materials
sector improved
owing to last-minutedemand prior to the
expiration of preferential tax treatmentthat spurred construction of owneroccupied homes and condominiums. The surge in demand
contributed to housing starts of 1.17 million units in fiscal
2003, the first increase in four years. The development of new
products and differentiated products and aggressive sales &marketing activities aimed at winning new customers resulted
in a solid sales performance for housing materials. Notable
among these products are the CB Series, the result of a new
surface treatment technology, and insulated front entrance
doors that provide enhanced security. In the commercial building construction materials sector, the Company coped with adecrease in the number of large-scale redevelopment projects
by working to increase sales by successfully completing largescale projects that took advantage of NLM’s high technicalcapabilities.
As a result, sales in the Building Materials Segment were
¥169,029 million, roughly the same level as the previous year.
Profits improved from the previous year owing to sales & marketing that emphasized profitability in the commercial building
construction materials sector, continuation of cost reduction
projects, and the implementation of measures to achieve
improvements in quality and delivery times, curtail purchasing
costs, and reduce overheads.
9FINANCIAL REVIEWOverview
During fiscal 2003 (the year ended March 31, 2004),
although personal consumption remained sluggish in view ofthe persisting harsh employment and income situation,strong private-sector capital spending and exports supported
a modest recovery of the Japanese economy.
In the aluminum industry, growth in sales of foodrelated products such as aluminum for cans was lackluster
owing to the unusually cool summer, but sales in thetransportation sector and other demand sectors weregenerally strong. As a result, total product demand exceeded
the previous fiscal year’s level.

the equity of Shin Nikkei Company, Ltd. in August 2000 bymeans of exchange of shares was completed in July 2003
and the amount of amortization decreased from ¥4.4 billion
for the previous fiscal year to ¥1.4 billion. Non-operating
expenses were 6.8% lower at ¥15.5 billion ($147 million)
mainly due to the decrease in interest expense as a result ofredemption of corporate bonds and the decrease in the loss
on disposal of inventories.
As a result, ordinary profit increased 30.6% from theprevious fiscal year to ¥16.1 billion ($152 million).
Similar to the previous fiscal year, the Company reported
a gain on sale of fixed assets amounting to ¥3.7 billion ($35
million), mainly attributable to sale of the former Osaka
Plant site, and a gain on sale of investment securities
amounting to ¥1.2 billion ($12 million) as special gains. On
the other hand, special losses decreased greatly from ¥8.0
billion for the previous fiscal year to ¥1.9 billion ($18
million). This decrease was attributable to the fact that,
whereas additional retirement allowance for the early
retirement program, loss on disposal of fixed assets andprior year severance costs for directors and statutory
auditors were recorded as special losses in the previous
fiscal year, no such items were recorded in the fiscal year
under review, and a loss on devaluation of investment
securities was about the same level as for the previous fiscal
year. Specifically, the loss on devaluation of investment
securities amounting to ¥1.9 billion relates to devaluation ofshares of Nippon Asahan Aluminium Company Limited, theEarnings and Expenses
In these circumstances, consolidated net sales of the NLMGroup were ¥532.2 billion ($5,035 million), having
increased 3.5% from the previous fiscal year. Please refer tothe Review of Operations (Pages 8 and 9) for an overview of
the results of operations.
The cost of sales increased 2.3% from the previous fiscal
year to ¥419.9 billion ($3,973 million), and the cost of sales
ratio decreased 0.9 percentage points to 78.9%. Selling,
general and administrative expenses increased 2.9% to¥85.9 billion ($813 million). As a result, operating profit
soared 31.2% to ¥26.4 billion ($249 million).
Non-operating income fell 40.8% to ¥5.3 billion ($50
million). This was mainly due to the fact that amortization ofnegative goodwill associated with the acquisition of 100% of

Net Sales By Segment

Total Shareholders’ Equity

Equity Ratio

750

150

20

600

120

16

450

90

12

300

60

8

150

30

4

0

2000

2001

2002

2003

2004

*including intersegment transactions
Billions of yen
Years ended March 31
Aluminum Ingot and Chemicals
Aluminum Sheet and Extrusions
Fabricated Products and Others
Building Materials

10

0

2000

Billions of yen

2001

2002

2003

0

2004

As of March 31

%

2000

2001

2002

2003

2004

As of March 31

investment vehicle for an Indonesian smelting project.
The total amount of current income taxes rose by ¥2.2
billion from the previous fiscal year to ¥4.6 billion ($43
million). This rise was attributable to the increase in taxable
income because consolidated subsidiaries for which theconsolidated taxation system is not adopted recorded better
financial results than for the previous year. Deferred income
tax increased by ¥5.4 billion from the previous fiscal year to¥2.3 billion (¥22 million). For the previous fiscal year,
deferred income tax amounting to ¥3.1 billion had a positive
impact on income taxes because the valuation allowance
provided for accumulated deficit decreased and the deferred
tax assets increased. On the contrary, for the fiscal year
under review, deferred income tax amounting to ¥2.3 billion
had a negative impact on income taxes because reversal ofdeferred tax assets was recorded in connection withoffsetting of taxable income of the consolidated subsidiaries
which have adopted the consolidated taxation system withaccumulated deficit. Consequently, consolidated net income
surged 62.0% from the previous fiscal year to ¥11.5 billion($109 million). The average number of shares outstanding
during the fiscal year increased from 530,380,188 shares infiscal 2002 to 540,507,663 shares in fiscal 2003. As a result,net income per share of common stock was ¥21.24 ($0.20),
having increased 59.2% from the previous fiscal year.
Payment of cash dividends of ¥2.5 per share of common
stock, ¥0.5 higher than for the previous fiscal year, wasapproved by resolution of the general meeting ofshareholders of the Company held on June 29, 2004.
Assets, Liabilities and Shareholders’ Equity
Total assets were ¥520.6 billion ($4,926 million), 1.0% lessthan at the end of the previous fiscal year. Current assets
increased 1.2% to ¥290.6 billion ($2,750 million), mainly
due to the increases in notes and accounts receivable—
trade in line with the higher net sales. Fixed assets decreased
3.7% to ¥230.0 billion ($2,176 million) as a result of theCompany’s efforts to reduce assets through sale of theformer Osaka Plant site and investment securities as well as
the decrease in deferred tax assets as mentioned above.
Total liabilities were ¥414.4 billion ($3,921 million),
4.4% less than at the end of the previous fiscal year. Thisdecrease was attributable to repayment of interest-bearing
debts, including redemption of bonds. Interest-bearing debt
decreased 9.8% to ¥229.7 billion ($2,173 million).
Minority interest in consolidated subsidiaries was ¥3.7
billion ($35 million), 18.4% higher than at the end of theprevious fiscal year. Shareholders’ equity rose 14.7% to¥102.5 billion ($969 million). This rise was attributable toan increase in retained earnings because the Company
recorded net income. Shareholders’ equity per share ofcommon stock amounted to ¥188.84 ($1.79), having
increased 13.1% from the end of the previous fiscal year.
The equity ratio was 19.7%, an improvement of 2.7
percentage points.
Cash Flows
Cash and cash equivalents at March 31, 2004, were ¥34.8
billion ($329 million), 22.1% lower than at the end of theprevious fiscal year.
Net cash provided by operating activities amounted to¥23.4 billion ($222 million), having decreased by 30.0%
due to the increase in working capital in line with the higher
net sales.
Net cash used for investing activities totaled ¥5.6 billion($53 million), compared with net cash provided by investing
activities amounting to ¥0.2 billion in the previous fiscal
year. This downturn was mainly owing to the decrease inproceeds from sale of fixed assets.
Net cash used for financing activities amounted to ¥27.7
billion ($262 million), having decreased by 24.1%. Thisdecrease was partly due to the decrease in the amount ofredemption of corporate bonds compared with the previous
fiscal year.
Outlook for Fiscal 2004
An unstable business environment is expected to continue
for some time on account of runaway growth in raw
materials prices and geopolitical risk factors, notably thesituation in the Middle East. However, there are also somepositive signs, such as the upturn of capital investment incertain industries in Japan in the context of the recovery ofcorporate earnings. We are determined to achieve the goals
set for the third year of the Mid-Term Management Plan. At
the same time we will accelerate the commercialization of
new products and the development of new businesses, thedriving forces of sustainable growth, from the medium- tolong-term perspective and sharpen our focus on
implementation of the growth strategy to make the best
possible use of our resources.
For fiscal 2004, on a consolidated basis we forecast net
sales of ¥550.0 billion, ordinary profit of ¥18.5 billion andnet income of ¥11.0 billion. Net income per share ofcommon stock is expected to be ¥22.29. We plan to pay out
year-end cash dividends of ¥3.0 per share of common stock,¥0.5 higher than for fiscal 2003.
Note: The above forecasts were revised and announced on August 3,
2004.

11

CONSOLIDATED BALANCE SHEETS
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
As of March 31, 2003 and 2004

Thousands of
U.S. dollars(Note 2)Millions of yen

ASSETS
2003
2004
Current assets:
Cash and deposits (Notes 3 and 6) .............................................................. ¥ 45,227 ¥ 35,564
Notes and accounts receivable—trade (Notes 6 and 14) ............................ 157,189
169,184
Inventories (Note 4) ...................................................................................
68,027
69,236
Deferred income taxes (Note 8) ..................................................................
5,472
5,413
Other current assets (Note 3) .....................................................................
13,653
13,347
Allowance for doubtful accounts .................................................................
(2,485)(2,119)Total current assets ..................................................................... 287,083
290,625$ 336,493
1,600,757
655,086
51,216126,284(20,049)
2,749,787

Fixed assets:
Property, plant and equipment (Note 6)—
Buildings and structures ........................................................................ 134,158
Machinery and equipment ..................................................................... 271,071
Land ......................................................................................................
66,101
Construction-in-progress .......................................................................
3,082
Accumulated depreciation ..................................................................... (289,906)
184,506

136,784
274,458
64,7222,819(296,221)
182,562

1,294,200
2,596,821
612,376
26,672(2,802,734)
1,727,335

4,414

3,935

37,231

32,153
9,495
12,782(4,672)49,758
238,678

29,466
6,385
11,576(3,964)
43,463229,960

278,796
60,413
109,528(37,506)
411,2312,175,797

Total assets ................................................................................... ¥ 525,761¥ 520,585$4,925,584

Intangible fixed assets .................................................................................

Investments and other assets—
Investment securities (Notes 5 and 6) ...................................................
Deferred income taxes (Note 8) ............................................................
Other assets ...........................................................................................
Allowance for doubtful accounts ...........................................................
Total fixed assets .........................................................................

The accompanying notes are an integral part of these statements.

12

2004

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
Millions of yen
SUBSIDIARIES AND SHAREHOLDERS’ EQUITY
2003
2004
Current liabilities:
Short-term borrowings (Note 6) ................................................................. ¥ 99,403 ¥ 96,628
Current portion of long-term debt (Note 6) ................................................
48,714
43,257
Notes and accounts payable—trade ............................................................
97,953
104,437
Other current liabilities ...............................................................................
48,56747,477
Total current liabilities .................................................................... 294,637
291,799
Long-term liabilities:
Long-term debt (Note 6) .............................................................................
Accrued pension and severance costs—
for Employees (Note 7) .........................................................................
for Directors and statutory auditors .......................................................
Negative goodwill ........................................................................................
Other long-term liabilities (Note 8) .............................................................
Total long-term liabilities ................................................................

Thousands of
U.S. dollars(Note 2)
2004

$ 914,259
409,282
988,144449,2102,760,895

106,642

89,797

849,626

23,897
1,444
1,314
5,326
138,623

25,039
1,416
480
5,861
122,593236,910
13,3984,541
55,455
1,159,930

Minority interest in consolidated subsidiaries ........................................

3,155

3,735

35,339

Shareholders’ equity:
Common stock—
Authorized: 1,600,000,000 shares
Issued:543,350,370 shares .....................................................
Additional paid-in capital ............................................................................
Retained earnings (Note 9) .........................................................................
Revaluation surplus (Note 10) ....................................................................
Net unrealized gains on securities (Note 5) .................................................
Foreign currency translation adjustment .....................................................
Treasury stock, at cost
(8,621,823 shares in 2003 and 1,028,654 shares in 2004).........................
Total shareholders’ equity ................................................................

39,085
24,68025,697
510
743
(505)

39,08524,56936,097
508
2,621
(289)

369,808
232,463341,536
4,806
24,799(2,734)(864)
89,346(133)
102,458(1,258)969,420

Total liabilities, minority interest inconsolidated subsidiaries and shareholders’ equity ................... ¥525,761¥520,585$4,925,584

Contingent liabilities (Note 14)

13

CONSOLIDATED STATEMENTS OF INCOME
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2003 and 2004

Thousands of
U.S. dollars(Note 2)Millions of yen
2003

Net sales ......................................................................................................... ¥ 514,042
Cost of sales (Note 13) ................................................................................. 410,449
Gross profit .............................................................................................. 103,593
Selling, general and administrative expenses (Note 13) ........................
83,507
Operating profit .......................................................................................
20,086
Non-operating income:Interest income ...........................................................................................
122
Amortization of negative goodwill ................................................................
4,386
Equity in earnings of associates ...................................................................
987
Other ..........................................................................................................
3,421
Total non-operating income ..................................................................
8,916
Non-operating expenses:
Interest expense ..........................................................................................
6,157
Amortization of transition obligation for employees retirement benefits (Note 7) ....
2,187
Loss on disposal of inventories ....................................................................
1,706
Other ..........................................................................................................
6,627
Total non-operating expenses ...............................................................
16,677
Ordinary profit ........................................................................................
12,325Special gains:
Gain on sale of fixed assets ..........................................................................
2,287
Gain on sale of investment securities (Note 5) ............................................
—
Total special gains ......................................................................................
2,287
Special losses:
Loss on devaluation of investment securities ...............................................
1,966
Additional retirement allowance for early retirement program (Note 7) .....
3,364
Loss on disposal of fixed assets ...................................................................
2,158
Prior years severance costs for directors and statutory auditors...................
482
Total special losses .................................................................................
7,970
Income before income taxes and minority interest ...........................
6,642
Income taxes (Note 8)—current ...................................................................
2,350—deferred .................................................................
(3,140)(790)
Minority interest in income of consolidated subsidiaries ......................
316
Net income ............................................................................................... ¥ 7,116
Per share of common stock:
Net income .................................................................................................. ¥Cash dividends ............................................................................................ ¥The accompanying notes are an integral part of these statements.

14

2004

2004

¥532,201
419,908
112,293
85,93826,355$5,035,490
3,973,015
1,062,475
813,114249,361

80
1,409
304
3,484
5,277

757
13,332
2,876
32,96449,929

5,438
2,130
1,292
6,680
15,54016,09251,452
20,153
12,224
63,204147,033
152,257

3,699
1,231
4,930

34,99911,647
46,646

1,914
—
—
—
1,914
19,108
4,562
2,309
6,871
712
¥ 11,525

18,110———18,110180,793
43,164
21,84765,011
6,737$ 109,045
U.S. dollars(Note 2)

Yen

13.34
2.00

¥ 21.24
¥
2.50

$
$

0.20
0.02

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2003 and 2004

Millions of yen

Number ofshares issued

Balance at March 31, 2002: .......................
Net income ...............................................
Cash dividends ............................................
Directors’ and statutory auditors’ bonuses....
Equity on revaluation gain for land of an
associate ...........................................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ...
Net increase in treasury stock ..................
Gain on sale of treasury stock ..................
Balance at March 31, 2003: .......................
Net income ...............................................
Cash dividends .........................................
Directors’ and statutory auditors’ bonuses ...
Equity on revaluation gain for land of an
associate ...........................................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net decrease in treasury stock ..................
Gain on sale of treasury stock ..................
Reversal of gain on sales of treasury stock
recorded by an associate due to thesale of its shares.................................
Balance at March 31, 2004 ........................

Commonstock

Additional
paid-in capital

Retainedearnings

Net unrealized
Revaluation
gains onsurplussecurities

543,350,370 ¥39,085 ¥24,569 ¥19,428
7,116
(815)
(29)

¥493

(3)

17

¥ 324

Foreigncurrencytranslation
Treasury
adjustment stock, at cost(¥578)

(¥ 7)

419
73
(857)
543,350,370

39,085

111
24,68025,697
11,525(1,085)
(40)

510

743

(505)

(864)

(2)
1,878
216
731
345

(456)
543,350,370 ¥39,085 ¥24,569 ¥36,097¥508¥2,621(¥289)(¥133)

Thousands of U.S. dollars (Note 2)

Number ofshares issued

Balance at March 31, 2003: .......................
Net income ...............................................
Cash dividends .........................................
Directors’ and statutory auditors’ bonuses ...
Equity on revaluation gain for land of an
associate ...........................................
Net unrealized gains on securities (Note 5) ..
Foreign currency translation adjustment ..
Net decrease in treasury stock ..................
Gain on sale of treasury stock ..................
Reversal of gain on sales of treasury stock
recorded by an associate due to thesale of its shares.................................
Balance at March 31, 2004 ........................

Commonstock

Additional
paid-in capital

Retainedearnings

Net unrealized
Revaluation
gains onsurplussecurities

Foreigncurrencytranslation
Treasury
adjustment stock, at cost

543,350,370 $369,808 $233,513 $243,136 $4,825 $ 7,030 ($4,778)
109,045(10,266)(379)($8,175)(19)
17,769
2,044
6,917
3,264

(4,314)543,350,370 $369,808 $232,463 $341,536

The accompanying notes are an integral part of these statements.

$4,806 $24,799 ($2,734)($1,258)
15

CONSOLIDATED STATEMENTS OF CASH FLOWS
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries
For the years ended March 31, 2003 and 2004

Millions of yen
2003

Cash flows from operating activities:
Income before income taxes and minority interest ......................................
Depreciation and amortization ....................................................................
Amortization of negative goodwill ................................................................
Loss on disposal of fixed assets ...................................................................
Gain on sale of fixed assets, net ...................................................................
Gain on sale of investment securities ...........................................................
Loss on devaluation of investment securities ...............................................
Increase in accrued pension and severance costs .......................................
Interest and dividend income ......................................................................
Interest expense ..........................................................................................
Equity in earnings of associates ...................................................................
(Increase) decrease in notes and accounts receivable—trade ....................
(Increase) decrease in inventories ..............................................................
Increase (decrease) in notes and accounts payable—trade ........................
Other ..........................................................................................................
Sub total ........................................................................................
Interest and dividend income received ........................................................
Interest paid ................................................................................................
Income taxes paid .......................................................................................
Net cash provided by operating activities ................................
Cash flows from investing activities:(Increase) decrease in time deposits ..........................................................
Payments for purchase of investment securities ...........................................
Proceeds from redemption of investment securities .....................................
Proceeds from sale of investment securities ................................................
Payments for purchase of fixed assets .........................................................
Proceeds from sale of fixed assets ...............................................................
Decrease in long-term loans receivable .......................................................
Proceeds from purchase of consolidated subsidiary (Note 3) .....................
Payments for purchase of securities of consolidated subsidiaries ................
Proceeds from liquidation of an associate ...................................................
Proceeds from capital reduction of an associate .........................................
Other ..........................................................................................................
Net cash provided by (used for) investing activities ..............
Cash flows from financing activities:
Decrease in short-term borrowings .............................................................
Proceeds from long-term debt ....................................................................
Payments of long-term debt .........................................................................
Cash dividends paid by the Company ...........................................................
Cash dividends paid to minority interest ......................................................
Other ..........................................................................................................
Net cash used for financing activities .......................................
Effect of exchange rate changes on cash and cash equivalents .....................
Net decrease in cash and cash equivalents ..................................................
Cash and cash equivalents at beginning of year ...........................................
Cash and cash equivalents at end of year (Note 3) ..................

The accompanying notes are an integral part of these statements.

16

2004

¥ 6,642 ¥ 19,108
17,12816,504(4,386)(1,409)2,158—(2,287)(3,699)—(1,231)
1,966
1,914
3,919
1,145
(347)
(281)
6,157
5,438
(987)
(304)
21,517(11,479)
5,318
(264)
(14,050)
4,829
(617)
957
42,131
31,228892
403(6,274)(5,409)(3,242)(2,774)33,50723,448389(2,156)
2,002
232(12,577)
9,526
201
—
(1,187)
2,887
1,189
(282)
224

Thousands of
U.S. dollars(Note 2)2004

$ 180,793
156,155(13,331)—(34,999)(11,647)
18,10910,834(2,659)51,452(2,876)(108,610)(2,498)45,690
9,055
295,468
3,813(51,178)(26,247)
221,856

(182)
(335)
—
3,538
(13,571)
5,556
176
1,346
—
—
—
(2,084)(5,556)(1,722)(3,170)—33,475(128,404)
52,5691,665
12,736———(19,718)(52,569)(4,214)(2,775)49,49028,380(80,310)(51,627)(813)(1,082)
(471)
(186)
(186)
(413)
(36,504)(27,703)(170)(59)(2,943)(9,870)47,59444,651¥44,651 ¥ 34,781(26,256)
268,521(488,476)(10,237)(1,760)(3,907)(262,115)(558)(93,386)
422,471$ 329,085

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nippon Light Metal Company, Ltd. and its consolidated subsidiaries

1. SIGNIFICANT ACCOUNTING POLICIES:(a) Basis of presenting financial statements —The accompanying consolidated financial statements of Nippon Light Metal Company, Ltd. (“the Company”) and its consolidated subsidiaries(together “the Companies”) are prepared in accordance with accounting principles and practices generally accepted in Japan, which are different
in certain respects as to application and disclosure requirements of International Financial Reporting Standards. The notes to the consolidated
financial statements include financial information, which is not required under accounting principles and practices generally accepted in Japan,
but is presented herein as additional information. In addition, the consolidated statements of shareholders’ equity are not required in Japan, but
are presented herein as additional information. The accompanying consolidated financial statements include certain reclassifications andmodifications for the purpose of presenting them in a form more familiar to readers outside Japan.
The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations andcash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.
(b) Consolidation and investments in associates —The consolidated financial statements include the accounts of the Company and, with minor exceptions, companies substantially controlled by theCompany. All significant intercompany transactions and accounts are eliminated.
Investments in significant companies where the Company has significant influence over management (associates) are stated at cost plus theCompany’s share of undistributed earnings.
The difference between the cost and the underlying net equity of investments in consolidated subsidiaries or associates accounted for by theequity method has been allocated to identifiable assets based on fair market value at the date of acquisition. Any unassigned residual amount isrecognized as goodwill and deferred or amortized on a straight-line basis over the effective period, with the exception of minor amounts which arecharged to income in the year of acquisition.
Negative goodwill, recognized on the integration of a subsidiary company, Shin Nikkei Company, Ltd. for the year ended March 31, 2001, wasbeing amortized on a straight-line basis over a 3-year period.
(c) Translation of foreign currencies —All monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term, are translated into Japanese yen at theexchange rates prevailing at the balance sheet date. Resulting gains and losses are included in the net income for the period.
Assets and liabilities of foreign subsidiaries and associates are translated into Japanese yen at the exchange rates prevailing at the balance sheet
date. Profit and loss accounts for the year are translated into Japanese yen using the average exchange rate during the year. The resulting
translation adjustments are accounted for as a component of “Shareholders’ equity”, except for the minority interest portion which is allocated to“Minority interest in consolidated subsidiaries”.
(d) Cash and cash equivalents —“Cash and cash equivalents” in the consolidated statements of cash flows comprise cash on hand, bank deposits available for withdrawal on
demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuation in value.
(e) Inventories —Inventories are principally stated at cost, determined by the moving-average method, except for costs related to construction-type-contracts which
are specifically identified.
(f) Financial Instruments —i) Derivatives:
All derivatives are stated at fair value with changes in fair value being included in the net income of the year in which they arise, except forderivatives designated as hedging instruments (see iii) Hedge accounting).
ii) Securities:
Securities held by the Companies are classified into ‘Held-to-maturity debt securities’, ‘Investments in equity securities issued by unconsolidated
subsidiaries and associates’ and ‘Other securities’.
‘Held-to-maturity debt securities’ that the Companies intend to hold to maturity are stated at cost, after accounting for any premium or
discount on acquisition which is amortized over the period to maturity.
‘Investments in equity securities issued by unconsolidated subsidiaries and associates’ are accounted for using the equity method.
Exceptionally, investments in certain unconsolidated subsidiaries and associates are stated at cost because the effect of application of the equity
method would be immaterial.
‘Other securities’ for which market quotations are available are stated at fair value as of the end of the year with net unrealized gains or losses
being included as a separate component of shareholders’ equity, net of related taxes. Realized gains and losses on sales are determined using the
average cost method and are included in the net income for the period.
‘Other securities’ for which market quotations are not available are stated at cost, except as stated in the paragraph below.
In cases where the fair value of ‘Held-to-maturity debt securities’, ‘Investments in equity securities issued by unconsolidated subsidiaries andassociates’ or ‘Other securities’ has declined significantly and such impairment of value is not temporary, such securities are written-down to fairvalue and the resulting losses are charged to income for the period.
17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSiii) Hedge accounting:
The Companies use derivatives to reduce the Companies’ exposure to the risk of fluctuations in foreign exchange rates, interest rates, and the priceof aluminum ingot in the market. Derivatives designated as hedging instruments by the Companies are principally forward exchange contracts,
interest rate swap contracts and aluminum ingot forward contracts. The related hedged items are trade accounts receivable and payable, long-termbank loans and sales or purchases of aluminum ingot. Thus, the Companies’ purchases of hedging instruments are limited to, at maximum, theamounts of the hedged items.
Gains or losses arising from changes in the fair value of the derivatives designated as ‘hedging instruments’ are deferred as an asset or liability
and included in net income in the same period in which the gains and losses on the hedged items or transactions are recognized. The Companies
use interest rate swaps to hedge their interest rate risk exposure. The related interest differentials paid or received under the interest rate swap
agreements are recognized over the terms of the agreements in interest expense.
The Companies evaluate the effectiveness of their hedging activities by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from the commencement of the hedges.
(g) Allowance for doubtful accounts —The allowance for doubtful accounts is estimated by applying the average percentage of actual bad debts in the past to the balance of receivables.
In addition, an amount deemed necessary to cover non-collectable receivables is provided on an individual account basis.
(h) Property, plant and equipment and depreciation —Property, plant and equipment are stated at cost. Depreciation is computed principally using the straight-line method at rates based on theestimated useful lives of the respective assets, principally, ranging from 2 years up to 60 years for buildings and structures, and from 2 years up to
22 years for machinery and equipment.
(i) Accrued pension and severance costs —“Accrued pension and severance costs for employees” represents the estimated present value of projected benefit obligations in excess of the fairvalue of the plan assets, except for the unrecognized transition amount and unrecognized actuarial differences. The unrecognized transition
amount is being amortized on a straight-line basis over 12 years and the unrecognized actuarial differences are being amortized on a decliningbalance basis over 12 years from the year following that in which they arise, except for these unrecognized costs in respect of retired employees, towhom the early retirement program applied, which were fully amortized at the time of their retirement.
“Accrued pension and severance costs for directors and statutory auditors” represents the estimated amount to be paid if all directors andstatutory auditors retired at balance sheet date, based on the Company retirement rules.
Until the year ended March 31, 2002, “severance costs for directors and statutory auditors” were accounted for on a cash basis with theapproval of a general meeting of shareholders. While the Company and some consolidated subsidiaries have no legal obligation, it is a customary
practice in Japan to make lump-sum payments to directors or statutory auditors upon retirement with the approval of a general meeting ofshareholders, and it is general in Japan to record “Accrued pension and severance costs for directors and statutory auditors”. Accordingly, effectivefrom the year ended March 31, 2003, the Company and some consolidated subsidiaries changed their method of accounting for severance costs for
directors and statutory auditors to an accrual basis in order to more appropriately reflect their costs and liabilities. The effects of this change for theyear ended March 31, 2003, was to decrease “Ordinary profit” by ¥94 million and to decrease “Income before income taxes and minority interest”
by ¥576 million, compared with the amounts which would have been reported if the previous method had been applied consistently.
(j) Lease transactions —Under Japanese accounting practices, finance leases are capitalized in principle. However, finance leases without an option to transfer ownership ofthe leased assets to the lessee may be accounted for as operating leases subject to appropriate footnote disclosure. Therefore, the Companies charge
or credit periodic lease payments and receipts to income as incurred.
(k) Income taxes —Income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants taxes and enterprise taxes. The
Company and its wholly-owned domestic subsidiaries adopt the Japanese consolidated taxation system.
The Company and its subsidiaries adopt the deferred tax accounting method. Income taxes are determined using the asset and liability
approach, whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax basis of assets and liabilities
and those as reported in the financial statements.
(l) Research and development costs and computer software —Research and development costs are charged to income as incurred. Expenditure relating to computer software developed for internal use ischarged to income as incurred, except in cases where it contributes to the generation of income or to future cost savings. In these cases it iscapitalized and amortized using the straight-line method over its estimated useful life, which is no longer than 5 years.

18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(m) Appropriation of retained earnings —The company is required to obtain the approval of shareholders at an ordinary general meeting for the appropriations of retained earnings inconformity with the Japanese Commercial Code. Appropriations of retained earnings are, therefore, not reflected in the consolidated financial
statements for the year to which they relate but are recorded in the consolidated financial statements in the subsequent fiscal year after
shareholders’ approval has been obtained.
(n) Net income and dividends per share —Net income per share of common stock, shown in the accompanying consolidated statements of income, is computed based on the weighted
average number of shares outstanding during the respective year.
Cash dividends per share, shown in the accompanying consolidated statements of income, represents dividends declared as applicable to therespective fiscal year.
(o) Accounting standard for impairment of fixed assets —On August 9, 2002, the Business Accounting Council in Japan issued “Accounting Standard for Impairment of Fixed Assets.” The standard requiresthat fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss shall be recognized in the income statement by reducing the carrying amount of impaired assets or a group ofassets to the recoverable amount to be measured as the higher of net selling price and value in use.
The standard shall be effective for fiscal years beginning April 1, 2005 and an earlier adoption is permitted. The Company has not adopted thestandard for the years ended March 31, 2003 and 2004.
(p) Reclassifications —Certain reclassifications of previously reported amounts have been made to conform with current classifications.
2. U.S. DOLLAR AMOUNTS:
The rate of ¥105.69= U.S.$1, the approximate current rate prevailing on March 31, 2004, has been used for the purpose of presentation of the U.S.
dollar amounts in the accompanying consolidated financial statements. These amounts are included solely for convenience and should not be
construed as representations that the yen amounts actually represent, or have been or could be readily converted, realized or settled in U.S.dollars
at that rate or at any other rate. The amounts shown in U.S. dollars are not intended to be computed in accordance with generally acceptedtranslation procedures.
3. CASH AND CASH EQUIVALENTS:
A reconciliation of “Cash and cash equivalents” to the accounts disclosed on the balance sheets at March 31, 2003 and 2004 is as follows:
Thousands of
U.S. dollars

Millions of yen
2003

Cash and deposits ..............................................................................................................................
Time deposits with maturity in excess of 3 months .........................................................................
Commercial paper included in “Other current assets” ...................................................................
Cash and cash equivalents ................................................................................................................

¥45,227(726)
150¥44,651

2004

2004

¥35,564(903)
120¥34,781$336,493(8,544)
1,136$329,085

For the year ended March 31 2004, the Company acquired a share of Alcan Nikkei Siam Aluminium Limited (which changed the company nameto Nikkei Siam Aluminium Limited on December 1, 2003), which became a newly consolidated subsidiary. At the time of consolidation, the assets
and liabilities and the proceeds from the purchase of the consolidated subsidiary were as follows:
Millions of yen
2004

Current assets ................................................................................................................................................................. ¥ 2,821
Fixed assets .....................................................................................................................................................................
1,227
Current liabilities ...........................................................................................................................................................
(819)
Long-term liabilities .......................................................................................................................................................
(220)
Negative goodwill ...........................................................................................................................................................
(575)
Acquisition cost ....................................................................................................................................................... ¥ 2,434
Payment in kind of investment securities for the acquisition ...................................................................................... (¥ 2,434)
Cash and cash equivalents held by a newly consolidated subsidiary(“proceeds from purchase of consolidated subsidiary”) ...................................................................................... ¥ 1,346

Thousands of
U.S. dollars
2004$26,691
11,609(7,749)(2,081)(5,440)$23,030($23,030)$12,736

19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. INVENTORIES:
Inventories at March 31, 2003 and 2004 comprised the following:Thousands of
U.S. dollars

Millions of yen
2003

Finished products ..............................................................................................................................
Work-in-process, including costs related to construction-type-contracts .......................................
Raw materials and supplies ..............................................................................................................
.............................................................................................................................................

¥22,854
34,10011,073¥68,027

2004

2004

¥21,945
35,346
11,945¥69,236$207,636
334,431
113,019$655,086

5. INVESTMENT SECURITIES:(a) ‘Other securities’ with available market value —The aggregate cost, carrying amount and gross unrealized gains and losses of ‘Other securities’ with available market values at March 31, 2003
and 2004 were as follows:
Millions of yen
2003
Cost

Equity securities ...................................................................................................
Other .....................................................................................................................
...............................................................................................................................

¥4,950100¥5,050

Unrealized
gains

Unrealized
losses¥1,6880¥1,688

¥383
—
¥383

Carrying
amount¥6,255100¥6,355

Millions of yen
2004

Equity securities ...................................................................................................
...............................................................................................................

Cost

Unrealized
gains

Unrealized
losses¥3,661¥3,661¥4,437¥4,437¥36¥36

Carrying
amount¥8,062¥8,062Thousands of U.S. dollars
2004

Equity securities ...................................................................................................
...............................................................................................................

Cost

Unrealized
gains

Unrealized
losses$34,639$34,639$41,981$41,981$340$340

Carrying
amount$76,280$76,280(b) Sale of ‘Other securities’ —The realized gains and losses on sale of ‘Other securities’ during the years ended March 31, 2003 and 2004 were as follows:
Thousands of
U.S. dollars

Millions of yen
2003

Selling amount .................................................................................................................................
Realized gains on sale ....................................................................................................................
Realized losses on sale ......................................................................................................................

20

¥232
70
23

2004

2004

¥2,8571,231—$27,032
11,647—

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(c) ‘Held-to-maturity securities’ and ‘Other securities’ without available market values —The carrying amounts of ‘Held-to-maturity securities’ and ‘Other securities’ without available market values at March 31, 2003 and 2004, were as
follows:
Thousands of
U.S. dollars

Millions of yen
2003(1) ‘Held-to-maturity securities’
Domestic debt securities privately offered .......................................................................
(2) ‘Other securities’
Equity investments in non-public companies .................................................................
Other .........................................................................................................................

¥

2004

133

¥

13,21757¥13,4072004

130

11,33949¥11,518$

1,230

107,285464$108,979(d) Maturity of debt securities —The redemption schedules for maturity of debt securities at March 31, 2003 and 2004 are as follows:
Millions of yen
2003
Due within
one year

Debt securities:
Government and municipal bonds ..............................................................
Corporate debt securities ..............................................................................
Other .....................................................................................................................
.......................................................................................................................

¥ 2
—
1
¥ 3

Due after one year, but Due after five years, but
within five years
within ten years

¥ 7
10
127
¥144

¥ 9
—
—
¥ 9

Due after morethan ten years

¥105
—
—
¥105

Millions of yen
2004
Due within
one year

Debt securities:
Government and municipal bonds ..............................................................
Corporate debt securities ..............................................................................
Other .....................................................................................................................
............................................................................................

¥13
—
13
¥26

Due after one year, but Due after five years, but
within five years
within ten years

¥45
10
15
¥70

¥49
—
—
¥49

Due after morethan ten years

¥14
—
—
¥14

Thousands of U.S. dollars
2004
Due within
one year

Debt securities:
Government and municipal bonds ..............................................................
Corporate debt securities ..............................................................................
Other .....................................................................................................................
............................................................................................

$123
—
123
$246

Due after one year, but Due after five years, but
within five years
within ten years

$426
94
142
$662

$464
—
—
$464

Due after morethan ten years

$132
—
—
$132

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT:“Short-term borrowings” at March 31, 2004 bore interest at annual rates ranging from 0.589% to 3.000% and generally represented bank loans or
short-term notes maturing at various dates within one year.
“Long-term debt” at March 31 comprised the following:Thousands of
U.S. dollars

Millions of yen
2003

Loans, principally from banks and insurance companies due from 2003 to 2014
with interest rates ranging from 0.799% to 8.020%:
Secured .......................................................................................................................................
Unsecured ..................................................................................................................................
Loans, principally from banks and insurance companies due from 2004 to 2015
with interest rates ranging from 0.660% to 5.700%:
Secured .......................................................................................................................................
Unsecured ..................................................................................................................................
Secured 1.25% Bonds due July 20, 2006, redeemable before due date ............................................
Unsecured 2.65% Bonds due February 10, 2004, redeemable before due date ...............................
Unsecured 2.45% Bonds due July 25, 2003, redeemable before due date ........................................
Unsecured 2.675% Bonds due August 20, 2004, redeemable before due date .................................
Unsecured 1.25% Bonds due July 20, 2006, redeemable before due date ........................................
Capital lease obligations due from 2004 to 2029 with interest rates ranging from1.900% to 7.200% ............................................................................................................................
.............................................................................................................................................
Less: portion due within one year .....................................................................................................
Total long-term debt .........................................................................................................................

¥ 36,641
79,715

2004

¥

2004

—
—

$

—
—

—
—
—
10,00010,00010,0009,000

109,155
3,845
9,000
—
—
10,000—1,032,785
36,38085,155——
94,616——
155,356(48,714)¥106,642

1,054
133,054(43,257)¥ 89,797

9,972
1,258,908(409,282)$ 849,626

A summary of assets pledged as collateral for “Short-term borrowings” and “Long-term debt” at March 31, 2004 is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and deposits ........................................................................................................................................................... ¥60
Notes and accounts receivable—trade ..........................................................................................................................
4
Property, plant and equipment ...................................................................................................................................... 106,094
Investment securities ......................................................................................................................................................
373

$

568
38
1,003,822
3,529

The aggregate annual maturities of “Long-term debt” beyond March 31, 2004 are as follows:
Years ending March 31

Millions of yen

2005 ................................................................................................................................................................................. ¥ 43,257
2006 ................................................................................................................................................................................
29,332
2007 ................................................................................................................................................................................
32,3392008 ................................................................................................................................................................................
18,7552009 ................................................................................................................................................................................
7,081
Thereafter .......................................................................................................................................................................
2,290......................................................................................................................................................................................... ¥133,054

22

Thousands of
U.S. dollars$ 409,282
277,528
305,980
177,453
66,99821,667$1,258,908

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. RETIREMENT BENEFIT PLANS:The Company and its domestic subsidiaries have defined benefit tax qualified pension plans and a non-contributory plan covering substantially all
employees. Additional benefits may be granted to employees according to the conditions under which termination occurs. Certain foreignsubsidiaries have defined contribution plans.
“Accrued pension and severance costs” as of March 31, 2003 and 2004 can be analyzed as follows:
Thousands of
U.S. dollars

Millions of yen

Projected benefit obligations .............................................................................................................
Fair value of plan assets ....................................................................................................................
............................................................................................................................................................
Unrecognized transition amount .....................................................................................................
Unrecognized actuarial differences ..................................................................................................
Accrued pension and severance costs ...............................................................................................

2003

2004

2004

(¥67,810)
16,863(50,947)
18,813
8,237(¥23,897)(¥65,500)
19,333(46,167)
16,683
4,445(¥25,039)($619,737)
182,922(436,815)
157,848
42,057($236,910)

The net pension cost related to retirement benefits for the years ended March 31, 2003 and 2004 was as follows:
Thousands of
U.S. dollars

Millions of yen
2003

Service cost ........................................................................................................................................
Interest cost .......................................................................................................................................
Expected return on plan assets .........................................................................................................
Amortization of transition amount ..................................................................................................
Amortization of unrecognized actuarial differences ........................................................................
Net pension and severance cost ........................................................................................................
*1

*2
*3

2004

¥ 3,801
1,516
(468)
*1
3,495
*2
1,581
¥ 9,9252004¥ 3,420
1,420
(368)
*1
2,130
1,531
¥ 8,133$32,359
13,435(3,482)
20,153
14,486$76,951

The above figures include an amount of ¥1,308 million and ¥38 million ($360 thousand) for the years ended March 31, 2003
and 2004, respectively, in respect of employees who retired during the respective fiscal years under the early retirement program.
These amounts were fully amortized at the time of employees’ retirement.
The above figure includes an amount of ¥404 million for the years ended March 31, 2003 in respect of employees who retired
during the fiscal year under the early retirement program. This amount was fully amortized at the time of employees’ retirement.
In addition to *1 and *2 above, additional benefits of ¥1,652 million under the early retirement program were granted for the year
ended March 31, 2003. The total amount of all these costs is disclosed within special losses as “Additional retirement allowance forearly retirement program” for the year ended March 31, 2003.
Assumptions used in calculation of the above information were as follows:
2003

Discount rate .....................................................................................................................................
Expected rate of return on plan assets ..............................................................................................
Method of attributing the projected benefits to periods of employee service ...................................
Amortization of unrecognized actuarial differences ........................................................................
Amortization of transition amount ..................................................................................................

2.5%
2.5%
Straight-line basis
Mainly 12 years
12 years

2004

2.5%
Mainly 2.5%
Straight-line basis
Mainly 12 years
12 years23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAXES:
The Company and its domestic subsidiaries are subject to a number of different taxes based on income which, in aggregate, indicate a statutory
effective tax rate of approximately 42.0% for the years ended March 31, 2003 and 2004.
Tax losses can be carried forward for a five or seven-year period for offset against future taxable income.
Significant components of deferred tax assets and liabilities at March 31, 2003and 2004 were as follows:
Thousands of
U.S. dollars

Millions of yen
2003

Deferred tax assets:
Tax loss carry forwards ..............................................................................................................
Accrued pension and severance costs ........................................................................................
Accrued bonuses..........................................................................................................................
Loss on disposal of fixed assets ..................................................................................................
Allowance for doubtful accounts ...............................................................................................
Others .........................................................................................................................................
Total gross deferred tax assets ............................................................................................
Valuation allowance ..................................................................................................................
Total deferred tax assets, net of valuation allowance ........................................................
Deferred tax liabilities:
Unrealized gains on securities ...................................................................................................
Valuation gain on subsidiaries ..................................................................................................
Others .........................................................................................................................................
Total gross deferred tax liabilities ......................................................................................
Net deferred tax assets .......................................................................................................................

2004

2004

¥21,710
8,678
1,649
1,851
1,997
8,418
44,303(28,068)
16,235¥11,339
9,511
2,383
1,828
1,499
8,929
35,489(21,561)
13,928$107,285
89,99022,547
17,29614,18384,483335,784(204,003)
131,781

(524)
(545)
(296)
(1,365)¥14,870(1,677)(708)(399)(2,784)¥11,144(15,867)(6,699)(3,775)(26,341)$105,440

A reconciliation of the difference between the statutory tax rate and the effective income tax rate for the year ended March 31, 2003and 2004 is
as follows:
2003

Statutory tax rate ...............................................................................................................................
Increase (decrease) in taxes resulting from:
Permanently non-deductible expenses .....................................................................................
Amortization of negative goodwill ............................................................................................
Equity in earnings of associates ................................................................................................
Decrease in valuation allowance ...............................................................................................
Decrease in deferred income taxes with tax-rates change ........................................................
Other ..........................................................................................................................................
Effective income tax rate ..................................................................................................................

2004

42.0%

42.0%

7.0
(27.7)(6.3)(30.0)
4.7(1.6)(11.9%)

3.6
(3.1)
—
(4.7)
—
(1.8)
36.0%

On March 31, 2003, Japanese National Diet approved various changes to the calculation of the statutory local enterprise tax for companies
with capital in excess of ¥100 million, effective April 1, 2004. Under the basic enterprise tax, the rate for the income based component has
decreased. As a result of this amendment, the tax rate to be applied to temporary differences between the carrying amount and tax basis of assets
and liabilities that are expected to reverse in the years beginning April 1, 2004 decreased as at March 31, 2003. This resulted in a reduction indeferred tax assets at March 31, 2003 by ¥297 million, compared with the assets that would have been recognized had the previous tax rate been
fully applied to all temporary differences. Net income for the year ended March 31, 2003 decreased by ¥309 million as a result of these changes inlocal enterprise tax regulations.

24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9. APPROPRIATIONS OF RETAINED EARNINGS:
The following appropriation was approved at the ordinary general meeting of shareholders of the Company held on June 29, 2004.

Cash dividends ................................................................................................................................................................

Millions of yen

Thousands of
U.S. dollars¥1,356$12,830

10. REVALUATION SURPLUS:
An equity associate of the Company revalued its land used for business purposes in accordance with the Land Revaluation Law. As a result of thisrevaluation, the Company recognized its portion of the associate’s revaluation surplus net of related taxes.
11. LEASE TRANSACTIONS:The Companies charge or credit to income periodic lease payments and receipts for finance leases that do not have options to transfer ownership ofthe leased assets to the lessee. Such periodic lease payments under finance lease contracts totaled ¥ 1,830 million and ¥1,777 million ($16,813
thousand), and receipts under finance lease contracts totaled ¥ 101 million and ¥76 million ($719 thousand), for the years ended March 31, 2003
and 2004, respectively. Future lease payments and receipts under the Companies’ finance leases and non-cancelable operating leases, including
amounts representing interest, at March 31, 2003 and 2004 were as follows:
Thousands of
U.S. dollars

Millions of yen

Lease payments:
Due within one year ...................................................................................................................
Due beyond one year .................................................................................................................
Lease receipts:
Due within one year ...................................................................................................................
Due beyond one year .................................................................................................................

2003

2004

2004

¥1,797
4,917¥6,714¥1,7594,925¥6,684$16,643
46,599$63,242

¥ 143
60
¥ 203

¥

$

¥

73
19
92

$

690
180
870

Leased assets under the Companies’ finance leases, where lessors retain ownership of leased assets, are accounted for as operating leases by theCompanies. If such leases had been capitalized, then the cost of the assets and the related accumulated depreciation at March 31, 2003 and 2004
would have been as follows:
Millions of yen
2003
Cost

Buildings and structures ......................................................................................
Machinery and equipment ...................................................................................
Intangible fixed assets ..........................................................................................

Accumulated
depreciation

¥

41
9,785
263
¥10,089

Net
amount

¥ 18
3,523
175
¥3,716

¥ 23
6,262
88
¥6,373Thousands of
U.S. dollars

Millions of yen
2004
Cost

Buildings and structures ......................................................................................
Machinery and equipment ...................................................................................
Intangible fixed assets ..........................................................................................

¥

36
10,093
171¥10,300

Accumulated
depreciation

¥

13
3,789
96
¥3,8982004
Net
amountNetamount

¥

$

23
6,304
75
¥6,402

217
59,646710$60,573

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The depreciation amount for these leased assets computed on the straight-line method over the period of the leases would have been ¥ 1,830
million and ¥1,777 million ($16,813 thousand) for the years ended March 31, 2003 and 2004, respectively.
Fixed assets, excluding sub-leased assets, which are leased to other companies under finance leases without options to transfer ownership ofthe leased assets to the lessee at March 31, 2003 and 2004, were as follows:
Millions of yen
2003
Cost

Machinery and equipment ...................................................................................

¥140

Accumulated
depreciation

¥97

Net
amount¥43
Thousands of
U.S. dollars

Millions of yen
2004
Cost

Machinery and equipment ...................................................................................

¥81

Accumulated
depreciation

¥51

2004
Net
amount¥30

Net
amount$284

The depreciation amount for these leased assets computed on the straight-line method over the period of the leases would have been ¥ 64
million and ¥38 million ($360 thousand) for the years ended March 31, 2003 and 2004, respectively.
12. DERIVATIVES:
In the normal course of business, the Companies enter into various derivative financial instruments in order to manage the exposure resulting
from fluctuations in foreign currency exchange rates, interest rates and the prices of aluminum ingot in the market. The Companies do not holdor issue derivative financial instruments for trading purposes.
At March 31, 2003 and 2004, there were no derivative financial instruments, except those instruments to which hedge accounting is applied.
13. RESEARCH AND DEVELOPMENT COSTS:
Research and development costs charged to “Cost of sales” and “Selling, general and administrative expenses” for the years ended March 31, 2003
and 2004 were ¥4,427 million and ¥4,804 million ($45,454 thousand), respectively.
14. CONTINGENT LIABILITIES:Contingent liabilities at March 31, 2004 for loans guaranteed and other guarantees given in the ordinary course of business amounted to ¥20,911
million ($197,852 thousand), including ¥4,726 million ($44,716 thousand) shared by other joint guarantors, and ¥3,174 million ($30,031
thousand) for notes discounted and ¥5 million ($47 thousand) for notes endorsed.
15. SEGMENT INFORMATION:
The Companies operate within four distinct industry segments, mainly in Japan: “Aluminum ingot and chemicals”, “Aluminum sheet andextrusions”, “Fabricated products and others” and “Building materials”.
The “Aluminum ingot and chemicals” segment supplies aluminum primary and remelted ingot used for various industrial materials, andproduces a wide spectrum of aluminas and alumina hydrates ranging from raw materials to basic materials for ceramic compounds.
The “Aluminum sheet and extrusions” segment produces sheet, coil, and extrusion products consisting primarily of shapes, tubes and rods.
The “Fabricated products and others” segment produces a variety of products which include, among others, aluminum foil, aluminum powder,
wing bodies for transport vehicles, automobile components and electronic materials.

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The “Building materials” segment produces a wide range of materials including sashes, curtain walls, and doors and fences for commercial
and residential construction.
“Corporate items” includes general and administrative expenses and other expenses not specifically related to business segments.
Export sales and operations outside Japan are insignificant.
Information by industry segment for the years ended March 31, 2003 and 2004 are as follows:
Millions of yen
2003
Aluminumingot andchemicals

Aluminum
sheet andextrusions

Fabricatedproducts
and others

Building
materials

Sales:
Customers ...........................................
Intersegment ......................................
Total ............................................
Operating expenses ....................................
Operating profit (loss) ...............................
Identifiable assets ......................................
Depreciation ..............................................
Capital expenditures ..................................

¥ 81,495
47,749129,244
124,298¥ 4,946¥ 97,424¥ 2,878¥ 3,303¥ 58,374
21,92280,296
79,269¥ 1,027¥ 68,997¥ 2,232¥ 1,714¥ 204,171
19,008223,179
212,110¥ 11,069¥ 188,840¥ 5,050¥ 4,300¥ 170,002
6,781
176,783
170,908¥ 5,875¥ 174,199¥ 6,881¥ 4,101*1 Netting of corporate items ...¥2,825 million*2 Netting of corporate items ...¥29,139 million

Eliminationor
corporate items¥

Consolidated—(95,460)(95,460)(92,629)*1(¥ 2,831)(¥ 3,699)*2
¥
87
¥
83

¥ 514,042—
514,042493,956¥ 20,086¥ 525,761¥ 17,128¥ 13,501

Millions of yen
2004
Aluminumingot andchemicals

Aluminum
sheet andextrusions

Fabricatedproducts
and others

Building
materials

Eliminationor
corporate items

Consolidated

Sales:
Customers ...........................................
Intersegment ......................................
Total ............................................
Operating expenses ....................................
Operating profit (loss) ...............................
Identifiable assets ......................................
Depreciation ..............................................
Capital expenditures ..................................

¥ 82,851
52,681
135,532
130,805¥ 4,727¥ 94,899¥ 2,816¥ 3,618¥64,860
22,96287,822
84,155¥ 3,667¥71,366¥ 1,702¥ 1,657¥215,461
19,544
235,005
220,934¥ 14,071¥201,848¥ 5,150¥ 7,459¥169,029
5,188
174,217
167,530¥ 6,687¥164,674¥ 6,746¥ 4,709¥—(100,375)(100,375)(97,578)*1(¥ 2,797)(¥ 12,202)*2
¥
90
¥
73

¥532,201—532,201
505,846¥ 26,355¥520,585¥ 16,504¥ 17,516*1 Netting of corporate items ...¥2,847 million*2 Netting of corporate items ...¥20,480 million

Eliminationor
corporate items

Consolidated$—(949,711)(949,711)(923,247)($ 26,464)($115,451)
$
852
$
691

$5,035,490—
5,035,490
4,786,129$ 249,361$4,925,584$ 156,155$ 165,730

Thousands of U.S. dollars
2004

Sales:
Customers ...........................................
Intersegment ......................................
Total ............................................
Operating expenses ....................................
Operating profit (loss) ...............................
Identifiable assets ......................................
Depreciation ..............................................
Capital expenditures ..................................
*1 Netting of corporate items ...$26,937 thousand

Aluminumingot andchemicals

Aluminum
sheet andextrusions

Fabricatedproducts
and others$ 783,906
498,448
1,282,354
1,237,629$ 44,725$ 897,899$ 26,644$ 34,232$613,682
217,258
830,940796,244$ 34,696$675,239$ 16,104$ 15,678$2,038,612
184,918
2,223,530
2,090,396$ 133,134$1,909,812$ 48,727$ 70,574

Building
materials$1,599,290
49,087
1,648,377
1,585,107$ 63,270$1,558,085$ 63,828$ 44,555*2 Netting of corporate items ...$ 193,774 thousand

As discussed in Note 1 (i), effective from the year ended March 31, 2003, the Company and some consolidated subsidiaries changed their method of
accounting for severance costs for directors and statutory auditors.
The effect of this change for the year ended March 31, 2003 was to decrease “Operating profit” by ¥37 million in the “Building materials”
segment, and to increase “Operating loss” by ¥57 million in the “Elimination or corporate items” column.
27

REPORT OF INDEPENDENT AUDITORS28

OVERSEAS NETWORKOVERSEAS SUBSIDIARIES AND ASSOCIATES
North America
Nikkei North America
Aluminum Inc.
Ohio, U.S.A.
Phone: 1-330-463-5565
Trading and marketing(100%)
Toyal America Inc.
Illinois, U.S.A.
Phone: 1-815-740-3037
Aluminum powder and paste(100%)
EuropeToyal Europe Société Anonyme
Accous, France
Phone: 33-5-59-983535
Aluminum powder and paste(100%)

East Asia
Alcan Nikkei China Limited
Hong Kong, SAR, China
Phone: 852-2522-3001
Trading and marketing(51%)
Nippon Light Metal (HongKong) Limited
Hong Kong, SAR, China
Phone: 852-2541-5563
Building materials(100%)
Nonfemet International(China-Canada-Japan)
Aluminium Co., Ltd.
Shenzhen, China
Phone: 86-755-661-1569
Extrusion(18%)

Southeast Asia
Amalgamated Aluminium
and Alloys Sdn. Bhd.
Malaysia
Phone: 60-3-341-9500
Aluminum alloys(35%)
Daiki Nikkei Thai Co., Ltd.
ThailandPhone: 66-3821-4631
Aluminum alloys(35%)
Nikkei Siam Aluminium
LimitedThailandPhone: 66-2-529-0136
Aluminum sheet, foil
(100%)
Nikkei Singapore
Aluminium Pte. Ltd.
Singapore
Phone: 65-6222-8991
Trading and marketing(100%)(As of March 31, 2004)

29

DIRECTORS AND OFFICERS

Directors
Shigesato Sato

Officers
Shigesato Sato

President
Representative Director

President
Chief Executive Officer

Yoshisato Hiratsuka
Takashi Ishiyama
Shigeru Kohmura
Takamichi Sakai
Tsuyoshi Nakajima
Makoto Fujioka
Kazuyuki Hasegawa
Masao Imasu
Yasuo Noda
Hidetane Iijima

Yoshisato Hiratsuka
Executive Vice President
Senior Executive Officer

Toshikazu Wasa
Mitsuru Ishihara
Yoshiaki Kurihara
Akira Kato
Tadakazu Miyauchi
Koji Ueno
Mitsuaki Asano

Shigeru Kohmura
Senior Executive Officer

Takashi Ishiyama
Senior Executive Officer

Motoi Kobayashi
AuditorsShozo Ueda
Koji Tajima
Yasuyuki Wakahara
Seiichi Takeda

Senior Executive Officer

Yoshinobu Hiki
Senior Executive Officer

Takamichi Sakai
Senior Executive Officer

Tsuyoshi Nakajima
Executive Officer
Makoto Fujioka
Executive Officer
Koji Kawakami
Executive Officer(As of June 29, 2004)

30

PROFILE

CORPORATE DATA

Since its foundation in 1939, Nippon Light Metal Company, Ltd. has been constantly
involved with aluminum. Today, Nippon Light Metal is Japan’s sole fully integrated aluminum manufacturer with activities ranging from alumina smelting to fabrication ofvarious products.
Nippon Light Metal comprises four business segments: Aluminum Ingot andChemicals concerning the production of alumina and related chemicals and aluminum ingot; Aluminum Sheet and Extrusions involving the production of sheets andshapes; Fabricated Products and Others including the production of transportationrelated products, electronic materials, foil and powder; and Building Materials covering the production of residential and office building materials. Through thesesegments, Nippon Light Metal is actively engaged in a wide range of fields such as
automobiles and railroads, electric machinery and electronics, industrial products,
construction, and living necessities.
The NLM Group—the preeminent source of products and services combining
aluminum’s excellent characteristics with new functionality and added value that caterto pressing customer needs—delivers customer satisfaction and contributes to environmental protection.

Head Office

NYK Tennoz Building
2-20, Higashi-Shinagawa 2-chome
Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp
Phone: 03-5461-9333
Fax: 03-5461-9344
E-mail: nlmmaster@nikkeikin.co.jp
EstablishedMarch 30, 1939
Paid-In Capital¥39,085 million
Shares of Common Stock

Authorized: 1,600,000,000
Issued: 543,350,370
Number of Shareholders

48,092

The Light Metal Educational
Foundation, Inc.
(2.8%)

Nikkei Products Co., Ltd.
Household utensils(100%)

Namekawa Aluminium Co., Ltd.
(2.7%)

Nikkei Extrusions Co., Ltd.
Aluminum extruded products(100%)

Nikkei-Keiyu-Kai(2.1%)

Nikkei Aluminium Core Technology
Co., Ltd.
Aluminum extrusions and fabricatedproducts(100%)

Japan Trustee Services Bank, Ltd. (trust
accounts for Mitsui Asset Trust andBanking Company, Limited and CMTB
Equity Investment Co., Ltd.)(1.8%)

Nikkei Panel System Co., Ltd.
Panel for pre-fabricated freezer/refrigerator and cleanroom(100%)

Mizuho Trust employee pension trust
Mizuho Corporate accounts(1.6%)

Major Domestic Subsidiaries

Shin Nikkei Company, Ltd.
Aluminum sashes, construction materials *1

Stock Exchange Listings

Contents
Consolidated Six-Year Summary................................................. 1
To Our Shareholders ................................................................. 2
Special Feature ......................................................................... 4
Basic Stance on Corporate Governance ..................................... 6
NLM Group Topics .................................................................... 7
Review of Operations ................................................................ 8
Financial Review ....................................................................... 10
Consolidated Balance Sheets ..................................................... 12
Consolidated Statements of Income ........................................... 14
Consolidated Statements of Shareholders’ Equity ...................... 15
Consolidated Statements of Cash Flows ..................................... 16
Notes to the Consolidated Financial Statements ......................... 17
Report of Independent Auditors ................................................ 28
Overseas Network ..................................................................... 29
Directors and Officers ............................................................... 30
Corporate Data ......................................................................... 31

Cautionary Statement
This annual report contains various projections and estimates. Important factors that could alter these projections and estimates include changes in the balance of aluminum supply and demand, fluctuations in the price of aluminum ingot andforeign exchange rates, as well as shifts in Japanese government policies and regulations. The Company cautions, therefore,that the projections and estimates contained herein involve risk and uncertainty, and that actual results could differ materially from those expressed or implied.

Tokyo, Osaka and three otherdomestic stock exchanges
Transfer Agent of Common Stock

Nippon Fruehauf Co., Ltd.
Aluminum vans, trucks, trailers,
containers(66%)

Aluminium Wire and Rod Co., Ltd.
Aluminum rough drawing wire
(58.3%)The Chuo Mitsui Trust & Banking Co., Ltd.
Last Shareholders’ Meeting

June 29, 2004

Matsuo Industry Co., Ltd.
Aluminum castings and forgings *Toyo Aluminium K.K
Aluminum foil, powder and paste(100%)

4

Riken Light Metal Industrial Co., Ltd.
Aluminum construction materials *2Major Shareholders(Percentage of Total Voting right)

Japan Trustee Services Bank, Ltd.
(trust accounts)(15.3%)The Master Trust Bank of Japan, Ltd.
(trust accounts)(7.2%)The Dai-ichi Mutual Life Insurance
Company(3.7%)
Mizuho Corporate Bank, Ltd.
(3.4%)
Asahi Mutual Life Insurance Co.
(2.8%)NLM ECAL Co., Ltd.
Housing for cellular and mobile
telecommunications base stations(100%)

Nippon Electrode Co., Ltd.
Carbon for iron and steel blast furnaces
and for aluminum smelting, and othertypes of carbon(100%)*1 98%; Direct interest by NLM
2%; Interest held by Nikkei Sangyo Co., Ltd.
*2 98.5%; Direct interest by NLM
1.5%; Interest held by Nikkei Logistics Co., Ltd.
*3 46%; Direct interest by NLM
44%; Interest held by Shin Nikkei Co., Ltd.
10%; Interest held by Nippon Fruehauf Co., Ltd.
*4 99.1%; Direct interest by NLM
0.1%; Interest held by Nikkei Sangyo Co., Ltd.

Nikkei Sangyo Co., Ltd.
Aluminum welding rods, various kindsof contract work
(98.6%)
Nikkei Information System Co., Ltd.
Development, maintenance and operation of computer software(100%)(As of March 31, 2004)

Nikkei Logistics Co., Ltd.
Transport, warehousing *3

On the Cover:
From top to bottom: Mt. Fuji viewed from the bauxite yard of Shimizu Plant, a rolling machine at Nagoya Plant,
photosensitive drum materials, an aluminum truss at Miyazaki Agricultural Experiment Station

31

Nippon Light Metal Company, Ltd.

ANNUAL REPORT 2004

NYK Tennoz Building,2-20, Higashi-Shinagawa 2-chome

Year Ended March 31, 2004

Shinagawa-ku, Tokyo 140-8628, Japan
http://www.nikkeikin.co.jp

Printed in Japan