Report 2018Year ended December 31, 2018

HORIBA’s corporate motto

Everything begins with measurement
Sustainable growth in society is established through technological innovation.
Engineers’ dreams, passions, and persistent efforts areintertwined with the conditions that enable them,including investment opportunities and social demand.
“Measurement Technologies” that distinguish unknown materials andphenomena help accelerate innovation by engineers.
Everything begins with measurement.
HORIBA’s “Measurement Technologies” and analysis solutions are
consistently at the frontlines of innovation.

Business Operations
At HORIBA, our mission is to contribute to the progress ofscience and technology, and the preservation of the global
environment and resources through the provision of highly
original products, analytical and measurement solutions,and engineering services that utilize our world renowned
measurement and analytical technologies. We are engaged
in the fields of engine emissions, scientific analysis,
industrial and process measurement, environment
monitoring, semiconductor process control, medical andhealth-care, and biotechnology. The new businesses andnew products we may initiate shall also satisfy our aim to

Corporate philosophy

develop scientific technology, improve the life of thecommunity, and minimize the impact on the environment.
We put priority on ensuring a safe business environmentand strictly abide by applicable laws, regulations, and ourarticles of incorporation. We have established and adopted
a quality management system and environmental
preservation system. We strive to deliver high value-added
products and services in the shortest possible time tocustomers all over the world while combining the uniquedevelopment, production, sales, and service functions ofall HORIBA Group companies throughout the world.
We aim to be a leader in the global market in the fields inwhich we operate by consistently satisfying our customers’
needs and effectively maximizing our resources throughinvestments in the carefully selected fields.

Customer Responsiveness

Employees (HORIBARIANs)

We maintain a philosophy of pursuing cutting edge technology in order

We are proud of the entrepreneurial spirit that has led toto supply products and services that consistently satisfy customers’

the creation of HORIBA Group companies. Each grouprequirements. We are committed to offering top-quality, highly reliable

employee is made aware of this heritage and we actively

products and services with a consistent level of excellence throughout

encourage ideas and innovations from individual

the world. Meanwhile, we strive to understand the true needs of

employees. HORIBA promotes an open and faircustomers and proactively propose solutions.

business environment, with attention to safety andhealth, which allows all group employees to achieve their

Responsibility to Shareholders andInvestors
We recognize that maximizing the returns to shareholders byconsistently raising HORIBA’s long-term corporate value is one of thepriority objectives of management. Our basic policy is to target total
returns (the combination of dividend payments and share buybacks)
to shareholders to be at a certain ratio of HORIBA’s consolidated net
income, and consistently deliver them. In addition, we are committed
to create opportunities for constructive dialogues with investors andstakeholders, regularly reporting our operating performance, fairly
and promptly disclosing information whenever an important businessor managerial issue arises, and maintaining transparency in ourmanagement. HORIBA Group companies, having adopted a unified
accounting standard and system and a common information base,shall maintain a timely and responsive management control system.
The managements of group companies also share responsibility ingenerating profit, delivering dividend payments, establishing andmanaging the internal control system, and developing human resources.

individual goals and maximize their talents and potential.
We strive to foster an environment of mutual respect sothat diverse talents and viewpoints can flourish. At thesame time, to further everyone’s personal andprofessional growth, we encourage intercultural
understanding and thinking from a global perspective.
We create a work environment for employees to achieve
their growth potential and exert their talents to the
maximum by accelerating diversity management andexpanding our international core human resources
development and exchange program. The basis of ourperformance evaluation is the merit count principle, (notthe demerit mark principle), as we value each and every
employee who makes efforts to improve his or her
performance with a challenging spirit.

Report 2018
Editorial policy
In this integrated HORIBA Report 2018, we have presented how HORIBA investments in invisible values arecontributing to actual business growth and creating social value. In order to facilitate understanding, related
activities are on each business segment page. Please see the ESG marks in the Business outline section ofthis report, which begins on page 41.

Regarding our use of the term “Owners” (shareholders)
HORIBA fully recognizes the importance of its shareholders and frequently refers to them as “Owners.”

Regarding the importance andcomprehensiveness of information in HORIBA Report 2018
We have selected financial and non-financial information that we believe to be of high importance for inclusion in
HORIBA Report 2018.

For more detailed information, please see our website.

The PDF version of HORIBA Report 2018 is also available through our website.

Wide variety

WebsiteRange
ofTargetReaders

HORIBA Report 2018

HORIBA Report

IR information

CSR information

Web Link

Web Link

Limited
Summary

Contents

Details and data

Notation of HORIBA and HORIBA, Ltd.

Change in Revenue Recognition Standard

In this HORIBA Report, the HORIBA Group of companies is

HORIBA, Ltd. and its domestic consolidated subsidiaries had

described as “HORIBA” and the parent company as “HORIBA, Ltd.”

formerly recognized revenue mainly on a shipping basis. However,starting from fiscal 2016, HORIBA, Ltd. and its domestic

Disclaimer regarding future plans and forecasts

consolidated subsidiaries changed its revenue recognition method

This HORIBA Report contains certain statements describing future

to recognize revenue on a completion-date-of-installation orplans, strategies, and performance forecasts of HORIBA, Ltd. anddelivery-date basis under the terms and conditions of the relevant

its affiliated companies. These statements reflect forecasts based

contracts. The amounts in or before fiscal 2015 are noton management’s assumptions and beliefs based on the available

retrospectively revised.

information as of February 12, 2019, when business results wereannounced. Actual performance may differ due to unforeseen

Market Sharecircumstances in the operating environment and other factors.

Market shares stated in this report are HORIBA’s estimates as of
fiscal 2018.

05

Strengths

Strategies

Results

INDEX
HORIBA’s

Strengths

01
07
09
11

HORIBA’s corporate motto/corporate philosophy

13

HORIBA’s value-creating cycle

15
21
23

Message from the CEO

Results over the long-term and global expansion
HORIBA’s 5 points of distinction
HORIBA’s five business segments in analysis andmeasurement field that are essential for society

Message from the COO/President
Message from the CFO

Special feature

25

HORIBA’s businesses that contribute toa sustainable mobility society

Creating corporate value with our invisible values

HORIBA’s

Strategies

29
31
33
35

Brand/Customers
Technologies
Organizational structure and talents
HORIBA’s CSR―Building invisible values

Corporate governance

37
40

Basic policy on corporate governance
Message from the Outside Directors

Business outline

41
43
45
47
49

Automotive Test Systems
Process & Environmental Instruments & Systems
Medical-Diagnostic Instruments & Systems
Semiconductor Instruments & Systems
Scientific Instruments & Systems

Financial data

HORIBA’s

Results

51
55
56
57

Eleven-year financial summary

59

Board of directors and corporate auditors/
Corporate officers

Consolidated balance sheets
Consolidated statements of income
Consolidated statements of cash flows

06

Results over the long-term and global expansion

Global growth through reliable
technology and proactive M&As
HORIBA has achieved continuous growth since its foundation, by
specializing in “Measurement Technologies” and entering new markets.
We now have a new management team focused on responding tovaried requests from our customers and society and seeking to raise
our corporate value while navigating the rapid changes in various areasof technology.

Development of the technology and productsthat form HORIBA’s foundation
1970
OLSON-HORIBA, INCORPORATED, a
joint venture company, was establishedin the U.S. HORIBA begins overseas
expansion.

1950

1964

1980

HORIBA pioneers the firstglass electrode pH meter
manufactured in Japan.

Launch of “MEXA,” a global
brand for emission
measurement systems.

Launch of the firstmass flow controller
manufactured in Japan.

1975

ー

1945
1945
HORIBA RADIOLABORATORY
was established.

Sales outside of Japan
Sales in Japan
Operating income

1950

Emission measurement systems weredelivered to the U.S. Environmental
Protection Agency (EPA).

Results up to 1977 are on a
non-consolidated basis and results from1978 are on a consolidated basis.
Sales from 1991 are divided into
overseas sales and domestic sales.

1955
1953
HORIBA, Ltd.
was established.

1960

01

1965

1970

1975

1st President (Founder)

1953—1978

Masao Horiba
Launched as a student venture
Masao Horiba founded HORIBA, Ltd. along with eight
employees, gaining a foothold with the first glass electrode
pH meter manufactured in Japan. Also, he established
HORIBA’s corporate motto, “Joy and Fun,” in 1978.

07

1980

02

Strengths

Strategies

Results

Global growth through M&As
1996

1997

Press conference on the announcement of the new
management structure

2005

Acquired ABX S.A.
(now HORIBA ABX SAS)in France.

Acquired Jobin Yvon
S.A. (now HORIBAFrance SAS) in France.

Acquired MCT(Mechatronics) businessof Carl Schenck AG in
Germany.

2015

2018

2018

Moving up to
the next stage under
the new management
structure
Net sales

210.5

Sales outsideof Japan

144.5 billion yen

Acquired MIRA, Ltd. (now
HORIBA MIRA Limited.) in
the U.K.

Acquired FuelCon AG(now HORIBA FuelCon
GmbH) in Germany.

billion yen

Acquired ROHM Co.,
Ltd.’s micro-blood
analysis system business.

Operatingincome28.8

2019billion yen

Acquired MANTA
Instruments, Inc. in
the U.S.

Sales
in Japan

65.9

billion yen

1985

1990

2nd President

1978—1992

Masahiro Oura
Development of products
popular around the world
Full-fledged development of theemission measurement systems andmass flow controllers that currently
support HORIBA’s earnings began
during this period.

1995

2000

03

3rd President

2005

2010

1992—2017

Atsushi Horiba (serving as Chairman & Group CEO since 2018)

2015

2018

04

4th President

2018—

Masayuki
AdachiBusiness expansion through M&As
Thanks to proactive M&As and synergy maximization,
sales have grown by more than five times in the 26 years
since Chairman and Group CEO Horiba assumed theoffice of president.

08

HORIBA’s 5 points of distinction

01

Corporate
cultureCorporate motto“Joy and Fun”

We believe that if we take interest and pride in the work that occupies so muchof our lives, and in the workplaces where many of us spend a large part of eachday, then our satisfaction with life will increase, and we will be able to enjoy ourlives even more as a result.

R&D expenditures in 201815.1(): Ratio of R&D expenditures
to net sales

billion yen (7.2%)

02

Scientific

A sail hoisted at the HORIBA BIWAKO E-HARBOR,
Biwako Factory, the home port driving research anddevelopment, manufacturing, and engineering at HORIBA.

Balancedmanagement

Sustainable growth withwell-balanced investment
in five business segments

2.9

billion yen

Semiconductor

2.2

billion yen(4.0%)

2.7(10.4%)Development-oriented
company
Demonstrating
HORIBA’s presencein the niche markets
of analysis andmeasurement services

03

Through its five business segments, HORIBA has developed 1,000 products
in a variety of markets. We provide several products that capture top-levelglobal shares, including automotive exhaust gas analyzers essential for
automotive development, mass flow controllers necessary for the
manufacture of semiconductors, and Raman spectrometers used at many
academic institutions.
09

80

billion yen(7.4%)

1.3(7.1%)

Process& Environmental): Ratio of R&D expenditures to
net sales by business segment

Globalmarket share
Scientific

5.8

billion yen

billion yen(

Medical- Semiconductor
Diagnostic

R&D
expendituresby businesssegment

MedicalDiagnostic

HORIBA is an analytic and measurement equipment manufacturer with fivebusiness segments: Automotive Test Systems as well as Process &Environmental, Medical-Diagnostic, Semiconductor, and Scientific Instruments &Systems. After launching our first product, the pH meter, we expanded our fieldsof technology and products, which resulted in strong growth.

Automotive Test Process
Systems&
Environmental

Automotive
Test Systems(10.5%)%

Globalmarket share

30

Raman
spectrometers%

Automotive
exhaust gas
analyzers

Globalmarket share

60%

Mass flow
controllers
Note: Market shares quoted are HORIBA’s estimates.

Strengths

Strategies

Results

points of

HORIBAʼs

distinction

04

HORIBA-style global management

05

Diversified
human
resources

Spreading our Kyoto-born corporate
culture around the globe

HORIBA got its start in Kyoto with a venture spirit. We haveultimately distinguished ourselves and achieved business growththrough our original strategy of capturing the top global share in theworld. Since the late 1990s, HORIBA has expanded its businessscale and geographic scope through M&As. At present, over 60% ofsales and employees are based outside of Japan. Our business inJapan has grown through the domestic development of businesses
acquired through overseas M&As.

HORIBA’s corporate growth is
supported by a variety of individual
characteristics and abilities
HORIBA is expanding its businesses on a global scale and has
diverse human resources working in countries worldwide who
consistently come up with fresh ideas and share information
regarding technologies and their expertise. HORIBA’s initiatives
promoting diversity are held in high regard and were selected forinclusion in the FY2018 Nadeshiko Brands (more on page 36).

Number of groupcompanies(As of December 31, 2018)49

companies

Overseas sales ratio(For the year ended December 31, 2018)

69%

Overseas
employee ratio(As of December 31, 2018)

62%

Number of employeeswith doctoral degrees(As of December 31, 2018)220
persons

10

HORIBA’s five business segments in analysis and measurement field that are essential for society

HORIBA’s five business segments in analysis
and measurement field that are essential
for society
Automotive Test
Systems

Process &Environmental
Instruments &Systems

Medical-Diagnostic
Instruments &Systems

Joy and Fun

Semiconductor
Instruments &Systems

Scientific

Instruments &Systems

11

Strengths

Strategies

Principal products

Major customers

Product applications

Emission measurement systems
Automotive emission analyzers
Onboard emission measurement systems
Driveline test systems
Engine test systems
Brake test systems
Fuel cell test systems
Battery test systems
Transport management system
Vehicle development engineering
Testing engineering
Lease and management of R&D facilities

Automotive
manufacturers

Development of newgasoline, diesel, andhybrid powertrains

Government agencies

In-use vehicle inspections

Stack gas analyzers

Electric powercompanies

Measurement ofwastewater and gaseousemissions

Water quality analysis andexamination systems
Air pollution analyzers
Environmental radiation
metersAutomotive
component
manufacturers

Government agencies

Vehicle certification andquality control

Manufacturers

Environmental pollution
monitoring

Medical testing
centers

Health and diagnostic
testing

Small tomedium-sized
hospitals

Disease diagnosis

Process measurement
equipment

Hematology analyzers
Immunology analyzers
Clinical chemistry analyzers
Blood glucose analyzers

Chemical concentration
monitors
Reticle/mask particle
detection systems

Semiconductor
production equipment
manufacturers
Semiconductor
device makers

Residual gas analyzers

pH meters

Manufacturers/Research
institutions

X-ray fluorescence analyzers

Universities/Government
agencies

Elemental analyzers
Raman spectrometers
Fluorescence spectroscopy/
fluorescence lifetime spectroscopy
Optical components; spectrometersand detectors

Flow control of gases
and liquids
Monitoring of cleaning
fluid concentrations
in semiconductor
manufacturing processes
Semiconductor and LCD
quality control inspections

Particle-size distribution
analyzers

Electric powercompanies

Major risk andopportunities
Changes in emission
gas regulations
The automotive
industry’s capitalspending and R&D
investments

Changes inenvironmental
regulations bygovernment agencies
Developments in energy
efficiency improvement
at factories and power
generation plants

Changes in total
healthcare expenditurescaused by changes in
populations and otherfactors
Changes in medical
insurance systems in
different countries

Medical practitioners

Mass flow controllers

Results

R&D
Product quality testing
Criminal forensics

Capital spending ofsemiconductor
manufacturers andothers in association
with fluctuating demand
for semiconductors
Production trend of
semiconductor
production equipment
manufacturers

Changes in R&D
budgets at government
agencies, universities,
and research institutions
Changes in the private
sector’s R&D spending
and capital spending for
production

pp. 41

42

pp. 4344

pp. 4546

pp. 4748

pp. 4950

Gratings

12

HORIBA’s value-creating cycle→pp. 43–44→pp. 45–46→pp. 47–48

s
m
te
ys

In
st
ru
m
en
ts

&

S

Sc
ie
nt
ifi
c

s

Instruments &SystemsstTe→ pp. 41–42

MedicalDiagnostic

In

ive
ot
om
ut emsls & nta s
ces nmeSystem
Provironts &Enstrume

A

Sy
st

Sem
Ins ictru
me ondntsu& S ctoystrem

HORIBA’s value-creating cycle→pp. 49–50

Fivebusinesses

Invisible
values→ pp. 31–32→ pp. 33–34 Orgs t r a n iz at
u c tu io n alresTechnologi es

HORIBA’s
Brandts→ pp. 33–34 Talen→ p. 29

C u stome r s →p. 30

Our five business segments are represented by a strong and growing trunk that receives nourishment fromthick roots (invisible values) that have firmly spread throughout a plot of rich soil (corporate culture).
The bountiful fruit (economic value) is produced through our business activities andbrightens people’s lives with beautiful colors (social value).
The fruit’s seeds eventually return to the rich soil, creating new value ---------------.
13

Strengths

Strategies

Results

Related goals
in the SDGs*

Social issues
confronted
by HORIBA

Global business making andselling more than
1,000 products of various kinds

To contributeto building asustainable society

Top-level shares inniche markets

To improve theglobal environment

Profit generated year after year
(Maintained an operating income level
above 10%)

To realize a safe,
pleasant society
To empower
regions

To create jobs

Business growth
supported bycontinuous investment
Creatingsocial andeconomicvalue

To promote
diversity

To initiate activities
to prevent
corruption

Creating
economic value

Creating social value* “SDGs” refers to the Sustainable Development Goals
unanimously adopted by the United Nations General
Assembly in 2015.

Ownership
andChallenging
SpiritHORIBA’s
corporate motto:

23Unique products
and services

Sustainablesupply chain

1
Super Dream
Team

Contribution tosecure well-being
for future society byusing cutting-edge“Measurement
Technologies”

6

Participation insociety and growthof individuals

CSR framework of activities that shape
HORIBA’s invisible values→p. 354

Construction of
governance,
slim andsolid internal
control5

Communication
with internal/
external
stakeholders

Open
and
Fair

14

MESSAGE

Message from the CEO

Chairman & Group CEO

15

Strengths

Strategies

Results

HORIBA will achievesustainable growth and open up
pathways toward a new era
through its spirit of “Joy and Fun”
HORIBA started a new management team in 2018, the 65th year since its
founding, and achieved sales of over 200.0 billion yen. During an era in which
technologies are undergoing significant changes in a variety of fields, HORIBA
will continue to work to create products and services with high added value,
focusing primarily on its core business of “Measurement Technologies.”

Sales exceed 200.0 billion yen, inspiring confidence regarding
the achievement of MLMAP2020 targets
We started a new top management team in fiscal
2018 and achieved record-highs in terms of bothsales and operating income at 210.5 billion yen (up7.8% year-on-year) and 28.8 billion yen (up 7.5%
year-on-year), respectively. In particular, sales of over200.0 billion yen inspired strong confidence that we
can fulfill the goals outlined in our Mid-Long Term
Management Plan (MLMAP2020) by its target year
2020 (more on page 23).
If I were to summarize 2018, I would say that HORIBA
was able to take a large step toward creating newmarkets and business models, conducting proactive
investment in the future. This investment included
expansion of the Aso Factory in Japan whereconstruction has been completed and full-fledged
operation has begun, enhancement of ourdevelopment and production base in New Jersey in
the United States, and our acquisition of FuelCon AG
in Germany, which develops and manufactures ourbattery test and fuel cell test systems. For fiscal 2019,
we anticipate that we will achieve sales of 218.0
billion yen (up 3.5% year-on-year) and operating

income of 29.0 billion yen (up 0.6% year-on-year),once again achieving record highs in bothcategories*1. We also forecast higher sales andincome (year-on-year) in the Process & Environmental,
Medical-Diagnostic, and Scientific Instruments &Systems segments while the Semiconductor
Instruments & Systems and Automotive Test Systems
segments continue to drive results.
Looking at the current business environment, werealize that emission gas and environmental
regulations are strengthening around the world. As
represented by the word “CASE*2,” the automotive
industry is facing a type of dynamic paradigm shift
said to only occur once per century. In addition,
various Asian nations, such as China and India, areachieving growth with a momentum rivaling that ofdeveloped nations, and market structures are
beginning to undergo large changes. HORIBA willfurther refine its management capabilities in order tocompete on a stage different from those it has
experienced up until now.

*1 Forecast as of February 12, 2019
*2 “CASE” is a general term used to describe next-generation vehicle technology and stands for “Connected,” “Autonomous (autonomous driving),”“Shared & Services,” and “Electric (development of electric vehicles).”

16

MESSAGE

Message from the CEO

HORIBA will raise its
corporate value through“balanced management”
based on along-term vision

Photo taken at Gasen-an, a tea ceremony room established inside of the HORIBA BIWAKO E-HARBOR, Biwako Factory (more on page 18)

Bringing multifaceted points of view to enhance
decision-making during an era of changing trends in technology
One year has passed since we formed our new
management team, with me as Chairman and Group
CEO, Juichi Saito as Executive Vice Chairman andGroup COO, and Masayuki Adachi as President and
COO. Throughout this year, we worked through adivision of roles under which Mr. Saito conducted
oversight of global management and business
operations; Dr. Adachi performs cross-sectional
observation of business segments while supervising
basic technologies and research and development inorder to enhance HORIBA as a provider of technology;
and I ensured balance throughout the entire group. I
also had the opportunity to gain a better picture of what
was happening outside than ever before, and aimed tospread our corporate culture further by actively visiting
group companies and sharing my own thoughts.
Furthermore, I was able to build a wide range of new
relationships in countries around the world by meeting
many customers and individuals representing academic
institutions and national government agencies.
When viewing circumstances in the operating

17

environment, I observe that technologies and customer
needs in a wide variety of fields are rapidly changing
and once again become keenly aware that trends intechnology can and will change. I feel very confident
that our new structure will hold up under these
conditions, as it has enabled us to conduct swift
decision-making based on multifaceted viewpoints,
including decisions regarding acquisitions, baseenhancement, and investment in technologicaldevelopment.
During the five years leading up to 2023, which will
mark the 70th year since the establishment of HORIBA,
Ltd., changes in technologies and markets larger thanever before are forecast in industries such as
automotive. We will combine our resources, which are
spread over our five business segments, and utilize
them in a coordinated fashion to speedily comprehend
customer needs while opening new paths forward into
the next generation by establishing new businessmodels.

Strengths

Strategies

Results

Demonstrating collaborative synergies with acquiredcompanies by nurturing people and technologies
HORIBA has achieved growth by welcoming
companies with businesses projected to synergize
with its proprietary technologies and markets into
its group.
When conducting corporate acquisitions, it goes
without saying that products and services areimportant points of consideration. However, more vitalthan anything else are the people that work at thecompanies targeted for acquisition and the knowledge
and technologies they create. When conducting
acquisitions, I view the characteristics of not only
management but also employees working at the target
companies, as well as what motivates them in their

daily work. I believe that this ability to assess andunderstand people is of paramount importance toglobal management. MIRA, Ltd. in the United Kingdom
joined HORIBA in 2015, followed by FuelCon AG in
Germany in October 2018. Our management team,myself included, is trying to directly meet with theemployees of companies who join our group as newmembers. We believe that we can create strong
synergy and grow together with the employees of ourgroup companies by placing technology and people atthe center of our brand strength and by sharing andcreating sympathy for our unique corporate culture,
which embodies our corporate motto of “Joy and Fun.”

Achieving sustainable growth through investment madefrom a long-term perspective
HORIBA has conducted well-balanced investment
across its five business segments. Previously, we wereable to avoid a lapse into the red during a period ofstagnation in the semiconductor industry, thanks tocontributions from the Medical-Diagnostic Instruments& Systems and Scientific Instruments & Systems
segments. However, we continued to invest in the
Semiconductor Instruments & Systems segment outof consideration for the future and were able todevelop it into what is now our largest source ofgrowth. We have also been able to achievewell-balanced business expansion on a global scale
through proactive M&As conducted primarily
overseas, as we continue to invest in acquiredcompanies after they join HORIBA. In order to achievesustainable growth, it is essential to conduct
investment from a broad perspective. Results may
take five to ten years to appear when conducting thisstyle of investment, but persevering in continuous andtenacious management will enable it to bear large fruitin the future.

Gasen-an—A tea ceremony room
Gasen-an is a tea ceremony room established inside of the HORIBA BIWAKO
E-HARBOR. The name of the tea ceremony room is a portmanteau of two Chinesecharacters, one taken from “Masao Horiba,” HORIBA’s founder, and the other from theJapanese word “sengu,” which means “the tradition of passing on shrine-building skills
from one generation of carpenters to the next” and encapsulates HORIBA’s philosophyof handing down technologies from one generation to the next. We
paid attention to the selection of authentic items and also style indesigning the interior of the tea ceremony room, from the selection ofits building materials to determining its structure. As such, it now
serves as a place in which a great number of guests visiting from both
inside and outside Japan can experience traditional Japanese cultureand HORIBA’s original and distinctive hospitality.

18

MESSAGE

Message from the CEO

Brilliantly unique human resources who respond to a diverse
range of customer needs
Many of HORIBA’s clients are global leaders at theforefront of fields, such as automotive andsemiconductors, that demand sophisticated technology.
Naturally, demand levels are extremely intense, and wemust continue to consistently refine our technicalcapabilities in order to respond to these needs. These
needs are not related to a limited number of fields but
instead span a wide range of industries, creating anenvironment in which we are able to regularly conductbusiness with some of the top customers in the world
while making full use of the technical capabilities wehave raised up until now. I believe that being able towork in an environment like this has an exceedingly large
appeal for a company. At HORIBA, we have establisheda cycle. In this cycle, many excellent human resources,
which we call HORIBARIANs that range from new
university graduates to mid-career hires gather to utilize
their own individual specialties to create unique products
and services, and they respond to new customer needs.
Currently, more than 60% of 8,000 HORIBA Group
employees are non-Japanese, and 220 group members
hold doctoral degrees. These diverse members are what
support HORIBA’s growth today. We are additionallyfocusing on initiatives, such as the HORIBA Stained Glass

Atsushi Horiba
Chairman & Group CEO

Juichi Saito

Executive Vice Chairman &Group COO

Project (more on page 34), in which people of various
backgrounds and ways of thinking come together todemonstrate their unique abilities and create pleasantworking environments.
The management team at HORIBA is keenly aware of
our mission to develop a great number of HORIBARIANs
that will lead the next generation and believes that it isimportant to compete in overseas businessenvironments from an early stage and accumulate many
experiences in a wide range of posts and regions, as Mr.
Saito, Dr. Adachi, and I have done. Of course, working
overseas necessarily includes experiencing manydifficulties and failures, but there is no greater method of
human resource development. In addition, facing many
challenges while living abroad allows us to discover newsocial issues that HORIBA should solve and widens ourfields of view as business people. More than 90% of ourinternal directors and corporate officers haveexperienced overseas assignments, and HORIBA
prepares systems that will also offer the current
generation of young employees many chances through a
posting system offering opportunities such as overseas
training.

Masayuki Adachi(Doctor of Engineering)President & COO
Chairman of Supervisory Board of
HORIBA FRANCE SAS

19

Masao Okawa

Managing Director andGeneral Manager ofGeneral Administration Division

Strengths

Strategies

Results

Contributing to society through “Measurement Technologies”
The United Nations formulated the Sustainable
Development Goals (SDGs), which it currently
advocates, in 2015. These goals mention a variety ofsocial issues, and I believe that finding the solutions tomany of these issues will start with measurement.
Fortunately, customers have described HORIBA as a“partner,” rather than as a “supplier” these days.
Making use of various analytical methods and coremeasurement technologies, such as automotive
exhaust gas analyzers and monitoring systems for
wastewater produced in factories, we are offering
products that provide assistance in resolving social

issues. In other words, I believe that providing
high-quality “Measurement Technologies” as a true
partner to our customers is precisely how we willcontribute to society moving forward. We will fulfill oursocial responsibilities by always behaving out ofconsideration for how we can activate society throughbusiness growth.
I sincerely hope for your continued support for
HORIBA and its employees, as we unite toaccomplish our goal of contributing to an affluent
society through “Measurement Technologies” andpursue a prosperous future.
April 2019

Atsushi Horiba

Chairman & Group CEO

Takashi Nagano
Director, Board Leaderof GLOBAL ATS BOARD
Chairman of
HORIBA KOREA Ltd.
(South Korea)

Jai Hakhu

Hideyuki Koishi

Yuichi Muroga

George Gillespie

Executive Corporate Officer

President of
HORIBA STEC Co., Ltd. (Japan)

President of HORIBATechno Service Co., Ltd.
(Japan)Senior Corporate Officer(Doctor of Engineering)
Chairman & CEO of HORIBA
Instruments Incorporated (U.S.)

Senior Corporate Officer

Senior Corporate Officer(Doctor of Engineering)
Executive Chairman of
HORIBA MIRA Limited (U.K.)

President of HORIBA ABX SAS(France)

20

MESSAGE

Message from the COO/President

To be at the top of global niche markets and sustain
As Group COO, looking at HORIBA
from a higher point of view

Continuous effort to gain top-level sharesin global niche markets

Since I was appointed as Group COO in January 2018, I’ve
been leading the group operations from a higher point of view.
Through this appointment, I’m able to guide the groupmanagement more quickly than before.
In the last one year, HORIBA has expanded business by inviting
FuelCon AG in Germany to our group and by acquiring
technologies from MANTA Instruments, Inc. in the Unite States
and ROHM Co., Ltd in Japan.
In HORIBA, Ltd. in Japan, we have created the new “Global
Business Division*” in order to centralize the planning andimplementation of group strategies. We also promoted highly
skilled marketing resources from group companies to enhance
our competitiveness. I will manage the group proactively in aneffort to achieve sustainable growth in the future.

HORIBA has been growing by finding niche markets where
we can be competitive and supplying “more accurate,”“faster,”and “easy-to-operate” technologies. Also, we aretaking high global shares for many products in manydifferent applications. To keep growth through this strategy,
HORIBA is investing continuously and very aggressively.
Moving forward, we will try to expand our business throughunique and advanced technologies and products combinedwith strong services support as one team.

* The Global Business Division is an organization that was established in January 2018 for the purposes of observing all business segments and regions on a global scale andpromoting the optimization of operations across the entire group while integrating marketing and information systems both inside and outside Japan. It is a consolidation ofstrategic divisions and divisions in charge of core systems from each business, as well as Sales Division functions for opening new markets and carrying out reforms.

Pursuing ultimate technologies andContinue to develop core technologies andenhance R&D capabilities
From the time of incorporation, HORIBA has been growing globally byconsistently offering original analytical values that are essential to theadvancement of world society. Evidently, our original core technologies havebeen the driving force of the growth. One year has passed since I was
appointed as president, and since then, I have been encouraging ourcolleagues to revisit and refine the core technologies from the fundamental
principles in addition to their immediate responsibilities to develop newtechnologies and new products. In the past year, we have successfullylaunched the new products that exceeded market expectations, including
XGT-9000 (more on page 50) and FTX-ONE (please see the link on page 22),
which have been typical outcomes of the core technologies enhancement of
HORIBA, Ltd., our corporate headquarters.
In order for us to generate innovative technologies, it is an absolute necessity
to foster motivated people. I believe that my personal mission is to continue
delivering new and high-value-added products and services throughdeepening and widening our core technologies. One of the actions we take is
the “sengu*” on a global scale. Moving forward, I will work toward fulfilling thismission with all of my power.

President & COO

Masayuki Adachi(Doctor of Engineering)21* “Sengu” is the translocation process of shrines in Japan carried out every couple of decades. With that,indescribable traditional skills and know-how are transferred and maintained through the series of
ever-lasting generations. In HORIBA, we promote the younger generation to re-establish the long-existingproduction processes with their own new technologies. It helps to deeply understand the technology
development in HORIBA’s history and accelerates the innovation for our future.

Strengths

Strategies

Results

growthNever forget the challenging mind
In the future, my challenge is to develop next-generation talents and sharewith them my “omoi,” the passion I have held as a “HORIBARIANs.”
Currently, HORIBA is maintaining a good position in each market, but ourbusiness environments, including technology trends, demand structures, andother elements, are drastically changing. It is very important to construct thestrong organization that can follow these rapid changes. Therefore we needto develop strong HORIBARIANs to lead the group to the right direction.
HORIBA is globalizing every year, and the diversity of talented humanresources is increasing. We will promote HORIBARIANs who haveaccumulated business and management experiences with a strong passion
for a higher management level so that they will have higher and broader
views and experiences.
Furthermore, we will continuously transfer our business and management
experiences not to repeat the same failure for them. As for myself, I will also
continue challenges, accumulate new experiences and pass down to them.
I believe it is my mission to create a continuous cycle of growth for HORIBA.
Executive Vice Chairman & Group COO

April 2019

Juichi Saito

delivering HORIBA-only solutions
Promoting academic partnerships
for further possibilities

Contributing to society throughexpansion in the data business

HORIBA is promoting global academic partnerships, as it is
the ideal approach to advanced research and businesses
in each region of the world. In 2018, we agreed on adonation to support a new institute at the University ofCalifornia, Irvine (UCI; more on page 28). UCI offers
high-level education and research opportunities, andthrough the institute to be established, it will promoteadvanced research for connectivity between power grids
and mobility with the control of producing, transporting,storing, and using energy. We believe HORIBA is the only
company in the world to be able to support such research
since we cover all the analysis and measurement solutions
that can be used in the entire energy process. Throughsuch collaboration with academia, we will work to create
new business opportunities together with fostering talented
human resources by interacting on a personal level.

Measurement and analysis are essential elements forcreating innovation. Also their data are becoming more andmore important as innovations in IoT, AI, and automation
rapidly expand. HORIBA’s products are acting as data
generators that produce vast amounts of high-quality data
through analysis and measurement. Big data acquired by
our instruments in the fields of advanced material, life
science, energy, and environment will help analyze themechanisms of our world and contribute to solving social
problems.
I will expand our business fields by delivering more solutions
to build our future utilizing our growing core technologies
with data control and management.
April 2019

Please see our website fordetails regarding FTX-ONE.

Web Link
Click!

22

MESSAGE

Message from the CFO

HORIBA is maximizing corporate
value over the long term throughhigh-level investment and asset
efficiency improvement initiatives
Managing Director andGeneral Manager of General Administration Division

Masao Okawa

Profile Masao Okawa joined HORIBA, Ltd. in 2017. He had worked for the Bank of Japan since 1988 andaccumulated global experience serving in a variety of positions, including at Harvard Law School(LL.M. ’94) and the Bank for International Settlements in Basel, Switzerland, as well as Chief
Representative of the office in Frankfurt, Germany and Branch Manager of the Kyoto Branch of the
Bank of Japan. Taking advantage of insights on finance, governance, and global experience at the
Bank of Japan, he is currently engaged in forming a global financial strategy and enhancing complianceand corporate governance as HORIBA’s General Manager of General Administration Division.

Distributing our highest-ever dividend per share in the wake of favorable results
During the fiscal year ended December 31, 2018, which marked the 65th year since our establishment, we recorded morethan 200.0 billion yen in sales and finished with record-high operating income and net income attributable to owners ofparent, as well as ROE of 14.3%. In accordance with these results, we distributed our highest-ever dividend, which
consisted of a regular dividend of 125 yen per share and a commemorative dividend of 20 yen per share celebrating our
65th anniversary, as shareholder returns for the fiscal year ended December 31, 2018. HORIBA has
adopted a policy of setting its total shareholder return ratio, which includes dividends and share buybacks, to about 30% ofconsolidated net income attributable to owners of parent. Moving forward, we intend to raise corporate value throughbusiness growth and continuously provide returns to all of our owners (shareholders).

Numerical targets under the Mid-Long Term Management Plan (MLMAP2020)
Net sales

250

Operatingincomebillion yen

30

Assumed exchange rates for 2020: 115 yen per U.S. dollar;125 yen per euro

10

ROE

billion yen% or more

Basic capital policy

Point

Point

Achieve higher
ROE

1

2

As stated in our MLMAP2020, HORIBA is on
target to achieve ROE of 10% or more by
2020. ROE is one of our most importantmanagement metrics.

Link shareholder
return toearnings growthBillions of
yen

100

%
150

■ Investing cash flow

89.9
61.1

40.7

50

0

-50

31.9

6.2
14.7
-34.4

-29.1

Conducted proactive
investment (including
acquisition of MIRA,
Ltd. in the U.K.,
construction of the
HORIBA BIWAKO
E-HARBOR, Biwako
Factory) supported byhigh operating cash
flow.

120

23

Dividend per share (right)
Commemorative dividend− Total return ratio (left)[including commemorative
dividends and share buybacks]

6—10 years ago

1—5 years ago

39

April 2004 to
December 2008

January 2009 to
December 2013

January 2014 toDecember 2018

0

Target 30% in
total return ratio

60

60

44

40

30

11—15 years ago

Change in dividend policy
in fiscal 2013 and after

145

116

67

90

70
60

50

17

30.6 27.6 30.0 27.4
28.2 26.8

13
2007 2008 2009 2010 2011 2012

2013

Yen
150

120

85

90

-75.1
-100

We are conducting proactive investment, which is
expected to result in creating future corporate value.
Additionally, each group company and eachbusiness segment are setting their own capitalefficiency targets and managing efficiently in order tomaximize HORIBA’s corporate value.

■ Dividend payments and total return ratio■ Operating cash flow
− Free cash flow

3

We set total returns (the combination of dividend
payments and share buybacks) to shareholders as
approximately 30% of consolidated net income.
This payout ratio reflects due consideration given to
ensuring stable management and retaining earnings
as capital for aggressive business development.

■ Free cash flows for every five years

Improve capitalefficiency tomaximize
corporate value

Point

2014

2015

2016

2017

2018

In fiscal 2013, we switched from a non-consolidated dividend payout ratio, which isbased on non-consolidated net income at HORIBA, Ltd., to a total return ratio, which isbased on HORIBA’s consolidated net income.

30

0Strengths

Strategies

Results

Leading the group with a financial approach and a global perspective
We must view opportunities and risks from a more global perspective in order to support HORIBA’s businesses expansion.
From a risk management point of view, balanced management achieved through our five business segments, whichcollectively form one of HORIBA’s major strengths, functionally contributes to risk diversification. Furthermore, the General
Administration Division, which I am in charge, monitors our businesses across the segment. I firmly believe that leading
HORIBA from a global point of view is a challenge worth undertaking.

Conducting effective investment from a long-term perspective
HORIBA has conducted high-level investment in production facilities, R&D, and human resources from a long-term
perspective. Recent investments include the establishment of the HORIBA BIWAKO E-HARBOR, Biwako Factory and theacquisition of MIRA, Ltd. in the United Kingdom in 2015; the expansion of HORIBA STEC Co., Ltd.’s Aso Factory, in 2017;
and the acquisition of FuelCon AG in Germany in 2018. We are also projecting 16.0 billion yen in both capital spending and
R&D expenditures in 2019*.
We invest proactively to overcome challenges posed by rapid changes in technological trends. However, when conducting
this investment we also need to carefully and thoroughly examine a number of factors, including our cash flow forecast, andverify that our assets are being utilized effectively. In 2017, we introduced HORIBA Premium Value, a HORIBA original
benchmark that has been formulated in considerations of operating income and the weighted average cost of capital(WACC), in order to raise asset efficiency. This benchmark aims to maximize returns on invested capital for each businesssegment. In the mean time, we have paid thorough consideration to ensure that it does not inhibit investment. We havecurrently spread the application of this benchmark throughout the entire group.
* Projection announced on February 12, 2019

Measures aimed at establishing the enhanced CFO teamAt the HORIBA’s Board of Directors’ meetings, major investment projects have been discussed throughly and decided
accordingly. HORIBA’s Board of Directors demonstrates its functional contribution to governance through carefully
investigation of specific investment projects, in addition to comprehensively reviewing management strategies.
On the other hand, it is important that we remain the kind of organization that can achieve speedy decision-making. Our
General Administration division must engage with our business segments to fully comprehend the special characteristics ofall of their operations, as well as those of all regional businesses. We have currently implemented an internal policy that
requires General Administration division employees to experience overseas work more actively in an effort to cultivate
next-generation human resources.
I will act as an intermediary to deepen cooperation between the management team and business segments and promotemeasures related to improving asset efficiency and optimizing asset allocation in order to further raise corporate value.
April 2019

■ HORIBA Premium Value■ Examples of capital efficiency

improvement initiatives

Formula
HORIBA
Premium
Value=

Operatingincomeー

Cost ofcapital*Value Driver
Net
sales

Cost ofsales

Selling,
general andadministrative
expensesWorking
capitalFixed assets

Examples of activity targets
by segment
New sales channels
development

Inventory optimization

New products launch

Early collection of accounts receivable

At HORIBA Europe GmbH’s HORIBA Czech Olomouc Factory, aproduction base for the Mechatronics (MCT) business*1, we drasticallyrevised the production process and supply chain for chassis
dynamometers and employed a pull production system*2. These changes
resulted in an approximate 25% reduction in production lead times.
*1 Mechatronics (MCT) refers
to measuring instruments forvehicles*2 Pull production: refers to asystem under which
production is conductedaccording to demand

Lead time reduction* Invested capital × In-house rate of cost of capital. We apply an original benchmark that isbased on HORIBA’s WACC and comparable with operating income in connection with our costof a capital target. Currently, evaluation is conducted by applying the same rate to all regions
and businesses and monitoring degrees of improvement.

24

Special feature

HORIBA’s businesses that contributeto a sustainable mobility society
As the world population increases, the number of passenger cars sold is projected to increase moving forward.
Tightening of fuel consumption and emission regulations worldwide have caused demand for even more fuel-efficientand clean internal-combustion engines, which continue to be one of the most important power sources for vehicles.
These internal-combustion engines are expected to remain at the center of the automotive industry as they continue
to be used in vehicles equipped with electric technologies, such as hybrid or plug-in hybrid vehicles. In recent years,
the development of zero-emission electric vehicles, which are expected to contribute to improving the global
environment, has processed at a tremendous pace, and automotive development as a whole is heading down theroad to diversification. On the other hand, when considering that the burdens growth in the automotive industry has
placed on the global environment, it becomes easy to realize that we must think about raising overall energy
efficiency, while contemplating factors such as conditions concerning resources and power generation in various
countries and regions, through well-to-wheel (oil well to tires) analysis that covers all stages of the energy cycle.
HORIBA holds an 80% global market share in emission measurement systems, securing a high market share in theemission measurement business, which combined with the MCT (Mechatronics) business,*2 covers the entirety of theautomotive measurement equipment business. In addition to the acquisition of U.K. subsidiary HORIBA MIRA
Limited for engineering business for vehicle development, we acquired FuelCon AG in Germany in 2018, whichallows us to expand business domains related to electrification. Furthermore, we are utilizing technologies in threebusiness segments outside of the Automotive Test Systems segment (Process & Environmental, Semiconductor, andScientific) and offering multifaceted analysis and measurement solutions for every energy phase, from production to
consumption.
By combining these diverse technologies, HORIBA is contributing to the construction of a sustainable mobility
society through timely response to demand that continues to expand in various directions.
*1 HORIBA’s estimates*2 MCT (Mechatronics): measuring instruments for vehicles

Improvement of efficiency throughout the energy process is necessary

HORIBA contributes to all stages of the energy
Petroleumrefining
Flow leading toenergy consumptionPowergeneration

Production

Batteries, fuel cells

Conversion and storage (Transmission)
Raman spectrometers(Analysis andevaluation ofbattery material
components)

Corresponding
HORIBAproducts
Process measurement equipment(Management of petroleum
refining process)25

Stack gas analyzers(Raising efficiencyof power plants)

Fuel cell test systems(Development of fuel cells)

Battery test systems(Development ofbatteries)

Strengths

Strategies

Results

Structural changes of the automotive market targeting transition to anext-generation mobility society

Market forecasts of vehicles, by power source (prepared by HORIBA based on the IEA Energy Technology Perspectives 2017*)
Passenger vehicle sales in 2040
Vehicles with engines

102 million units
(85%)

122

* Modified by HORIBA based on IEA data from Energy Technology Perspectives 2017 © OECD/IEA 2017. License:
www.iea.org/t&c. It provides a long-term global scenario to limit the rise in global temperature to well below two
degrees Celsius (2°C), as set out in the Paris Agreement.

million units

HORIBA’s exposure by business domain

BEV, FCV

20 million units

Fuel cell vehicles (FCVs)

(15%)

3

MCT

Passenger vehicle sales(Million of units)

Increase in
the ratio of
vehicles withelectric
powertrain

Battery electric vehicles (BEVs)

120

2018

(HEVs/PHEVs/
BEVs/FCVs)▼

Plug-in hybrid vehicles (PHEVs)

EMS*

Compressed natural gas (CNG)/
Liquefied petroleum gas (LPG)

Increase in
vehicles withengines＋

60

Strengtheningof fuelefficiency andexhaust gas
regulations

Hybrid electricvehicles (HEVs)▼

Diesel

2020

2030

2040

2050

New demandformeasurement(BEVs)▼

Diversificationin vehicle
development
Increase indemand fortesting
Increase inoutsourcing ofdevelopmentfromautomakers

Process &Environmental
Semiconductor
Scientific

Progress inthe developmentofnext-generation
vehicletechnology,
strengthening ofenvironmental
regulations▼

Increase indemand for
power generation,
automotive
semiconductors,
and batteries
Increase inmeasurement
demand related
to theenvironment

Increase indemand formeasurement
equipment0

2010(HEVs/PHEVs)＋

Increase in
the ratio of
BEVs and
FCVs▼

Increase in
need
to improveengines

Gasoline

Need formeasurement
when engines,
electric motors,
andbatteries
are combined

businesssegments

ECT

2060* EMS: Emission Measurement Systems● Progress in vehicle electrification technology● Tightening of CO2 emission regulations

Promotion of BEVs and FCVs

● Increase in HEVs and PHEVs● Increase primarily through sales of gasoline/

diesel vehicles in emerging nations

Internal-combustion engines will continue to bean essential source of power moving forward

HORIBA’s estimated market size of its Automotive Test Systems segment:

2 trillion yen or more

(HORIBA’s estimates)

for transformation into a sustainable next-generation mobility society

process including production, transmission, and use
Officesandfactories

Gasoline/hybridvehiclesBatteryelectric
vehicles(BEVs)

Fuel cellvehicles(FCVs)

消 費 (Use)
Consumption
Air pollution analyzers(Measurementof pollutants)

Water quality meters(Measurement ofindustrial wastewater)

Emission measurement systems(Improvement of internal-combustion
engine performance)

Four-wheel drive
test system(Development of vehicles)

Mass flow controllers(Response to growth indemand for automotive
semiconductors)

26

Special feature

HORIBA’s businesses that contribute toa sustainable mobility society

HORIBA’s strategies related tonext-generation vehicle technologies
Director, Board Leader of GLOBAL ATS BOARD

Takashi Nagano

Profile Takashi Nagano joined HORIBA, Ltd. in 1985. Then he held positions such as General
Manager of the Engine Measurement System Management Division at HORIBA, Ltd.,and President of HORIBA Europe GmbH (Germany). In 2005, he became a corporate
officer at HORIBA, Ltd. and was appointed to the position of director in 2016. Sincejoining HORIBA, he has consistently driven global business expansion through his
involvement in the Automotive Test Systems business segment. As the Board Leaderof the GLOBAL ATS BOARD, he is currently working to achieve further business growthby leading active investment and the creation of new business.

Energy efficiency, the environment, and safety:
Three perspectives supporting the construction of new mobility societies

HORIBA’s Automotive Test Systems segment has played a role in emission measurement throughout its history. We take great pridein this business segment’s unparalleled and continuous contribution to society through our analysis and measurement technologies
designed to respond to emission gas certification procedures and internal-combustion engine adaptation that have grown more
complicated due to strengthened regulations. On the other hand, we believe that the three perspectives of energy efficiency, theenvironment, and safety are increasing in importance due to expectations that new mobility societies will be formed moving forward. It
is also true that automotive manufacturers are facing demand for technology and product development from a variety of directions,for making the improvement of development efficiency imperative and partners who provide support in this regard essential.

Aiming for business expansion through forward-thinking and proactive
investment and technological strength capable of responding to customer needs

HORIBA is conducting active investment in order to improve its ability to respond to market demand. Most recently, we obtained
resources for battery and fuel cell test systems through our acquisition of FuelCon AG in Germany (more on page 28), which we
combined with our existing products and services, enabling us to provide more wide-ranging and flexible applications. We will aim toestablish new business models through the application of CELL 0 (more on page 28), which is slated to be put into operation at the
HORIBA BIWAKO E-HARBOR, BIWAKO Factory in 2019, and the proposal of many analysis and measurement solutions aimed atraising energy efficiency in electric and other vehicles.
In order to secure continuous business growth, we will need strategies that are more deeply rooted in a long-term point of view. Our
support for the establishment of a new institute at the University of California, Irvine (UCI) (more on page 28) is an investment thatwill provide opportunities for the creation of new businesses in the fields of energy efficiency, the environment, and safety. Throughour collaboration with UCI, we will aim for business expansion in domains expected to make further progress moving forward, suchas electrification and cybersecurity in conjunction with the advancement of next-generation power grids called “smart grids,” which
are projected to spread.
In terms of our response to diversifying automotive technology and product development, we are helping to streamline thedevelopment cycle and producing achievements in the provision of systems utilizing highly accurate simulation technology through a
joint project with Subaru Corporation (more on page 28). We believe that this type of business model will serve the needs ofcustomers such as components and materials manufacturers, in addition to those of automakers, and are working to expand into
more business domains utilizing the engineering technology of U.K. subsidiary HORIBA MIRA Limited.

Contributing to the resolution ofissues facing the automotive
industry as a trustworthy partner
The GLOBAL ATS* BOARD, comprised of me and two
members of management from HORIBA MIRA Limited and
HORIBA Instruments Incorporated in the United States, wasstarted in 2018 in pursuit of group integration. Through thisboard, we have established a framework that allows us tomake immediate decisions and undertake quick action froman optimal global perspective in matters concerningbusiness strategy. By conducting business operations
through this new organization, we will promote the rollout of
products and services more intimately related to actual
development sites and establish our standing as atrustworthy partner within the automotive industry.
* ATS: Automotive Test Systems

27

Members of the GLOBAL ATS BOARD

Takashi Nagano (center)

George Gillespie
Executive Chairman of HORIBA MIRA Limited (right)
Ken Mitera
Executive Vice President of HORIBA Instruments Incorporated (left)

Strengths

Strategies

Results

In pursuit of business expansion related tonext-generation vehicle technologies

01

FuelCon AG joined HORIBA

Strengthening of battery testing field

In September 2018, we acquired FuelCon AG in Germany (now,
HORIBA FuelCon GmbH), which develops, manufactures, and sells
battery and fuel cell test systems. By demonstrating synergy
through integrating HORIBA’s long-held analysis and measurement
systems and engineering technologies with FuelCon’s amassed
reliable record of supplying products to primarily German
automotive manufacturers, HORIBA provides optimal measurement
solutions in the field of electric vehicle development.
Business expansion through acquisition

02

Establishment of CELL 0,
an evaluative testing facility forbatteries used in electric vehicles

We decided to establish CELL 0, an evaluative testing facility for powersources such as batteries used in electric vehicles and fuel cells, within
the E-LAB development testing facility for automotive at HORIBABIWAKO E-HARBOR. The facility is scheduled to begin operating in
2019. We will equip CELL 0 with battery development testing expertisefrom HORIBA MIRA Limited in the United Kingdom, as well as HORIBA
FuelCon GmbH’s wide variety of battery test systems, and respond to
the diverse customer needs of the next-generation automotive industry
through the development of electric vehicles and Model-Based
Development (more on page 32).

Electric vehicles (HEVs, PHEVs, BEVs, FCVs, etc.)*
VehiclesDrivelines

Engines

Batteries/
Fuel cells

CELL

CELL

CELL

CELL

Measurement
equipment
Testing
procedures

Artist’s rendering of the interior of the E-LAB

Engineering* HEVs: Hybrid Electric Vehicles; PHEVs: Plug-in Hybrid Electric Vehicles;
BEVs: Battery Electric Vehicles; FCVs: Fuel Cell Vehicles

Overview of FuelCon AG (now, HORIBA FuelCon GmbH)

Establishment: 2001
Number of employees: 62 (as of December 31, 2018)
Primary customers: Automotive and automotive parts manufacturers mainly situatedin Germany

03

Supporting the establishmentof a new institute at Universityof California, Irvine

In August 2018, we concluded an agreement with the University ofCalifornia, Irvine (UCI) in the United States to support theestablishment of the HORIBA Institute for Mobility and Connectivity
in connection with the University’s Advanced Power and Energy
Program. With this agreement, we will strengthen the collaborative
academic and industrial relationship we have with UCI, which isviewed as a highly trustworthy organization by U.S. regulatory
agencies, including the Environmental Protection Agency (EPA).
Through this institute, we will integrate the fields of energy andmobility, which have previously been treated as separate domains,promote research aimed
at resolving a variety ofenvironmental issues andwork to create businesses
that will contribute to theentire energy industry.

Providing various measurement solutions through theintroduction of CELL 0
1. Tests measuring battery charging and discharging performance andevaluating the charging and discharging cycle
2. Connection testing for vehicles and powertrains (linked to CELL 1—3)
3. Test in the Loop*, a total evaluation system targeting energy optimization* A system that enables the verification and development of vehicle performancethrough evaluation combining all test system varieties with simulation software

04

Providing test systems that
help streamline the vehicle
development cycle

We conducted a joint development project with Subaru
Corporation that aimed at solving problems encountered during
the vehicle development process. By enabling the new test
system to conduct highly accurate on-road simulation, as well ascomprehensive and elaborate data collection based on HORIBA’s
four-wheel drive test system, we succeeded in moving about 70%
of vehicle testing into the laboratory. Moving forward, we willcontinue toprovide richly
diverse systems
that assist in
raising theefficiency
of vehicle
development.

Signing ceremony for the support agreement

Three research subjects investigated by the
HORIBA Institute for Mobility and Connectivity
1. To develop vehicles, fuel supply chains, and mobility systems that emit nopollutants
2. System construction to connect zero-emission vehicles with anext-generation electric grid that incorporates renewable energies at amuch higher level than exists today
3. To invent the next-generation of conveyances that can sense theirsurroundings and communicate with the traffic and energy infrastructures

Test system provided to Subaru Corporation

We offer more details regarding
the test system we provided to
Subaru Corporationon our website (in Japanese only).

Web Link
Click!

28

Creating corporate value
with our invisible values

Invisible values
Creating value using invisible values is one of HORIBA’s largest management themes. We believe in
the importance of maintaining a trunk-and-branch situation in which the fruit growing on the
branches of a tree represents the economic and social values generated each year through visible
values, and the tree’s trunk represents our businesses. However, the whole tree will topple over if
we do not properly extend the thick roots that represent ourinvisible values into the abundantly fertile soil that
HORIBA Report →pp. 13—14
represents corporate culture. HORIBA considers its brands,
organizational structure, talents, technologies, andcustomers to be invisible values and invests in themcontinuously.

nal reoitauOrganiz Struct

HORIBA
Brand

T ec

hnol
ogies

29

st

om
er
s

u

T

C

al
en
t

s

While pursuing numerical targets such as net sales
and profits, HORIBA works to raise the value of its brand by carefully
fostering the talents, technologies, and corporate culture that it encompasses,
which are essential for securing eternal growth and act as a source for future earnings.
We believe that continuing the wide range of activities in which we engage to expand our other four invisible values,
which are our “organizational structure,” “talents,” “technologies,” and “customers,” leads to higher customer confidence,
which is equivalent to the HORIBA brand.

Strengths

Strategies

Invisible values

Results

Source of corporate value

Customers

HORIBA helps improve the quality of life in a sustainable society byproviding high-quality products and services to customers. We think
it is important to provide solutions in addition to supplying hardware(instruments). In order to achieve this goal, HORIBA Group
collaborate with suppliers in Japan and overseas.

Aiming to become a true partner of our customers
HORIBA maintains laboratories (showrooms) that allow customers to “see,” “use,” and “experience” its technologies. We are aiming tobecome a true partner of our customers by proposing analytical technologies in line with their demands and providing optimal services.

HORIBA BIWAKO E-HARBOR:
A swift provider of flexible products and services
HORIBA BIWAKO E-HARBOR, Biwako Factory, in Otsu, Shiga
Prefecture has consolidated all development, design, andproduction functions related to HORIBA’s gas measurement
technologies.
This base, which began full-fledged operation in 2016, haspromoted reforms aimed at raising efficiency and productivity.
Calling the process “sengu” or the translocation process oftechnology, we promote the younger generation to re-establish
the long-existing production processes with their own newtechnologies. It helps to deeply understand the technology
development in HORIBA’s history and accelerates the innovationfor our future. Furthermore, this base adopted a system that
consolidates processes we had previously decentralized outsideof the company, such as the components assembly process,onto one floor. We are currently aiming to reduce time spent
waiting before processing begins, as well as impediments to the
distribution of components. In addition, we are striving to raiseoverall quality while reducing lead times to one-third of levels
before the factory was launched, and doubling productivity
through the construction of a flexible and efficient supply system.

The HORIBA BIWAKO E-HARBOR receives many tour requests from
customers, the national and municipal governments, and schools both
inside and outside of Japan. The facility’s total number of factory tour
guests exceeded 10,000 in August 2018.

E-LAB
Attached HORIBA BIWAKO E-HARBOR is an automotive development test facility called “E-LAB.” In the facility’s three laboratories, which
are referred to as “CELL 1, 2, and 3,” customers can bring in test subjects, such as vehicles or engines, and use HORIBA’s cutting-edge
measuring equipment. Furthermore, CELL 0 will be newly added as an evaluation and testing laboratory for electric vehicle batteries in 2019
(more on page 28).
We have also consolidated information from our nine development testing facilities for vehicles worldwide into E-LAB and have established asystem that allows for real-time comprehension of testing statuses at each of our bases.

HORIBA Analytical Laboratory:
Where you can truly feel the value of
our analysis and measurement technologies

HORIBA Analytical Laboratory (Kyoto)

HORIBA Analytical Laboratory, located in two bases: one in Kyoto andthe other in Tokyo, primarily exhibits products from the Scientific
Instruments & Systems segment. At this laboratory, about 20 analyticaltechnicians conduct sample measurements and demonstrations forcustomers considering purchasing our products. Additionally, we provide
a variety of advice for customers who are already using our analyzers,
providing application data that allows for maximum demonstration ofdevice performance and sharing recommendations regarding analysis
methods. HORIBA Analytical Laboratory has achieved laboratory
accreditation in the form of the International Organization forStandardization (ISO) Standard “ISO/IEC 17025”. This achievement
ensures international credibility for the data we provide within the scopeof the accreditation and also carries the advantage that certificates canbe accepted not only in Japan but also from one country to anotherworldwide without the need for further testing.
30

Creating corporate value
with our invisible values

Invisible values

Source of corporate value

Technologies

Technological development is one of the most important drivers forvalue creation and the lifeline of a manufacturer such as HORIBA.
To make an analogy, technical capability is a form of basic physicalfitness, which cannot be maintained without continuous training
and exercise. We firmly believe that continuous investment willcontribute to our future growth and profitability improvement.
HORIBA aims to improve the efficiency of our R&D investments
and realize a higher operating income.

Continuous investment in core technologies
HORIBA allocates 7– 8% of its sales to investment in R&D
and has expanded its market share during a period ofdemand recovery by continuing to invest during
recessions, when many companies cut back on
investment. In 2009, the year of global recession, theSemiconductor Instruments & Systems segment lapsed
into an unprofitable territory. However, supported by stableearnings of the Medical-Diagnostic and Scientific
Instruments & Systems segments, we were able tomaintain the same level of overall R&D investment in the
Semiconductor Instruments & Systems segment, which
resulted in the segment’s favorable operating performance
today.
We firmly believe that this investment policy will contributeto our future growth and profitability improvement.

R&D expenditure and ratio of R&D expenditures to net sales
Billions ofyen

15■■ R&D expenditures (left)̶ Ratio of R&D expenditures to net sales (right)

11.9 12.3
10

9.8

9.4

9.4 10.0 10.0

8.0

8.1

5

8.6

12.9

%

13.9

15.1

10.7

7.8

10

7.8

7.2

7.6

7.1 7.2

0

Application of core technologies to products
HORIBA focuses its R&D resources on developing specific technologies in analysis and measurement and implements effective
product development in the five business segments of different markets by applying the obtained core technologies. In productdevelopment, we strive to provide flexible applications and to meet demands from customers and society crossing over theboundaries of the business segments.
HORIBA’s major technologies (by scale of sales)
Infrared measurement

Technology to analyze
components in gas in real time

Gas flow control

Technology to measure andcontrol the flow of fluids
instantly

Particle analysis

Technology to measureparticles (diameter, number,weight, and components)

Spectroscopic analysis

Technology to analyze materials
by using ultraviolet light, visible
light, and near-infrared light

Liquid analysis

Technology to measurecomponents or characteristics
in liquid, such as pH, sodium,acids, alkalis, and glucose

31

Process &Environmental

502009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Automotive
Test Systems

15

MedicalDiagnostic

Semiconductor

ScientificStrengths

Strategies

Results

Refining our cutting-edge technologies
through industrial and academic partnerships
HORIBA believes that collaboration between academia and business is a large strength when it comes to responding to changes inindustry. Accordingly, we are actively promoting partnerships with academic institutions worldwide, including our support for theestablishment of the new institute at the University of California, Irvine (more on page 28).

Opening of MIRA Technology Institute at HORIBA MIRA Limited
In September 2018, we opened MIRA Technology Institute on site at HORIBA MIRA
Limited in the United Kingdom. Collaborating with local universities, including Coventry
University, we installed a fully-functioning educational facility within a space of over
2,000m2. In addition to lectures from university faculty, this facility provides lecturesthat make use of HORIBA MIRA Limited’s facilities. Through the operation of MIRA
Technology Institute, we are cultivating superior
engineers who will lead us during the next
generation and contributing to the developmentof the automotive industry.
Prof. Dr.-Ing.
Günther Prokop

Research conducted jointly with the Dresden University of Technology
Model-Based Development (MBD)* is currently spreading throughout the automotive
industry. Through the research that we are conducting with the Technical University
Dresden in Germany, we are performing highly precise testing during the simulation stageof MBD and aiming to streamline development. In exchange for academic expertise,
HORIBA provides the university with test facilities. We are conducting collaborative
development with the university while aiming for future product commercialization.

Holder of the Chair of Automotive
Engineering at the Technical
University Dresden

Dr. Prokop has stated “Through
HORIBA provision of the facility,
the University can test
technologically-sophisticatedproducts by using the newest
equipment and technologies.”* Model-Based Development (MBD): A development technique that develops and installs engines andvehicles using simulation technology, with the ultimate goal of mass production.

200th anniversary of the establishment of Jobin Yvon S.A.
Jobin Yvon S.A. (now HORIBA FRANCE SAS), an optical instrument manufacturer that
became a member of the HORIBA Group in 1997, celebrated the 200th year since its
establishment in 2019.
HORIBA FRANCE SAS has cooperated with many celebrated scientists throughout its
history, including Augustin-Jean Fresnel and Francois Arago, launching many products ina wide range of optical fields. Out of analytical products that make use of light, such as
Raman spectrometers, the analytical products currently offered by HORIBA FRANCE SAS
provide particularly high performance. Its products are used by some of the world’s mostadvanced research institutions, including NASA. Additionally, HORIBA FRANCE SAS is
actively engaged in its industrial and academic partnerships, which include productdevelopment through a joint project with Ecole Polytechnique, France’s top educational
institution in the field of science and engineering.
In the future, HORIBA FRANCE SAS will continue to promote new product development andthe cultivation of new product applications as a leading optical systems company.

The Fresnel lens forlighthouses, a productof Jobin Yvon S.A. at
the time of its founding

Consolidation of technologies related to water
quality measurement in pursuit ofbusiness expansion

In January 2017, we integrated our resources of water quality measurement business inJapan into HORIBA Advanced Techno Co., Ltd. to strengthen service and support networks,
as well as technological capabilities related to water quality measurement that weaccumulated within Japan. Moving forward, we will aim for business expansion bysimultaneously utilizing water-related analysis and measurement technologies and sales
networks from the Process & Environmental, Semiconductor, and Scientific Instruments &Systems segments. In 2018, we launched sales of “Hakaru EXpress”, a service that installs
water quality analyzers free of charge, collects measurement data, and then offers reports on
this data in exchange for compensation. This system is revolutionary in that it provides
assistance with the streamlining of water quality management for factories and other facilities
by combining HORIBA’s technologies and services.

Amedee Jobin (left) and Gustave Yvon (right), two
figures who expanded business at Jobin Yvon S.A.
through strong working relationships with scientists.

Net sales in water-related businessBillionsof yen20
15
10

Process & Environmental
Semiconductor
Scientiﬁc

12.0

14.1

20.0

15.6

5
0
2016

2017

2018

2020 (Plan)

32

Creating corporate value
with our invisible values

Source of corporate value

Organizational Structure

Invisible values

HORIBA operates five business segments in 49* companies.
We believe it is important that each business is promoted from thelocal region. With that aim, we are extending our “Joy and Fun”
corporate motto throughout our global operations while promoting
balanced management, matrix organization, and the HORIBA
Stained Glass Project to build a Super Dream Team.

Organizational
Structure
and Talents* As of December 31, 2018

Balanced management attained througha matrix model of organization

HORIBA operates under a matrix framework, with its five business segments composing the vertical axis and three regions (Asia, Europe,and the Americas) making up the horizontal axis. This is a global organizational framework for executive decisions on strategies and plansof each segment, which removes barriers such as separation of countries, regions, or group companies.
We have achieved continuous growth over the years by conducting balanced management that involves flexibly utilizing corporate
resources and consistently investing in each business segment, even when one of them might be facing a sluggish business environment.
We will continue to exploit the benefits of the multiplier effect from successful examples and strengths in one segment or one region toanother and improve HORIBA’s corporate values.

The BlackJack Project:
Enhancing organizational capabilities through operational reforms

The BlackJack Project is HORIBA’s unique operational improvement initiative which began in 1997 with the objective of changing theawareness and activities of employees. From the outset, a dedicated internal team worked to promote this initiative, which fulfills thevital role in providing opportunities for sharing global experience and knowledge and represents one of our most important initiatives
aimed toward establishing a Super Dream Team. Over the last few years, we have registered about 800 proposals per year, as well
as a total of over 9,000 proposals over the entire life of the initiative, which has spanned over 20 years. These proposals, which covera variety of topics ranging from business-related concerns, such as raising operational efficiency on the manufacturing floor or cost
reduction, to communication-related ideas, such as promoting cross-cultural understanding, help form HORIBA’s corporate culture,
which encourages employees to take initiatives in working toward reform. The BlackJack Project, which is also the best method wehave for management to know what happens on site, is helping provide support for our current favorable business results.
Number of proposals■ Japan ■ Outside of Japan

1,000

853

proposals

800

Proposals submitted in 2018 (e.g., HORIBA, Ltd.)

Other 5%

Safety, hygiene, andenvironmental

600

7%

400

Sales promotion
and marketing

7%

200

Quality

0

2014

2015

2016

2017

2018

11%

Time saving,
efficiency,
cost reduction

41%

Human
resources andorganizational

29%

Primary achievements of the BlackJack Project
BlackJack Award World Cup 2018
In 2006, we extended the activities of the BlackJack Project to include overseas groupcompanies. Since 2007, we have held an internal World Cup competition that selects
the best of candidate proposals from each country in which we operate, bestowing acorresponding award. This competition provides a forum through which candidates
can present their accomplishments to management. In 2018, an overseas groupcompany’s project won the first prize for the first time since 2014.
First prize-winning proposals

Introduction of the HORIBA Care App for smartphones

It is important for hematology analyzers to monitor the usage of reagents consumed duringlaboratory tests. We developed and introduced a smartphone app that allows users tounderstand the locations of their end customers, as well as statuses of analyzer usage,
as a means for simplifying and reducing required administration processes and times.
Connecting end customers to HORIBA with the app’s platform has enabled thesimplification of order processes and the gathering of information regarding product usage.
We are aiming to strengthen our supply system and raise customer convenience toensure that we can respond to a rapidly expanding Indian market.

33

Jyoti Pant of HORIBA India, won first prize in 2018with her project

Strengths

Strategies

Source of corporate value

Results

HORIBA’s
five pillarsof“omoi”

Talents

At HORIBA, employees are our most important
assets. In order for all employees to achieve “Joyand Fun,” we work to realize HORIBA’s five pillarsof “Omoi”. HORIBA’s organizational success is due
to our highly diversified employees’ practice of
HORIBA’s five “omoi.”

1 To be a part of a collaborative community,

at the forefront of new ideas and creations.

2 To achieve goals and make life memorable byfostering the highest intellectual potential.

3 To reach across the globe to expand learningthat captures key business developments,
wherever they occur.
4 To be proud of sharing what I do andwhat HORIBA delivers.

5 To be helpful to the world and its people.

Organizing a Super Dream Team
Under the slogan “HORIBA Group is One Company,” since 2004, HORIBA has promoted “Balanced Management” throughadoption of a matrix model of organization to manage the group companies as a single integrated entity. Under thismanagement structure, we will establish a Super Dream Team of diverse human resources through the HORIBA Stained Glass
Project. This project is geared toward promoting diversity by increasing awareness among employees regarding the value andsignificance of diversity in human resources in order to encourage each of them to utilize their abilities to their full potential.
Through these changes, we will accelerate reform in existing businesses, as well as the creation of new businesses.

HORIBA Stained Glass Project
In January 2014, we launched the Stained Glass
Project. Its mission is to make HORIBA stronger by
the continual creation of new value through diverse
human resources and skillsets, regardless of theirgender, age, nationality, disability, or other differences.

Areas in which
HORIBA is
promotingdiversity

Diversity promotion
Improvement in productivity,
corporate competitivenessWe shifted our focus to improving job satisfaction
Job satisfaction

Comfortableworking environments

Expected roles/Self-fulfillment

Continued employment
and respect for all individuals

and ensuring comfortable working environments
and promoting activities that encourage our diverse
human resources to contribute even more actively
on a daily basis. To this end, we strengthened ourStained Glass Project initiative by launching theStained Glass Project Office in 2017.

Individual
discretionand sense of
growthSelf-directed
careerdevelopment

Flexibility
regardingtime and location

Workingenvironment
improvement

Primary activities of the HORIBA Stained Glass Project
Establishment of a telework program: The introduction of the Good Place Work System
In January 2019, we implemented the Good Place Work System (telework program), which expanded our previous work-from-homesystem, at all group companies in Japan. HORIBA has supported the continued employment of staff who have promising futures but facedifficulty when coming to work. In 2006, we allowed these employees to begin working at home, enabling them to balance their work withconcerns such as childcare and nursing care. We introduced this new system to further raise productivity while preserving the current
work-life balance for employees.

2019

2005

● Shortened working

hour system▶ Shortened working
hours permitted
only during times
specified by thecompany2014● Launch of Stained

Glass Project

2016● Good Balance● Good Place Work System▶ Individuals who have received approval

Work System▶ Revisions allowing for
more flexibility when
deciding working
hours

from their department heads are permitted
to work outside of their respective workplaces.
Approval is based on guidelines formulated
by teams established in each department.
When forming these guidelines, these teams
consider factors such as work responsibilities,
safety and health, and confidentiality.

Increasing visibility of project activities: Special website launch
We launched our website, “Stained Glass Project—Diversity at HORIBA,” in November 2018.
On this site, we introduced the vision of the Stained Glass Project, which is promoting diversity
throughout the company, as well as specific promotional activities related to diversity.

Web Link
Click!

34

Creating corporate value
with our invisible values

HORIBA’s CSR

Building Invisible Values
HORIBA believes in building invisible values through relationships between its business activities and its otherwide-ranging activities. While focusing on the three backbone values that form the core of its management, HORIBA
is adjusting its diverse business and identifying important andrelevant issues. HORIBA considers these activities to be thestarting point of its CSR initiatives.
HORIBA’s value-creating
cycle Report
HORIBA
pp. 13—14→

HORIBA’s value-creating cycle

Strengths

Strategies→pp. 43–44→pp. 47–48

To improve theglobal environment

Profit generated year after year

&

S

Sc
ie
nt
ifi
c

s

Related goals
in the SDGs*

To contributeto building asustainable society

Top-level shares inniche marketss→pp. 45–46

m
te
ys

In
st
ru
m
en
ts

Instruments &Systems

MedicalDiagnosticstTe→ pp. 41–42

Sem
Ins ictru
me ondntsu& S cto
yst
r
em

In

ive
ot
om
ut ems

The three backbone values thatform the core of HORIBA’s managementls & nta s
cesonmeSystemProvir nts &EnstrumeA

Sy
stResults

Social issues
confronted
by HORIBA

Global business making andselling more than
1,000 products of various kinds(Maintained an operating income level
above 10%)

To realize a safe,
pleasant society
To empower
regions→pp. 49–50

To create jobs

Business growth
supported bycontinuous investment
Creatingsocial andeconomic
value

Five
businesses

To promote
diversity

To initiate activities
to prevent
corruption

Creating
economic value

Creating social value* “SDGs” refers to the Sustainable Development Goals
unanimously adopted by the United Nations General
Assembly in 2015.

HORIBA’s corporate motto: Joy and Fun

HORIBA’s
corporate motto:

Open and Fair→ pp. 31–32→ pp. 33–34 Or

gs tr a niz at
u c tu io n alresTechnolo

gie

s

ts

→ p. 29

C u stome r s →2

3

Unique products
and services

Sustainablesupply chain

1
Super DreamTeamHORIBA’s
Brand→ pp. 33–34 Talen

Ownership and Challenging Spirit

Ownership
andChallenging
SpiritInvisible
valuesContribution tosecure well-being
for future society byusing cutting-edge“Measurement
Technologies”

6

Participation insociety and growthof individuals

p. 30

Our five business segments are represented by a strong and growing trunk that receives nourishment fromthick roots (invisible values) that have firmly spread throughout a plot of rich soil (corporate culture).
The bountiful fruit (economic value) is produced through our business activities andbrightens people’s lives with beautiful colors (social value).
The fruit’s seeds eventually return to the rich soil, creating new value ---------------.

CSR framework of activities that shape
HORIBA’s invisible values→p. 354

Construction of
governance,
slim andsolid internal
control5

Communication
with internal/
external
stakeholders

Open
and
Fair

13

14

Progress of HORIBA’s CSR activities

2016■ The ESG Workshop, which iscomprised of the Junior Corporate
Officer in charge of CSR at
HORIBA, Ltd. and core membersof each segment, was launched.

■ HORIBA’s corporate philosophy

and strength were confirmed, andthe areas and frameworks where
HORIBA can or should contributein solving social issues or do so interms of relation to stakeholders
were studied.

35

2017
■ 25 ESG Workshops were held in

one year.

■ The ESG Subcommittee wasestablished within the HORIBAGroup CSR Promotion Committee.

■ CSR activities by HORIBA’s

overseas group companies weresurveyed.

2018■ CSR activities were delegated to four

subcommittees covering environment,social affairs, governance, and public
relations. Each subcommittee
formulated its own mission andconducted activities according to anannual plan. ESG Workshops were
held as an avenue for reporting.
■ Responded to client-led CSR audits
and investigations with cooperationfrom each subcommittee.
■ Reconstructed HORIBA’s CSR website.

2019 (Plan)■ Clarify HORIBA’s CSR policy andtransmit it both internally andexternally through the Mid-Long
Term Management Plan.

■ Strengthen external transmission

by enhancing the CSR website.

■ Hold our 50th ESG Workshop.

Strengths

Strategies

Results2

3

Unique products and services

Sustainable supply chain

Sharing technologies and productdevelopment between business segments
p. 31

Efficiency enhancement at
HORIBA BIWAKO E-HARBOR via production
process reform
p. 30

Promotion of global projects incooperation with universities andresearch institutions

Corruption prevention; rejection offorced labor and child labor
p. 32

Offering products and services
by utilizing global M&A
pp. 07–08

1

Promoting CSR-conscious
procurement activities

4
Construction of governance,
slim and solid internal control

Super Dream Team
“Balanced Management” and“Matrix Organization” to enhance theoperational baseContribution tosecure well-being
for future society byusing cutting-edge“Measurement
Technologies”

p. 33

The mission of the
HORIBA Stained Glass Project is to
identify talents and to promoteorganizational growthp. 34
Appointing management from overseas groupcompanies as corporate officers
at HORIBA, Ltd.
p. 37

Appointment of outside directors/auditorssince our foundation
pp. 37–38
Adoption of HORIBA Premium Value,
an indicator for targeting and monitoring
the improvement of capitalefficiency
pp.23–24
Global adoption of the ERP(Enterprise Resource Planning) System;
Enhancement of stability of the business base,assisted by the IMS*1

6

5

Participation in society andgrowth of individuals

Communication with internal/
external stakeholders

Use of the BlackJack Project and
HORIBA COLLEGE*3 for growth of individuals
and the organizationp. 33

Investor relations (IR) activities ina timely and fair manner
Signatory to the UNGC; dialogue with outside
institutions, such as the CDP*2
p. 38

Workstyle renovation to support designing“Rewarding Work”
and a prosperous lifestylep. 34

Promotion of global dialogue withbusiness partners and customers

Advocating societal participation
through systems such as a side job
permission system

Internal communication with employees andexecutives at product launch meetings, etc.

p. 30

Signatory tointernational initiatives

External
evaluation
We received our first selections
for inclusion in the “Health &Productivity Stock Selection
Program (2019)” and “Nadeshiko
Brand (2019),” both of which aredecided by the Ministry of Economy,
Trade and Industry and the Tokyo
Stock Exchange, Inc.

Health and Productivity
Stock Selection Program
In 2012, HORIBA’s top management issued
its Physical and Mental Health Promotion
Declaration. Inclusion in the 2019 Healthand Productivity Stock Selection Program
was granted out of recognition for various
initiatives conducted in pursuit of thisdeclaration’s goals.

Nadeshiko Brand
Our inclusion in the Nadeshiko
Brand 2019 was awarded out ofrecognition for our initiatives
promoting diversity, primarily our
Stained Glass Project (more on
page 34).

*1 IMS, or Integrated Management System, integrates the standards of several management systems, including ISO. The HORIBAGroup has established IMS for Quality (ISO 9001), Environment (ISO 14001), Occupational Health and Safety (OHSAS 18001),
and Road Traffic Safety management systems (ISO 39001). Furthermore, IMS has been enhanced through the additional
implementation of standards regarding the quality of medical devices (ISO 13485) and business continuity (ISO 22301).
*2 The CDP, formerly the Carbon Disclosure Project, is a non-profit organization based in London that works with institutional
shareholders to disclose the environmental strategy and greenhouse gas (GHG) emissions of major selected corporations in the
FTSE Index. The CDP sends questionnaires to major companies across the world, analyzes and evaluates the companies’
self-reported data, and discloses the results to investors.
*3 HORIBA COLLEGE was established in 2009 as a place where employees can teach and learn from each other as both students
and lecturers.

United Nations Global Compact(UNGC)HORIBA, Ltd. supports the initiatives of
the United Nations Global Compact since
we became a signatory in 2012 throughthe agreement of top management.

Detailed information regarding
HORIBA’s CSR activities can befound on our website:

Web Link
Click!

36

Corporate governanceCorporate governance

Basic PolicyonCorporate
Governance

Based on the corporate philosophy of “Open and Fair,” HORIBA has pledged to (1) establish an organizational
structure that promptly responds to changes in the business environment, (2) improve its managerial monitoring of
performance, and (3) enhance compliance-related arrangements. These objectives have the aim of establishing aworld-class governance structure. At the same time, we are committed to establishing good relationships with all
stakeholders, including owners (shareholders), customers, employees, and local communities. In addition
to proper information disclosure, we seek to promote constructive dialogue with our owners (shareholders),
contributing to our sustainable growth and medium- to long-term improvement in corporate value.

Point 1

Corporate governance structure chart

Selection as Corporation with Boardof Corporate Auditors

General Meeting of Shareholders
Appointment/Dismissal

Board of Directors
Directors: 8

Supervising/Monitoring

Of which are independent
outside directors: 3 (1 female)

Selection/Dismissal
Business Execution Instructions

Point 2

ReportCoordination

Of which are outside auditors: 2

Independent
AuditorSupervising/Monitoring

Financial Audit

Internal controls
Business Execution

Representative director
Supervision

Board of Corporate
Auditors
Corporate Auditors: 3

We have appointed
outside directors andauditors since theestablishment of thecompany in 1953.

Supervision

Entrusting Business
Execution

Appointment/
Dismissal

Appointment/Dismissal

Discussed Items/
Reporting

ReportingCorporate Officers/
Division Managers

Monitoring

ReportingOperations Committee/
Management
Committee

24 in total

Litigation, Exports, Legal Affairs,
Fixed Assets, Public-Sector Grants,
Subsidiary Audits
SupervisingInternal Auditing(Group Internal Audit Office)
Coordination*

Of which are women: 1; foreigners: 7

Committees, etc.*1

Supervising

Integrated Management
System (IMS)(Quality, Environmental, Safety & Health, Quality of
medical equipment, Business continuity
management, and Road traffic safety management)

Direction and Orders
Reporting

Point 3We have been employing a corporate
officer system since 1998.

* Number of corporate officers

Promotion
Reporting Principles

Internal Control Promotion Committee
HORIBA Risk Control Committee

Coordination HORIBA, Ltd. Risk Control Committee*2 Coordination

HORIBA CSR Promotion Committee

HORIBA, Ltd. CSR Promotion Committee

Joy and Fun/Open and Fair

Advisory/
Proposals
Compliance
Committee

HORIBA Corporate Philosophy/Ethical Guidelines*1 Committees, etc. refer to committees and conferences that are established and registered based on the “Regulations Concerning Conferences and Committees,” such as the Group
Promotion Committee for Management of Public Subsidies and the Safety and Health Committee.
*2 The HORIBA, Ltd. Risk Control Committee discusses and approves issues and measures concerning risk control.

37

Strengths

Strategies

Results

Corporate governance system

Outside directors

HORIBA has adopted the type of organization defined as a“Corporation with Board of Corporate Auditors” in the
Companies Act. Based on this organizational design, HORIBA, Ltd.
has appointed outside directors and corporate auditors since its
founding in 1953 to avoid management with an introverted approach.
As of April 2019, the Board of Directors is comprised of eight
members, including three independent outside directors, including one
woman. In 2018, the Board met 12 times in order to make decisions
more promptly and to augment managerial capability. In addition,
HORIBA introduced a corporate officer system in 1998 to makesmooth and agile execution of operations under the supervision andguidance of directors. At present (April 2019), 24 corporate officers,
including one woman and seven non-Japanese, play an active role inJapan and overseas.
As of April 2019, the Board of Corporate Auditors is comprised of three
corporate auditors, including two independent outside auditors. It
performs objective and appropriate auditing and monitoring of thework of the Board of Directors, in cooperation with independent
auditors and internal auditing (Group Internal Audit Office, which is
positioned directly under Executive Vice Chairman & Group COO).

2018

2013
Outsidedirectors:
Directors:

1

Outsidedirectors:

5

Directors:

3

8

Ratio of outside directors in
the Board of Directors

2018

2013

38%

20%

Evaluation of the Board of Directors’ effectiveness
From December 2018 to January 2019, we distributed to all eight directors a questionnaire concerning the Board of Directors’ effectiveness andreceived a response from each of them. The main questions were: 1) three roles and responsibilities of the Board, as per the Corporate
Governance Code Basic Rule 4; 2) structure of the Board (number of members, diversity, knowledge, experience, ability, etc.); and 3) number of
meetings held. In addition, talks took up 4) hours of discussion; 5) issues of discussion; and 6) subjects of discussion. As a result, the directors
judged that the effectiveness of the Board was confirmed to be satisfactory as it was. Various opinions were shared concerning details of
discussions held by the Board of Directors, including feedback that called for the enhancement of qualitative reporting on business execution
and the assertion that informal discussion held before or after Board of Directors’ meetings are raising the effectiveness of the Board.

Directors’ compensation
Compensation for directors consists of base compensation (regular fixed-amountsalary), earning-based compensation (bonus) linked to the earnings results of eachfiscal year, and stock options (retirement allowance) linked to medium- to long-term
earnings performance. Compensation for outside directors, however, consists strictlyof base compensation (fixed-amount salary), excluding compensation linked toearnings performance, given the nature of their assignment. The limits forcompensation for directors and outside directors are approved as a separate matterat the annual general meeting of shareholders. Compensation for directors (notincluding outside directors) for 2018 was 686 million yen in total.

Breakdown of directors’ compensation(excluding outside directors)■ Base compensation

21%■ Earnings-based
compensation■ Stock option

71%

8%

Total directors’ compensation

Relationships with owners (shareholders) and investors
Open general meeting of shareholders

Since its initial stock listing in the Second Section of the Osaka Securities
Exchange in 1971, HORIBA has encouraged all shareholders to attend the annual
general meeting of shareholders. This annual meeting is held on a Saturday tofacilitate public attendance. An informal gathering event is held afterwards toenable shareholders to talk directly with management.

Constructive dialogue

In 2018, Institutional Investor, a world-famous professional financial
journal from the United States, selected HORIBA as a superior company
in the Electronics/Precision Instruments category.

For analysts and institutional investors■ Financial results briefing

Held four times per year

(Briefings for the first and third financial
quarters are held via telephone)■ Visitations and individual interviews (within Japan)

About 250 cases■ Visitations and individual interviews (overseas)

HORIBA abides by the “Basic Policy for Constructive Dialogue with Shareholders”
as announced on our website (see to the right). We make efforts to explain our
corporate policy, financial condition, and corporate culture to our owners basedon the perspective of “fair disclosure,” and ask for their understanding andcontinued support.

Third-party evaluation of IR activities

Status of IR-related activities

About 80 cases

For individual investors■ Information sessions, etc.
Please see our website formore details regarding our“Basic Policy for Constructive
Dialogue with Shareholders.”(in Japanese only)

Held about four times per year

Web Link
Click!

List of rankings awarded to HORIBA by Institutional Investor:

Honored Companies 4th place
Best IR Professionals 1st place* Institutional Investor ranks listed Japanese companies with superior IR activities in 27
different categories based on voting conducted by more than 1,000 institutional
investors and securities analysts from around the world.

Best Analyst Days

(Eita Uesugi, Manager,
Investors Relations,
Corporate Control Dept.)

3rd place38

Corporate governance

The philosophy behind the shares we hold forstrategic purposes other than pure investment

Anti-takeover measures
HORIBA has not adopted anti-takeover measures. We reviewed
the “Basic policy on the persons to control decision making overthe financial and business policies of HORIBA,” which wasannounced in our Corporate Governance Report.
Please see our website for moredetails regarding our Corporate
Governance Report.
(in Japanese only)

Web Link
Click!

HORIBA holds shares from companies that it believes are essential for
raising its medium- to long-term corporate value and considers various
factors when determining which shares to hold, including the strengtheningof business strategies and relationships with business partners and themaintenance of relationships with local communities.
Each year, our Board of Directors comprehensively considers elements
associated with share retention, including return and investment amounts,
and makes judgments concerning the advisability of continued investmentin the same companies. We have established policies for situations inwhich we determine that a company’s shares are inappropriate forretention, employing response measures such as share curtailment, etc.

Risk management and compliance
HORIBA has established Group Risk Management Regulation, in order to strengthen its risk management framework, and broadly classifies risks
into categories, including operation risks, risks related to development and manufacturing, sales risks, and financial risks. A management system
for addressing these risks and a responsibility system that will manage crisis situations whenever they occur are stipulated in the Regulations.
The HORIBA Risk Control Committee has taken on the responsibility of responding to risk management issues and discussing and approving
possible countermeasures. This committee includes members from primary group companies within Japan and aims to strengthen frameworks
related to risk management and compliance.
Compliance Committees, which promote awareness of compliance issues and deliberate regarding related matters, were launched at primarygroup companies within Japan quite some time ago. These committees also review details included in internal reports, conduct hearings, compile
their own reports, and provide advice concerning the rectification of any confirmed issues.
HORIBA has established its Corporate Philosophy, Compliance Management Provisions, and Code of Ethics to enhance its complianceframework and to prevent illegal acts. To facilitate early detection and correction of illegal acts, we also established an internal reporting systemthat includes a lawyer consultation service, as well as an internal e-mail reporting system. Through this system, we will continue to raise employee
awareness and enforce observance of laws and regulations. In addition, we will hold seminars on compliance for employees in management
positions and request participants to provide guidance to their staff members.

Strengths of
HORIBA’s
Board ofDirectors
Position

LeadershipManagement
strategies

Name

Industrial
knowledge

Globalbusiness

Sales andmarketingTechnology
and R&D

Governance

Legal affairs

Finance andaccounting

Reason for appointment as Director

Atsushi Horiba

He served as President & CEO of the company over the 26-year period from 1992 through the end of 2017,
while from 2018 he assumed the concurrent duties of Chairman and Group CEO. During these years, he has
played a pivotal role in spearheading the global growth of the overall HORIBA Group, while accumulating richmanagement experience. In view of this background, he is judged qualified to help guide the group to evengreater strength and global development in his capacity as Group CEO.

Executive Vice Chairman& Group COO

Juichi Saito

As General Manager of the Corporate & Segment Strategy Division, he attained extensive experience inpromoting operations with focus on business strategies, corporate acquisition, and other sectors. He has
likewise built up an impressive overseas track record through engaging in management duties of the company’s
U.S. subsidiary and other assignments, further supporting the view that he is fully capable of unifying the overall
Group in promoting programs of renewed global development as the Group COO. In view of this, he wasappointed to the post of Director.

President & COO

Masayuki Adachi

Chairman & Group CEO(Doctor of Engineering)

He has achieved far-reaching experience in the R&D Division of the company, while excelling in overseas
management assignments at the company’s subsidiaries in the United States and France. These and otherfactors support the judgment of his ability to further enhance the company’s technical prowess and propel the
HORIBA Group to even greater successes, resulting in his appointment to the position of Director.

Managing Director,
General Manager ofGeneral Administration
Division

Masao Okawa

In view of his global experience compiled during his previous service at a topflight financial institution, it is thebelief that he is uniquely qualified to formulate global financial strategies and functions in strengthening HORIBA
compliance and corporate governance. For these and other reasons, he was appointed to the post of Director.

Director, Board Leader of
GLOBAL ATS BOARD

Takashi Nagano

He has extensive experience at the Automotive Test System segment and Sales Division while holding
management positions at HORIBA German and South Korean subsidiaries and cultivating other pivotal
knowledge through the company’s overseas operations. This background supports the assessment of his
credentials to expertly deal with the tumultuous changes that currently characterize the automotive industry,leading to his appointment to the position of Director.

Director (Outside)

Masahiro Sugita

His plentiful experience in international economic and financial matters, penetrating knowledge and insights
cultivated as a director and corporate auditor at other companies and other assets are being put to valuable
use in the company’s management. In consideration of these outstanding benefits, he was appointed to serveas an Outside Director.

Director (Outside)

Jiko Higashifushimi

He is renowned for his penetrating insight nurtured as Head Priest of Shorenin Religious Corporation. The
counsel based upon this background, together with his work experience at a financial institution and othervaluable personal assets, have been effectively utilized in the company’s management operations to date.
Taking these contributions into consideration, he was appointed as serve as an Outside Director.

Director (Outside)

Sawako Takeuchi(Doctor of Engineering,
Doctor of Economics)

Her knowledge and wisdom as an engineering PhD; experience in France (an important base for HORIBA
business operations); and other overseas assignments and additional achievements have been fruitfully utilized in
the company’s management platform up to this time. To continue to benefit from this background and expertise,
she was appointed to serve as an Outside Director.
→ Please see pages 59–60 for lists of directors, auditors, and corporate officers.

39Strengths

Strategies

Results

Message from the Outside Directors

Outside directors’ views of HORIBA and their
expectations of the Board of Directors
April 2019

From the left:

Outside Director

Masahiro Sugita
Outside Director

Sawako Takeuchi
Doctor of Engineering
Doctor of Economics
Outside Director

Jiko Higashifushimi

Masahiro Sugita

Changes caused by updates to the management team andmy expectations moving forward

I am aware that changes to the management team were made in order to strengthen it and open up new roads for HORIBA to pursue
growth so that it can respond to the dramatic evolution in technology and changes in global political and economic systems moving forward.
The backbone of HORIBA’s management is Mr. Horiba, who is continuing to serve in his position as Group CEO and embodies the HORIBA
spirit that has endured since the company’s founding. I believe that coming up with a vision for responding to questions like “how can we
respond to further expansion in the corporate scale and toughen our organizations?” is an important task facing the company moving
forward. Mr. Saito plays a central role in the integration of global management and the effective use and allocation of management resources.
He is also working hard to ensure that his diverse insight is reflected in our management and our development of human resources. I
anticipate that, in addition to his activities as president of HORIBA, Ltd., Dr. Adachi will keep a close eye on changes in technological trends
and become a new driving force for HORIBA growth that is grounded in both science and technology.

Jiko Higashifushimi

State of discussions within the Board of Directors

Three years have passed since I was appointed as an outside director in March 2016. Meetings of HORIBA’s Board of Directors are
generally amicable but do possess a modicum of intensity, and this is thanks to Mr. Horiba’s character. Items brought up for discussion at
HORIBA’s Board of Directors are always accompanied by polite explanations, which, I believe, allows outside directors to comprehend allof their most important points. Outside directors are also able to actively ask questions and receive proper answers because detailed
explanations are made easy to understand through documents accompanying figures. Recently, the company has established separate
briefings in which responsible parties and outside directors can discuss issues brought up for debate at Board of Directors’ meetings.
Discussions at these briefings are also lively, and offer participants the opportunity to gain a large amount of relevant knowledge.

Sawako Takeuchi

Expectations for inside directors

A new trend of technologies fusing manufacturing and telecommunications, such as autonomous driving systems and medical services
that utilize the IoT, is picking up speed. In this environment, the Board of Directors has successfully switched gears in management, by
setting objectives that include the upgrading of a global production system, the development and application of new core technologies,
and the facilitation of synergies among the HORIBA’s five business segments. On the other hand, the Board of Directors should accerelate
the improvement of quality of existing businesses, the expansion of customer networks and the development of human resources. I havehigh expectations focusing on a new management team that moves on implementation of a global information sharing system of strategic& technological development, policies that enable us to extract lessons from past failures to discover new solutions, and consolidation of
HORIBA’s advantages deriving from synergies between internal and external operations.

40

Business outline

Automotive
Test Systems

Automotive Test
Systems

Providing powerful support for the efficiency of vehicle
testing and acceleration in automotive development
ITS*4 business
1%

ECT*3
business
12%

Europe30%
Japan 29%

Sales
breakdown
2018 Net sales

79.6

Sales by region

billion yen

EMS*1business64%

MCT*2
business
23%

Asia
27%

Americas14%*1 Emission Measurement Systems *2 Mechatronics (MCT); measuring instruments for vehicles *3 Engineering Consultancy & Testing *4 Intelligent Transport Systems

HORIBA’s automotive Emission Measurement Systems (EMS) are used by national certification bodies throughout theworld and hold a global market share of 80%*. HORIBA provides complete test and measurement solutions to theworld’s leading automotive manufacturers, including test systems for engines, chassis, powertrains, brakes, andcatalysts. We are also able to respond to wide-ranging demand in the Engineering Consultancy & Testing(ECT) business, offering a wide variety of products and services ranging from the development of batteries
for electric vehicles to autonomous driving technology, in addition to providing vehicle performance
testing and R&D expertise.
* HORIBA’s estimates2018 results

2019 forecast■ Recorded highest-ever sales and operating■ Enduring strong demand caused by emission

income due to favorable performancein the EMS business

Sales of emission measurement systems rose as emission
regulations were strengthened worldwide. In addition, we
worked to further raise production efficiency at HORIBA BIWAKO
E-HARBOR, Biwako Factory. Sales also increased in the ECT
business amid increases in the strength of emission regulations
and response to developments in next-generation vehicle
technologies, leading to a rise in overall sales and operating
income.

Net sales and operating income(Billions of yen)120

■ Net sales (left)
Operating income (right)● Operating income planfor 2020 (right)

15

Planned value set in the Mid-Long
Term Management Plan “MLMAP2020”,
announced in February 2016

80
73.3

79.6

100
10

10

64.2 62.2 7.6 7.7
49.5
40

37.1 35.7 38.6

2.8 4.4 4.2
1.6
0

55.0

43.2
5.8

5

4.4
3.5

1.8
2009 2010 2011 2012 2013 2014 2015 2016 2017 201841

regulations■ Further growth in the Mechatronics (MCT) business

2020(Plan)

0

Demand for emission measurement systems is expected to bestrong as emission regulations continue to become stronger.
Based on projections, we forecast that sales in the Mechatronics(MCT) business will increase. This increase will be boosted by
HORIBA FuelCon GmbH in Germany, which was acquired in
September 2018 and develops test systems for batteries and fuelcells used in electric vehicles. Consequently, this segment willgrow in both overall sales and operating income year-on-year.
Medium- to long-term strategy

Becoming a comprehensive supplier that provides totalsolutions to the automotive industry of the next generation

We soundly respond to customer expectations through our reliable quality and ourbrand power, which has been established by an 80% global market share* inemission measurement systems. We are also creating and providing original valuethat only HORIBA can offer in the field of next-generation vehicle technologies in
response to rising demand for testing and engineering. This will be achieved bygenerating synergies between our EMS, MCT, and ECT businesses whiledevelopments involving vehicle electrification and autonomous driving technology are
picking up speed in this field.
* HORIBA’s estimates

Major risks and opportunities

In addition to strengthening global emission regulations, developments in
next-generation vehicle technologies, including vehicle electrification and autonomous
driving systems, are attracting a great deal of attention. In the midst of thisenvironment, automotive manufacturers around the world are actively promoting
investment in development. Additionally, new players, including companies fromother industries and other burgeoning new ventures, are continuously entering theautomotive industry. HORIBA views these kinds of changes in automotive
development technology and industry structure as business opportunities.

Strengths

Strategies

Major products and market shares

Results

Note: Market shares quoted are HORIBA’s estimates.

■ Emission measurement systems■ Driveline test systems

These systems continuously and simultaneously measure a wide rangeof gaseous and particle components in emission gases over a broad
range of concentrations. They are widely used in R&D andengine/vehicle certification in the automotive industry. The systems
include large-scale systems installed inside a laboratory, in which
HORIBA holds an 80% global market share and on-board
configurations for road tests.

The driveline is an extremely important part of the overall powertrain
that transmits energy from engines or motors to the vehicles’ tires.
HORIBA’s driveline test systems use the latest simulation technology
for a wide range of powertrain and driveline testing applications.
HORIBA’s strength is demonstrated by providing flexible systems
based on custom and open solutions.

Global market share

Segment sales share

Global market share

Segment sales share

80%

45%

15%

5%

TOPICS
Trend of automotive--related regulations
Introduction of the Worldwide harmonized

01 Light vehicle Test Procedure (WLTP) and the Real
Driving Emissions (RDE) regulation

Although each member country and region has adopted its own cycles
and methods for testing passenger car exhaust emissions and fuelconsumption, in 2014 the United Nations Economic Commission for
Europe (UNECE) introduced the WLTP*1 to provide a common technicalregulation for measurement of exhaust emissions and fuel consumption
for light-duty vehicles. A set of laws and regulations was adopted inEurope in September 2017 as “Euro 6d.” In September 2018, it was put
into effect in Japan. RDE*2 regulations, which provide standards for
on-road emission testing, were also enacted in Europe in September
2017 and are scheduled for adoption during 2022 in Japan. Automotive
manufacturers are undergoing preparations for response to these new
regulations.
Next-generation emission regulations are projected to continue
expanding globally in the future, with emission regulations equivalent toEuro 6 scheduled for adoption in both China and India in 2020.
*1 Worldwide harmonized Light vehicle Test Procedure: Internationally coordinated emission andfuel consumption testing laws for passenger cars and other vehicles that are geared toward
international standardization*2 Real Driving Emissions: Regulations concerning emissions from vehicle running on-roadof emission standards
02 Progression
by region/country■ Region/country standard
Testing method

RDE regulations take effect
Adoption of WLTP

Euro 5Euro 6b

EuropeBegin the RDE

regulations

Euro 6dJapan

Post new long-term regulations

Begin the WLTP

Next regulation
Tier 2
CFR1066

Federal Tier 3

U.S.
California

LEV Ⅲ

China IV
China V

China

China VI

India

New regulations equivalent toEuro 6 and similar legislation

Bharat Stage IV

Bharat Stage VI
2011

2012

2013

2014

2015

2016

2017

2018
Present

2019

2020

2021

2022

Sources: HORIBA’s survey based on materials of the Ministry of Economy, Trade and Industry;
Ministry of Land, Infrastructure, Transport and Tourism; Japan Automotive Manufacturers
Association Inc.; and others

Automotive Test Systems: Market size and growth areas
HORIBA businessdivisions

EMS business

MCT business

Gasoline & diesel

HybridElectric and fuel cells

Market size (Billions of yen)
HORIBA’s estimates

Emissions measurement

55–65

Engine performance testing

100–120

Vehicle body, Wind tunnel balance, Brake testing

15–20

Driveline testing

30–40

ITS business

Safety and Comfortability

10–15

ECT business

Vehicle design development, Vehicle performance testing, Lease of R&D facilities

2,000–
42

Business outline

Process & Environmental
Instruments & Systems

Process &Environmental

HORIBA helps develop measurement technology
for global environmental preservation, andproduction and quality management processes

Other 8%

Stack gasanalysis 34%

Process
measurement
7%

Europe 13%
Americas
14%

Sales
breakdown
2018 Net sales

19.3

Air
pollution
analysis
18%

Japan 49%

Sales by region

billion yen

Asia 24%

Water quality analysis 33%

We supply a broad range of analysis and measurement instruments for analyzing air pollution, water quality, and soil
quality. We play an important role in gas measurement and monitoring of industrial wastewater in the energy and heavy
industries such as electric power, steel, and chemical industries; purified water management for medical andsemiconductor use; and water quality monitoring and control for food, as well as cosmetics fields. In essence,
HORIBA’s analytical and measurement technology contributes to leading technological innovation, which
supports public safety, security, and health in addition to global environmental preservation. This also meansthat we help achieve sustainable development, as advocated by Sustainable Development Goals (SDGs).

2018 results

2019 forecast■ Robust sales of water quality analyzers and■ Continued strengthening of environmental■ Recovery of the process measurement systems■ Recovery of the stack gas analyzers business

air pollution analyzers in Asia
business in the Americas

Sales in the process measurements systems business werestrong in the Americas, and at the same time sales of water
quality analyzers and air pollution analyzers increased in Asia.
As a result, both sales and operating income increased
year-on-year.

Net sales and operating income(Billions of yen)
30

■ Net sales (left)
Operating income (right)● Operating income planfor 2020 (right)

3

2.5

Planned value set in the Mid-Long Term
Management Plan “MLMAP2020”,
25.0
announced in February 2016

2.5
20
1.6
14.5
10

12.0 11.7

16.4

16.7

16.7

17.4

19.3

1.5

1
1.0

0

0.2
2009 2010 2011 2012 2013 2014 2015 2016 2017 201843

in JapanThe same as last year, we predict higher sales of water quality
analyzers and other products as environmental regulations arestrengthened in emerging countries in Asia and elsewhere. In
Japan, we forecast recovery in the sales of stack gas analyzers.
On the other hand, operating income is expected to remain thesame level as 2018 despite the increase in sales, due to factors
such as continued global investment in R&D.

Medium- to long-term strategy

Value creation in the context of environmental
regulations and process measurement equipment

HORIBA will develop business in the environmental and analytical instruments
market in emerging countries by utilizing its accumulated know-how and experiencein Japan, Europe, and the Americas. We also aim to increase market share in the
global water quality measurement business by collaborating with the water-related
business of other HORIBA business segments. As to our process measurement
equipment business, we aim to expand business in the petroleum refining andpetrochemical industries and intend to increase the recognition given to the HORIBA
brand in Japan and overseas.

1.7

1.2
0.8

0

13.7

14.7

2

2.0

2.0

regulations in Asia

2020

(Plan)

Major risks and opportunities
Along with economic development, emerging countries, in general, tend to tighten
environmental regulations. In developed countries, which already have suchenvironmental regulations, focus is shifting to environmental improvement at factories
and power generation plants and to improvement in energy efficiency.
HORIBA views these kinds of changes in regulations and production processes asbusiness opportunities.

Strengths

Strategies

Results

Major products and market shares

Note: Market shares quoted are HORIBA’s estimates.

■ Stack gas analyzers■ H-1 series of industrial water quality analyzers

These analyzers provide highly sensitive and precise
measurements of NOx, SO2, CO, CO2, and O2 constituents ingases emitted by boilers and furnaces in thermal power
stations and refuse incineration facilities. A single unit cansimultaneously and continuously measure all five gases.
HORIBA has the top market share inthis competitive market in Japan andseeks sales growth in the global market.

These industrial water quality analyzers perform measurement in a wide range ofapplications, from pure water for semiconductor and food industries for drinking
water, sewage and industrial wastewater treatment. They confirm progress in
wastewater treatment processes and control water treatment equipment. Moreover,
we have developed pH electrodes that resist damage in a harsh environments bystrengthening their toughness, thereby reducing the frequency of electrodereplacement and maintenance operations. By responding to expanding worldwide
needs for remote monitoring services in water and sewage quality management
and process monitoring, HORIBA pursues sales growth in the global market.

Japan market share

Segment sales share

Japan market share(Total of water quality analyzers)

50%

34%

20%

Segment sales share(Total of water quality analyzers)

33%

TOPICS
Major products and targeted markets

Major target
marketMarket size of environmental and process instruments

Industry
processes

04

Environmental improvement

03

Environmental regulations

02

Environmental pollution

01

Industry development andmarket maturity

Emerging countries

Developed countries

Expanding opportunities forbusiness, due to tighter regulations
accompanying economic
development

Mature regulation but stablereplacement demand
Potential growth in the process area
aimed at productivity improvement

E SG Environment

Creation of social value

Expansion in environmental regulations andthe monitoring business in Southeast andSouthern Asian regions

Each emerging countries has environmental regulations that are adjusted toits own unique factors, including its regional characteristics and industrial
foundations, and these environmental regulations are being strengthenedin accordance with rapid economic development. By locally enhancing its
engineering strength, HORIBA is working to meet the individual needs of eachcountry in which it operates and propose products and solutions that comply
with the unique regulations adopted in each of these countries. Furthermore,
we provide technical guidance for environmental researchers and experts inemerging countries. Therefore, we offer support in terms of software, in
addition to assistance withmeasurement instruments. Moving
forward, HORIBA will pursue businessexpansion with a high level of relevanceto local customers while contributing toenvironmental conservation.
Tap water quality monitoring device
supplied to Kuala Lumpur, Malaysia

RelatedSDGs

01 Air pollution analyzers

HORIBA’s air pollution analyzers have won highacclaim in the field as highly reliable analyzers that
demonstrate excellent precision and long-term stability
at ppb* concentrations. They are used in over 50
countries to monitor air quality by municipal
governments and private industries. Demand has been
expanding for PM2.5-related monitoring.
* ppb: parts per billion. One part per billion denotes one part per 1,000,000,000 parts.
This notation is mainly used for describing low concentration measurements

Major target
market02 Stack gas analyzers

HORIBA has the leading market share* in Japan for continuous emission
monitoring systems used in plants and other facilities that generate
gaseous emissions and soot. Our instruments have established a widely
recognized credibility for robust and reliable sampling systems, which areessential in continuous measurement of avariety of gases. The analyzers are used
in applications for power generation,
petrochemicals, steel, paper, food, andpharmaceuticals.
* HORIBA’s estimates
Major target
market03 Water quality analyzers

HORIBA‘s products are used for monitoring and control in water
treatment processes. We have a wide-ranging water quality product line
to measure pH, the basic water quality indicator, as well as chemical
oxygen demand (COD), total nitrogen, and total phosphorous. Our
products have been highly evaluatedin the water quality analysis field bycompanies in the electric power, gas,petrochemical, steel, paper, food, andpharmaceutical industries.
Major target
market04 Process measurement system

We have established a structure that enables us to integrate various
equipment and devices of petrochemical refining, dissolution, andprocessing into a system and provide it collectively. Based in Texas,
the heart of the U.S. oil industry, we contribute to efficient production
management in the process measurement
field of the oil industry. In 2017, werelocated to a new expanded office in thesuburbs of Houston, to acceleratebusiness expansion.

44

Business outline

Medical-Diagnostic
Instruments & Systems

MedicalContributing to a healthy life
through in-vitro diagnostic systems

Immunology
6%

Other 1%

Europe 35%

Sales
breakdown
2018 Net sales

26.0Japan 23%

Sales by region

billion yen

Clinical chemistry,
Blood glucose 16%

Hematology 77%

Americas 20%

Asia 22%In the global market of in-vitro diagnostic systems; HORIBA provides instruments and reagents for blood sample
testing throughout the world. The segment’s business model is based on recurring revenues generated fromsales of reagents. We aim to ensure stable earnings by expanding our installed base of medical diagnostic
instruments. In particular, HORIBA’s strength is in small and medium-sized hematology analyzers for Pointof Care Testing (POCT) in clinics and satellites in hospitals such as operating rooms, as well as small to
medium-sized hospitals and commercial laboratories.

2018 results

2019 forecast■ Strong sales in China and India■ Higher results in Japan expected through■ Adoption of new technologies throughacquisition of ROHM Co., Ltd.’s micro-blood
analysis system business

Sales of hematology analyzers were strong in both China andIndia. We acquired the micro-blood analysis system business from
ROHM Co., Ltd. in pursuit of further business expansion and areengaging in development activities to enhance our competitiveness.
As a result of these factors, sales increased while operating
income fell year-on-year.

Net sales and operating income(Billions of yen)
40

■ Net sales (left)
Operating income (right)● Operating income planfor 2020 (right)

40
Planned value set in the Mid-Long Term
Management Plan “MLMAP2020”,
announced in February 201630

26.8 27.0 27.4 26.5
20

22.3 22.5

23.4

22.4

10

1.9

2.4

2.4
2.3

6

25.1 26.0
4.0

3.1■ Enduring strong sales in Asia

We project year-on-year increases in both sales and operating
income due to our continued efforts to strengthen ourdevelopment capabilities, including our acquisition of the
micro-blood analysis system business, and projected strong sales
expected to be supported primarily by expansion in the sales of
new products in Japan.

Medium- to long-term strategy

Expanding into new areas and increase sales
by launching new products

At present, HORIBA’s strengths reside in having development bases in Japan andFrance and a local production infrastructure of reagents in China, India, and Brazil,
with their high expected demand for reagents. We aim to globally introduce small
and medium-size hematology analyzers, which are highly regarded in Japan, and to
expand sales of new medium- to large-sized products, which are sourced from
France. Moreover, we are interested in cooperating with other companies throughM&A and OEM arrangements, so as to expand into new areas in the in-vitro
diagnostic systems market.

Major risks and opportunities
2

1.8
1.9

0

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

45

4

2.8

2.4
1.7

8

expanded sales of new products

2020(Plan)

Global population is rising mainly in emerging countries and healthcare costs are
generally on a rise. In developed countries, there is an increasing demand forhigh-precision, efficient medical devices, so as to realize more efficient medical
services. Medical insurance systems that support these medical services areundergoing major changes in many countries. HORIBA views these kinds of changes
in demand for medical devices and in healthcare systems as business opportunities.

Strengths

Strategies

Major products and market shares

Results

Note: Market shares quoted are HORIBA’s estimates.

■ Hematology analyzers■ Hematology and CRP analyzers

Blood tests are essential for diagnosis and health assessment ofpeople and animals. These analyzers check red and white blood cellcounts as well as hemoglobin and platelet counts.

This is the first analyzer in the world to simultaneously measure blood
cell counts and C-Reactive Protein (CRP), which the body produces
in response to internal inflammation, thus facilitating faster and moreaccurate diagnosis.

Global market share

Segment sales share

Japan market share

Segment sales share

7%

77%

100%

12%

TOPICS
Business development by test category
HORIBA aims to be acknowledged as a clinical solution partner by strengthening thedata management and automation areas and expanding product development either
by ourselves or through collaboration with other companies.
Test category

Hematology

Clinical chemistry

Immunology

Coagulation

Market size

0.35 trillion yen

2 trillion yen

2 trillion yen

0.2 trillion yen

CRP analysis

Coagulation
analysis(HORIBA’s estimates)

Large
hospitals

Hospitals Testing centers
Small- andmedium-sized
hospitals
Private practitioners
Hospital units andsurgery rooms (POCT)

Hematology
analyzer
systems

Small andmedium-sized
hematology
analyzers

Clinicalchemistry
analyzers

Blood glucose
measurement
systems

Field in which HORIBA exhibits strength

HORIBA has bases for development and production in both Japan and France, as well as
global sales and production networks, thanks to its 1996 acquisition of ABX S.A. (now
HORIBA ABX SAS) in France. In 2018, we made progress in terms of the supply andoperation of medium- and large-sized hematology analyzers at facilities such as large-scaletesting centers in the United Kingdom and Brazil through our HORIBA Evolutive Laboratory
Organization (HELO) Solution testing system. In Japan, we updated HORIBA MEDISIDE
LINKAGE, our remote monitoring service, to support operations related to data andprecision management in laboratories, and consequently, we are providing solutions for
improving efficiency.
In the future, we will aim for further business expansion by continuing to accelerate new
product development and utilizing our global networks while working to enhance theglobal sales network constructed by HORIBA ABX SAS in France, as well as our
production bases which allow us to provide a steady stream of reagents (consumables) toareas in which they are consumed in mass quantities.
FranceMedium- and large-sized
hematology
analyzers*HELO(HORIBA Evolutive Laboratory
Organization)
Japan

Hematology and
CRP analyzers

Product development
and production base(instruments andreagents)
Technology
development of
medium- andProduction
large-sizedbaseproducts(reagents)

India

Japan

Product development andproduction base(instruments and reagents)
Technology developmentof small-sized products

China

Production base(instruments andreagents)

HORIBA possesses long accumulated blood-related
analysis and measurement technologies, which leadto strength in terms of small- and medium-sized
hematology analyzers in the POCT market. Recently, we
introduced new technologies through the acquisition of
ROHM Co., Ltd.’s micro-blood analysis systembusiness, which practically utilizes the fine electronic
components processing technology originally developed
by ROHM. In the future, we will develop smaller
products of lower cost and thereby aim to enhance our
product lineup for the in-hospital market and to increase
our share in it. HORIBA aims to create new value
through synergy between new and existing technologies
and the merging of businesses.
of social value
E S G Creation
SocialGlobal R&D and sales/production networks

FranceAcquisition of micro-blood analysis systembusiness from ROHM Co., Ltd.

HORIBA’s products contributing to theeradication of malaria, as outlined in the
UN’s Sustainable Development Goals(SDGs)HORIBA analyzed a large volume of test data
accumulated over the years and added a decisionalgorithm for detecting malaria infection to its
hematology analyzers. This addition made screenings
for infection possible during the usual hematology
analysis process, enabling the reduction of working
hours spent testing.
According to the 2016 statistics from the World
Health Organization (WHO), more than 200 million
people in 91 countries have been infected with malaria.
Early diagnosis of malaria leads to early treatment,
preventing further transmission through infection andwarding off increases in severity. HORIBA will pursue
business growth while
contributing to the early
detection of infectious
diseases.
SDGs call forthe eradication of malaria

Brazil

Production
base(reagents)

RelatedSDGs

46

Business outline

Semiconductor
Instruments & Systems

Semiconductor

Contributing to yield enhancement and technology innovation insemiconductor manufacturing processes with HORIBA’s flow
control and measurement technologies

Gas analyzers 1%
Chemicalconcentration
monitors
12%

Reticle/mask particle
detection systems
1%

Europe 7%
Japan 35%

Americas
12%

Sales
breakdown
2018 Net sales

57.7

Sales by region

billion yen

Mass flow controllers 86%

Asia 46%

Mass flow controllers, used in the (front-end) manufacturing process of devices such as semiconductors, are a major
product of the Semiconductor Instruments & Systems segment. We have a leading global market share*, largely on
the strength of our flow control technology that enables yield enhancement and miniaturization in thesemiconductor manufacturing process. We will provide solutions for responding to technological advances inthe semiconductor manufacturing process, in addition to measuring equipment such as chemical
concentration monitors, and establish an important position in the growing semiconductor industry.
* HORIBA’s estimates2018 results

2019 forecast■ Investment demand from semiconductor■ Semiconductor manufacturers are expected

Sales slowed down over the second half of the year, but full-yearsales to semiconductor production equipment manufacturers
increased as semiconductor manufacturers conducted high levels ofcapital spending. As a result, we recorded the highest-ever sales
and operating income. We also worked to develop our supply anddevelopment capabilities, beginning full-scale operations at HORIBASTEC Co., Ltd.’s Aso Factory and launching a research anddevelopment base in the United States.

A phase of investment adjustment in the semiconductor industry is
expected to continue during the first half of the year, but weforecast increased demand in the medium- to long-term. Over thesecond half of the year, demand from semiconductor production
equipment manufacturers is expected to recover in accordancewith rebounding investment from semiconductor manufacturers.

manufacturers was strong but leveled off during
the second half of the year

Net sales and operating income(Billions of yen)
60

45

■ Net sales (left)
Operating income (right)● Operating income planfor 2020 (right)

20

57.7
Planned value set in the Mid-Long Term 53.3
Management Plan “MLMAP2020”,
17.0
15.6
announced in February 2016

50
15

38.8
35.3
30

27.6

24.6

6.3
15

0

12.4

-0.09

10

28.9 9.4

4.9

9.6

24.1
17.8

4.8

5

6.4

2.2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

47

10

0
2020

(Plan)

to continue making investment adjustments
during the first half of the year, with recovery
in investment expected for the second

Medium- to long-term strategy

Expand market share of main products

We will further enhance our flow control technology, which has been accumulated
primarily in mass flow controllers. We also aim to grow sales of chemical concentration
monitors, used in semiconductor wafer cleaning processes. In addition, we will
combine our flow control technology and analysis and measurement technology so as
to enhance the development of new products that satisfy customer needs.
Meanwhile, we intend to apply our flow control technology to other industries bypromoting product development for energy, petrochemical, pharmaceutical, food,and other markets.

Major risks and opportunities

An increase in processing volume at data centers and penetration of Artificial
Intelligence (AI) and the Internet of Things (IoT) have significantly boosted demand forsemiconductors. In addition, advances in technology and production process, suchas miniaturization and 3D-integration semiconductor production processes, havesignificantly impacted demand for semiconductor production equipment.
HORIBA views these kinds of changes in demand for semiconductors andtechnology advances as business opportunities.

Strengths

Strategies

Major products and market shares

Results

Note: Market shares quoted are HORIBA’s estimates.

■ Mass flow controllers■ Chemical concentration monitors

These high-precision gas and liquid controllers
regulate flow rates in semiconductor
manufacturing processes, such as etching anddeposition processes. They are indispensable
components for high-quality semiconductors.

These compact units are used in semiconductor
manufacturing to monitor concentrations ofchemical cleaning agents. They ensure cleaning
fluids are precisely delivered and properly used,
thereby optimizing the cleaning process andboosting production yields.

Global market share

Global market share

Segment sales share

80%

12%

60%

Segment sales share

86%

Application of mass flow controllers(Semiconductor manufacturing
process; solar battery
manufacturing process)

Web Link
Click!

TOPICS
Reasons behind HORIBA’s global share expansion in mass flow controllers

01

Increase in demand for etching tools, due to an increase in memory
and more 3d-integration processes. HORIBA’s differential pressure
type mass flow controllers are being widely relied upon in thenext-generation manufacturing process

02

Stable product supply capability, realized by making continual
investment for development and production even during an
economic downturn

03

A global sales andservice infrastructure
and a strong support
capability

HORIBA’s share2018
Approx60%

2009
Approx40%

An increase in data centers and use of IoT and AI has boosted
semiconductor demand, while technological advances, such as theincrease in 3D-integration processes, have raised demand for etching
devices. HORIBA’s differential pressure type mass flow controllers arerecognized for enabling these new processes and are widely adopted
for cutting-edge semiconductor manufacturing, thereby contributing tohigher market share. This success is attributable to both our continued
investment in and launch of new products even during a previous
downturn in demand, and to our elevated technical capability andproduction capacity which better satisfies demand from semiconductor
manufacturers. In our view, our balanced management, which enabled
us to carry excess funding capacity and maintain production facilities tomatch anticipated demand, was a key contributor to our success.

Total on-site support during the semiconductor manufacturing process
We provide an abundant product lineup that covers the entire semiconductor manufacturing process, including material evaluation, manufacturing,and quality management. Moving forward, we will utilize technologies and products from the Semiconductor Instruments & Systems segment andother segments including the Process & Environmental and Scientific Instruments & Systems segment, to contribute to the semiconductor industry.

Evaluation of materials

Manufacturing processes

Surface Analysis

Dry Process

Atomic ForceMicroscopy
Raman
Spectrometer(evaluation of
next-generation
semiconductor materials)

ScientificMaterials Analysis

Wet Process

Utility/Wastewater

Chemicalconcentration
monitor

Mass flow
controller(raising of
precision in the
etching process)(highly accurate
measurement of all
chemical varieties)

Semiconductor

Semiconductor

Lithography

Cathodoluminescence
spectroscopy system

Reticle/mask particle detection systems
and Foreign substance removal devices(evaluation of compound
semiconductors)(raising quality during the exposure process)Scientific

ESG

Quality management/
wastewater treatment

pH meters

On-site industrial water
quality analyzer

ScientificProcess & Environmental(Management of purified water and wastewater at factories)

Semiconductor

Business related
to water quality
measurement(more on page 32)

Creation of social value
SocialStrengthening of global R&D and establishment ofa base for development in the United States

Note: The products shown are examples.

RelatedSDGs

We established the HORIBA Reno Technology Center, a base for development, in Reno, Nevada, which is easily
accessible from the western coast of the United States, an area that is dotted with the bases of many semiconductor andsemiconductor production equipment manufacturers. Ever since establishing a sales base concentrating on mass flow
controllers in Silicon Valley in 1989, we have continued to conduct activities that are highly relevant to the local customers
in the area. In the future, we will strengthen our development capabilities by quickly incorporating the needs of the market
and contribute to further growth in the semiconductor industry.

48

Business outline

Scientific
Instruments & Systems

Scientific

Generating HORIBA’s core technology and supporting
the leading edge of scientific technology

Water quality
analysis 8%
Particlecharacterization
11%

Other 3%

Molecular &microanalysis
38%

Europe 21%
Japan 26%

Sales
breakdown
2018 Net sales

27.7

Sales by region

billion yen

Opticalcomponents 21%

Americas
26%

Asia
27%

Elemental analysis 19%

HORIBA began its history with the R&D leading to Japan’s first glass electrode pH meter. HORIBA’s analyzers use infrared
rays gas analysis, X-ray elemental analysis, as well as Raman spectrometers and fluorescence spectral analysis. These
analyzers contribute to R&D activities at the frontline of scientific technology exploring the unknown frontier ofscience. HORIBA’s analyzers are widely used in basic research, foreign-object examination and defect analysis forpharmaceuticals, food, and electronic components, forensic science, archaeological surveys, and others.
Additionally, the Scientific Instruments & Systems segment develops basic analytical methods and coremeasurement technologies, which play key roles in providing new technologies to the four other businesssegments of HORIBA.

2018 results

2019 forecast■ Robust sales in Europe and Japan■ Increased sales in the Americas expected

through the strengthening of our bases■ Expenses incurred in association withthe strengthening of our bases in the Americas■ A demand environment that is continued strong

Having active R&D investment on the background, sales increased
in both Japan and Europe as a result of efforts to strengthen oursales activities, including bundled sales and product customization.
On the other hand, operating income decreased on a year-on-yearcomparison due to the expense for the enhancement of our basesin the the United States (more on page 50), despite sales growth.

We forecast the increase of both sales and profitability throughproductivity growth by means of strengthening our bases. In
addition, we anticipate the demand environments to be continued
strong in both Japan and Europe, and, consequently, year-on-yearincreases in sales and operating income.

Net sales and operating income(Billions of yen)
40

4Planned value set in the Mid-Long Term
Management Plan “MLMAP2020”,
announced in February 2016

30

25.6
20

20.5 20.8

1.2
10

22.0

27.0

25.7 26.1

3.5

27.7

3

2

20.4

1.4

1.2

1.1

Medium- to long-term strategy

Development of high-value-added products for creating
new markets

We will aim for further growth through the synergy between product development,
which takes advantage of the collective strengths and core technologies of our basesin Japan, France, and the United States, and the sales routes and applications of othersegment businesses.
Additionally, we have been jointly developing original products with customers in orderfor our R&D teams to have a better grasp on the needs of the customer and to leadthose needs to product development. Our efforts are not limited to existing businessdomains such as material and energy, but also extend to life science fields, such as
the biotechnology and drug discovery market. Our challenge is to create value in the
new analysis and measurement business in these areas.

1.3
1

0.9
0.4

0.2

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

49

35.0

22.9

0.9 0.90■ Net sales (left)
Operating income (right)● Operating income planfor 2020 (right)

in Japan and Europe

2020(Plan)

0Major risks and opportunities
In addition to each country’s government research institution that develop
cutting-edge technologies, private companies are also actively investing in thedevelopment of these technologies.
HORIBA views these kinds of changes in the course of advanced technology
development as business opportunities.

Strengths

Major products and market shares

Strategies

Results

Note: Market shares quoted are HORIBA’s estimates.

■ Raman spectrometers■ pH meters

Raman spectroscopy is a spectroscopic technique that provides information
about the molecular structure of molecules by measuring their vibrationalmodes. These vibrational modes act as a molecular fingerprint offering
quantitative measurements which can be used to identify the chemical underanalysis. In recent years, Raman spectroscopy has attracted attention for new
applications in material research. Raman has a very delicate light scattering
mechanism, so a highly sensitive and optimal optical design is necessary.
HORIBA FRANCE SAS, which has produced superior results in the field of
optical technology, is developing a diverse variety of Raman spectrometers
and is regularly pursuing peak performance.

HORIBA is recognized as one of the top pH meter brands
beginning with our development of Japan’s first glass electrode pH
meter in the 1950s. HORIBA offers a full pH product line to satisfy
diverse customer needs ranging from desktop models to support
laboratory research, to rugged and portable instruments for field
applications measuring river water, groundwater,
and wastewater.

Global market share

Segment sales share

Japan market share

Segment sales share

30%

23%

50%

9%

TOPICS
Developed and manufactured products at our three global bases and respective policies
CountryJapan(HORIBA, Ltd.)

Product
pH meters
Particle-size distribution analyzers
Elemental analyzers
X-ray fluorescence analyzers

Elemental analyzer (Carbon/Sulphur)Raman spectrometers
Glow discharge optical emission
spectroscopic

France(HORIBAFrance SAS)

Spectroscopic ellipsometer
GratingPrimary policies
Proactive launch of new productsthat create new markets

HORIBA, Ltd., which already retains many basic technologies,
continues actively launching new products that meet the needsof its wide range of customers, which includes companies,
universities, and research facilities. Additionally, we broadly
conduct product customization, by providing a coretechnology-based response to the elaborate demands of ourcustomers. We will continue fulfilling our important role inproviding analysis and measurement technologies to the otherfour business segments and will achieve our goal of improving
profitability through initiatives like these.

New product
XGT-9000

Simultaneously conducts nondestructive andnoncontact elemental analysis and optical image
screening. It performs highly precise elemental
analyses and coating thickness measurements on
microscopic parts, such as semiconductor integrated
circuits, as well as foreign substance analyses on
various devices, including lithium-ion batteries.

HORIBA France SAS’s grating displayedin the Nobel Prize Museum

Professor Gérard Mourou, the 2018 recipient of the Nobel Prizein Physics, has used HORIBA France’s grating in his researchconcerning the improvement of laser performance for many years,
producing considerable achievements. In commemoration of hisaward, Professor Mourou selected grating from HORIBA France thathe actually used in his research for display in the Nobel Prize
Museum. Moving forward, HORIBA will support researchers acrossthe globe in order to contribute to the future development andadvancement of science.
Related

SDGs

Creation ofsocial value

E S G Social

Professor Mourou andhis grating fromHORIBA France

Grating, a core part usedin spectrometers

Fluorescence spectroscopy/
Fluorescence lifetime spectroscopy
Fluorescence and absorbance
spectrometer

United States(HORIBA
Instruments
Incorporated)

Optical components;
Spectrometers and Detectors

HORIBA New Jersey Optical
Spectroscopy Center

This facility began full-fledged operation on August 30, 2018, as a
new base of HORIBA Instruments Incorporated. With a site area thatis approximately twice the size of the previous base, this facility will
work toward further business growth moving forward.

MANTA Instruments, Inc. joined HORIBA

Fluorescence and absorbance
spectrometer “Duetta”

On January 24, 2019, we acquired all shares of MANTA Instruments,
Inc. in the United States, converting it into a subsidiary. This start-up
company develops, sells, and manufactures nanoparticle tracking
analysis systems. This technology is expected to be utilized in thebiotechnology, life science, and medicinal research fields, as well as
fields of cosmetics, catalysts, and semiconductors. In the future, wewill aim for further business expansion in the field of particle tracking
analysis systems.

ViewSizer™ 3000:
Nanoparticle Tracking Analysis System

50

Financial data

Financial data Eleven-year summary

2008.122009.122010.122011.122012.122013.12Net sales¥134,248¥104,538¥118,556¥123,456¥117,609¥138,136

Operating costs and expenses

123,290

99,394106,256

108,549

105,857

124,402

10,958

5,144

12,29914,906

11,751

13,733

Net income attributable to owners of parent

6,039

3,161

7,927

8,664

7,396

8,999

Capital expenditures

6,645

4,534

4,033

4,670

7,882

7,680

Depreciation and amortization

4,955

4,573

4,523

4,146

3,743

4,279

10,662

9,831

9,480

10,06010,092

10,774¥133,279¥129,580¥137,290¥144,649¥153,836¥189,269

22,66027,59034,45935,76738,85849,246

63

6

1

126

4

25

37,33034,50536,42539,24937,51647,38629,802

23,363

24,843

26,28828,101

33,085

23,11523,602

22,51622,92428,17933,326

40

52

60

0

-

-

11,063

10,515

13,423

13,196

11,82916,409Liabilities with interest

20,984

18,34817,12818,35818,083

24,577

Shareholders’ equity

76,82979,906

84,01990,232

99,248114,209

Share price at end of fiscal period (Yen)

1,237

2,250

2,303

2,320

2,489

3,590

Number of employees (consolidated)

5,146

5,133

5,202

5,448

5,530

5,787

Net income—basic¥142.76¥74.77¥187.46¥204.88¥174.87¥212.76

Net income—diluted

142.71

74.68

187.11204.41

174.37212.01

1,816.96

1,889.58

1,986.77

2,133.44

2,346.45

2,699.88

44.00

13.00

17.00

40.00

50.00

60.00

Operating income to net sales (%)

8.2

4.9

10.4

12.1

10.0

9.9

Return on assets (%)

4.2

2.4

5.9

6.1

5.0

5.2

Return on equity (%)

7.7

4.0

9.7

9.9

7.8

8.4

Shareholders’ equity ratio (%)

57.6

61.7

61.2

62.4

64.5

60.3

Consolidated dividend payout ratio (%)

30.8

17.4

9.1

19.5

28.6

28.2

Nonconsolidated dividend payout ratio (%)

30.0

30.0

30.3

30.5

37.5

48.9

For the year

Operating income

Research and development expenses

At year-end
Total assets
Cash and cash equivalents
Trade notes andaccounts receivable

Affiliatedcompanies
Other

Inventories
Property, plant and equipment, net
Trade notes andaccounts payable

Affiliatedcompanies
Other

Per Share Information

Net assets
Cash dividends

Financial Ratios

Notes: The stated amounts are rounded down to the nearest million yen from the year ended December 31, 2009, but are rounded (up or down) to the nearest million yen prior to that year.
1. The U.S. dollar amounts are provided solely for convenience at the rate of 111.00 yen to 1.00 U.S. dollar, the rate prevailing on December 31, 2018, on the Tokyo foreign exchange market.
2. HORIBA, Ltd. and its domestic consolidated subsidiaries had formerly recognized revenue mainly on a shipping basis. However, starting from fiscal 2016, HORIBA, Ltd. and its domestic
consolidated subsidiaries changed its revenue recognition method to recognize revenue on a completion date of installation basis or a delivery date basis under the terms and conditions of
the relevant contracts. The amounts in or before the fiscal 2015 are not retrospectively revised.

51

Strengths

Strategies

Results

HORIBA, Ltd. and consolidated subsidiaries

2014.122015.122016.122017.122018.122018.12

Millions of yen

Thousands of U.S. dollars$1,897,027¥153,065¥170,898¥170,093¥195,399¥210,570

135,851

151,526

151,593

168,565

181,731

17,214

19,372

18,49926,834

28,838

10,58912,882

12,962

16,281

22,313

11,001

16,30913,796

11,63910,239

4,905

6,110

6,816

7,534

7,240

11,986

12,341

12,933

13,911

15,183

136,783

Millions of yen

Thousands of U.S. dollars$2,505,729¥207,335¥231,032¥239,657¥265,920¥278,136

51,10947,85951,94058,33362,837

149

2

7

12

24

52,09754,76953,71760,14059,087

34,83835,71740,28945,57355,13939,441

56,97861,977

68,70168,739

20

-

77

91

101

15,385

17,63819,93523,18021,832

28,41245,22747,15342,49644,516

123,924

129,581

132,654150,282

161,362

4,015

4,695

5,410

6,790

4,490

5,965

6,831

7,149

7,399

7,943

1,637,216
259,801
201,018
92,24365,225566,099216
532,315496,747
619,270909
196,684
401,045
1,453,711
U.S. dollars 40.45

Yen

U.S. dollars¥250.28¥305.73¥307.74¥386.30¥529.24$4.76

249.28304.36306.38384.67526.984.74

2,928.82

3,078.40

3,148.70

3,565.00

3,826.44

34.47

67.00

70.00

85.00

116.00145.00

1.30

11.2

11.3

10.9

13.7

13.7

5.3

5.9

5.5

6.4

8.2

8.9

10.2

10.0

11.5

14.3

59.8

56.1

55.4

56.5

58.0

26.8

22.9

27.6

30.0

27.4

38.5

35.1

46.7

53.8

50.7

Computations: Shareholders’ equity = net assets - subscription rights to shares - non-controlling interests
Net income per share (Yen) = net income attributable to owners of parent / (average number of shares issued and outstanding in the fiscal period, corrected for treasury stock)
Net assets per share (Yen) = shareholders’ equity / (number of shares issued and outstanding, corrected for treasury stock)
Operating income to net sales (%) = 100 x operating income / net sales
Return on assets (ROA, %) = 100 x net income attributable to owners of parent / average total assets in prior fiscal period
Return on equity (ROE, %) = 100 x net income attributable to owners of parent / average shareholders’ equity in prior fiscal period
Shareholders’ equity ratio (%) = 100 x shareholders’ equity / total assets
Consolidated dividend payout ratio (%) = 100 x dividends paid / net income attributable to owners of parent
Nonconsolidated dividend payout ratio (%) = 100 x dividends paid / net income (nonconsolidated)

52

Financial data

Eleven-year summary

Net salesby segment

Millions of yen

We achieved record-high sales

200,000

240,000

210,570
195,399in the year ended December
31, 2018, as the Automotive

153,065

24,810during the first half of the year.

16,76280,00024,722

14,711

104,538

11,787

14,55822,913

12,022

20,82522,04027,676

24,69422,51423,48520,503
12,483
22,33740,00054,232

semiconductor manufacturers

118,556 123,456 117,609

13,721

120,000

emission gas regulations andconcentrated investment from138,136

134,248

segments drove results in thewake of strengthening vehicle

Process &Environmental

27,754

Scientific57,785

Semiconductor

26,012

MedicalDiagnostic

73,36079,656

Automotive
Test
Systems

2017

2018

170,898 170,093
160,000

Test Systems and Semiconductor Instruments & Systems

19,361

17,433

13,70920,40624,153

17,861
26,832

22,40016,465

16,754

16,75327,05925,738

26,11753,30025,62735,38638,82827,447

26,56464,251

62,2072015

2016

28,93427,037

37,192

38,67843,23049,52455,00135,751

2009

2010

2011

2012

2013

2014

25,1870

2008

Net income attributable to owners of the parent and ROE
We recorded our highest-evernet income attributable toowners of the parent in theyear ended December 31,
2018, due to record-highoperating income gained
through increased sales and atemporary reduction in tax rate.
ROE finished at 14.3%, fulfilling

Millions of yen

Net income attributable to owners of the parent (left)

14.3

20,000

9.7

9.9
7.8

7.7

8.4

10.2

10.0

12,882

12,962

7,927
6,039

6.0

7,396

4.0

3.0

3,161
0

straight year.

0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Cash flows
We continued to conduct
high-level investment in the year
ended December 31, 2018,
including the strengthening of
our overseas bases. Although
we recorded the highest-everprofit, cash flow from operating
activities fell year-on-year due inpart to an increase in inventories
caused by a high backlog oforders. Free cash flow finished in
the positive range, amounting to
8.5 billion yen.

53

12.0

9.0

8,999

8,664

15.0

16,281

8.9

10,58910,000

the MLMAP 2020 target of
10% or more for the fourth

22,31311.5

15,0005,000%

Return on equity (ROE) (right)

25,000Operating cash flow

Millions of yen

Investing cash flow

30,000Free cash flow

28,287
19,53620,00013,711
10,0000

7,521
8,011 9,520
490-4,191-10,000

13,395

11,964
6,954
9,143-2,821

15,076
11,455

5,504

6,965

-7,891-8,111

15,871

15,120
8,506

5,444
1,580

809

-6,145

14,770-20,000-9,875-10,427-15,872-13,167-11,029-30,000-30,642-40,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Strengths

Strategies

Accounts receivable (AR) and AR turnover (days)
Millions of yen

Trade notes and accounts receivable (left)

Inventories and inventory turnover (days)
Days

AR turnover (right)

70,000140

50,00040,000125

120

60,000102

37,393

112

34,511

36,426116

39,375116

Millions of yen
60,000Inventories (left)

117

60,152 59,111 120

115
53,72452,24654,77147,411

112

102

100

50,000

100

93

86

85

40,00076

80

37,52030,00020,00040

10,00020

074

29,802

60

23,363

24,84386

81

81

45,57333,085
28,101
26,28834,838

87

80

75

80

40,28935,71760

20,00040

10,00020

002008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201802008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

R&D expenditures and R&D expenditures to net sales
R&D expenditures (left)

Days
120

Inventory turnover (right)

55,139125

30,000Millions of yen
15,000Results

Capital expenditures and depreciation and amortization

R&D expenditures to net sales (right)%
15,183 10.0

Capital expenditures

Millions of yen
20,000Depreciation and amortization

9.4

13,911
12,9338.1
7.9
7.8 11,986 12,341
12,000
7.6
7.2
7.1
7.2
8.0
10,774 7.8
10,662
10,092
10,060
9,831
9,480
8.6

16,3098.0
15,0009,000

13,796
11,6396.0

11,001

10,0006,000

10,239

7,882

4.0

7,534

6,645
4,534

5,000
3,000

2.0

0

4,955

0

4,573 4,033 4,146

4,279

3,743

7,240

6,816

4,670
4,905

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20182008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Cash dividends per share
Yen

6,110

7,680
4,523

Net income per share and net assets per share
Net income per share (left)

Yen

150

145

Net assets per share (right)

600

3,826
3,565

529

125
480

116

2,700
360

85
75

60
50

67

1,890

50

44

2,133

70
240

40

2,929
386

187

2,400

2,346
306

308

250

205

120

13

3,149

1,987

1,817
143

25

3,200

3,078

100

Yen
4,000

1,600

213
175

800

17
75

0

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2018

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201854

Financial data

HORIBA, Ltd. and consolidated subsidiaries
As of December 31, 2017 and December 31, 2018

Consolidated balance sheets
2017.12

AssetsCurrent assets:

Cash and cash equivalents

Affiliated companies
Other

Trade notes and accounts receivable
Allowance for doubtful receivables
Marketable securities
Inventories
Deferred tax assets
Other current assets

Total current assets

Property, plant and equipment:

Land
Buildings and structures
Machinery, equipment and vehicles
Construction in progress
Other property, plant and equipment

Total

Accumulated depreciation

Net property, plant and equipment
Investments and other noncurrent assets:

Investment securities
Investments in nonconsolidated subsidiaries and affiliates
Deferred tax assets
Allowance for doubtful accounts
Other investments and other assets

Total investments and other noncurrent assets
Intangibles:

Goodwill
Software
Other intangibles

Total intangibles
Total assets

Current liabilities:

2018.12¥62,837
24
59,087(682)
1,899
55,1394,312
9,586
192,203

216
532,315(6,144)
17,108496,747
38,84686,3601,731,558

13,73654,52824,166
3,468
16,208112,109(43,408)
68,701

13,69255,89424,784
3,018
17,729115,118(46,379)
68,739123,351
503,549
223,279
27,189159,720
1,037,099(417,828)
619,270

10,955
45
1,549
(77)
2,861
15,334

8,314
44
1,092
(76)
2,917
12,29274,900
396
9,837
(684)
26,279110,738

194
3,298
904
4,397
¥265,920

901
2,907
1,092
4,901
¥278,136

8,117
26,1899,837
44,153$2,505,729

2018.12$566,099

2018.12¥7,773718
91
23,18014,8886,277
13,519
61
1,464
63
1,932
49
4,357
74,378¥10,458
1,735
101
21,832
15,9203,514
17,475
1
1,265
2,012
3,681
77,99915,630909
196,684
143,423
31,657
157,432
9
11,39618,12633,162
702,693

34,005
2,036
2,145
640
1,848
40,675
115,054

32,322
950
1,946
640
2,258
38,118116,117

291,189
8,558
17,531
5,765
20,342
343,405
1,046,099

Common stock
Authorized—100,000,000 shares
Issued and outstanding—42,155,029 shares (excluding treasury stock) at 12/2017
Issued and outstanding—42,170,448 shares (excluding treasury stock) at 12/2018

12,011

12,011

108,207

Capital surplus
Retained earnings
Treasury stock—377,723 shares at 12/2017 and 362,304 shares at 12/2018

18,717
115,345(1,488)144,585

18,717
132,329(1,428)
161,630

168,621
1,192,153(12,864)
1,456,126

4,636
1,151
(90)
5,697
492
90
150,866¥265,920

2,788(2)(2,829)
(224)
(267)
549
106
162,018¥278,136

25,117(18)(25,486)(2,018)(2,405)
4,945
954
1,459,621$2,505,729

Short-term loans
Current portion of long-term debt
Trade notes and accounts payable

Affiliated companies
Other

Accounts payable—otherAccrued income taxes
Advances received
Deferred tax liabilities
Accrued bonuses to employees
Accrued bonuses to directors and corporate auditors
Reserve for product warranty
Provision for loss on disaster
Other current liabilities

Total current liabilities

Long-term liabilities:

Long-term debt
Deferred tax liabilities
Net defined benefit liability
Provision for loss on dissolution of the employees’ pension fund
Other noncurrent liabilities

Total long-term liabilities
Total liabilities

Net assets:
Shareholders’ equity:

Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains or losses on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans

Total accumulated other comprehensive income
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

55

Thousands of U.S. dollars2¥58,333
12
60,140(788)
1,400
45,573
4,331
8,485
177,4872017.12

Liabilities and net assets

Millions of yen1

2018.12$94,216

Strengths

Strategies

Results

HORIBA, Ltd. and consolidated subsidiaries
For the years ended December 31, 2017 and December 31, 2018

Consolidated statements of income

Millions of yen1

2018.122017.12Net sales¥210,570$1,897,027

112,10756,457
168,565

120,630
61,100181,731

1,086,756
550,450
1,637,216

26,834

28,838259,801

280
(428)
(296)
58
(2)
(199)
81
0
(2,526)(9)455
138(2,448)

323
(440)
(473)
537
(22)
(76)
11
0
115
48
56
79

2,909
(3,963)(4,261)
4,837
(198)
(684)
99
0
1,036
432
504
711

24,38528,917

260,513

7,647
439
8,086

6,375
203
6,579

57,432
1,828
59,270

16,29816¥16,281

22,33824¥22,313201,243
216$201,018

Cost of sales

Selling, general and administrative expenses

Total operating costs and expenses
Operating income:
Other income (expenses):

Interest and dividend income
Interest expense
Foreign exchange gains (losses), net
Gain on sales of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Subsidy income
Gain on sales of investment securities
Gain on transfer of businesses
Gain on bargain purchase
Impairment loss
Loss on valuation of investment securities
Reversal of provision for loss on dissolution of the employees' pension fund
Other, net

Total other income (expenses), net
Income before income taxes
Income taxes:
Current

Deferred

Total income taxes
Net income
Profit attributable to non-controlling interests
Net income attributable to owners of parent

2018.122017.12Per share information:¥386.30
384.67116.00Net income—basic

Net income—diluted
Cash dividends

2017.12Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans

Total other comprehensive income

Comprehensive income

Comprehensive income attributable to non-controlling interests

U.S. dollars2

2018.12¥529.24526.98145.00

$4.76

4.74
1.30

Millions of yen1

2018.12

Thousands of U.S. dollars2

2018.12¥16,298¥22,338$201,243

1,708
3,452
130
5,291
¥21,589(1,848)(2)(3,989)(133)(5,973)¥16,364(16,648)(18)(35,936)(1,198)(53,810)$147,423¥21,570
19¥16,348
16$147,279(Breakdown of comprehensive income)Comprehensive income attributable to owners of parent

Yen1

HORIBA, Ltd. and consolidated subsidiaries
For the years ended December 31, 2017 and December 31, 2018

Consolidated statements of comprehensive income

Net unrealized gains or losses on available-for-sale securities

2018.12¥195,399

Operating costs and expenses:

Net income
Other comprehensive income:Thousands of U.S. dollars2

144

Notes: 1. The Japanese Yen amounts are rounded down to the nearest million.
2. The U.S. dollar amounts are provided solely for convenience at the rate of 111.00 yen to 1.00 U.S. dollar, the rate prevailing on December 31, 2018, on the Tokyo foreign exchange market.

56

Financial data

HORIBA, Ltd. and consolidated subsidiaries
For the years ended December 31, 2017 and December 31, 2018

Consolidated statements of cash flows

Millions of yen1

2018.122017.12
Cash flows from operating activities:

Thousands of U.S. dollars2

2018.12¥24,385¥28,917$260,513

Depreciation and amortization

7,534

7,240

65,225

Impairment loss

2,526

-

-

Increase (decrease) in allowance for doubtful receivables

(75)

(69)

(621)

Increase (decrease) in net defined benefit liability

(190)

(83)

(747)

Increase (decrease) in provision for loss on dissolution of the employees’ pension fund

(607)

-

-

Interest and dividend income

(280)

(323)

(2,909)Interest expense

428

440

3,963

Foreign exchange losses (gains)

79

167

1,504

Loss (gain) on sales of property, plant and equipment

(56)

(514)

(4,630)Loss on disposal of property, plant and equipment

199

76

684

9

-

-

Decrease (increase) in trade notes and accounts receivable(4,514)(862)(7,765)Decrease (increase) in inventories(3,633)(10,368)(93,405)

Increase (decrease) in trade notes and accounts payable

2,588

(596)

(5,369)Other, net

3,601

4,976

44,82831,99629,001

261,270

Income before income taxes

Adjustments to reconcile income before income taxes to
net cash provided by operating activities:

Loss on valuation of investment securities

SubtotalInterest and dividends received

279

305

2,747

Interest paid

(466)

(439)

(3,954)(3,521)(9,331)(84,063)

28,287

19,536

176,000

Increase in time deposits(1,197)(1,403)(12,639)

Decrease in time deposits

1,395

1,202

10,828

32

32

288

(1,901)(2,200)(19,819)

Income taxes (paid) refund

Net cash provided by (used in) operating activities
Cash flows from investing activities:

Decrease in time deposits restricted for use
Payments for purchase of marketable securities

701

1,701

15,324(11,664)(9,667)(87,090)

Proceeds from sales of property, plant and equipment

266

1,420

12,792

Payments for purchase of intangibles

(354)

(611)

(5,504)

Payments for purchase of investment securities

(22)

(24)

(216)

3

0

0

(427)

(1,481)(13,342)(13,167)(11,029)(99,360)

Net increase (decrease) in short-term borrowings(3,839)2,792

25,153

Repayment of long-term debt

(1,039)(541)(4,873)

Repayments on finance lease obligations

(163)

(181)

(1,630)Net decrease (increase) of treasury stock

(0)

(0)

(0)

(4,002)(5,309)(47,828)(9,044)(3,240)(29,189)(6,864)

Proceeds from sales or redemption of marketable securities
Payments for purchase of property, plant and equipment

Proceeds from sales or redemption of investment securities
Other, net

Net cash provided by (used in) investing activities
Cash flows from financing activities:

Cash dividends paid

Net cash provided by (used in) financing activities

317

(762)

Net increase (decrease) in cash and cash equivalents

6,393

4,503

40,567

Cash and cash equivalents at beginning of year

51,94058,333

525,522

Cash and cash equivalents at end of year

¥58,333¥62,837$566,099

Effect of exchange rate changes on cash and cash equivalents

Notes: 1. The Japanese Yen amounts are rounded down to the nearest million.
2. The U.S. dollar amounts are provided solely for convenience at the rate of 111.00 yen to 1.00 U.S. dollar, the rate prevailing on December 31, 2018, on the Tokyo foreign exchange market.

57

Strengths

Strategies

Results

Corporate information
Head office

2 Miyanohigashi, Kisshoin, Minami-ku Kyoto 601-8510 JapanFounded

October 17, 1945

Incorporated

January 26, 1953

Net sales

210,570 million yen (Consolidated)

Paid-in capital

12,011 million yen (Consolidated)

As of December 31, 2018

Number of employees

7,943 (Consolidated)

As of December 31, 2018

Fiscal closing date

December 31, annually

Annual Meeting of Shareholders

Held in March

Transfer agent

Sumitomo Mitsui Trust Bank, Limited

Independent auditor

KPMG AZSA LLC

Stock listings

Tokyo Stock Exchange, First Section

Fiscal 2018

Securities Code: 6856

Major shareholders

As of December 31, 2018

Name of shareholders

Shares (Thousands)

Percentage* (%)

Japan Trustee Services Bank, Ltd.

2,652

6.29

The Master Trust Bank of Japan, Ltd.

2,194

5.20

National Mutual Insurance Federation of Agricultural Cooperatives

1,682

3.99

PICTET AND CIE (EUROPE) SA, LUXEMBOURG REF: UCITS

1,052

2.50

Atsushi Horiba

1,039

2.47

THE KYOTO CHUO SHINKIN BANK

830

1.97

The Bank of Kyoto, Ltd.

828

1.96

BNYM AS AGT/CLTS NON TREATY JASDEC

798

1.89

HORIBA Raku-Raku Kai

782

1.86

Japan Trustee Services Bank, Ltd. (trust account 5)

776

1.84

* Percentages of shares are calculated by deducting own shares (362,304 shares).

Stock Price Trend

Foreign investors
3.4%

Yen

Yen

25,00010,000

Nikkei Stock Average (Nikkei 225) (left)

20,000Japanese companies
2.1%

Financial institutions,
Securities companies
1.3%

Breakdown ofTypes of
Shareholders(9,438 in total)

8,000

Individual investors
93.2%
15,000

6,000

10,0004,000

HORIBA (right)

5,000

0
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Individual investors
20.2%

Breakdown ofOwnership
among
Shareholders

2,000

0
2008

Japanese companies
6.4%(42,532,752
shares in total)

Foreign investors
32.9%

Financial institutions,
Securities companies
40.5%

58

Board of directors and corporate auditors/Corporate officers

Board of directors and corporate auditors (As of April 1, 2019)
Chairman & Group CEO

Executive Vice Chairman & Group COO

President & COO

Atsushi Horiba

Juichi Saito

Masayuki Adachi (Doctor of Engineering)1971 Joined OLSON-HORIBA
Incorporated (U.S.)

1982 Joined HORIBA, Ltd. then held
positions such as General Manager
of Engine Measurement Planning &Development Department andPresident of HORIBA Instruments
Incorporated (U.S.)
2005 Appointed as HORIBA’s Director
2008 Appointed as Vice President of
HORIBA STEC Co., Ltd. (Japan)
2013 Appointed as HORIBA’s Executive
Vice President
2016 Appointed as HORIBA’s Executive
Vice President and Representative
Director
2018 Appointed as Executive Vice
Chairman & Group COO up to thepresent

1985 Joined HORIBA, Ltd. then held positions
such as General Manager of Emission
Analysis, Research & Development Division
and General Manager of Engine
Measurement System Management Division
2006 Appointed as HORIBA’s Corporate Officer
2007 Appointed as President of HORIBAInternational Corporation (U.S.)
2014 Appointed as HORIBA’s Director
Appointed as President of HORIBA Jobin
Yvon SAS (now HORIBA FRANCE SAS)
2016 Appointed as Chairman of Supervisory
Board of HORIBA Jobin Yvon SAS(now HORIBA FRANCE SAS) up to thepresent
Appointed as HORIBA’s Senior Managing
Director
2018 Appointed as President & COO up to thepresent

1972 Joined HORIBA, Ltd. then held
positions such as General Managerof Overseas Technology
Department and General Managerof Overseas Headquarters
1982 Appointed as HORIBA’s Director
1992 Appointed as President and CEO
2005 Appointed as Chairman, President
and CEO
2018 Appointed as Chairman & GroupCEO up to the present

Managing Director,
General Manager of General Administration Division

Director,
Board Leader of GLOBAL ATS BOARD

Masao Okawa

Takashi Nagano

1988 Joined the Bank of Japan then held positions suchas Chief Representative in Frankfurt and Kyoto
Branch Manager
2017 Joined HORIBA, Ltd. and was appointed as SeniorCorporate Officer
2018 Appointed as Managing Director up to the present

1985 Joined HORIBA, Ltd. then held positions such as General
Manager of Engine Measurement Planning & Development
Department, General Manager of Engine Measurement System
Management Division, and President of HORIBA Europe GmbH
(Germany)
2005 Appointed as HORIBA’s Corporate Officer
2011 Appointed as President & CEO of HORIBA Europe GmbH (Germany)
2014 Appointed as President of HORIBA KOREA Ltd. (South Korea)
2016 Appointed as HORIBA’s Director up to the present
Appointed as Chairman of HORIBA KOREA Ltd. (South Korea) up to
the present
2018 Appointed as Board Leader of GLOBAL ATS BOARD up to the present

Corporate officers (As of April 1, 2019)
Executive Corporate Officer

Corporate Officers

Jai Hakhu

Ken Mitera

Executive Vice President of HORIBA Instruments
Incorporated (U.S.)

James Thepot

President of HORIBA FRANCE SAS (France)

Christian Dubuc

Executive Vice President of HORIBA ABX SAS(France)

Atsushi Nakamine

Deputy General Manager of Global Business
Division

Hiroo Chihara

Vice President of HORIBA Techno Service Co., Ltd.
(Japan)Tadao Nakamura

Chief Director & President of HORIBA Instruments(Shanghai) Co., Ltd.

Chairman & CEO of HORIBA Instruments(Doctor of Engineering) Incorporated (U.S.)
President of HORIBA ABX SAS (France)

Senior Corporate Officers

Hideyuki Koishi

President of HORIBA STEC Co., Ltd. (Japan)

Yuichi Muroga

President of HORIBA Techno Service Co., Ltd.
(Japan)George Gillespie

Executive Chairman of HORIBA MIRA Limited.
(Doctor of Engineering) (U.K.)

Chief Director & President of HORIBA (China)
Trading Co., Ltd.

59

Director (Outside), Independent Director

Director (Outside), Independent Director

Director (Outside), Independent Director

Masahiro Sugita

Jiko Higashifushimi

Sawako Takeuchi Doctor of Economics)

1967 Joined the Bank of Japan then held
positions such as Matsumoto
Branch Manager and DirectorGeneral of the International
Department
1998 Appointed as Director of Overseas
Investment Research Institute, theExport-Import Bank of Japan
1999 Appointed as Auditor of the Bank ofJapan
2003 Appointed as Outside Auditor (fulltime) of Banyu Pharmaceutical Co.,
Ltd. (now MSD K.K.)
2006 Appointed as HORIBA’s Outside
Director up to the present2013 Appointed as Outside Director of
the 77 Bank, Ltd. up to the present

1988 Appointed as Higashi-Kurume
Branch Manager of Saitama Bank
(now Resona Bank, Limited)
1993 Entered Shorenin Religious
Corporation then held a position as
its Head Deacon
2003 Appointed as the Representative
Presiding Director and Head Priestof the Shorenin Religious
Corporation up to the present
2016 Appointed as HORIBA’s Outside
Director up to the present

1988 Appointed as Deputy Director, Master ofInternational Business (MIB)
Graduate Program, Ecole Nationale des Ponts et
Chaussées (France)
1998 Appointed as Associate Professor, School ofEngineering, University of Tokyo Graduate School
2004 Appointed as Urban Development Sector (Economist/
Analyst), Asia-Pacific Division, the World Bank
2005 Appointed as Special Assistant to the Ministry ofForeign Affairs and as Visiting Professor, Graduate
School of Engineering, Kyoto University
2011 Appointed as President, Japan Cultural Institute inParis (Japan Foundation)2016 Appointed as HORIBA’s Outside Director up to thepresent
Appointed as Advisor to the Ministry of Education,
Culture, Sports, Science and Technology
2017 Appointed as Specially Appointed Professor,
Yamagata University Faculty of Engineering
2018 Appointed as Invited Professor, Tokyo College ofMusic up to the present
Appointed as Invited Professor, Yamagata University
Faculty of Engineering up to the present

Corporate Auditor

Corporate Auditor (Outside)

Corporate Auditor (Outside), Independent Auditor

Toshihiko Uno

Kanji Ishizumi

Keisuke Ishida

1974 Joined HORIBA, Ltd. then held
positions such as General Manager ofHardware Development and General
Manager of Production Center
2002 Appointed as HORIBA’s Corporate
Officer
2004 Appointed as HORIBA’s SeniorCorporate Officer
2012 Appointed as HORIBA’s Corporate
Auditor up to the present

1971 Joined the Ministry of International
Trade and Industry (now the
Ministry of Economy, Trade andIndustry)
1975 Registered as Attorney at Law
1981 Appointed as representative
partner of the Chiyoda Kokusai
Law Offices up to the present
1995 Appointed as HORIBA’s Corporate
Auditor (Outside) up to the present

1978 Appointed as Representative Director and CEO,SHASHIN KAGAKU CO., LTD.
2000 Appointed as Representative Director, Chairman of
the Board, CEO, SHASHIN KAGAKU CO., LTD.
2001 Appointed as Chairman of the Board, SK-Electronics
Co., Ltd.
2005 Appointed as HORIBA’s Corporate Auditor (Outside)
up to the present
2016 Appointed as Advisor, SK-Electronics Co., Ltd. up to
the present
2019 Appointed as Representative Director, Chairman of
the Board, SHASHIN KAGAKU CO., LTD. up to
the present(Doctor of Engineering

Junior Corporate Officers

Toshiya Higashino

President & COO of HORIBA Instruments
Incorporated (U.S.)

Narihiro Oku

Chief Manager of QSR Division, Quality &Safety Management Center

Yasuo Yamashita

Deputy General Manager of General Administration
Division

Hitoshi Motokawa

General Manager of Sales Division

Hiroshi Nakamura

President of HORIBA Europe GmbH (Germany)

Hideyuki Nishibun

General Manager of Global Business Strategy
Division of HORIBA Techno Service Co., Ltd.
(Japan)Akio Kinoshita

Deputy General Manager of Global Business
Division, Automotive Technology

Haruko Nozaki

Principal of HORIBA COLLEGE, CSR

Arnaud Pradel

Executive Vice President of HORIBA ABX SAS(France)Tsukasa Satake

Deputy General Manager of Research &Development Division, Tokyo based

Dan Horiba

President of HORIBA Advanced Techno Co., Ltd.
(Japan)Masashi Nishimura

Deputy General Manager (China Strategy) of
Global Business Division

Dale Poole

Executive Vice President of HORIBA Instruments
Incorporated (U.S.)

Hiroyuki Urabe

President of HORIBA KOREA Ltd. (South Korea)(Doctor of Engineering)(Doctor of Engineering)60

Report 2018
[ Year ended December 31, 2018 ]HORIBA,HORIBA,Ltd.
Ltd.

2 Miyanohigashi,
2 Miyanohigashi,
Kisshoin,
Kisshoin,
Minami-ku
Minami-ku
Kyoto
Kyoto
601-8510
601-8510
Japan
Japan
Phone:
Phone:+81-75-313-8121+81-75-313-8121

E-mail:E-mail:ir-info@horiba.com
ir-info@horiba.com
https://www.horiba.com
https://www.horiba.com