Meeting Materials for FY2019
June 2020
KYB Corporation(Stock Code: 7242; First Section of Tokyo Stock Exchange)

Masao Ono
Representative Director, President Executive Officer

1Introduction
FY2019 Performance and the Previous Mid-Term Management Plan

• In FY2019, there was a large deficit due to the total amount of various
expenses.
• The previous mid-term management plan fell short of its targets dueto the discovery of nonconforming acts involving seismic
isolation/mitigation materials and changes to the demandenvironment.
2020 Mid-term Management Plan

• Under the current state of affairs, it is extremely difficult toformulate a 2020 mid-term management plan.
• We will explain KYB’s management issues and how it will tackle them.

2

KYB’s Management Issues
and Initiatives

3

Review of the 2017 Mid-Term Management PlanIFRS(¥ Billion)

FY2019target

FY2019(As of May 2017)

Differences

actualNet Sales

398.0

381.6

(16.4)

Segment profits*26.0

17.6

(8.4)

[Segment profits ratio][6.5%][4.6%][(1.9)%]

ROE

10.0%――*Segment profits correspond to operating income in JGAAP

4PositiveResults✓ Introduced value-added products for automobiles to the market✓ Completed the goal of transferring and integrating production lines for construction
machinery✓ Achieved measurable results with reorganizing unprofitable plants and businesses

Issues✓ Nonconforming acts in a non-core business came to light✓ Delay in structural reforms of unprofitable businesses

Current Management Issues

Items to Focus on➢ Quickly bring seismic isolation/mitigation oil
dampers up to conformity➢ Deal with the novel coronavirus (COVID-19)➢ Initiatives after coronavirus➢ Initiatives aimed at restoring trust (ESGefforts)
5Progress
Progress Plan for Bringing Nonconforming Seismic Isolation/Mitigation
Dampers up to Conformity(Buildings)

Number of affected buildings:991 buildings
As of Mar. 31, 2020

1,000100%

Buildings
件数
Completion rate
完了率

Work started on: 636 buildings (64%)
Work completed on: 427 buildings (43%)

800

80%

(Reference)
As of May 31, 2020
Work started on: 734 buildings (74%)
Work completed on: 510 buildings (51%)

600

60%

ActualPlanned

21/3

21/2

21/1

20/12

20/11

20/10

20/9

20/8

20/7

20/6

20/5

20/4

20/3

20/2

20/1

19/12

19/11

19/1019/9

19/8

19/7

19/6

19/5

19/4

0%
19/3

0
19/2

20%

19/1

200

18/12

40%

18/11

400

18/10

6(Completion rate)

Quickly bring seismic isolation/mitigation oil
dampers up to conformity
Preventive Measures and State of Progress (As of March 31)

Cause Analysis*1. Starting: The details of a concrete plan being
considered

Progress
Items

Starting*1

Underway*2

Completed

Strictly build acompliance awareness,
reform corporate
culture171115

Evaluate businessfeasibility, revise ourbusiness operation
systems as well as
information sharingsystems

220418

7. Monopolization of important business

Improve inspection
systems/methods

120938. 1) Deficient quality inspections
2) Lack of inspections for similar
nonconforming instances related toquality

Strengthening internal
audits/regulation
systems

161411

9. Problems related to commercialization

Total

67

2

1847

*2. Underway: Preparations are complete,
operations are ongoing

1. Lack of compliance awareness2. Corporate culture looks away frominconvenient truths
3. Management focused on receiving orders
4. Lack of inspections
5. Lack of nonconforming act preventions ininspection machines
6. Incomplete information sharing system

7

The Impact of the Novel Coronavirus (COVID-19)

Current situation

AC(Automobiles)

Sales decrease from peak in April to May, production adjustmentsin each region

Future influencing factors
Interest in purchasing automobiles, an expensive consumer
durableCurrent situation

HC(constructionMachinery)

Prompt recovery in China, while on the other hand,developed countries are economically sluggish

Future influencing factors
Restart of infrastructure investment due to the lifting of restrictions
on mobility
Economic stimulation measures in many countries

8

AC: Automotive Components

HC: Hydraulic Components

Initiatives Currently Underway to Deal with
the Novel Coronavirus (COVID-19)
Coronavirus infection prevention measures
Measures for the health and safety ofcustomers, business partners, regional
communities, and employees
・Avoid the “Three Cs” (Closed spaces, Crowdedplaces, Close contact)・Thorough hygiene management
・Promote working from home

Structural reforms, thorough cost reductions
・Speed up selection and integration
AC: Accomplish reorganization of plants andcompanies
HC: Sales promotions to local manufacturers inChina

・Greatly reduce fixed costsManufacturing personnel system that
corresponds to volume decreases, rationalizationof internal offices

・Increase efficiency by removing waste
Cash flow improvement
・Postpone or cancel capital investments(Investments necessary for future growth arecontinuing)・Enhancement of inventory control, reduce
working capital(Raise accuracy in predicting demand, review
inventory levels)

9・Secure cash on handwith the KPS* activity

・Decrease quality losses(Total costs)
SG&A expenses

Cost of sales

Before improvements

After improvements*KPS (Kayaba Production System): A production system that targetscost reductions and is based on the concept of removing all
unnecessary wastes

Initiatives Currently Underway to Deal with the Novel Coronavirus: Reorganization of unprofitable plants and companies◼ Secure competitiveness by integrating major plants and collective
reorganization in accordance with clients’ shifts in demand

10AC✓ Reorganize shock absorber plants within Europe(Western Europe⇒Eastern Europe)✓ Reorganize EPS manufacturing (placing importance on China)✓ Close Spain PV plant✓ Reorganize motorcycle manufacturing plants in AsiaHC✓ Focus on China, the world’s largest hydraulic excavator market✓ Develop low cost models✓ Complete domestic reorganization (integrate manufacturingof motor products)

AC: Automotive Components
EPS: Electric Power Steering

HC: Hydraulic Components
PV: Vane pump for hydraulic power steering

Initiatives After Coronavirus
The two core business that support KYB
AutomotiveComponents
Operations(AC)

HydraulicComponents
Operations(HC)

Special-purpose vehicles, etc.
11

Initiatives After Coronavirus

Changes in values due to the novel coronavirus▶ Become a company that clients want to choose
Shift to growth markets/fields
Selection andintegration✓ Sales promotions to the three German premium carmakers

AC✓ Develop specialized low-cost models at China plants

HC

Promote innovative monozukuri (manufacturing expertise)
Unmanned operations/ manpower reduction✓ Raise level of automation and unmanned operations

AC

Create high-value-added products
Further refine coretechnologies
12✓ Refine technology for our mainstay shock absorberproducts✓ Develop hydraulic electronic controls system

ACHCInitiatives After Coronavirus: Promote Innovative Monozukuri
Promote innovative monozukuri (manufacturing expertise)✓ Reduce processing costs 30% by raising the level ofautomation and unmanned operations

Unmanned operations/ manpower reduction✓ Sequential roll out in domestic and overseas plants

1st Term

2nd Term

Value

Tech. Items

Final Term

Build a fully unmanned OEM production line
AI control
IoT remote control

IoT Cloud /communication control

IoT monitoring control

Overseas expansion
Plan to install a standard aftermarket shock
absorber production line in Europe
Domestic expansion

Plan to install an aftermarket
strut production line

13

3rd Term

Robot control

30% decrease inprocessing costInitiatives Aimed at Restoring Trust (ESG Efforts)◼ To become a company that never again causes inconvenience to society
by making awareness of norms our foundation

Reform corporateculture(Governance)
Awareness of norms
Compliance observance
Strengthening governance

Safety & quality
management
Zero serious disasters, key
disasters, and serious fires
Zero quality problem

14

Environmentfriendly
Environmental load decrease(compared to FY2019)
Energy output level -1%/year
Industrial waste output level-1%/yearCautionary Statement

This report contains forward-looking statements, including KYB’s plans
and strategies, as well as statements that report historical results.
Forward-looking statements involve such known and unknown risks anduncertainties as economic conditions; currency exchange rates; laws,regulations, and government policies; and political instability in principal
markets.

15For further information, please contact to:Investor Relations Sect., Finance Dept.
Tel: +81-3-3435-3580

Appendix

Outline of Nonconforming Acts
How the incident happened
For some seismic isolation/mitigation oil dampers, coefficients were falsified, or measurement
results were arbitrarily increased or decreased by adjusting the starting point and made tovary so as to fall within the intended range. Due to this improper act, products that did notconform to the standards set by Japan’s Ministry of Land, Infrastructure, Transport andTourism, or did not meet the standard values set by customers, were installed in buildings.

Number of nonconforming and unknown products as well as affected buildings
Nonconforming products *1(1) Nonconforming tocertification by Minister(2) Out ofcustomer standards(1)-(3) Total

Seismic isolation oildamper

245 buildings

370 buildings

237 buildings

852 buildings1,056 units

3,014 units

3,388 units

7,458 units

Seismic mitigation oildamper―

30 buildings

109 buildings

139 buildings―

253 units

4,402 units

4,655 units

245 buildings

400 buildings

346 buildings

991 buildings

1,056 units

3,267 units

7,790 units

12,113 units

Total*1 There is no minister certification system for seismic mitigation oil dampers.

16(3) UnknownAppendix

Seismic isolation/mitigation
Seismic isolation/mitigation
Seismic isolation

Seismic
isolation layer

Support material

Seismicmotion
地震動

Damping material

Seismic mitigation

Damping
material

17Seismic motion

Structure that prevents transmission of undergroundvibrations by establishing a seismic isolation layer andconnecting the building to the ground using support materials
and assisting damping materials.
Support materials made of laminated rubber, etc. prevent thetransmission of power to the building by being deformed by
the power of the ground and moving horizontally.
Depending on the scale and structure of a building, damping
materials such as oil dampers are added to support materials,
thereby curtailing vibration and excessive deformation of theseismic isolation layer.

Structure that mitigates vibration of the building by wind orearthquake through the placement of damping materials oneach floor.
Damping materials such as oil dampers mitigate vibration byabsorbing power from the wind or an earthquake, therefore
curtailing the deformation of each floor of the building.

Appendix

Demand Forecast
Automobile Production Forecast(Million units)

94

95

23
13

13

17

Middle East, Africa
中東・アフリカ

92

South America
南米

28

27.5

9
FY16

18

229
FY17

33.8

7.1

7.1

18.7

17.8

83

ASEAN, India
ASEAN・インド

1323North America
北米

12China中国

7.9Europe
欧州

2.9
2.5
2.3

3.0
2.7
2.6

3.1
3.1
2.3

3.1
3.5
2.3

FY16

FY17

FY18

FY191726Japan
日本

22

21.5

22

20

99

FY18

FY19

Source: IHS (the end of Apr. 2020)

7.1

5.9

1.7
1.2

Other emerging
他新興国
economies
中国
China
Europe欧州
北米
North America
日本
Japan

12.2

Less than 6 tons
13.6

22

34.3

23

1628

(Ten thousand units)

6 tons and over33

18

Demand for Hydraulic Excavators Forecast

17.0

17.1

14.8

2.0

1.9

2.0
2.0

3.0

2.8

4.7

4.4

4.2

4.2

3.2

3.34.0

4.7

3.3

3.4

3.4

3.5

FY16

FY17

FY18

Other emerging
他新興国
economies
中国
China
欧州Europe
North America
北米Japan日本

FY19
Source: based on customer data