NGK SPARK PLUG CO., LTD.
Integrated Report 2018

NGK SPARK PLUG CO., LTD.
14-18 Takatsuji-cho, Mizuho-ku, Nagoya 467-8525

https://www.ngkntk.co.jp/

NGK SPARK PLUG CO., LTD.

Public Relations Dept., Corporate Strategy Gr.
Phone: 81-52-872-5896 Fax: 81-52-872-5951
Risk Management Dept., Corporate Strategy Gr.
Phone: 81-52-872-6248 Fax: 81-52-872-5999

Integrated Report

2018

01

Information

02
86

Independent Verification Report

CONTENTS

Our Standing Position

About NGK SPARK PLUG

Keyword fortoday’s NGKSPARK PLUG

03-

Strategic View

Review of Business

Review of Strategic Resources

Reliable Governance

Information

Commentary on strategies tocreate value

Creating value in business

Creating value from strategic
resources

Corporate governance

Financial and Corporate Data

15-

27-

37-

49-

61-

27 NGK SPARK PLUG’s Key Issues (1)37 NGK SPARK PLUG’s Key Issues (3)Plug and sensor’s future strategy

Personnel Reform by the Strategic

03 Financial and Non-financial Highlights

15 CEO Message

05 Corporate Philosophy and Long-term

21 NGK SPARK PLUG’s

Management Plan
07 History of our Challenges and Creationof our Strengths

Value Creation Process

31 NGK SPARK PLUG’s Key Issues (2)23 Risks and Opportunities

Product development derived

39 Human Resources

25 Message from Finance Officer

from ceramics

41 Research & Development /11 NGK SPARK PLUG’s

33 Review of Business (1)Sales Structure

Automotive Components group

13 Past, Present, and Future

35 Review of Business (2)Management Plans

Technical ceramics group

Human Resources Department

Intellectual Property Management
43 Quality and Manufacturing

49 Meeting with Outside Directors

61 Financial Results Highlights for the
Past 11 Years

51 Management System

85 Corporate Profile and Stock Information

54 Corporate Governance86 Independent Verification Report

57 CSR Management
59 Compliance
60 Risk Management

45 Global Procurement
46 Environment– semiconductor div. –Technical ceramics group- ceramics div. -This report is centered on particularly important financial andBy proactively disclosing management plans, business results, CSR and environmental initiatives, and other information, NGK SPARK PLUG intends to foster an

non-financial information. For detailed financial information,

understanding of the company among all stakeholders and create opportunities for communication. As a means to achieve this objective, we issue the Integrated

please refer to the Securities Report and Business Results

Report and CSR Report.

Briefing Presentation Materials. In regard to the CSR Report
and CSR website, detailed information on the company’s

Scope and Period Covered

Guidelines for Reference

Period covered: The year ended March 31, 2018 (April 1, 2017 – March 31, 2018)“The International Integrated Reporting Framework,” the International

Some information pertaining to activities in the year ending

Integrated Reporting Council (IIRC)

March 31, 2019 is also included.

“Guidance for Integrated Corporate Disclosure and Company-Investor

Scope: The NGK SPARK PLUG Group
Some information reported by NGK SPARK PLUG (non-consolidated)

initiatives is available on our website.

NGK SPARK PLUG Integrated Report

Shareholder Newsletter

Corporate Governance
ReportBusiness Results Briefing
Presentation Materials

CSR Report and CSR
websiteDialogues for Collaborative Value Creation,” the Ministry of Economy,
Trade and Industry
Detailis also included.
Note Regarding Forward-looking Statements

Securities
ReportFinancial information

This report contains forward-looking statements regarding the company’s future plans, strategies, and business results. Please note that actual business results may
differ from the expectations presented in this report.

NGK SPARK PLUG Communication
Summary

Editorial Policy

https://www.ngkntk.co.jp/english/

Non-financial information

Financial and Corporate Data

36 Review of Business (3)03 About NGK SPARK PLUG

Our Standing Position

Financial and Non-financial
Highlights

Keyword fortoday’s NGKSPARK PLUGNGK SPARK PLUG is a “highly profitable company.” An operating income ratio of 16.4% (year ended March
31, 2018) is a high level among companies in the automotive component industry. With a target of 20% for
the year ending March 31, 2021, we will continue to be a highly profitable company.

Financial Highlights

16.4 %

Year ended
March 31, 2018

Operatingincome ratio

01

Non-financial Highlights

Performance

Data related to employees

Net sales/Operating income/Operating income ratio■■

Net sales ■■ Operating income(Millions of yen)
400,000

383,272
347,636

329,758
300,000

Profit attributable to owners of the parent/ROE (Return on equity)

Operating income ratio

17.9
15.7

409,912■■

Profit attributable to owners of the parent（%）(Millions of yen)

20

60,000372,919

11.5

12.0

11.4
9.1

15
40,00014.4

200,000（%）(Number of patents)

12.0

1,200

44,33530,81551,66153,595

2014/3

2015/3

2016/3Equity ratio

2015/3

2016/32017/3（%）■■ Cash dividends per share

Dividend payout ratio
(%)

100

50

80

80.0

65.6

70.2

60.0

64.4

63.5

62.5

40

35.2
29.7

60

60

40

21.3

18.6

42

10

0

0

2014/3

2015/3

2016/3

2018/32017/3

2014/3

2015/3

2016/32017/32017/3

2018/3

2014/3

Ratio of female employees/Number of female employees inmanagerial posts (non-consolidated)■■

Number of female employees in managerial posts

16.72

2016/3

17.41

2018/3■■(%)(Number of persons)

20.00

80

15.00

60

Number of employees on childcare leave

16.30

16.14

15.78

2017/3

Number of employees on childcare leave (non-consolidated)20

15

2015/3

Ratio of female employees(Number of persons)

55

58

53

12

48

47

10

10.00

40

5.00

20

0

0

8

20

20

0

2016/3

10

36

28
20.0

42

2015/3

30

28.7
40.0

451

446

5,851

5,719

0

2014/3

(Yen)

100.0

15,322

4,000

578

0

2018/3

Cash dividends per share/Dividend payout ratio
Equity ratio

565

5,829

5,823

5,809
448

0

2014/3

14,926

14,524

13,197

8,000
4.0

0

2018/32017/3

12,000300

012,760421

396

67,2790

Non-consolidated ■■ Consolidated

16,000

432

371

572

5

66,284

1,010

936

872

842

600

20,00062,196■■20,000900

7.4
25,602

In Japan ■■ Outside Japan(Number of persons)8.0

36,75332,704

10

100,000

Number of employees at work
■■

1,020

16.4
17.3

Number of new patents filed

ROE (Return on equity)

6

5

4

0

2018/3

2014/3

2015/3

2016/32017/3

2014/3

2018/3

2015/3

2016/32017/3

2018/3

Data related to environment
Capital expenditures/Depreciation

Earnings per share
■■

(Yen)

Earnings per share

209.37200.00150.26

Capital expenditures ■■ Depreciation(Millions of yen)35

50,00040,00036,372141.60119.4430

41,03436,32837,591

30,000Fluctuations in tap water/well water usage

Outside Japan■■ Groups in Japan (without integrated certification)■■ Groups in Japan (with integrated certification)

Outside Japan
Groups in Japan (without integrated certification)■■ Groups in Japan (with integrated certification)■■

CO2 emissions (10,000 tons-CO2)

45,339168.88150.00Fluctuations in CO2 emissions from energy use
■■

25

28.89
3.41

31.17
27.61
3.28

28.56
3.62
1.29

■■

200

31.43

5.04

5.37

1.51

1.25

■■

Amount of water used (10,000 m3)

160

168

162
25

26

120

20

166

162

162

28
4

38

38

5

4

130

124

120

100.0020,00050.00

10,000011,567

13,337

16,834

19,601

20,92010

2015/3

2016/32017/3

2018/3

80

25.48

24.33

23.65

24.63

24.81

0

2014/3

2015/3

2016/32017/3

2018/3

143

136

40

5

0

2014/315

0

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/304

05 About NGK SPARK PLUG

06

Corporate Philosophy andLong-term Management Plan

Keyword fortoday’s NGKSPARK PLUG

The “NITTOKU SHINKARON” is NGK SPARK PLUG’s long-term management plan. Through the 3-year phases of“Delving,” “Renovating,” and “Evolving,” we will seek to become the No. 1 leading “Monozukuri” company thatdelivers real value to customers across the world, a highly profitable company, a progressive company, and ahuman “asset” company. By 2020, we will strive to be a company that can offer “Real Value” to all our stakeholders.

Corporate Philosophy

02

NITTOKUSHINKARON

Long-term Management Plan: NITTOKU SHINKARONAt NGK SPARK PLUG, we aim to contribute to people all over the world by linking people to technologies anddelivering new values. As a truly global corporation, we want to build stronger ties not only with customers andcommunities, but the local and global environments. We are always working to make our corporate philosophy
and our commitments a reality.

Three elements constitute ourcorporate philosophy.

We offer a working
environment in which each oneof us is encouraged to makefull use of his or her personality
and capabilities. With all our
power we are dedicated topursue management based ontrust and confidence.

SloganWith established trust andconfidence inside and outside
the company, we aim tocontribute to the peoples of theworld by creating andputting at their disposal
new values forthe future.

Ever onward! Always mindfulof what is the best course,
we swiftly put it into action.

With full use of the most suitable
technology and our accumulated
experience, we continue striving to offer
new values to the peoples of the world.

The Nittoku Way
The Nittoku Way refers to a set of philosophies that includes values that are sharedby the entire NGK SPARK PLUG Group, and the actions based on these philosophies,
as well as the manner in which those actions are carried out.

The Four Shared Values of
the Nittoku Way
Shisei-Shinjitsu

Sincerely, do our very best.

Dokuritsu-Jiei

Believe in one’s own ability, and takeactions by oneself.

Shikai-Keitei

Unite efforts with the people of the world,
and utilize each other’s differences.

Soshi-Kantetsu

Have cherished desire, and carry it throughtill the end.

Seventh medium-term management plan(for FY2016 to FY2020)

NGK existing

Spark business
Plug

DelvingRenovating

Evolving

FY2010 to 2012

FY2013 to 2015

FY2016 to 2018

Delve into existing
business and seek
new business

Launch new products
or new business

Develop existing and new
businessat an accelerated rate

Real
Value

07 About NGK SPARK PLUG

08

History of our Challenges andCreation of our Strengths

Keyword fortoday’s NGKSPARK PLUG

Our company has continued to challange and evolate. Its roots can be traced to Morimura Gumi, foundedby the forefather of the Morimura Group, Ichizaemon Morimura in 1876. On-time delivery of quality products
at affordable prices. Morimura Gumi’s DNA of a commitment to quality continues to flow through the veinsof NGK SPARK PLUG to this day.

Challenge

03

Morimura Gumi
(March 1876)

Nippon Toki
Gomei Kaisha

Morimura Bank
(June 1897)(January 1904)

Okura Art China(May 1919)

Merged with
Mitsubishi Bank

Okura Art
China.Inc.

(1929)(reorganized in April 1950)

Morimura Gumi
Co., Ltd.

Toyo TokiCo., Ltd.

Nippon Toki,Ltd.

NGK Insulators,
Ltd.

(April 1918)(May 1917)(July 1917)(May 1919)

Noritake
Co.,Limited

NGK Insulators, Ltd.

Morimura
Bros., Inc.
(changed corporatename in July 1946)

TOTO Ltd.
(changed corporatename in May 2007)(changed corporatename in April 1981)(changed a part of corporatename from Kanji to
Katakanain May 1986)

NGK SPARKPLUG(October 1936)

Established Ceramica e Velas de Ignicao NGK do Brasil Ltda.

Origins of the Morimura Group1876 —Startup Period

1950 —The birth of NGK SPARK PLUG

Establishing the NTK brandand expanding overseas

The first spark plugs manufacturer in Japan.
NGK SPARK PLUG’s history starts with Morimura Gumi,a corporate group whose name is synonymous withJapan’s ceramic industry that was founded in 1876.
The founding brothers of Ichizaemon Morimura
and Toyo Morimura were honest and passionate
merchants. Determined to reclaim wealth which had
flowed overseas, they embraced the challenge of
foreign trade for the prosperity of Japan. On-time
delivery of quality products at affordable prices. The
sincerity of the Morimura Bros. Inc. was valued evenin the foreign culture of the United States, building
trusting relationships. The Morimura Bros. declined
the help of the Meiji government and started a small

Growth Period

trade business based on their independent spirit,and their business gradually grew bigger. Eventually,
Morimura Gumi began to manufacture ceramics andthe Morimura Group was born.
NGK SPARK PLUG was established in 1936 asa spinoff from the Spark Plug Division of NGK
Insulators. Our spark plug production began after adecision by Magoemon Ezoe, the first president of
the company, that we would “produce plugs using
our country’s ceramics.” Our plug manufacturing
has since grown to cement a position as the No. 1
manufacturer of spark plugs in the world, andcontinues to evolve.

After postwar confusion had settled down and plug
manufacturing stabilized, we embarked on
development of technologies and products thatmade use of ceramics, in an effort to diversify ourbusiness. This marked the birth of the NTK brand. In
the mid-1950s, using the development of ceramic
products that served as the foundation of the “NTKbrand,” we moved into products in the areas ofindustry and environment. For example,
piezoelectric ceramics utilize the active properties ofceramics to create voltage by applying pressure orsonic waves by applying voltage. Later, as a new
type of ceramic, the NTK brand is currently used in awide range of applications not limited to plugrelated products.
Furthermore, exports increased as Japan
entered a period of rapid economic expansion.
Using the 1959 establishment of our first overseas
base of operations in Brazil as a starting point, we
actively expanded overseas, creating a strong
overseas network. As overseas sales grew, we
provided plugs to the world’s premiere motorcycle
race, and that machine took the top position.
Thanks to strong performance at races by machines
fitted with our spark plugs, our brand became
known worldwide.

1876

1936

1949

1959

Founding of
Morimura Gumi

Founding of NGKSPARK PLUG

Started the
manufacture of NTK
technical ceramics

Established Ceramica e Velas de Ignicao NGK do Brasil Ltda.

1930

1937

Launched “NG Spark Plugs,” the firstspark plugs manufactured in Japan

Started manufacturingof NGK Spark Plugs

1958

1967

Developed ceramic
chip cutting tools

Started the
manufacture of IC
packages09 About NGK SPARK PLUG

10

Keyword fortoday’s NGKSPARK PLUG

History of our Challenges and Creation of our Strengths

03

Challenge

Wide range oxygen sensor

Exhaust temperature sensor

Zirconia oxygen sensor

1960 —

Establishment Period

1990 —

Full-scale motorization of society
and sensor development
The full-scale motorization of society arrived in the
1960s alongside the expansion of the Japanese
economy. In 1967, the number of vehicles owned inJapan exceeded 10 million, and cars could be seen
throughout the country. Meanwhile, environmental
pollution such as air pollution became a social issue,
and in 1968, the Air Pollution Control Act was
passed in Japan. Administrative guidance wasprovided calling on countermeasures against
exhaust gases. At the time, the United States andJapan were the only countries with such exhaust

Bioceramics

Started the manufacture oftemperature sensors forautomobiles

Development Period

Toward development of products
for the next generation

gas regulations, but the movement eventually
spread to other developed nations, and theregulations became increasingly strict with thepassage of time. Amid such circumstances, webegan development on various automotive sensors,
including exhaust gas sensors, zirconia oxygen
sensors, and wide range oxygen sensors. From thenon, toward creating a sustainable environment,
society, and economy, we have continued to create
products in response to increasingly strict regulations.

1973

Iridium plug

To respond to energy and environmental issues for the
next generation, we are accelerating development ofhigh performance spark plugs and sensors, along withmeasures for a society powered by hydrogen energy.
In 2000, the automotive industry began
development of fuel cell vehicles (FCV). We also began
developing a “hydrogen leak detection sensor.” Throughusing sensor technologies from automotive oxygen
sensors, we were successful in developing the industry’s
first automotive thermal conductivity hydrogen sensor.
The hydrogen leak detection sensor, which canaccurately detect hydrogen leaks, has already been
selected for use in the mass production of FCVs.

Additionally, we are also proactively developing
solid oxide fuel cells (SOFC), and established theFuel Cell Div. in 2016. We are focusing on the
product that incorporates our core ceramic molding,printing, bonding and sintering technologies, andare fostering its R&D. Furthermore, we are also
engaging in R&D in the medical field, with a view tocontributing to the aging society.
We will continue to challenge ourselves in a variety
of fields through the use of various technologies thatcan be derived from ceramics.

1985

2006

2016

Started the manufacture of glow plugs(ceramic type)

Total number of domestic
production of Spark Plugs reached
10 billion units

Started the sale ofhydrogen leakdetection sensors

1982

2005

2007

Started the manufacture ofoxygen sensors forautomobiles

Developed a hydroxyapatite cement

Developed “1kW class solidoxide fuel cell power
generation system”

11 About NGK SPARK PLUG12NGK SPARK PLUG’s
Sales Structure

Keyword fortoday’s NGKSPARK PLUG

The company’s ratio of sales outside Japan is 84%. Our business network spans 21 countries. We are
actively working to expand our production and sales network into emerging markets by creating a
production system optimized on a global scale.

Net sales
outside Japan

04

84 %

Consolidated net sales composition by business

Consolidated net sales composition by region

The automotive components business, which is centered on spark plugs and automotive exhaust gas sensors,
accounts for 80% or more of the company’s sales. At present, we are focusing on creating new businesses, as we
aim to diversify our portfolio of businesses over the long-term.

The company operates businesses around the world, We are somewhat affected by foreign exchange rates,
but we do not rely on any particular region, and therefore our risks are diversified.

Technical ceramics group– ceramics div. –

10%

Other

1%

Central and SouthAmerica

Other

7%

4%

Japan

17%

North America

26%

Cutting tools

Net sales for the year ended
March 31, 2018

409.9

Electrostatic chucks

Technical ceramics group– semiconductor div. –billion yen

4%

Net sales for the year ended
March 31, 2018409.9
billion yen

Semiconductor ceramic packages

Automotive
Components group

85%
Asia

Spark plugs

Glow plugs

Automotive exhaust gas sensors

20%

Europe26%

13 About NGK SPARK PLUG

14

Past, Present, and FutureManagement Plans

Keyword fortoday’s NGKSPARK PLUG

Real Value05

The company is moving forward with its “three years of evolving” and the five years that look toward
creating “Real Value” as its seventh medium-term management plan to serve as the final phase of“NITTOKU SHINKARON.” We are diligently working to provide real value through resolving management
issues that were discovered through practice.

Looking back on the Medium-term Management Plans
Year ended March 31, 2011 to year ended
March 31, 2013 Delving
Delve into existing businesses andseek new business

From year ended March 31, 2017 Evolving

Launch new products or new business

Develop existing and new business at an accelerated rate

Period to assess and recognize changes in theenvironment surrounding our company

Preparation period to become newly rebornWith a foundation in measures under “Delving,” increase speed in “decision-making” and“execution” to work toward the launch of new products and new businesses

A preparation period to become newly reborn, change what needs to be changed with courage while staying true
to our DNA
In 2010, we raised the “NITTOKU SHINKARON” long-term management plan in view of where we wish to be in 10 years, and thisplan is an evolution that serves as the final stage and looks toward creating Real Value over a period of five years

Basic policy

Establish footing for a strong business foundation andfurther development“Maximize use of management resources, implementing bold challenges in new business areas andsectors ahead of ‘Evolution’”Issues to
focus on(1) Restructure and solidify current businesses via stronger“Monozukuri” abilities(2) Develop new products for the next generation via new
R&D structure(3) Strengthen organizational abilities via strategic use of
personnel resources(1) Provide new value in promising new areas via strategic marketing activities(2) Not only strengthen current core competencies, but also implement development of new corecompetencies(3) Recognize that human “assets” are what will “Renovate” the company and accelerate therenovation of the company via designating and achieving our own commitments(1) Establishing new business pillars(2) Strengthening current businesses(3) Establishing strong business infrastructure2010  NGK Spark Plugs (France) takes over NGK Spark
Plug Industries Europe (France) via an absorptiontype merger
2011  Advanced concentration to United States West
Virginia Factory by closing Irvine Factory
2012  Strengthened ceramic sensor manufacturing
capabilities

2013

From 2017  To strengthen sensor production system, increased capacity at NGK SPARK PLUGS (ASIA) and NGK SPARKPLUGS (INDIA)

ConceptCoreelements

Year ended March 31, 2014 to year ended
March 31, 2016 Renovating

Automotive
components
group

2014
2015

Chinese sensor manufacturingsubsidiary “Changshu NGK Spark Plug”
begins operations
Construction completed for SparkTec
TONO Nino Headquarters Plant
Acquired Wells Manufacturing L.P.

Accelerating Current & New Businesses

Our Ideal Image in theYear 2020

Delivering “Real Value”

SparkTech Tono Co., Ltd

Current
businesses

Ceramics-div.
2010  Dissolved cutting tool business subsidiary in
PolandTechnical
ceramics
groupNew
products
Newbusiness
expansion

ESG
measures

RemainingissuesSolid oxide fuel cell (SOFC)
Product development using our company’s technologies
for global needs and markets in response to global
warming
New business discovery project
Launched project team with the objective of creating
new next-generation businesses by FY2020 and began
activities (response to changes in the management
environment such as revolutions in automotive
technology)
2010
2011
2012

Founded the CSR Committee
Established the CSR Policy
Decreased the upper limit of the number of
directors from 25 to 13
Introduced the corporate officer system

 onsider new direction toward structural reforms in theCcommunication media components businessThorough CSR Strengthen control functions andglobalization of headquarters divisions
Improve organization abilities
Strengthen technical ceramics divisions

Semiconductor div.
2013 Completed transfer of commercial rights in manufacture of organic CPU packages to
Taiwanese partner
2014 Terminated production of organic packages
Ceramics-div.
2014 Transferred dielectric business to MARUWA
2015 Acquired all shares in Nihon Ceratec
Transferred assets for ceramic tube business for vacuum switches to India-based
Developed new material for cutting tools “BIDEMICS”

2013
2014

2015
2016

2013
2014
2015

Capital and business alliance with Eastern Co., Ltd. (Joint exploration of new markets (FCCSP))
Joint development of “FOMM Concept One” ultracompact electric vehicle with FOMM
Finalized partnership with US-based Spirometrix to create new products that utilize current
sensor technologies
Toward mass production of “Tubular-type Cell Stack” solid oxide fuel cells (SOFC), enteredbusiness alliance with Mitsubishi Hitachi Power Systems, Ltd.
Established the Fuel Cell Div.
“KM5 5touch (Sale name: 02Fresh-5G)” oxygen concentrator for medical use
Began mass production of hydrogen leak detection sensors

Semiconductor div.
Made semiconductor business an independent subsidiary
2016
Established NTK Ceramic
Reconsidered semiconductor business and manufacturing facilities
Until 2017 Withdrew from crystal PKG businessHighly Profitable Company
Progressive Company
Human “Asset” Company

2016
2017

Capital alliance with Japan Medical Dynamic Marketing (manufacture and sale of orthopedic implant products)
Began experimental operation of SOFC “pressurized hybrid power generation system” (Komaki)
Joint development with Hokkaido University toward practical use of artificial cartilage materials
Established healthcare material joint research laboratory with AIST
Expand use of planar SOFC (from residential to industrial)
Gas inhalation sensors: Begin sales of “NO (nitrogen monoxide) inhalation measurement units for hospitals” featuring oursensor units in Europe

New products in development
All-solid batteries Laser diode packages for automotive use

Appointed an outside director Launched DIAMOND (Women Empowerment) Project
Began holding global personnel conferences
Increased number of outside directors to two

2016

Formulated the criteria for the appointment of independent directors
Began assessing the effectiveness of the Board of Directors
Established the working style reform committee

2017

Break away from reliance of over 80% on internal combustion engines
Sharing and strengthening internal technologies; establishment of commercialization promotion structure
Create new businesses
Strengthen management foundations toward business growth
Improve organization abilities

The No. 1 Leading “Monozukuri” Company

Air quality sensors

Increased the number of outside directors to three Joined the UN Global Compact
Began program to develop the next generation of global business leaders
Founded the Working Styles Reforming Office Formulated the “Global Eco Vision 2020”
Established the Nomination and Remuneration Committees Introduced the performance-linked stock remuneration system
Turned overseas bases into regional headquarters (RHQs) Designated as ESG investment stock
Certified Bronze Class at the Sustainable Award 2017 Certified as one of the Excellent Enterprises of Health andProductivity Management (“White 500”) Certified as one of the New Diversity Management Selection 100 companies

Response to contraction in internal combustion engines and movement toward EVs and electrification
Development of new businesses
Fair corporate culture that allows for diverse individuals to reach their potential
Enrichment of corporate governance*The chart shows net sales.

15 Commentary on strategies to create value

Strategic View

16

CEO Message

by maintaining our status as a highly profitable company

Shinichi Odo
Representative Director and Chairman of
the Board Chief Executive Officer
President Officer“NITTOKU SHINKARON” Long-Term
Management Plan Progress
Since the founding of NGK SPARK PLUG in 1936, we haveestablished our raison d’etre as offering new value to people
around the world, utilizing our technical expertise in combining
our core strength in ceramics with different materials, ourdevelopment of quality products, and our technical expertise inmass-production. Our businesses have been developed in linewith global economic expansion and the trend toward
motorization. As targets for the year ending March 31, 2021,

the final year of our seventh medium-term management plan,
have designated net sales of 520 billion yen and operating
income of 100 billion yen, and we are continuing to endeavor
to achieve these targets.
In the “NITTOKU SHINKARON,” a long-term
management plan we formulated in 2010, we outlined ourideal images in the year 2020 as a “‘Monozukuri’ company,”a “highly profitable company,” a “progressive company,” anda “human ‘asset’ company.” We have divided our path toachieve this images into three steps: “delving,” where wedelve into existing businesses and seek new businesses;

to new businesses and there are aspects that are difficult tocontrol, but in view of potential ultra-long-term risks posedby the shift to electric vehicles and the spread of car sharing,
we must create new business pillars. In addition, as thebusiness environment changes, we shall also hasten tostrengthen our management foundations to facilitatesustainable growth. With regard to being a “human ‘asset’company,” we are engaged in diversity management andpersonnel reforms in the form of providing opportunities for
women and the “platinum generation (aging workers)” via theStrategic Human Resources Department. We are fostering a
corporate culture that treats our diverse human resources
fairly, and enables them to work in a lively and active manner.

Summary of the Year Ended March 31, 2018:
Promoting both the further strengthening ofwell-performing current businesses andcreation of new businesses
Regarding recent business results, the automotive
components business has been performing favorably overall
due to the effect of the ongoing strong demand for spark
plugs, glow plugs, and sensors not only in developed
markets, but also in emerging markets such as China, India,
and Thailand. In China in particular, sales have grown by
more than 20% year on year, and there has also been acontribution to profits from factors such as the good
reception to precious metal plugs and other value-added
products in the repair parts market, and we have thus
made progress with the issue of expanding sales inemerging markets.
Stricter environmental regulations around the world arecontributing to increased demand in the sensor business,
and we expect the number of units in use to continue
increasing, mainly with regard to value-added products suchas wide-range sensors that measure oxygen concentrationin exhaust gas and sensors that detect NOx. Volumes ofsome sensors have decreased with the decline in sales ofdiesel-powered vehicles, but overall demand continues totrend upward, partly because of an offsetting increase from ashift to sales of gasoline-powered vehicles, and we shall
respond to the demands of the market.
In our semiconductor package business, which remains
an issue, we made it a business subsidiary in 2016, and havebeen diligently working by inviting management talent,reconsidering facilities, selecting and concentrating ofproducts, and reduce fixed costs. As a result, for the year
ended March 31, 2018, we were successful in reducing theamount of losses by about half compared to the previous
year. We are making steady progress in line with ourregeneration plan, and are focusing on achieving profitability
over the full-year by the year ending March 31, 2020.
In addition, in regard to new businesses, we are focusing
on developing and producing tubular and planar stacks in thefuel cell business, which was established as division in 2016,
in order to supply a full line-up of stacks for home use,commercial use, and industrial use. Looking ahead, there areplans for the installation of a pressurized hybrid power

Evolving

at an accelerated rate

Commentary on strategies to create value

Work to achieve
the long-term management
plan targets“renovating,” where we launch new products and new
businesses; and “evolving,” where we develop existing andnew businesses at an accelerated rate; and our aim has
been to become a company that can ultimately deliver “RealValue” to all stakeholders.
At present, we are in the third step, “evolving.” In termsof our current state compared with our ideal images, withrespect to becoming a “‘Monozukuri’ company,” we havemaintained the top share of the global spark plugs market
for many years, and have also acquired the top share in thetemperature sensor market. In addition, we are also pursuingunique core technology and using it to create new products,
including R&D on all-solid state batteries, which are very
safe, using our proprietary technology. With respect tobecoming a “highly profitable company,” our operating
income ratio for the year ended March 31, 2018 was 16.4%,
maintaining a high level among companies in the automotive
components industry. We are targeting an operating income
ratio of 20% by the year ending March 31, 2021, as we
focus on management that prioritizes high profitability by
reducing losses in the ceramic packaging business of thesemiconductor-related business in line with plans andimproving profitability for the Group as a whole. Regarding
becoming a “progressive company,” in addition to aiming
toward further expansion in current businesses, we will
actively advance the creation of new businesses. Sales in theautomotive components business are currently proceeding
ahead of targets and still make up over 80% of the total, as
the proportion of growth businesses, including new
businesses, remains relatively low in terms of the balance ofour business portfolio. There are many uncertainties related

17 Commentary on strategies to create value

18

CEO Message

generation system (made by Mitsubishi Hitachi Power
Systems, Ltd.) equipped with our Tubular-type Cell Stacks.

There is a possibility that the external environment of ourcompany will change drastically in the future due to factors
such as the spread of electric vehicles (EVs). Furthermore,
PHVs (plug-in hybrid vehicles) run for longer periods solely
on electrical power than HVs (hybrid vehicles), so we mustalso consider the possibility that spark plugs will last much
longer. Looking ahead, it might be shrinking the repair parts
business along with the spread of EVs and PHVs. We
recognize these changes as significant risks that may affectour businesses, and we must adopt countermeasures froma long-term perspective. On a daily basis, I encourage our
employees to face new challenges and take risks to create
and foster new businesses.
Meanwhile, according to documents published this yearby the International Energy Agency (IEA), against a backdrop
of increasing automotive demand in emerging markets, thenumber of automobiles with internal combustion engines willcontinue to grow until 2050 in both the global number soldand number owned, commanding a large share of the overall
automotive industry, even with the inclusion of EVs. This
indicates a scenario where there will not be such a rapid shift
toward EVs that do not require our mainstay products ofspark plugs and sensors in the next 10 to 20 years. In
particular, about 75% of the spark plugs our Group provides
are used for repair purposes. Even after new cars are sold,spark plugs must be replaced for vehicles owned, so it isunlikely that this demand will fall drastically in a short span oftime, and when viewed from the global market, the market isactually expected to grow at over 5% on an annual basis. As
we hold a significant share of the global spark plug market atpresent, the NGK SPARK PLUG Group must continue toprovide a stable supply to the market.
We must make some difficult decisions with regard to
future demand forecasts, but we shall endeavor not to suffer
significant opportunity losses in an optimistic scenario, and
we also intend to establish new businesses that can secure
profits even if a crisis occurs sooner than expected in a
scenario unfavorable for the company, while carefully
assessing capital expenditures and making bold decisions
so as not to miss opportunities for investment in new
businesses, and thereby addressing business risks that will
significantly impact our management.

Not limited to EV risk, there are various risks surrounding
our company’s businesses over the medium- to longterm stemming from trends in the market, technology,
and laws and regulations. One such risk that we have oureye on is the effect of progress in ICT (information andcommunications technology) on distribution forautomotive components. Spark plugs for repair use aremainly sold in stores, etc., and we have built a strong
distribution network. However, developments in ICT havecaused revolutions in retail formats in many industries,
and we are aware that we must implement some form ofcountermeasure in future, even in retail distribution for a
BtoB company like us. First, we shall further utilize our
distribution network to sell other automotive components
in addition to spark plugs, such as ignition coils.

To further expand the automotive business,revise ‘monozukuri’
Against a backdrop of stronger environmental regulations, there
have been rapid improvements in vehicle fuel economy,
reductions of CO2 emissions, and downsizing of engines. As aresult, not only must spark plugs maintain and improve a highlevel of ignitability, but their sizes must be adjusted to reduce
their diameter and make them longer as well.
The insulator, which serves as the core of the spark plug, islike a piece of pottery that must be baked, and is a functional
component that is very difficult to make thin, narrow and long.
We are able to respond to trends in new engines andenvironmental regulations because we have expertise nurtured
over many years from taking on the entire process ofdevelopment and manufacturing from ceramic materials to thefinal product, including production technologies to stably
produce quality functional components such as these. I believethat this “ceramic development ability” and “ceramic productmass production technical expertise” give NGK SPARK PLUG acompetitive advantage.
However, there are issues that we must address infuture in regard to production processes. In addition tocontinuously striving to improve performance and quality,
we have also constantly improved productivity as well,
but at present, full automation has not been achieved,
and there are certain processes that require a humantouch. In particular, with an older population and lower
birthrate in Japan, a lack of personnel is an increasingly
dire issue regardless of industry, and issues lie in the useof robotics in the manufacturing process and further

Assess business risks andkeep withthe times
advancement of automation.
At the same time, another issue is the continuation of
manufacturing technologies that have been fostered during
our over 80 years in Monozukuri. Automation andsystemization has advanced by leaps and bounds in the
manufacturing process for ceramics products, and timerequired for baking has been reduced significantly. For
example, we recently succeeded in reducing the timerequired for baking processes for insulators by one hour, but
doing so required many years of steady testing. In this way,
there are many aspects of ceramics that cannot be fully
explained by logic alone, and aspects remain that are reliant
on people’s intuition and talent. In addition to handing downthese technologies and abilities to the young generation,
through the use of ICT, it will also be necessary to consider
Monozukuri methods that do not rely on intuition and talent.

Semiconductor package business to movefrom “survival” to “winning”
We are implementing reforms in the semiconductor
package business, where losses have continued formany years, as we aim to achieve profitability by theyear ending March 31, 2020.
The company intends to continue operating thesemiconductor package business. Value-added products
such as wide-range sensors and planar fuel cell stacks havebeen created by using semiconductor package technology
in a cross-departmental manner. We have been able to refine
our core semiconductor package technologies precisely
because we operate the semiconductor package businessas a business rather than R&D, and have developed
applications for products through varied trial and error underdifficult circumstances. First, we aim to “survive” and achieve
profitability, in order to continue operating this business.
On the other hand, it will be difficult to target businessdevelopment if, after profitability is achieved, the operating
income ratio is only 2% to 3%.There is no room for growthinvestment, and we shall therefore soon consider strategies
aimed at moving from “surviving” to “winning,” to enable us
to secure an appropriate operating income ratio to invest
for “winning”.

Improving efficiency for supply chain
management on a global scale
NGK SPARK PLUG operates businesses on a global scale,and we recognize that reforms aimed at further
strengthening supply chain management (SCM) are an
important issue. With regard to our mainstay spark plugs
products, they can be shipped in high densities via transport
containers due to their small size. Accordingly, transportation
expenses as a portion of overall costs have remained at alevel that does not have a significant effect. However,logistics costs such as personnel expenses in warehousing
operations are on the rise around the world. In response, forexample, we invested several billion yen in Europe to focus
on introducing robotics and automation in our logistics
operations. In Japan, we also created a new logistics center
three years ago and established a model method, which wehave begun rolling out globally. In the future, we will
accelerate such measures globally, and work toward the
optimization of logistics.

Targets for the year ending March 31, 2019:
Forecasts call for increased sales and profitson the back of strong performance from theautomotive components business
Regarding business results forecasts for the year ending
March 31, 2019, at present, we project that both net sales

Commentary on strategies to create value

Correspond to business risks in achanging market

Preparing for business risks from gamechangers such as entry by the ICT industry
into distribution

19 Commentary on strategies to create value

20

CEO Message* SPE = Semiconductor production equipment

Direction in new businesses:“Solving social issues” through our products
For our direction in new businesses, we have considered fields
where we can utilize our strengths to tackle business
opportunities, while remaining mindful of our contribution to
future social issues. Specifically, we will advance initiatives in
next-generation automobiles, the environment- and energyrelated field, and the medical field.
First is the development of cell stacks that serve as the corecomponent of solid oxide fuel cells (SOFC), which are expected
to serve a vital role in a hydrogen society. Hope has been placedin SOFCs as fuel cells for power generation that use ceramicsolid electrolytes. As this field can make use of our specialty inceramics technologies, we are currently focusing on productcommercialization with the aim of becoming a comprehensive
cell stack manufacturer including residential, commercial, andindustrial use.
Additionally, we are also advancing development ofelemental technologies regarding solid-state batteries, which
are being looked at as next-generation batteries due to theirhigh safety and performance. As their solid inorganic
compounds are used as electrolyte material, we areadvancing development that makes use of our ceramics
technologies here as well. After about 10 years of R&D,
component prototypes have been completed, and we arelooking into future business expansion.
Meanwhile, in the medical field, we have developed
techniques for ceramics in the form of sintered bone
prosthetic materials, which are made by sintering materials
incorporating the inorganic component of bones, andhardening-type bone prosthesis, which can fit to replaceabsent parts of the bones during surgery and harden inbodies afterward. Furthermore, we are also promoting
development of new artificial bones that have features similar
to natural bones as well as strengthening our businesses
through initiatives such as a capital alliance in 2016 withJapan Medical Dynamic Marketing, INC., a reseller of medical
devices. In future, we shall consider business development,
including M&A, as we look toward expanding sales in Europe,
United States, and other developed countries.

Establishing corporate culture essential for
creating new businesses and personnel
reforms aimed at sustainable growth
It is my belief that to create new businesses, changing our
employees’ mindset is essential. Our Group has established

Solvingsocial issues

through our products and creating
our new value

a solid business model through spark plugs and sensors,
and to our benefit, we have been able to expand ourbusiness through a chain of successes. But viewed from adifferent perspective, we are prone to becoming anorganization that finds it difficult to foster a corporate
culture that does not fear failure.
In the seven years that have passed since I becamepresident, I have talked and explained about the importanceof facing challenges and taking risks. Compared with when I
was appointed as president, I can feel that the mindset ofour employees has definitely begun to change. In addition,
we have launched the “DNA Project,” which has theobjective of creating businesses for 10 years in the future,and is centered on employees in their 20s and 30s. This
project led to the creation of a new subsidiary in 2018. In
addition, in order to encourage people to “face challenges”
in the company, we began reforming our personnel structure
four years ago, with the aim of renewing the evaluation
system. At present, we are continuing with personnel
reforms under the leadership of the Strategic Human
Resources Department. We will work to create “transparency
in personnel assets” on a global basis through initiatives
such as creating a personnel asset database, while
promoting the unified management of personnel assets,from acquisition to development to assignment.
In 2013, the Group launched the “DIAMOND
Project,” and has been promoting the creation of aworkplace where women can shine. Furthermore, in
2015, we also began work on “working style reforms”
that revisit work-life balance on a companywide scale,not just for women. Although the DIAMOND Project has
been successful in increasing the number of women in
managerial positions by a factor of three since its launch
five years ago, I feel that if the number increases by afactor of three again, it will be easier for women toenvision a career and actively participate. In addition, weshall further promote diversity among management, inorder to approach issues from a range of perspectives,and live up to the expectations of stakeholders.

Approach to governance
After introducing a corporate officer system in 2012, wehave reduced the number of directors and currently havestructure with ten directors including three outside
directors and four audit & supervisory board members
including two outside audit & supervisory board members.
With a broad range of ideas exchanged at board meetings,
I think that the Board of Directors is functioning well, andthanks to the introduction of the Nomination andRemuneration Committees, decisions are not made solely

by people like the CEO or COO, but through a frameworkin which persons in open environments both inside andoutside of the company can understand. In addition, aperformance-linked stock remuneration system has been
introduced for executives since 2017 with the intent ofheightening their motivation to contribute to improving
business results and expanding our corporate value overthe medium- to long-term. In regard to crossshareholdings, we have been reducing our shareholdings
on a yearly basis, and are considering further reducing ourshareholdings in future.
NGK SPARK PLUG signed the UN Global Compact inNovember 2016. As a good corporate citizen, we will comply
with the ten principles of the Compact and contribute to thecreation of a sustainable society through the achievement of
the Sustainable Development Goals (SDGs).

Approach to shareholder returns
In the seventh medium-term management plan, our basic
policy is to return profits to shareholders, with a stabledividend as the base and a dividend payout ratio of atleast 30%, also share buybacks accordingly, but I would
like to aim for a total return ratio of 50% when sharebuybacks are included. We are still at the stage where newinvestments and capital expenditure to prevent opportunity
losses are required, and I would like to ask forshareholders’ understanding in this regard.

Becoming a corporate group that cancontribute to a bright future of growth in theautomotive industry
Thank you for your kind support of NGK SPARK PLUG.
As the overall automotive industry moves toward a
historic revolution, automotive components manufacturers
need to redefine their own positions. Our Group will not beheld back by our previous successes and current
conditions, keeping a watchful eye on market and industry
changes to reveal our path forward. And through solving
societal issues, we will aim to become a corporate groupthat can contribute to the development of a bright future.
To our shareholders and investors, I ask for yourcontinued understanding and support.

Commentary on strategies to create value

and income will improve upon those achieved during theprevious year. In addition to products such as spark plugs
and sensors in the automotive components business
continuing to be drivers, the technical ceramics businesssuch as SPE business* will also contribute to results.
For the full year, we forecast that net sales will increase by
6.4% year on year to of 436.0 billion yen, operating income
will increase by 7.0% year on year to 72.0 billion yen,ordinary income will increase by 8.5% year on year to 75.0
billion yen, and profit attributable to owners of the parent will
increase by 18.4% year on year to 52.5 billion yen. For ourplans for capital investment, we plan to invest 43.8 billion
yen. By strengthening our abilities in each business, we
believe that we can respond to strong demand.
We are targeting spark plugs production of
approximately 1.0 billion units in the year ending March 31,
2021, and with our plans for significant capital expendituresin areas such as land and buildings largely solidified, we shallmove to the implementation stage in a timely manner.
We will consider subsequent capital expenditures by keeping
close watch on future demand projections.

21 Commentary on strategies to create value

22

NGK SPARK PLUG’s Value Creation Process
OUTPUT

Social issues resolved(Medium-term
management plan KPIs)

Three strengths

Our Ideal Image in the Year 2020

INPUT
Technology

External factors
Risk

Number of new patents filed

1,010

Decline in number of vehicles
with internal combustion engines
Fall from peak automotive
demand in developed countries

520.0

Cleaning up automotive exhaust gases
Improving automotive fuel economy
Efficient use of hydrogen

ting
Cut

billion yen

A

Proc

om

billion yen

Information and infrastructure
maintenance

sin
ess
es

Creating high-functionality

Operating income ratioelectronic devices

20

Reducing lead times for plant
manufacturing processes% or more

Effective use of facilities
Challenging ourselves in spaceent

39companiesem

Joint development withanagmajor global automotive
manufacturers

Lo

Finance
Rating and Investment
Information, Inc.

100.0

mi
cs

ra
ce
ial
r
t
s
Indu

bu

s

21 overseas countries

mics
logiesductionlogiesurement

Sale

Global

ctors
ondu
mic
Se

o n e n ts

billion yen

CeratechnoMass protechnow
Ne

co m p37.5

Opportunity

Operating income

Tools

ut

o ti
ve

Capital expenditures

International situation

Possibilities of a hydrogensociety

Contribution toenvironmental issues

billion yen

25.2

Labor shortages

Expansion in semiconductorrelated products (ceramic
packages, electrostatic chucks,etc.) due to higher demand forsemiconductors

g

DR&D expenses

Delayed response toenvironmental issues in various
countries

Increased automotive demand in
emerging marketsnin

Net sales

Reducing environmental pollutants

Decline in demand for plugs due
to engine downsizing

Stricter environmental
regulations

P

n
la

R&

g is

ti c s

P

tio
roduc

na

n

u
dq

t
ali

y

m

ROIC

13% or more
Improving safety
Dividend payout ratio

Safety in automotive driving

30.0%

A+

Japan Credit Rating Agency, Ltd.

A+

Long-term management plan:
Corporate
foundation

Global Eco Vision 2020
CSR Policy

Corporate DNA

NITTOKU SHINKARON
Compliance Policy
Code of Conduct

Corporate Philosophy
The Nittoku Way

Development of medical
technologies
Improving QOL
Safety in surgical procedures

Commentary on strategies to create value=

Value we provide

23 Commentary on strategies to create value

24

Risks and Opportunities

Short-term

Risks
Decline in automobiles with internal
combustion engines

Peaking of demand for automobiles
in developed countries

Decrease demand for spark plugs
with trend toward engine downsizing

Labor shortage

Opportunities
Stricter environmental regulations

Expanded demand for automobilesin emerging markets

Medium-term

Risk / opportunity expected time horizon

Long-term

Commentary on strategies to create value

The markets surrounding NGK SPARK PLUG are entering a transitional phase, and our businesses are directly facing
significant changes.
We aim to identify short- to medium-term, and long-term risks and opportunities, and maximize profit in existing
businesses, while also turning risks into chances and boldly embarking on the challenge of creating new businesses thatlook to the future.

Measures
Demand for automobiles is expected to increase over the short- to medium-term, so, we are focusing on further strengthening theautomotive components business. By measures that include enhancing manufacturing efficiency with thorough process management,
reducing defects and increasing the overseas production ratio in order to lessen the impact of foreign exchange fluctuations, we aim tocontinue securing profits, while also utilizing our advantage in terms of technological development to further increase our market share.
Looking ahead, we will also utilize NGK SPARK PLUG’s global sales network to the greatest possible extent as we engage in sales anddistribution businesses for automotive components other than spark plugs. In addition to enhancing the automotive components
business in this way, we shall also endeavor to develop the fuel cell business, medical business, and other new businesses, as we look toachieve our target of sales of 30 billion yen in these areas by the fiscal year ending March 31, 2021.
We intend to make careful decisions about our future response, while closely watching trends in each country and the actions ofeach automaker. In the short- and medium-term, the shift to high-performance, value-added products is continuing, and we arefocusing on product development and sales to allow us to address this demand. Furthermore, in the United States, where has theculture of users repairing their own cars, we shall endeavor to further strengthen our ties with the automotive repair market, andfurther increase our market share.

As the trend toward engine downsizing advances, the number of cylinders and spark plugs per vehicle will decline. On the other
hand, as conditions within engines become increasingly restricted, spark plugs are required that have a high level of added value
in terms of ignitability, voltage resistance, etc., but there are a limited number of companies that can develop such spark plugs.
We view this as an opportunity and aim to further increase profits by responding to the “increasing use of spark plugs withadvanced functionality.”

Since April 2018, we have taken steps to strengthen the functions of the Strategic Human Resources Department and secure thenecessary human resources by promoting efforts to hire and utilize human resources on a global basis, in addition to creating a
comfortable working environment by providing systems to enhance employee loyalty. In addition, we shall also work to save labor byoutsourcing, increasing automation and the use of IT in production processes, and enhancing operational efficiency. Furthermore, we shallalso strengthen our means of connecting with diverse human resources by working to enhance awareness of NGK SPARK PLUG.

Risks
Environmental regulations are becoming stricter in different countries, particularly in Europe, in order to create a sustainable society. In
order to realize this objective, NGK SPARK PLUG develops and sells various sensors related to engine temperature increases andexhaust gases for automobiles. Looking ahead, opportunities to provide these products are expected to increase in line with stricter
environmental regulations, including providing products for new installment in motorcycles in emerging countries, particularly India
and Southeast Asia, and increases in the number of units in use per vehicle.
At present we are focused on expanding our market share, mainly in China and India, and are implementing sales strategies
tailored to each region. In China, we are seeing favorable sales of low-price spark plugs tailored to the market, which webegan selling in the previous year. In addition, we are focusing on building a network of distributors in inland regional cities,building relationships with local manufacturers, and strengthening our sales network. In India, we are focusing on building andstrengthening our sales support systems.

Increasing semiconductor-related
products in line with increase in
semiconductor demand

In the semiconductor-related business, we are expanding the uses and customers for our semiconductor manufacturing equipmentrelated products, by leveraging synergies with NTK CERATEC Co., Ltd. (former Nihon Ceratec Co., Ltd.), with which we integrated
management in 2015. In the semiconductor business, we are developing semiconductor packages for various uses.

Possibilities of a society powered byhydrogen energy

We are promoting the fuel cell business as a growth business and aim to become an integrated supplier and manufacturer of SOFC
(solid oxide fuel cells) stacks. In future, we shall also begin developing SOEC (solid oxide electrolysis cells), which produce hydrogen.
In addition, we are also developing products that look toward a society powered by hydrogen energy, including hydrogen leakdetection sensors to protect the safety of hydrogen-powered vehicles.

Opportunities

25 Commentary on strategies to create value

Strategic View

26

Message from Finance Officer
Kenji IsobeFirst half of seventh medium-term management planlargely progressing as planned.

Member of the Board,
Corporate Officer
Senior General Manager,
Corporate Administration Group

Progress toward management indicators

Approach to financing

Our seventh medium-term management plan (hereinafter“mid-term plan”), which began in April 2016, contains stretch
goals, particularly in its second half, but our progress in the firsthalf has been generally in line with plans. We are gradually
approaching our targets, with the operating income ratio and
ROIC* at 16.4% and 10% respectively in the year ended
March 31, 2018. Although our targets of an operating income
ratio of 20% or more and ROIC of 13% or more are high, I
believe it is important that we maintain our strength of being a“highly profitable company.” We have made employees acrossthe company conscious of our motto, “set stretch goals andachieve completion,” but I would like to contribute to achieving
management indicators in terms of our financial strategy, taking

At NGK SPARK PLUG, we have made ROIC amanagement indicator because we believe it is important
to ensure investment efficiency across all businesses andimprove corporate value by targeting efficient operation
across the company as a whole, effectively utilizing funds,
including those raised by means other than equity fromthe market. When creating budgets, we assess business
continuity and other factors, while making comparisonswith budgets in three years’ time, including ROIC, andcomparing targets and present values each quarter. I feelthat awareness of ROIC has gradually spread in eachbusiness, but in terms of ROIC for the company as awhole, I think we should increase ROIC by increasing theinto consideration awareness of ROIC, reduction in capitalraising cost, sense of balance in balance sheets, cash flows,
and profit and loss, balance in investments between existingand new businesses, and total return ratio.

numerator in the ROIC formula (net operating income
after tax), rather than reducing investment. In ROIC
management, each business manages ROIC based on
the asset base (accounts receivable - trade + inventories– accounts payable - trade), but for the company as awhole, we shall manage ROIC based on the liabilities
base (interest bearing debt + shareholders’ equity). We
shall focus on how much return on invested capital(ROIC) can exceed the weighted average cost of capital(WACC) as a management target for the company as awhole. While the business side is tasked with enhancing
ROIC, on the financial side we shall fulfill the role ofreducing WACC from the current 6% or so as much as
possible. Taking this into consideration, we shallapproach financing with a long-term perspective, while
maintaining a sense of balance in regard to the twoissues of: 1) financing plans that take the DE ratio into
account; and 2) ratings to contribute to interest bearing
financing at a low cost.

*ROIC: Net operating income after tax ÷ invested capitalBusiness performance indicators■

Net sales (100 million yen) ■ Operating income (100 million yen)
Operating income ratio (%)

35.2

ROIC (%)

Dividend payout ratio (%)

28.7

27.7

14.4

16.4

16.5

8.5

10.0

10.1

3,729

535
2017/3

4,099

672
2018/3

30.0
20.0
13.0
5,200

4,360

720
2019/3 (plan)

Commentary on strategies to create value

Engaging in ROIC management andaimming to achieve stretch goals
while maintaining a sense of balance.

1,000

2021/3 (plan)

Approach to use of funds
In regard to the use of funds raised, NGK SPARK PLUG
intends to invest in new businesses and growthbusinesses to create new business pillars, in addition toreforming our business portfolio to prepare forcircumstances where the automotive components
businesses cannot maintain the current high level ofprofitability over the ultra-long-term. However, demand in
the automotive components business is currently
stronger than expected, and there is a risk of opportunity
losses if we refrain from investment in existing
businesses. Accordingly, we shall attempt to maximize
profits by investing in existing businesses, while also
increasing the proportion of investment in new andgrowth businesses, although this shall also requirebalance. In particular, starting from this year ending
March 31, 2019, we have increased new businesses’
share of R&D expenses, and the number of opportunities
to consider investment in new businesses has also
increased. In addition to increasing the proportion of
investment in new businesses and growth businesses
over the long-term, in order to steadily develop profitablebusinesses, we shall also make difficult investment
decisions at the same time in order not to allow any
opportunity losses in existing businesses.

Approach to shareholder returns
Returns to shareholders are based on three measures:“stable returns,” “dividend payout ratio of 30%,” and “sharebuybacks.” In the past, internal reserves remained high as
dividends and share buybacks were moderate, and this was

also one reason our WACC has been high. Our company
believes that conducting steady dividends and reducing ourequity ratio through share buybacks will ultimately lead toshareholder returns, in other words, the total return ratio will
increase. Balance is important here as well. While maintaining
our shareholder returns measures, we intend to allocate profits
in a well-balanced manner between investments in growthbusinesses, and the employees who support the company.

Approach to financial and management
indicators going forward
NGK SPARK PLUG has been a highly profitable company formany years, and I think there has been a culture of focusing
solely on profit and loss for that reason. However, going
forward, I think we must focus not only on profit, but also on
the balance sheet and cash flows, otherwise stakeholders,
particularly investors, may increasingly not approve of aspectsof our management. We shall endeavor to enhance corporate
value, based on the approaches to future financing, use offunds, and shareholder returns I have described.

To achieve our goals
For the seventh medium-term management plan, we shall
firmly seek new business in the first half of the five-year period
and look to achieve our ambitious targets as these efforts bear
fruit and we see growth in the second half. I will cautiously
observe progress as the person responsible for accounting
and finance, and do my utmost to provide support to achieve
our goals.

27 Creating value in business

Review of Business

28

1
3

NGK SPARK
PLUG’s Key
Issues2

Plug and sensor's
future strategy

Estimated global number of vehicles sold and vehicles owned

Figure 1

Global number of vehicles sold (RTS)(Millions of units)

■
■

250

Global number of vehicles owned (RTS)

Fuel Cell ■ BEV ■ PHEV Diesel ■ Hybrid Diesel ■ ICE Diesel
PHEV Spark Ignition ■ Hybrid Spark Ignition ■ ICE Spark Ignition(Millions of units)

3,000

200

2,400

150

1,800

100

1,200

50

600

0

■
■

Fuel Cell ■ BEV ■ PHEV Diesel ■ Hybrid Diesel ■ ICE Diesel
PHEV Spark Ignition ■ Hybrid Spark Ignition ■ ICE Spark Ignition

0

2015

2020

2025

2030

2035

2040

2045

2050

2015

2020

2025

2030

2035

2040

2045

2050

Source: Based on IEA Mobility Model data developed by the International Energy
Agency, ©OECD/IEA 2018.

WeightWeightLong reachLong reach

Improvedvoltage
resistanceThick

Spark plug demand continues to grow
As environmental regulations across the world become
increasingly strict, development of electric vehicles (EVs) at
automotive manufacturers is rapidly advancing. In reality,
many unresolved issues remain, such as charging time,
driving range, and battery manufacturing costs, and it isbelieved that it will be some time before the proliferation of
automobiles that run solely on electrical power. Furthermore,even if the transition to EVs accelerates rapidly, the first toachieve critical mass will be plug-in hybrid vehicles or hybrid
vehicles that feature an engine, and spark plugs will continue
to be a requirement. Therefore, demand for plugs
disappearing is a risk to be considered over the long term.
Additionally, of spark plugs sold, approximately 75% arefor repairs, and unless all vehicles including those alreadyowned transition to those that run solely on electric power,
demand for spark plugs will not disappear. In Asian countries
such as China, the number of new automobiles sold is
projected to continue to increase, and in emerging markets

Thin

ThinnerLong reach(Thick)Business environment and trends

Current insulators

High voltage resistantinsulators

Thread diameter

Normal reachHigh voltage resistant insulators

Insulator thickness(Thin)

Our strengths and future strategy

in particular, it is estimated that sales of automobiles withengines will remain strong. In tandem with this, it can beassumed that sales volume of spark plugs will also grow.

Use technological advantages to work toward
expanding market share

Figure 1

We are a company that has refined our ceramics
technologies as a “comprehensive ceramics manufacturer”
for over 80 years, and have a significant advantage inceramics technologies.
To “improve durability” and “reduce diameters” of spark
plugs, the improvement of the insulator part is a necessity,
as it serves as the foundation for spark plugs performance.
The insulator part is made of ceramics and accounts for the
majority of a spark plug’s composition. Since we are involvedin the entire process of ceramics production from thematerials research stage to the manufacturing stage, we areable to respond in detail to requests for high performanceand specifications.
Additionally, since we have business connections with nearly
all automotive manufacturers, we are able to grasp
technological trends and respond appropriately. We are thenable to sell products that are the first to reflect these cuttingHigh technological barriers in spark plugs
In automobiles, to address environmental concerns andassociated issues in fuel economy, low emissions, andinterior space, the development of increasingly compact
engines, or engine downsizing, has become a recent
trend. In line with engine downsizing, spark plugs are
now required to be thinner and longer. Meanwhile, as theconditions in which spark plugs are used become moredifficult, creating thin ceramics that are required forinsulator sections is generally considered to be difficult,and the technological barrier grows by the day.
Figure 2edge technological trends on repair markets across theworld, ensuring that the needs of the repair market are met.
By making use of these strengths, and to maximize profits,
we will secure required production abilities for an everexpanding market, create structures to enable theproduction of approximately 1.0 billion units annually by theyear ending March 31, 2021, and work toward further
expanding our market share.

Creating value in business

Ongoing spark plug demand

Weight(High) Dielectric breakdown voltage (Low)

Creating compact and durable spark plugs

Figure 2

29 Creating value in business

Review of Business30

1Regulatory trends, elemental technologies, and compliant products

Figure 3

2016

Gasoline
Diesel

2019

2020

2021

2023

2024

2025
LEV4
(Undecided)

Eu6d temp
WLTP/RDE

2

Eu7(Undecided)

Eu6d
WLTP/RDE
National
6a Regulations
WLTP
BS6
Regulations
RDE

HEV expansion

48V expansion

National 6b
Regulations
WLTP/RDE
Regulatory tightening(Postprocessing revision)

China restrictions tightened (GPF)
Lean burnForced induction gasoline

Fuel reforming

PHEV expansion

Regulatory tightening(Postprocessing revision)

Postprocessing complications
owing to regulatory tightening

PM regulations
tightened

NOx reduction(High EGR)

Trends in sensor numbers
Before mid-term plan

’16

’17
●

Environmental
regulations’18

Euro6dtemp

Trends in sensor numbers

NOx sensors■ Knock sensors■ Temperature sensors■ Wide-range sensors■ Oxygen sensors

2022

NGK SPARK
PLUG’s Key
Issues

’19

’20

’21

Euro6d● National 6a Regulations WLTP
● BS6 Regulations

’22

’23

’24

’25

●

●

National 6a Regulations WLTP/RDE

Future of the sensor business

NOx sensors+45% annually■with high added-value sensors

Wide-range
sensors+24% annually
2014/3

2015/3

2016/32017/3

2018/32021/3Business environment and trends
Stronger exhaust gas regulations to cause
growth in sensor demand to continue“Living in harmony with the environment” has been alongstanding issue in the automotive industry. From the
1990s onward, in developed nations such as Europe and theUnited States, exhaust gas restrictions have been put inplace, growing increasingly strict. Furthermore, in emerging
markets as well, environmental restrictions are being
tightened in recent years, and in China, where air pollution
has become a dire issue, exhaust gas restrictions will befurther strengthened in around 2020, creating further
demand for exhaust gas sensors.
Additionally, in India, stronger exhaust gas restrictions
are planned for motorcycles, causing a significant increase indemand for exhaust gas sensors for motorcycles as well. We
believe that the wave of stronger exhaust gas restrictions willcontinue to spread across the world.
Figure 3

Our strengths and future strategy
Difficult technological barriers

Leverage technological advantages andstrengthen production structure

Owing to stronger exhaust gas restrictions in various
countries, the performance required of exhaust gas sensors
is rising. Not limited to oxygen sensors that were mainstream
to this point, the need for products with high added value isincreasing, including wide-range sensors that can measure
exhaust gas conditions in greater detail and NOx sensors
that can measure nitrogen oxide. The development of suchsensors requires not only time, but a high level ofmanufacturing technology for the processing of theirceramics, meaning only a handful of companies have thecapabilities for development.

As such environmental restrictions progress further, it isestimated that the number of motorcycles andautomobiles newly utilizing exhaust gas sensors will
increase while the number of sensors installed per vehicle

Figure 4

A factory being expanded in India to strengthen our production capabilities, primarily inregard to oxygen sensors for motorcycles.
(Scheduled to be completed in 2019)will also increase, and we project that this will cause
demand to rise significantly in exhaust gas sensors. As acompany with ceramics technologies for the developmentof high value-added sensors and a diversified portfolio of
products in the exhaust gas sensor field, we believe that
our company has a strong advantage in future
development.
To establish a structure for future increases indemand, we are working to strengthen manufacturing
capabilities for various sensors in countries such as India,
Thailand, and the United States. By further strengthening
our development abilities, we will improve our future
market competitiveness, accelerate business expansion,and contribute to environmental conservation.

Creating value in business

Figure 4

2018

Tier3
LEV3

Regulatory trends

Tech trends
required by
vehicles20173

31 Creating value in business

Review of Business

32

1

3

NGK SPARK
PLUG’s Key
Issues22

Product development derived
from ceramics

Environment- and energy-related field

Expanding use of planar SOFC cell stacks

Regarding planar SOFC cell stacks that are currently under development, in addition to previous
residential uses, we have expanded their use to commercial and industrial applications, which require
more power output. We are engaged in development and evaluation to respond to the performance
demands of fuel cell system manufacturers in the commercial and industrial sector that require highefficiency and long-term reliability. As a part of this effort, we are providing cell stacks to experimental
machinery manufactured by Hitachi Zosen Corporation and are participating in experimental trials.
Moving forward, we will work to grow our portfolio of achievements to expand our business inproviding cell stacks for fuel cell batteries in a wide range of outputs and applications.

Medical field

Established research laboratory toward development of
medical and healthcare products

Creating New Value

Next-generation automobile field

NGK SPARK
PLUG

AIST

Joint
Research
Laboratory

Hydrogen leak detection sensors

Hydrogen leak detection sensors detect small hydrogen leaks from fuel cell systems and stop
the provision of hydrogen to fuel cells. As our hydrogen leak detection sensors do not use
chemical reactions, they have low degradation over time, are fast to start up and respond,
and utilize a “heat transfer method” that is resistant to vibrations and shocks, allowing forhighly accurate measurements on the existence of hydrogen gas through measuring theamount of heat dissipated on the heater (detector element) by hydrogen.

R&D with ceramics at the core
Ceramics have characteristics that include “insulation,” “heatresistance,” and “abrasion resistance.” Our company has
grown by developing and manufacturing products that utilize
these characteristics.
Additionally, through creating new value by combining
ceramics with other materials such as metals and plastics
and technologies and quality management that enable
mass production of uniform products, we distribute our
products worldwide.
Spark plugs, which have been developed andmanufactured since our founding, require “trustworthiness”
and “high quality” that are able to accurately function inengine environments that reach temperature of up to 2000
degrees Celsius. To overcome these strict requirements, wehave been relentless in R&D, constantly polishing ourceramics technologies.
With the objective of diversification that makes use of
these materials technologies, we have been involved in thedevelopment and manufacture of new products that makeuse of ceramics as “NTK Technical Ceramics” since 1949.

Leveraging the characteristics of ceramics (zirconia), we
have paved the way toward our future through constantdevelopment of new products such as “exhaust gas
sensors” that measure automotive exhaust gas conditions,ceramic cutting tools that offer heat resistance and durability,
and semiconductor packages that protect IC chips fromheat and so on.
Currently, we are focusing our efforts on R&D in the“environment- and energy-related field,” “medical field,” and“next-generation automobile field.” In the “environment- andenergy-related field,” we launched the fuel cell business with
the intent of contributing to the future energy society. In solidoxide fuel cells (SOFC), which are being developed for use inresidential, commercial, and industrial applications, we havebeen engaged in development by concentrating ourmanufacturing technologies in semiconductor packages andspark plugs (multilayer technologies, technologies to combine
metals and ceramics). In view of future demand that is
expected to result from rapid proliferation, we are advancing
measures toward improving capabilities and establishing mass

production structures. In the medical field, we are aiming foroverseas expansion of products such as artificial bones, andwill work to fulfill our duty to create products needed by anaging society. In the next-generation automobile field, we aredeveloping hydrogen leak detection sensors that can detect
the leak of hydrogen, a flammable gas, to ensure the safety ofhydrogen automobiles. Furthermore, we have also focused on
development of solid-state batteries, which are expected to be

next-generation energy storage devices, and are working to
see their use in home appliances, mobile phones and drones,
as well as in mobility applications, in the future. Additionally, toleverage exhaust sensing technologies found in gas sensors infields other than automobiles, we are seeking applications indiffering fields, such as agriculture and medicine.
We will strive to create new businesses utilizing
our technologies.

“DNA Project” to create a corporate culture that encourages new ideas
As an “engine for promoting new businesses” across the entire company, we launched the “DNA (Dynamic New Approach) Project.”Since 2016, selected team members are executing projects in an incubation office. From among these, a new company, “Sharing
FACTORY,” was established in March 2018. This company provides sharing services to the manufacturing industry.

Creating value in business

In April 2017, to strengthen materials R&D for medical and healthcare products, we established a materials
and chemistry research laboratory within the National Institute of Advanced Industrial Science andTechnology (AIST). Through cooperation between our company, with our strengths in product development
utilizing new ceramics materials, and AIST, with its high technological potential for the combination, device
creation, and evaluation of medical materials and advanced ceramics, we are working in partnership torealize innovative healthcare products and contribute to improving QOL (quality of life) for people.

33 Creating value in business

Review of Business

34

Review of BusinessWe are supporting the world’s motorization through the supply of products, mainly components for internal combustion
engines. These include spark plugs to serve as a “lighter” for the electrical ignition of fuel-air mixture; various automobile
sensors that greatly contribute to the purification of exhaust gas from gasoline-or diesel-powered vehicles; and glow plugs
to assist the autoignition of diesel engines. We are also developing and selling hydrogen leak detection sensors to ensure
safety in a world powered by hydrogen energy.

Automotive
Components group

348.2

Operating income

billion yen

68.1(Increased by 9.4% year on year)

Sales/Operating income ratio of the automotive components group■■

Plug business ■■ Sensor business

Operating income from the automotive components group

Operating income ratio（%）(100 million yen)

5,000

25

1,000

20

800

15

600

10

400

23.3

22.0

4,000

3,000

2,000

18.2
2,718
1,128

2,928

3,229
1,332

1,204

3,181
1,251

19.6
3,482
1,370

1,897

1,724

1,931

2,112

0

2014/3

683

711

589

681
579

Plug business
NGK SPARK PLUG Group is making good progress on our
strategy of expanding our market share in China and otheremerging markets. In regard to sales, we have focused on“building our sales network,” “increasing penetration of the
NGK brand,” and “introducing low-price spark plugs
targeted at emerging countries,” and as a result, we havebeen able to strengthen relationships with prominent
distributors and increase the number of stores selling our

products, while also enhancing brand recognition withproactive marketing activities. In addition, new products
have been well received in emerging markets, and in thefiscal year under review, sales volume of spark plugs
increased by 24% compared to the previous fiscal year ineach of our priority markets of China and India. Looking
ahead, we shall continue making efforts to further increase
our market share.

Spark plug sales volume by region
China

India
Up

Up

1,000

1,591

billion yen(Increased by 17.4% year on year)(100 million yen)

21.7

Medium-term management plan progress

2015/3

2016/32017/3

5

200

0

0

2018/3In the automotive industry, the Group’s main businessfield, conditions were supportive for sales in the UnitedStates, including a stable labor environment and low
gasoline prices, but new automobile sales decreased
overall compared to the previous fiscal year. Unit sales ofautomobiles remained favorable in China, increasing
compared to the previous fiscal year despite the impactof the end of tax reductions for small vehicles. Overallunit sales of automobiles in Japan exceeded those in theprevious fiscal year, despite being affected by issues
related to improper testing at automakers.

year onyear

year onyear

2014/3

2015/3

2016/32017/3

2018/32017/3

Review of operations

+24%

+24%

Financial results for the fiscal year
ended March 31, 2018
Due to the favorable sales of new cars in China and othermarkets, we recorded steady sales for automotive
components. Also, our sales of repair parts were satisfactory,
being driven by sales in China, North America, and SouthAmerica. As a result, in the automotive components
business, we posted net sales of 348,198 million yen (up9.4% year on year) and operating income of 68,098
million yen (up 17.4% year on year).

2018/3

2019/32021/32017/3

2018/3

2019/32021/3

Sensor business
Sales of diesel-powered vehicles declined in Europe, whichhas particularly affected demand for temperature sensors,
but sales volumes are expected to recover on demand fortemperature sensors for gasoline-powered vehicles over the
medium-term. Amid increasingly strict environmental

regulations globally, we forecast that sales volume will
increase by approximately 45% and 24% on an annual basis
for NOx sensors and wide-range sensors, respectively, overthe period from the fiscal year ending March 31, 2019 until
the fiscal year ending March 31, 2021.

Forecast for the year ending March 31, 2019
Although global growth in unit sales of new automobiles
is expected to slow, we intend to promote sales of a wide
range of automotive component products by utilizing ourexisting sales network to the greatest possible extent,
while also capitalizing on the trend toward more added

value owing to stricter environmental regulations indifferent countries. As a result, we expect that we willrecord net sales of 367,419 million yen (up 5.5% year onyear) and operating income of 71,902 million yen (up5.6% year on year).

Creating value in businessNet salesTechnical ceramics
group

35 Creating value in business
Review of Business

Review of Business36– ceramics div. –Technical
ceramics group

Our semiconductor packages and substrates
made by using our unique ceramic multilayer
technology are adopted for a range of products,
including communication devices, smart devices,
medical equipment and cameras.

17.9– semiconductor div. –Operating loss

(Decreased by 8.0% year on year)

Semiconductor-related sales/Operating income ratio
■■

Sales

2.6

billion yen

Net sales

39.8

billion yen(4.8 billion yen loss in the previous fiscal year)

Operating income from the semiconductor div.

Operating income

billion yen(Increased by 25.0% year on year)

Sales/Operating income ratio of the ceramics-div.

Operating income ratio

■■

（%）

(100 million yen)(100 million yen)

（%）

40

0

600

8

253

238

194

179

20

6.8

-20

450

(29.3)(31.2)(29.9)-20-40

2014/3

2015/3

2016/32017/3

2018/3

Review of operations
Production of high-end smartphones and smartphones
made by Chinese manufacturers is trending favorably. In
addition, the semiconductor market is being driven byincreasing demand for semiconductor memory anddifferent types of sensors, owing partly to the trend
toward high-performance smartphones.

Financial results for the fiscal year
ended March 31, 2018
In this business, overall sales declined compared to the previous
fiscal year as we exited unprofitable product lines, but profits
improved compared to the previous fiscal year as shipments ofsmartphone components and other products increased.
As a result, on a consolidated basis, sales came to17,901 million yen (down 8.0% year on year) and operating
loss amounted to 2,571 million yen (as compared to an
operating loss of 4,842 million yen in the previous fiscal year).

-80

-100

(87)
2014/3(79)245

2016/32017/3

2018/3Medium-term management plan progress andforecast for the year ending March 31, 2019
In the semiconductor package business, we are targeting
profitability on a monthly basis in the fiscal year ending
March 31, 2019, and normal profitability by the fiscal year
ending March 31, 2020. For our revitalization plan, we haveattracted outside management personnel and implemented
initiatives including concentrating our operating sites,
selecting and concentrating our product range, andoptimizing the workforce. As a result, the loss has become
smaller, and we are making good progress with therevitalization plan. In addition, in terms of forecasts for the
fiscal year ending March 31, 2019, we intend to select andconcentrate our product range and reduce costs, and as aresult, we expect that we will record net sales of 16,320
million yen (down 8.8% year on year) and operating loss of
1,404 million yen (as compared to an operating loss of 2,571
million yen in the current fiscal year).

40

4.0

20
2

2015/3

2016/32017/3

15

17

16

10

4

1.3
2014/3

24

4

250

0

2015/3

50

30

319

150

(71)

(100 million yen)

398

(48)

-60

(14.4)(24.9)

6

328

300

0

0

7.4

6.0

(26)

-40

(Increased by 296.8% year on year)

Operating income ratio

400

200

billion yen

Operating income from the ceramics-div.

Sales(100 million yen)

297

1.6

0

2018/3

Review of operations
Shipments remained favorable for cutting tools andceramic products to be used in industrial equipment.
Increased shipments of components for semiconductor
manufacturing equipment particularly contributed to anincrease in sales.

Financial results for the fiscal year
ended March 31, 2018
In this business, shipments remained favorable for cutting
tools and ceramic products to be used in industrial
equipment. Increased shipments of components forsemiconductor manufacturing equipment particularly
contributed to an increase in sales. As a result, consolidated
sales for the business came to 39,834 million yen (up 25.0%
year on year) and operating income to 1,589 million yen (up296.8% year on year).

0

2014/3

2015/3

2016/32017/3

2018/3Medium-term management plan progress andforecast for the year ending March 31, 2019
In order to respond promptly to strong market growth,
including decisions about production, we implementedorganizational changes in April 2018, making the
Semiconductor Production Equipment Division an
independent division in order to increase speed. In
addition, we plan to make investments totaling billions of
yen through the fiscal year ending March 31, 2020, withthe policy of responding to market demand and notallowing any opportunity losses. In addition, in terms offorecasts for the fiscal year ending March 31, 2019, we
intend to establish a stable profit-making system, and as
a result, we expect that we will record net sales of 45,816
million yen (up 21.7% year on year) and operating incomeof 4,656 million yen (up 27.5% year on year).

Creating value in businessNet sales

In the cutting tool business, we have developed
new materials for cutting tools in addition toceramic materials, and manufacture a wide
range of products. Our ceramic products forindustrial use include components forsemiconductor manufacturing equipment andother products that make use of the uniquefeatures of ceramics. We are also continuing todevelop new business fields.

37 Creating value from strategic resources
1

3

NGK SPARK
PLUG’s Key
Issues

Review of Strategic Resources

38

General Manager of Human Resources speaks:

2

Personnel Reform by
the Strategic Human
Resources Department
Tomohiro Yamaguchi
General Manager, Strategic Human Resources Department
Corporate Strategy Group“Globalization” is critical

Human resource policy
Our current human resource policy is: “We acknowledge that
employees are the most important management resource.
In light of this, we respect the diversity and individuality of
our employees and promote the cultivation of physicallyand mentally healthy human beings, striving to promote thefurther development of our Group as a whole.” Under thispolicy, we define one aspect of our ideal image in the year
2020 as being a “human asset company,” but to accomplish
this, I believe that it will require a “fair corporate culture thatallows diverse personnel to shine,” “frameworks to enable
autonomy, challenge, and growth,” and “high professionalism
and love for the company.” Under this policy, we have defined“personnel development and organizational invigoration to
maximize performance” as the Strategic Human Resources
Department’s mission, and with the objective of becoming
an HR specialist organization that promotes human resource
strategies that unify management and business, we havedefined “Observe,” “Develop,” and “Motivate” our employees
as our basic stance.

“Observe”
First, we must engage in “observing.” Domestically, we have acertain grasp of what types of human assets lie where thanks
to our history of hiring and educational activities. However,moving forward, we must expand this approach to cover ouroperations globally. Talent management is carried out by the
RHQ in each region, but on the other hand, in the Strategic
Human Resources Department, we would like to discoverhuman resources with the potential to become managers
from within the NGK SPARK PLUG Group as a whole. To
this end, we must create a “human asset bank.” In addition
to information on skills such as work histories and training
achievements, information that includes mindset informationsuch as attendance records and willpower will be collected
through methods such as employee surveys and individualinterviews and stored in a databank. As the first step in thisinitiative, we implemented for the first time a 360-degree
survey for employees at the general manager level during theyear ended March 31, 2018. Our aim was to make managers
understand how their subordinates and colleagues felt about
them and provide multiple feedback meetings with specialists,
thereby contributing to the making the company more
dynamic by reviewing everyday management methods. First,
we are providing opportunities for general managers to “watch
people.” Looking ahead, we shall also implement measuresfor “observing” via “employee awareness surveys,” “corporate
culture assessments,” etc.

“Develop”
Any new businesses that we create will not have a certain
recipe for success like the plug business. And of course,
there is no guarantee that highly capable human assets

from current businesses will enjoy the same success in
new business areas. Therefore, we will bring change todevelopment policies. By redefining what types of humanassets can support new businesses and current businesses
alike, we will fundamentally revise our previously uniform
training programs. For example, as a measure to achieve
this objective, it is difficult to generate new creativity withinternal training, so we have launched programs centered oninteraction with different industries. We are accepting internal
applications for this program, with a focus primarily on the“ambition” of applicants. We shall implement measures fordeveloping human resources to promote on-the-job-training(OJT) in the workplace (onsite), which is fundamentally themost effective form of training.

“optimal for business to optimal for resources.” To make sure
this initiative for optimization is carried out thoroughly, we
are advancing the creation of a framework for succession
planning. The managerial staff in each section defines aheadof time the specific person that will be succeeding them. If
there is no successor, it will become necessary to hire fromoutside of the company ahead of time, and this will lead to
discovering gaps in our human assets.
In other areas, we are considering creating an “internal
application system.” At our company, each department
makes a presentation to the new graduate hires, and the“Motivate”

new graduates may then request assignment of their choicebased on what they learned in these presentations, and thenthe company matches them with their choices. This methodof personnel assignment has been used for over 10 years.
However, the first department that these young employees
are assigned to may not always be the best place for them. In
addition, it is difficult for employees to put themselves forward
for work they want to do. The company shall thus create asystem of personnel assignment based on “the right people in
the right places.”
Furthermore, as a way to support the activities of seniorcitizens, we will also work to implement measures to create
work for our senior workers, such as a job matching systemthat matches the company’s needs with the desired functions
sought after by seniors.

Traditionally, personnel transfers focused on assigning the
optimal human resources to each site where there were gaps
in staffing. However, moving forward, we will assign personnel“systematically” after considering what types of human assets
should be assigned to each department head, based on theapproach of “the right people in the right places,” particularly
for important positions. Essentially, our view is to move fromIn the Strategic Human Resources Department, with theestablishment of a human asset bank to “Observe” as our
foundation, we will solidify our training policy that will serve
as a pillar for “Develop” by the end of the current fiscal year,
and subsequently, we plan to roll out initiatives to “Motivate.”
Under the spirit of “No Attack No Chance,” we will engage inreforms with speed.

Investment in training by organizational level
General and Section Managers
Heads and general staff, etc.

(Millions of yen)Managers and Chiefs

149

150

120

65
90

92
26
44

60

31
30

0

34
2013

40
2018

Creating value from strategic resources

Our company has advanced our businesses with the mottoof “global, speedy, and fair,” and at present, over 80% of oursales are generated in overseas businesses. Meanwhile, thehuman resources division primarily managed domestic labor,
whereas outside Japan it primarily managed expatriates,
presenting issues where the “globalization” of the personnel
function lagged behind.
To resolve these issues, we first started periodicallyholding a “Global Personnel Conference” from 2013,
and through networking with personnel divisions at key
bases worldwide, we have advanced the “globalization”
of the human resources division. The Strategic Human
Resources Department was launched in April 2017, andin April 2018, we reorganized such that the former Human
Resource Department is now specialized in domestic
labor management as the Labor Department while theStrategic Human Resources Department is tasked with
global personnel development such as hiring and training.
The number of people working in the Strategic Human
Resources Department has grown from 14 people before
the reorganization to 50, and from the idea that we should
respect diversity and assign capable personnel, 15 womenand two foreigners are also part of the department. In
essence, the Human Resources Department has justbegun measures in “personnel reform” that will shift fromthe previous section centered on domestic labor to asection that comes up with personnel strategies that unify
management and business on a global scale.

39 Creating value from strategic resources

40

Review of Strategic Resources

Review of Strategic Resources

Basic Philosophy

Diversity

We believe that if every employee utilizes their individuality and freely leverages their capabilities, it will contribute to
the growth of the company and individual happiness, and we therefore position diversity as an important management
strategy. We are promoting diversity to create an employee-friendly workplace that accepts different personnel “assets”(one in which all people regardless of their gender, age, disability or nationality, enjoy their work), and effectively use thenew value and ideas generated by such a workplace.

Human Resources

Strengthening and Maintaining Initiative to Promote Active Participation of Women

Development of human resources

Employees are the most important management resource. We promote the sustainable growth of the NGK SPARKPLUG Group by striving for human resources development that respects the diversity and individuality of ouremployees and by encouraging individual employees to reach their own full potential, to grow and to participate
actively in a state of physical and mental health.

Rolling out PDCA Cycle through Employee Satisfaction Surveys
The Group conducts an “employee awareness survey” in aneffort to see what extent the vision and policies ofmanagement have taken hold and understand the current
status of diversified personal values, environment andworkplace with the aim of achieving the management policyof the Corporate Philosophy: “We offer a working
environment in which each one of us is encouraged tomake full use of his or her personality and capability. With
all our power we are dedicated to pursue management
based on trust and confidence.” In the survey of the year
ended March 31, 2017, we collected answers from 89.6% of
employees. Based on the results, each division has
formulated an action plan and rolled out a PDCA cycle so
as to attain better results in the next awareness survey,
which in turn will lead to an enhancement in capabilities at
the workplace.

Analysis result by category
Comparison withthe previous survey (2012/3)

Job

3.50
3.00

Supervisors

2017/3
2012/3

2.50
2.00
1.50

Management

1.00

Health and safety

Workplace/communication

Human resource system
Development

In the previous survey results, the human resource systemscored low. After the adoption of a new human resource
system, however, better results are shown in 2016 survey withall eight categories balanced out with no particular weakness.

HAGI Program
In view of our globally expanding business operations, welaunched the “Global Next-generation Management
Personnel Development Program” in 2016, for discoveringand developing personnel eligible to become the nextgeneration of management among those from all Group
companies. We conduct hiring and recruitment of humanresources regardless of nationality, and provide
opportunities and environments to enable every employee

Proportion of female employees
Generalists

Section Chiefs

Managers

(%)
8
7
6

4.91

5

5.54

5.87

6.68

4
3
2
1
0

2.57
2.32
0.52

2.68

2.81

2.68

0.66

0.81

1.07

2.49
1.24

2014/3

2015/3

2016/32017/3

2018/3

Promoting the Active Participation of Senior Citizens

4.00

Disciplines

These activities received approval, and we have received
broad recognition by society for our activities, including being
selected for the “2014 Excellence Award, Nagoya City
Accreditation and Commendation System for Companies that
Promote Increased Roles for Women” and the “2015 Japan
Productivity Center Incentive Award, Empowerment Grand Prix
for Activities by Women,” as well as being selected by the Ministryof Economy, Trade and Industry for its “New Diversity
Management Selection 100” in 2017, and being certified by Aichi
Prefecture as an “Aichi Josei Kagayaki Company” (Company
Supporting Aichi Women’s Career Success) for fiscal 2018.

to actively participate. In recent years of great
environmental change, the program is intended to offer
learning opportunities for personnel representing the next
generation, and it is called “HAGI,” from the “Shokasonjuku” private school located in Hagi-shi, Yamaguchi
Prefecture, from where many talented people went out into
the world at the end of the Edo era. The president serves as
the principal of the program.

As the birthrate declines and the population ages, labor
shortages are expected owing to a decline in the working age
population and an increase in the elderly population. On theother hand, promoting the active participation of senior citizens
is an important issue, including raising the starting age forreceiving national pension and ensuring employment for theelderly. In 2001, we introduced a post-retirement reemployment
system for providing work opportunities to retired employees sothat long-accumulated knowledge and expertise are effectively
utilized. In year ended March 31, 2018, the total number of
employees using this system was 223. We are working hard to
prepare an environment that meets the needs of senior
employees, our company and the worksite and use it in a waythat takes into consideration the aptitudes, motivation andabilities of senior employees.
Total number of employees using the reemployment system(Persons)
300
250

247

228

229

2015/3

2016/3

251

200

223

150
100
50
0

2014/32017/3

2018/3

Employment of the Disabled“Nittoku Smile Co., Ltd.” which establish for promoting
employment of the disabled certified as the special subsidiarycompany in January 2018.
The ratio of disabled employees at our company was
2.17% in year ended March 31, 2018, so we were able to meetthe statutory employment rate.
Additionally, we already had met the statutory employment
rate in year ended March 31, 2019 at June 2018.
For broadening the scope of work to the disabled, we
promote to make more decent workplace for them.

Percentage of Disabled Employees
Legally required ratio

Employment Rate (%)

2.17

2.2
2.0
1.8

1.83

1.80

1.82

2014/3

2015/3

2016/3

1.90

1.6
1.4
1.2
1.0

2017/3

2018/3Creating value from strategic resources

Basic Philosophy

In 2013, the company as a whole set about creating aworkplace where women can actively participate, as our firststep toward diversity. We have positioned active participation by
women as an engine for promoting the reform of our corporate
culture, and have changed the mindset of managers and female
employees themselves.
Specifically, we implemented a training program in which a
female employee is paired with her manager, in order to support
career development and increase ambition. Under the program,she takes on the challenge of performing a task that is one level
higher than the task presently assigned to her for nine months,
and her manager offers advice to help her fulfill the task, thereby
supporting her growth. We also hold lecture meetings andtraining sessions of diversity management for all senior
managerial employees. Furthermore, in all departments,
including those of Japanese Group companies, generalmanagers devised action plans that suited their own
departments. We presented Encouragement Awards todepartments with outstanding initiatives. In addition, we are
expanding systems to create a workplace that is more
comfortable for female employees.

41 Creating value from strategic resources

42

Review of Strategic Resources

Review of Strategic Resources

Research & Development

Research & development activities at the Group are being
conducted toward creation of new value by leveraging
the best technology and accumulated experience, basedon our corporate philosophy. Activities are mainly
conducted at Engineering R&D Group and respective
technology departments of each division, and we strive

for a higher level by using the latest technology that is
attained through active participation in academic
conferences and associations both in Japan andoverseas or joint research projects with universities andpublic research institutes, etc.

Open Innovation

Basic Philosophy
To protect its existing and newly developed products, the company takes steps to actively acquire intellectual property
rights and make effective use of them. We investigate the intellectual property rights of third parties in all production
processes, from early stages of development to mass production, to avoid the risk of infringing the intellectual property
rights of third parties or violating contracts, laws and regulations. We also verify the appropriateness of the intellectual
property-related provisions in various contracts. In addition, we are educating employees on the importance ofintellectual property. In the future, we will strengthen the management of intellectual property across the Group, as thebasis for our continued evolution as a “Monozukuri Company.”

NGK SPARK PLUG’s Activities Regarding Intellectual Property

We are actively engaging in the creation of new innovation by
utilizing our core technology cultivated to date.
Here, core technology means technology by whichceramics can be combined with other materials such as
metal and organics to make products used in the field
where the high reliability and durability are required. We
are advancing application of the core technology mainly
into the three areas of “environment and energy,” “next-

generation vehicles,” and “medical” as new businessdomains. Further, we are proactively seeking for partners
to work with in an effort to find solutions of social issues
which cannot be achieved by the Company alone. In April
2018, we established Open Innovation Center in San
Jose, California, USA, accelerating activities targeted at
new business creation.

At NGK SPARK PLUG, we have created systems forresponding in a timely, strategic manner on a global level,
based on our management policies and businessstrategies, in order to “further stimulate the onsite
operations of the entire company, the development of
new technology and products, and theircommercialization in regard to activities related tointellectual property, and propose and promote

intellectual property strategies to contribute to profits in
our core businesses.” In accordance with this objective,
we take measures to address intellectual property
requirements in accordance with the development stage,in order to respect the proper rights of third parties. In
addition, we also utilize patents as a source of technicalinformation to analyze R&D trends, thus assisting in
discovering new subjects for our R&D.

Promoting Measures to Stamp Out Counterfeit Goods
Ceramics

Metal

Organic

As our spark plugs “NGK SPARK PLUGS” are sold in
more than 190 countries around the world, it is one of theimportant issues to manage trademarks and further
undertake measures against counterfeit goods.
We have been working with each Group company
around the world and with local law firms to proceed withactivities to stamp out the imitation of NGK SPARKPLUGS. Those activities have been implemented primarily
in China, and are being strengthened in regions such as

the ASEAN and India, where economic growth continues.
Counterfeit goods, which threaten the safety ofcustomers, are becoming more sophisticated and arebeing traded in smaller lots over the Internet, etc. We
have been continuously engaging in activities to uncoverand stamp out counterfeit goods in close cooperation
with the police, customs authorities, and relevant
administrative agencies.

Creating value from strategic resources

Framework and Policies of Research and Development

Intellectual Property
Management

43 Creating value from strategic resources

Review of Strategic Resources

44

Review of Strategic Resources

Quality and Manufacturing

Quality Management System
In an effort to meet the demands of customers and various
industries who develop products, we have obtained thecertification of international standard ISO 9001 and sector
standards required in each business domain, for our quality
management system. We are committed to its operation andare further strengthening our quality assurance system inorder to offer new value.
The Quality Committee, as part of corporate
governance system, determines policies, formulates
guidance and gives instructions, to optimize each function of
the Company from a viewpoint of the Group as a whole.
In addition, at Quality Assurance Meetings, quality-related
issues and challenges inside and outside the Company areshared and learning related thereto are provided in the quality
exhibition room permanently set up inside the Company. The
Meeting also promotes initiatives that lead to offering
customers better products and greater services, such as
exhibiting the commitment to product quality by the top
management of the Company, from its founder to the current
management leaders, together with what we learned fromproblems in the past on panels, which contributes toprevention of its obsolescence and continued education.

Quality Management Promotion System

CSR Committee(Chairman:
President & CEO)

Quality Committee

Corporate Quality
Management Division

Quality Assurance
Meetings

Business divisions
Quality management promotion system

We regard all the value, expectations, and evaluations provided to customers through products and services, and all
the people, goods, processes, and arrangements involved in producing them as “quality.”
We are always conscious of making the best value for customers, and aware that we are the ones who support
quality, we continue to grow, ambitiously applying creativity and imagination to all operations.
We create value for customers in accordance with our Corporate Quality Rules and Corporate Quality Policy. We
will continue to contribute to society with safe and trusted manufacturing, as well as the development of humanresources who effectively and efficiently implement total quality management (TQM), which enables us to respondflexibly and promptly to the evolving internal and external business environment.
NGK SPARK PLUG is working to share and practice the concepts of TQM (Quality Management) in order to becomea Group company that creates value for all stakeholders and has a system that can respond flexibly and swiftly tochange. Based on our CSR Policy, we have updated NGK SPARK PLUG’s Corporate Quality Rules and identified thefollowing five areas as the mainstays of total quality management (TQM).

1

Promoting Quality Training
We are working to develop our human assets as “making
things is making people.” We have established extensive
training programs that include quality control and QC Circle
Activities, and many of our employees attend these
programs. We are also further strengthening more advanced
practice activities at work sites. We expect that training
participants will improve their skill on techniques throughpractical application in familiar themes in addition to
spreading this learning to the employees around them.
We also offer training and practical support regarding
quality and problem solving for suppliers so that they provide
us with consistently high quality parts and materials basedon continuous quality improvement.

NGK SPARK PLUG Group QC Circle conference

In-house training

Quality assurance
In order to provide products and services that meet the needs of our customers and society, NGK SPARK PLUG will establish
all operations and guarantee their safety and reliability and promote development activities aimed at creating new value.

2

Daily management
NGK SPARK PLUG will consider methods and indicators to measure the quality of all our operations and promptly
investigate the causes when results that differ from normal are obtained as well as taking countermeasures to maintainand improve quality.

3

Policy management
NGK SPARK PLUG will further improve and innovate activities to maintain and enhance quality. We will establish strategies andobjectives for creating new value for customers and responding to the evolving internal and external business environment andexplicitly identify issues and problems that need to be tackled as we work towards achieving our strategies and objectives.

4

Small group improvement activities
NGK SPARK PLUG will use small group teams to solve the various issues and problems identified through daily management
and policy management, thereby developing human resources.

5

Quality control education
NGK SPARK PLUG will create the understanding and awareness of the mainstays of TQM, which are the prerequisites formaintaining and enhancing quality and activating improvements and innovation and then establish and implement a levelspecific education system.

Measurement Management
Appropriate measurement management in order to obtainreliable measurements is vital in manufacturing. In orderto protect the NGK SPARK PLUG brand, we implement
appropriate management at the company and also

implement initiatives tailored to the issues of Group
companies, making the importance of measurement
known throughout the Group.

Creating value from strategic resources

Basic Philosophy

45 Creating value from strategic resources

46

Review of Strategic Resources

Review of Strategic Resources

Global Procurement

Basic Philosophy

To procure superior materials and components at an appropriate price with speed and safety, it is a requirement tocreate healthy relationships of trust with transaction partners. By applying ourselves diligently to conduct activities
through the supply chain that will be mutually beneficial, we work to grow trust between companies.

Environmental issues are a common challenge for all mankind. Every member of the NGK SPARK PLUG Group will work towards
reducing environmental burdens from our business activities as much as possible and developing and providing products andtechnologies that contribute to improving the environment. We will also endeavor to communicate in greater depth with our
stakeholders including our local communities so that we may all work together to contribute to creating a sustainable society.

CSR Promotion in Global Procurement

Global Eco Vision 2020

As we aim to realize globally optimal procurement basedon our quality products principle, we focus on
strengthening cooperation with suppliers and promoting
CSR through our supply chain.
The Group promotes purchasing activities that areconsiderate of social issues such as human rights andthe environment, and regarding concerns that mineral
resources extracted from the Democratic Republic of theCongo and surrounding nations are being used as asource of funds for armed insurgents, we recognize thesemineral conflicts as a significant social issue in the courseof resource and materials procurement.
Regarding the use of minerals from conflict zones,
we implement surveys throughout the supply chain, and if
such risks are discovered, we work to avoid usingmaterials from those sources.

To our partners
We aim not just to engage in conventional cost management, but to conduct procurement activities that can make proposals andoffer value through purchasing. CSR is one important element of value that a company can offer. Therefore, we produced the “CSR
Procurement Guidelines,” and made an overall assessment of suppliers’ trends through a suppliers’ self-checklist, and provided
feedback on the results. We aim to pave the way to continuous social progress through promoting CSR and mutual development
together with our suppliers.

In our activities for environmental conservation, we set mediumterm environmental targets. From the fiscal year ended March
31, 2017, we have drawn up a vision for our company andimplemented activities under Global Eco Vision 2020.
We set four important environmental tasks, “Natural
resources,” “Global warming,” “Toxic, hazardous chemicals” and“Key quality (development of environment-friendly products),”
under Global Eco Vision 2020. By tackling these tasks throughour business activities and on a foundation of “Education (raising
consciousness of the environment),” “Compliance,” and “Opencommunication” we will work to enhance our manufacturing
power, increase our brand value, and contribute to not only thesustainable development of our company, but of society, also.
Environmental activity promotion organizations
Environmental Administrator (President)

CSR Committee

Central Environmental Committee Chairman

Central Environmental Committee

Chief Central Environmental Administrator

Internal
Environmental
AuditorEnvironmental
ISO
BureauRegional environmental
administrator
Environmental Committee
Each region
Note: “Each region” refers to the
Headquarters Region, Komaki
Region, Miyanojo Region, Ise
Region, and Group companies
in Japan.

Head of the division
Divisions
Divisions include the Groups
established at the Headquarters.

Head of the working group
Working groups
The working groups conduct
cross-divisional activities, such as
examining and conducting
professional surveys and measuresfor energy conservation andchemical substances.

Creating value from strategic resources

Basic Philosophy

Environment

47 Creating value from strategic resources

48

Environmental action plan
Major item

Minor item

Globalwarming

Reducing CO2 Emissions
Target for the fiscal year ending March 31, 2021

Result for the fiscal year ended March 31, 2018

Production

Reduce per-unit CO2 emissions by 5% relative to the fiscal year
ended March 31, 2016 (Average yearly reduction of 1%)

Target: Reduce per-unit CO2 emissions by 1% relative to the fiscal year ended March 31, 2017
Result: Reduced the emissions by 7.3% relative to the fiscal year ended March 31, 2017
Ongoing cross-departmental energy conservation activities under the leadership ofthe energy conservation working groupPromoted measures to reduce CO2 (equivalent to 1.8% of emissions)

Logistics

Increase efficiency for logistics

Increased the efficiency of various activities accompanying logistics

Reduce defective products to reduce waste

Reduced waste by reducing defective products generated by different processes

Design products in consideration of waste reduction

Implemented initiatives to limit waste by improving product structure, etc.

Use water more efficiently

 educed water use through business restructuring, etc.
R
Reduced water use by remodeling equipment and reviewing operational methods

Raw materials

Design products in consideration of the saving of raw materials

Limited use of precious metals through replacement with resource-saving types—

Build an environment-friendly product certification system andexpand the lineup of such products

Implemented measures to increase environment-friendly products—

Ensure compliance with ELV, RoHS, REACH and otherregulations

Shared regulatory information across departments and made necessary responses to theregulations under the leadership of the chemical substances management working group—

Foster the replacement of substances of concern with substitutes Replaced phthalic acid, whose use will be prohibited by RoHS in 2019, with a substitute

Waste
Depletion of
resources

Water

Environmentallyfriendly products
Hazardous
chemical
substances

Totally discontinue the use of HCFCs—

During the fiscal year ended March 31, 2018, per-unit CO2
emissions were 1.18 tons/million yen, marking an early
achievement of the target of 1.23 tons/million yen (down
5% compared with the fiscal year ended March 31, 2016)as previously set forth in Global Eco Vision 2020.
This was primarily the result of previous energy
conservation efforts in addition to the accumulated effects
of energy conservation resulting from the business
CO2 emissions from energy use

Outside Japan
Groups in Japan (without integrated certification)
Groups in Japan (with integrated certification)

CO2 emissions (10,000 tons-CO2)
40

30

28.89
3.41

Upgraded fluorocarbon R-22 air conditioners

28.56

27.61
3.28

3.62
1.29

24.33

23.65

20

25.48

10

Environmental Burdens from Business Activities (Fiscal year ended March 31, 2018)

31.17

5.37
1.25

24.63

24.81

OUTPUT

54,000 tons

Electricity

Suppliers

Used in offices and plants

449.86 million kWh

Output into waters

Ceramic and metal materials purchased

City gas

EnergyLPG
Used in offices and plants and for testing, travel
and transportation

7,692 tons

Research,
Design,Manufacturing,Sales

Output into air

18.83 million m

3

Chemical substances (PRTR)
Released into waters and notified by sites

0.3 tons

Tap water/well water usage

320,000 tons-CO

2

Chemical substances (PRTR)
Released into air and notified by sites

Total:

390,000 kWh

Products

Waste

Generated by solar power generators and smallhydroelectric generators

80

143

16,900 tons
2,131 tons

Logistics

Handled and notified by sites

865 tons

926 kL (crude oil equivalent)

28
4

136

130

162

38
5

38
4

124

120

Asia
58.6%

North America
8.4%

Regional
composition ofusage
outside Japan

2015/3

2016/32017/3

South America
30.8%

Europe1.8%

Data for the fiscal year
ended March 31, 2017
onward include data for
Wells and overseas
sales subsidiaries.

2018/3CO2 emitted by external transporters
CO2 emissions due to externally commissioned
transportation

Promotion and Results of Reduction of Waste
Per-unit waste disposal during the fiscal year ended March
31, 2018 was 0.052 tons/million yen, a 15% improvementcompared to the fiscal year ended March 31, 2017.
This was because we were able to limit the output ofcertain types of high-volume waste through the businessrestructuring of spark plug production factories andsemiconductor component-related factories, in addition
to previous activities to reduce waste.

2,465 tons-CO

2

Fuels used for transportation(outsourced)
Fuels used for transportation by trucks, ships,
and aircraft

2014/3

19,031 tons

3

PRTR

26

Africa0.4%

Waste recycled(including waste sold)Tap water and groundwater used

1.63 million m

166

162

162

Primary reasons for the improvement in per-unit usage
include a reduction in water usage as a result of the businessrestructuring of semiconductor component-related factories.

0

Sent to landfill or incinerated

Tap water, well water

Logistics

Water

168

120

Waste generated(and treated on commission)

Renewable energy

Chemical
substances

160

25

Other fuels

Logistics

200

40

1,008 kL (crude oil equivalent)Outside Japan
Groups in Japan (without integrated certification)
Groups in Japan (with integrated certification)

Volume used (10,000m3)*4

138 tons

Used in offices and plants and for testing, travel
and transportation

2018/3Per-unit water usage during the fiscal year ended March
31, 2018 was 5.68m3/million yen, a 10.0% improvementcompared to the fiscal year ended March 31, 2017.

1.63 million m

GHG from energy use and non-energy use

3

2017/3South
America
23%

Europe7%

Promotion and Results of Efficient Water Use

Released into sewerage systems and public
waters; output was deemed to be equivalent
to the total volume of tap water and well water
consumed.

GHG emissions

Used in offices and plants

2016/3

Regional
composition ofemissionsoutside JapanFor purchased electricity,
the CO2 emission
coefficient set for eachcountry under the GHG
Protocol is used, while for
fuel, the same
coefficients as thoseused in Japan are used.
Data for the fiscal year
ended March 31, 2017
onward include data for
Wells and 11 overseas
sales subsidiaries.

Group
Overseas
NGK SPARK
companies in organizations
PLUG*3
Japan *2

Wastewater

Ceramic and metal materials

2015/3

Asia
37%

North
America
32%

Product shipment

Waste output

Outside Japan
Groups in Japan (without integrated certification)
Groups in Japan (with integrated certification)

Output (tons)

Customers

Customers*1 For each INPUT and OUTPUT amount, companies included in the scope of reporting are indicated with .
*2 Group companies in Japan: Nittoku Alpha Service Co., Ltd., Nittoku Unyu Co., Ltd., Ceramic Sensor Co., Ltd., NTK Ceramic Co., Ltd., CS Nakatsugawa Co., Ltd., Nansei Ceramic Co., Ltd., Kamioka
Ceramic Co., Ltd., SparkTec WKS Co., Ltd., Nichiwa Kiki Co., Ltd., SparkTec TONO Co., Ltd., which have integrated certification; and Nittoku Denshi Co., Ltd. and NTK Ceratec Co., Ltd., which are outsideof integrated certification.
*3 “Overseas organizations” refers to the following overseas manufacturing and sales organizations: NGK Spark Plug (Shanghai) Co., Ltd., Changshu NGK Spark Plug Co., Ltd., Woojin Industry Co., Ltd.,NTK Technical Ceramics Korea Co., Ltd., NGK Spark Plugs (Thailand) Co., Ltd., Siam NGK Spark Plug Co., Ltd., NGK Spark Plugs (ASIA) CO., LTD., NGK Spark Plugs Malaysia Berhad, PT NGK Busi
Indonesia, NGK Spark Plugs (India) Pvt. Ltd., NGK Spark Plugs (U.S.A.), Inc., Wells Vehicle Electronics, L.P., Ceramica e Velas de Ignicao NGK do Brasil Ltda., NGK Spark Plugs (France) S.A.S., NGK Spark
Plugs SA (Pty) Ltd.; and to the following overseas sales organizations: Taiwan NGK Spark Plug Co., Ltd., NGK Spark Plugs (Vietnam) Co., Ltd., NGK Spark Plugs (Philippines), Inc., NGK Spark Plug (Australia)
Pty. Ltd., NTK Technologies, Inc., NGK Spark Plugs Canada Limited, Bujias NGK de Mexico S.A. de C.V., NGK Spark Plug Europe GmbH, NGK Spark Plugs (UK) Ltd., LLC NGK Spark Plugs (Eurasia), andNGK Spark Plug Middle East FZE.
*4 For overseas organizations, only CO2 emissions from energy use are calculated.

20,00017,882

18,427

16,00012,00017,552

6,453

5,654

19,756
7,066

6,134
595

8,000

12,2284,000

11,974

19,031

10,823

7,305

697

770

11,993

10,9570

2014/3

2015/3

2016/32017/3

2018/3Africa
1.5%
Asia
30.6%
Europe6.5%

North America
26.1%

Regional
composition of
outputsoutside Japan
South
America
35.3%

Data for the fiscal year
ended March 31, 2017
onward include data for
Wells and overseas
sales subsidiaries.

Creating value from strategic resources

Raw materials

INPUT

2014/3

Scope covered*1

Group
Overseas
NGK SPARK
companies in organizations
PLUG*3
Japan *2

Africa
1%

31.43

5.04
1.51

0
Scope covered*1

restructuring of spark plug production factories andsemiconductor component-related factories.
Going forward, we will revise upward our Global Eco
Vision 2020 targets, and with the objective of a 15%
reduction in comparison to the fiscal year ended March 31,
2016 (1.10 tons/million yen), will move forward withadditional energy conservation measures.

49 Corporate governanceReliable Governance50

Meeting with
Outside Directors
mid-career hires. However, frameworks were established
two or three years ago, and they are now beginning to bear
fruit. To further accelerate innovation, I think that we willneed personnel such as external personnel that are not tied
down to the “NGK SPARK PLUG” ways of thinking, or
personnel with abundant knowledge of unknown new areas.
I hope that these frameworks can be used moving forward
to advance “diversity.”

Creating a corporate
culture that breeds“innovation” and increasing corporate value

Q1

Do you think NGK SPARK PLUG progressing in
relation to changing to a corporate culture thatbreeds innovation?

Tamagawa: I believe that the core ceramics technologies
are amazing.
However, initiating challenges into completely new
fields takes time, and in addition, we must change any partsof our culture that prevent us initiating challenges. There will
be attempts made in many fields over a long time span, anda tolerant foundation must be made that will accept failure
in order to achieve success. Not failure without trying, butwhat is important is to just try different things, and in this
aspect, there is still progress to be made at the company.
Yasui: When thinking about society 20 or 30 years fromnow, I think it is important that we consider the future of thecompany with an awareness of what sort of innovation NGKSPARK PLUG should create and how our technology will be

Q2

From left

Morihiko Otaki

Megumi Tamagawa

Kanemaru Yasui

Vice Chairman, PASONA Inc.
Outside director of
NGK SPARK PLUG since 2013

Member of the Board of
MARUYAHONSHA Co., Ltd.
Outside director of
NGK SPARK PLUG since 2016

Head of the Office Yasui Certified
Public Accountant
Outside director of
NGK SPARK PLUG since 2014

necessary for that innovation. For example, the “Sharing
Factory” company was launched this spring from an
employee’s idea. Although I don’t believe that this businessis thought to become a future mainstay of our company, I
do feel that this is likely a manifestation of management
seeking out awareness reforms on the employee level.
Otaki: The significant strengthening of the Strategic Human
Resources Department beginning this year is one initiative
to allow us to respond to large waves of future change. Last
year, I participated as a lecturer in the “HAGI Project,” whichaims to develop next-generation talent, and participants
were selected with a global perspective and were full of
ambition. I felt that the company was shifting gears towardutilizing personnel globally, and also felt the company’s
desire to actively foster personnel that would act as leadersboth inside and outside Japan.
Yasui: As the ratio of overseas production will only continue
to rise, human resources must be thought of on a global
level. Until now, no clear development program had been
established with regard to developing successors, but now
we have clearly established a program and made efforts toimplement a strategic response. This is a point that makes
me feel that the corporate culture is changing. I can feel astrong desire from the management layer to effect changes
in the company.
Otaki: When I was first appointed five years ago, there
wasn’t a strong desire to acquire personnel from outside thecompany, and frameworks were lacking for the utilization ofCompared with the previous year,
how active are Board meetings?

Yasui: I think that discussions are active. Discussions inrecent meetings of the Board of Directors have strongly
reflected the company’s circumstances as they havefrequently centered on topics such as the future direction of
the automotive components business and investment in
new businesses, and in my opinion, the discussion views
have shifted to a more long-term focus.
Otaki: Of the over 80 years of the company’s history, M&A
only began about five years ago, and when considering thebusiness scope, I think that this is a rarity. However, sincethen, discussions revolving around M&A that look to the
future of the company have been made continuously, and I
feel that speedy discussions have been made.
Tamagawa: In M&A, regarding investment decisions andkeeping track of conditions after the investment, I
sometimes think that we must create more structures andrules; I feel that providing input as an outside director,
taking such things into account, is necessary for the future
growth of the company.

Q3

What are you doing as outside director to
improve the company’s corporate value?
Please tell us what you keep in mind when
performing your role in supporting NGKSPARK PLUG’s challenges.

Otaki: To increase corporate value over the long term, wemust create new businesses. Of course, new businesses
require new investment, and as our company is not alone infearing the uncertainty of the future, sometimes investments
are canceled, or the scale is toned down. During suchtimes, it’s necessary to make committed decisions. To
ensure that the company can challenge new businesses

Yasui: Although our company tends to be seen as“conservative,” I feel that it was a “company that is tolerantof failure.” I think that is precisely the reason why we havebeen able to build our current position in the automotive
components business. However, as the organization slowly
grew bigger, it might have become slightly conservative. I
think losses are inevitable from investments in new
businesses, but I think it is important for managers to show
leadership to ensure that this does not cause our ambition
to face challenges to fade. As an outside director, I hope tocontribute to supporting new businesses.
Tamagawa: As an accountant and as a business owner as
well, I have come across many different companies. Even if
the management spirit is the same, outside directors will
see things from varying fundamental viewpoints. I feel thatmy role is to express my own views to enable the othermanagers to see diverse ways of thinking and notice
different things.

Q4

As an outside director, what hopes do you havefor NGK SPARK PLUG, and what are
its issues?

Yasui: I think that in future, a greater sense of speed will be
required in both new and existing businesses, and therefore,
I hope that things will move forward without becoming
overly satisfied with the present.
Otaki: I think that, however small, we should create aprofitable new business, even if it is just one. That is myhope, and I feel contributing to it is my role and task.
Tamagawa: What I feel to be amazing about working withNGK SPARK PLUG is that we invest in profitable areas in a
reliable, timely manner. From here on, some information thatindicates that the plugs and sensors business will see its
peak in future, I hope that we will maintain our tenacity as
we also actively focus on new businesses.

Corporate governanceOtaki: NGK SPARK PLUG has been producing amazing
products for over 80 years.
However, although timespan for change is short at
so-called BtoC companies, making it easy to create
innovation, it is certain that innovation is harder to come byat BtoB companies. Although there are many issues that wemust still overcome in relation to “establishing new businesspillars,” one of the basic policies of the medium-term
management plan, I feel that the seeds are steadily
beginning to grow.

Tamagawa: When I was first appointed, I felt that there
were issues in the human asset aspect. However, projects
to encourage the active participation of women are being
implemented, for example, and I feel that the developmentof personnel to support innovation is slowly progressing. I
recognize that human asset strategy from a diversity
viewpoint is a very important issue moving forward withrespect to innovation.

and increase its corporate value, I will continue to comment
as an outside director.

51 Corporate governance

52

Management System (As of June 26, 2018)
Directors

Outside Directors

Representative Director and Chairman of the Board
Chief Executive Officer
President Officer

Representative Director and Vice President Officer
Internal Auditing Office, overall control ofCorporate Strategy Group and Engineering
R&D Group

Member of the Board (Outside Director)

Member of the Board (Outside Director)

Shinichi Odo

Teppei Okawa

Morihiko Otaki

Kanemaru Yasui

April 1981
Joined our company
February 2011 General Manager, Procurement Group Procurement Dept.
June 2011
Member of the Board
April 2012
Corporate Officer, Member of the Board
June 2012
Corporate Officer
June 2013
Corporate Officer, Member of the Board
April 2014
Managing Officer, Member of the Board
April 2015
Senior Managing Officer, Member of the Board
April 2016
Representative Director
Vice President Officer (up to today)

August 1996
August 2011
June 2013
June 2016
August 2016

April 1977
July 2005
June 2007
June 2010
June 2011
April 2012
April 2016

Joined our company
President, NGK SPARK PLUGS (U.S.A), INC.
Member of the Board, NGK SPARK PLUG CO., LTD.
Managing Director, Member of the Board
President
President & CEO
Representative Director and Chairman of the Board
Chief Executive Officer
President Officer (up to today)

President & CEO, JOHNSON & JOHNSON K.K. VISION CARE COMPANY
Vice Chairman of the Board, PASONA INC.
Member of the Board, NGK SPARK PLUG CO., LTD. (up to today)
Director, Henry Schein Japan K.K. (up to today)
Vice Chairman, PASONA INC. (up to today)

Member of the Board
Senior Managing Officer
In charge of Div. Business Planning
management Division

Member of Board
Corporate Officer
Corporate Strategy Group

Member of the Board (Outside Director)

Takeshi Kawai

Mikihiko Kato

Megumi Tamagawa

April 1987
Joined our company
February 2011 General Manager, Sensor Engineering Dept. II,
Automotive Components Group Sensor Div.

April 1985
February 2012
August 2012
October 2015

Joined our company
General Manager, Corporate Planning Dept.
President of CERAMICA E VELAS DE IGNICAO NGK DO BRASIL LTDA.
General Manager, Corporate Planning Dept., NGK SPARK PLUG CO., LTD.

August 1990
Registered as a Certified Public Accountant
February 1991 Joined BDO Toyo & Co.
December 2000 Manager, Accounting Department,
Japan Branch, General Electric International Inc.

April 2016
June 2017

Corporate Officer (up to today)
Member of the Board (up to today)

October 2004
March 2006
March 2016
June 2016

April 2012
April 2015
June 2015
April 2016

Corporate Officer
Managing Officer
Managing Officer, Member of the Board
Member of the Board, Senior Managing Officer (up to today)

March 1981
April 1999
August 2007
June 2008

Registered as a Certified Public Accountant
Representative Partner, Central Audit Corporation
Representative Partner, KPMG AZSA LLC
Representative Partner, Executive Director,
Head of Nagoya Office, KPMG AZSA LLC

July 2013
June 2014

Head of the Office, Yasui Certified Public Accountant (up to today)
Member of the Board, NGK SPARK PLUG CO., LTD. (up to today)

Joined MARUYAHONSYA Co., Ltd.
Representative Director, MARUYAHONSYA Co., Ltd.
Member of the Board, MARUYAHONSYA Co., Ltd. (up to today)
Member of the Board, NGK SPARK PLUG CO., LTD. (up to today)

Audit & Supervisory Board Members
Member of Board
Managing Officer
Automotive Components Sales & Marketing
Division

Audit & Supervisory Board Member, Standing

Audit & Supervisory Board Member, Standing

Takio Kojima

Toru Matsui

Fumio Mizuno

Yasuhiko Hotta

April 1984
Joined our company
February 2011 General Manager, Next Generation Product Project,
Product Planning Center, Engineering R&D Group

April 1984
April 2011
October 2013

April 1981
Joined our company
February 2006 General Manager, Semiconductor Components Div. Production Dept.
Sec. I Communication Media Components Group

April 1980
Joined our company
February 2008 General Manager, Accounting & Finance Dept.
November 2008 General Manager, Semiconductor Components Div., Communication
Media Components Gr.

April 2012
October 2013
April 2014
April 2018
June 2018

General Manager, Next Generation Product Project,
New Business Advancement Group
General Manager of R&D Center, Engineering R&D Group
Corporate Officer
Managing Officer (up to today)
Member of the Board (up to today)

Joined our company
President, NGK SPARK PLUG EUROPE GmbH
General Manager, OEM Sales & Marketing Dept., Sales and Marketing
Div., Automotive Components Group, NGK SPARK PLUG CO., LTD.

December 2014 President of NGK SPARK PLUG (SHANGHAI) CO., LTD.
April 2015
Corporate Officer, NGK SPARK PLUG CO., LTD.
July 2016
President, NGK SPARK PLUG (SHANGHAI) TRADING CO., LTD.
April 2018
Managing Officer, NGK SPARK PLUG CO., LTD. (up to today)
June 2018
Member of the Board (up to today)

June 2009

General Manager, Production Dept. Ceramic Package Div.
Communication Media Components Group

April 2011
July 2011
April 2013
June 2015

President, NTK CERAMIC CO., LTD.
Senior General Manager, NGK SPARK PLUG CO., LTD.
Vice Senior General Manager, Technical Ceramics Group Semiconductor Div.
Audit & Supervisory Board Member, Standing (up to today)

June 2009
February 2011
July 2011
April 2016

General Manager, Planning Dept., Communication Media Components Gr.
General Manager, Information Systems Dept.
Senior General Manager
Senior General Manager, Working Styles Reforming Office,Corporate Strategy Gr.

June 2017

Audit & Supervisory Board Member, Standing (up to today)

Member of Board
Corporate Officer
Secretarial Office, Corporate Administration
Group, Nagoya Factory Manager

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Kenji Isobe

Fumiko Nagatomi

Akihiko Minato

April 1986
July 2011
April 2013
December
2015
April 2016
June 2018

Joined our company
General Manager, Accounting & Finance Dept.
General Manager, Corporate Planning Dept. and Public Relations Office
General Manager, Accounting & Finance Dept.,
Corporate Administration Group and General Manager, Public Relations Office
Corporate Officer (up to today)
Member of the Board (up to today)

April 1981
April 1989
June 2016

Registered as an attorney, Joined Hachisuka Law Firm
Opened Nagatomi Law Firm (up to today)
Audit & Supervisory Board Member (Outside Corporate Auditor),
CHUBU Electric Power Co. Inc. (up to today)

April 1976
June 2003
May 2007

Joined The Mitsubishi Bank, Ltd.
Executive Officer, The Bank of Tokyo-Mitsubishi, Ltd.
Managing Executive Officer, The Bank of Tokyo-Mitsubishi UFJ, Ltd.
(currently, MUFG Bank, Ltd.)

June 2017

Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD. (up to today)

June 2009Managing Director, MARUNOUCHI YOROZU Co, Ltd
Outside Audit & Supervisory Board Member, The Nanto Bank, Ltd.

June 2010

Representative Director and Vice President, Mitsubishi UFJ Researchand Consulting Co., Ltd.

June 2012
Outside Audit & Supervisory Board Member, Mitsubishi Materials Corporation
September 2016 Chairman, MST Insurance Service Co., Ltd. (up to today)
June 2018
Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD.
(up to today)

Corporate governanceMember of Board
Managing Officer
Engineering R&D Group

53 Corporate governance54

Corporate governanceManagement System

Corporate Officers

Basic Philosophy

Senior Managing Officer

Senior Managing Officer

Takahiro Suzuki

Yoshitaka Narita

Industrial Ceramics Div.
Semiconductor Production Equipment Div.
President of NTK CERATEC CO., LTD.

Overall control of PAMA region
President of NGK SPARK PLUGS (U.S.A.) HOLDING, INC.
President of NGK SPARK PLUGS (U.S.A.),INC.
President of NTK TECHNOLOGIES, INC.

Senior Managing Officer

Managing Officer

Kozo Amano

Noboru Ishida

Overall control of Marketing Div.
Cutting Tools Div.
Overall control of Business Development Div.
Medical Div.

Product Technology Div.
Overall control of Facility Engineering Div.
Corporate Quality Management Div.
Fuel Cell Div.
Komaki Factory Manager

Managing Officer

Corporate Officer

Kozo Yamasaki

Nobuyuki Tokioka

President of NTK CERAMIC CO., LTD.

AEC Div.

We believe that it is our foundational and important managerial task to establish and maintain a fair and efficientmanagement system, while securing soundness and transparency in management, in order to enhance corporate
value by fulfilling our corporate social responsibilities. We will enhance our corporate governance to ensure theefficiency and soundness of our corporate activities in line with our corporate philosophy, thereby fulfilling our
responsibilities to our stakeholders.

Corporate Governance System
We choose to have an Audit & Supervisory Board, who audit
our directors objectively from an independent position. We
have also separated the managerial decision-making andsupervision function from the business execution function byintroducing the corporate officer system. In the fiscal year
ended March 31, 2018, the Board of Directors met 14 times.
As for decision-making, the Board of Directors makes
decisions on the most important matters for management,

while decisions on other matters are made by the Corporate
Management Committee and others for greater speed indecision-making.
We also appoint three outside directors and twooutside audit & supervisory board members with an eye
to introducing independent external viewpoints toenhance the supervision function and ensuretransparency in management.

Corporate governance system
General meeting of shareholders
Appointment/dismissal

Appointment/dismissal

Corporate Officer

Corporate Officer

Yoshihiro Matsubara

Yutaka Tanaka

Facility Engineering Div.
Corporate Quality Management Div.

Sensor Div.
Glow Plug Div.

Nomination
Committee

Giving opinions
Appointment/
dismissal

Instruction

Consultation

Remuneration
Committee

Giving opinions

Corporate
Management Committee

President and CEO

Corporate
Officers’ Meeting

Instruction Corporate Officers

Administration Officer in Charge

Corporate Officer

Masato Taniguchi

Masaki SumiyaMarketing Div.
Business Development Div.

In charge of EMEA region
President of NGK SPARK PLUG EUROPE GmbH

Instruction

Business Operating Section/Group Companies

Mutual cooperation

Audit

Independent Auditors
Mutual cooperation

Internal Auditing OfficeInstruction

Audit

Various Conferences and Committees (CSR Committee, etc.)

Disclosure

Chronological table of measures taken for corporate governanceCorporate Officer

Corporate Officer

Hiroyuki Maeda

Hiroyuki Tanabe

SCM Div.
Procurement Div.

President of CERAMICA E VELAS DE IGNICAO NGK DO
BRASIL LTDA.

Corporate Officer

Corporate Officer

Hiroyasu Ogura

Akiyoshi Kato

In charge of ASEAN & India region
President of NGK SPARK PLUGS (THAILAND) CO., LTD.
President of SIAM NGK SPARK PLUG CO., LTD.
President of NGK SPARK PLUGS (ASIA) CO., LTD.

Spark Plug Div.

 hanged the term ofCservice of a director
from two years to
one year

2005

2008

 ounded theF
CSR Committee2010 bolished theAretirement allowancesystem for officers

Corporate Officer

Koji Suzuki

Yoshiyuki Takayanagi

Automotive Component Sale & Marketing Div.

Medical Div.

Increased thenumber of outside
directors to threeIncreased the numberof outside directors
to twoIntroduced thecorporate officer
system2011

 stablished the Internal
E
Auditing Office

Corporate Officer

 ecreased the upperDlimit of the number of
directors from 25 to 13

2012

 stablished theE
CSR Policy

2013

2014

 ppointed anAoutside director

2015

2016

2017

 ormulated the criteriaF
for the appointment of
independent officers
 egan assessing theBeffectiveness of theBoard of Directors
 stablished the Nomination andE
Remuneration CommitteesIntroduced the performance-linked
stock remuneration system(Corporate Officers who do not concurrently serve as Directors)

Corporate governanceCorporate Officer

Audit & Supervisory Board(including outside audit & supervisory board members)

Board of Directors (including outside directors)

55 Corporate governance

56

Board of Directors

Compensations for Directors and Corporate Officers

The Board of Directors of the company is composed of
10 directors, 3 of whom are outside directors.
Meetings of the Board of Directors are held regularly
once a month as well as whenever necessary fordeliberation and determination with respect to issues asprescribed in applicable laws and regulations or articles
of incorporation as well as other key managerial issues,
and also for supervision of business execution status in
response to reports from the directors.
In addition, a Nomination Committee, whose
membership includes outside directors, was establishedin April 2017 as an advisory body to the Board of

Directors. To ensure reasonableness and transparency,
decisions regarding candidate nominations for the
directors shall be made by the Board of Directors
following deliberations by the Nomination Committee forsubmission to the General Meeting of Shareholders. The
term of office of directors is one year.
Decisions regarding candidate nominations for theaudit & supervisory board members shall be made by the
Board of Directors with the consent of the Audit &Supervisory Board, following deliberations byrepresentative directors for submission to the General
Meeting of Shareholders.

Independence of Outside Directors and Audit & Supervisory Board Members
Outside directors play supervisory roles in positions
independent from business operations, including expressing
their opinions by taking a broader view at important
meetings, including the Board of Directors meetings.
Outside audit & supervisory board members play auditing
functions by drawing on their expertise to carry out audits
from multifaceted viewpoints and express their opinions atimportant meetings including the Board of Directors meetings.

We appoint independent outside directors and audit &supervisory board members in line with our own selection
criteria as well as the criteria set by the securities exchanges
to ensure that candidates for independent positions have no
special relationships with the management team or major
shareholders and that they have no conflicts of interest withgeneral shareholders.

Director and corporate officer remuneration is determined by
the Board of Directors based on deliberations regarding the
responsibilities and performances of each director andcorporate officer by the Remuneration Committee, which
was established in April 2017 as an advisory body to theBoard of Directors and whose membership includes outside

directors. We also introduced a performance-linked andhighly transparent and objective stock remuneration systemfor directors and corporate officers in June 2017, aiming to
make our executives more aware of their roles in improving
the company’s medium- to long-term business performanceand contributing to an increase in corporate value.

Evaluation of the Effectiveness of the Board of Directors
The company conducted an evaluation of the effectiveness of the Board of Directors. An overview of this evaluation for the fiscal
year ended March 31, 2018 is as follows:1

Method of evaluation

2

Overview of evaluation results

Evaluation by the Board of Directors, based on a survey of directors and audit & supervisory board members
It was judged that the effectiveness of the Board of Directors of the company is sufficiently ensured. The reasons thereof are as follows:
1) The composition of the Board of Directors includes a sufficient percentage of independent outside directors, and constructive
discussions take place.
2) Revisions have been made to the agenda items of Board of Directors meetings, and efforts are being made to make discussions at
meetings of the Board of Directors more effective and make deliberations regarding important management issues more adequate.
3) A framework for promoting constructive dialogue with shareholders has been established appropriately and is functioning properly.
Furthermore, the following issues were also identified as items that it is hoped will be implemented in order to further enhance theeffectiveness of the Board of Directors:
1) Further improvement shall be made to the content and volume of the materials for the meetings of the Board of Directors toincrease efficiency.
2) Enhanced orientation and training shall be provided for acquiring knowledge required of directors.
3) A remuneration scheme for the management team shall be considered reflecting short-term and long-term targets in a balanced way.

Appointment reasons for outside directors and audit & supervisory board members
Name

Reason for appointment

Outsidedirector

Morihiko
Otaki

He has a wealth of experience in global companies and expertise as an executive,
and is expected to supervise management in an appropriate manner.

Attended 12 of the 14 Board of
Directors meetings held during
the term*1.

Outsidedirector

Kanemaru
Yasui

He is expected to make recommendations to management by using his expertise andexperience gained over the course of his long career as a certified public accountant.

Attended all of the 14 Board of
Directors meetings held during
the term*1.

Outsidedirector

Megumi
Tamagawa

She is expected to make a range of recommendations by drawing upon her wealth ofexperience as an executive in a different industry as well as the expertise developed
as a certified public accountant.

At tended all of the 14 Board of
Directors meetings held during
the term*1.

Audit &
supervisoryboard
memberKenichi
Masuda*2

He has served as a director at financial institutions and is expected to use hisabundant expertise and knowledge regarding finance and corporate management forthe benefit of the company.

Attended 13 of the 14 Board of
Directors meetings held during
the term*1.

Attended all of the 10 Board of
Directors meetings held during
the term since her appointment
to the position of outside audit &supervisory board member onJune 29, 2017.

Audit &
supervisoryboard
memberFumikoNagatomi

She is expected to use the expertise and knowledge that she has accumulated
during her long career as an attorney for the company.

Audit &
supervisoryboard
memberAkihiko
Minato*3

He has served in important posts at financial institutions and is expected to use hisabundant expertise and knowledge regarding finance and corporate management forthe benefit of the company.

*1 Fiscal year ended March 31, 2018
*2 Mr. Kenichi Masuda resigned from his position as outside audit & supervisory board member on June 26, 2018.
*3 Mr. Akihiko Minato assumed his position as outside audit & supervisory board member on June 26, 2018.

Frequency of attendance

Audit & Supervisory Board Members and Measures to Strengthen Their Functions
The Audit & Supervisory Board of the Company is composedof 4 audit & supervisory board members, 2 of whom areoutside audit & supervisory board members. Timely andappropriate opinions are expressed from outside perspectives.
No outside audit & supervisory board members have interests
such as engaging in transactions with the company and/or
belong to any organizations that have such interests.
Furthermore, in accordance with a request from the audit& supervisory board members, one staff member is appointed

to support the operations of the Audit & Supervisory Board,and this staff member engages in internal communication,
investigation, and other supporting operations. In addition,members of the Internal Auditing Office and the Accounting
Auditor conduct investigations and make reports in responseto requests from audit & supervisory board members, and therespective organizations strive to enhance the quality of audits
and work together.

Internal Auditing System
Our Internal Auditing Office performs audits of NGK SPARKPLUG and its Group companies as an independent
department, reports the results to management, and makes
proposals to the audited companies on improvements
regarding the identified problems. Departments that receive
such proposals formulate and implement improvement plans,
and the Internal Auditing Office monitors and checks theimplementation status. To ensure the reliability of financial
reporting, the Office assesses the effectiveness of internal

Dialogue with Investors
We aim to enhance corporate value by disclosing
information to investors in an open, fair manner, and thereby
enhancing understanding of the company. We shall continue
endeavoring to appropriately distribute information andenhance the quality of communication.

control over financial reporting based on the internal control
reporting system set pursuant to the Financial Instruments
and Exchange Act of Japan.
The Internal Auditing Office works to improve theeffectiveness of internal audits by exchanging views on eachof the audit plans and results with audit & supervisory board
members and/or independent external auditors regularly or
as required.

Number of instances of dialogue
with institutional investors
Number of instances of dialogue
at overseas roadshows
Number of participants at
information sessions forindividual investors

224
88

per yearper year

1,117

people per year

Corporate governance

Title

57 Corporate governance58

Corporate GovernanceReliable Governance

CSR Promotion System
As well as determining each year’s key tasks for
implementation of the CSR Policy, the CSR Committee
oversees and evaluates the CSR-related activities
implemented by the respective task force committees anddivisions, and makes proposals regarding them, in order toachieve total optimization of CSR activities, thereby
strengthening the business foundation.
Working groups are established as necessary to discussspecific themes and develop countermeasures.
Through close collaboration among the CSR
Committee, the task force committees, and working groups,
a company-wide CSR promotion system is put in place.

CSR Management

CSR promotion system
CSR Committee
Chairman: President & CEO

Risk Management Dept.
(Secretariat)

BCM-WG

Quality
Committee

Safety and
HealthCommittee

Environment
Committee

CSR
Procurement WG

Confidentiality
Management
Committee

Risk Management
WG

ExportControlCommittee

Compliance
Committee

Communication with Stakeholders
To deepen mutual understanding, we are fostering dialogue with our stakeholders through various opportunities.
Stakeholders

Basic Philosophy

Our CSR

Shareholders
and investors

In addition to meeting the legal standards of information disclosure, we disclose information through various media andpromptly release information on our website.

Customers

To ensure that our customers purchase and use our products and services with peace of mind, we offer information on
our website, exhibitions, etc. from a customer-oriented point of view.

Suppliers

In order to establish healthy partnerships with our suppliers and ensure mutual growth, we hold corporate policy
briefings and conduct other activities through our supply chain system.

Local
communities

We respect local culture and customs in our sites established in respective regions in the world and engage in smoothcommunication with local communities, while also aiming to build a comfortable society as a member of thosecommunities and striving to participate in various activities that contribute to society.

Employees

To provide employees with safe and sound workplaces where they can work hard and make a meaningful contribution,
the management team proactively visits individual workplaces and talks with workers on-site.

Our CSR Philosophy and Policy
We act based on our Corporate Code of Conduct and our
CSR Policy in order to realize our Corporate Philosophy.
Enhancement of corporate value

Corporate
Philosophy
Corporate
Code of Conduct

CSR Policy

 isk Management Policy
RCompliance Policy
Information Security Policy
Corporate Quality Policy
Information Disclosure Policy
Procurement Policy
Human Resource PolicyOccupational Safety and Health
Basic Policy
Social Contribution Policy
Environmental Policy

Participation in the United Nations Global Compact

Contribution to SDGs

The NGK SPARK PLUG Group participated in the United

NGK SPARK PLUG shall focus on achieving the Sustainable

Nations Global Compact in November 2016.

Development Goals (SDGs) adopted by the UN in 2015.

The Global Compact is an initiative proposed in 1999 by

Inclusion in SRI Indexes
The NGK SPARK PLUG Group is a member of the following indexes related to SRI (socially responsible investing):

then Secretary-General of the United Nations Kofi Annan toaddress various issues facing the world, such as global
warming, environmental problems and disparities in society. It
was established formally at the UN headquarters in July 2000 asa set of voluntary action principles to be followed by companies.
The NGK SPARK PLUG Group will
support the Global Compact’s 10
principles set in four fields (human rights,
labor, environment and anti-corruption)and conduct activities to contribute tobuilding a sustainable society.

 bout Sustainable Development Goals (SDGs)
A
SDGs are a set of 17 goals and 169 targets for creating a sustainable world by 2030
that were adopted at a UN summit, and they aim to resolve shared global problems
and issues, including poverty and inequality, and climate change, etc. with theobjective that “not a single person on earth will be left behind.”(As of March 31, 2018)

Corporate governance

We view CSR not just as a responsibility but as anopportunity to be accountable through review of the
NGK SPARK PLUG Group’s economic, environmental
and social activities from a global perspective, toenhance corporate value, and to contribute to thesustainable development of society in accordance with
our Corporate Philosophy.
Our CSR activities are wide-ranging and diverse, and toprovide our Group’s action guidelines for fulfilling CSR,
we established the CSR Policy in April 2011, which
comprises 10 policies, such as the Compliance Policy
and others. In line with the CSR Policy, we review andpromote CSR based on a multifaceted approach.

Communication

59 Corporate governance60

Corporate GovernanceReliable GovernanceCorporate Ethics Helpline
The Corporate Ethics Helpline is an internal reporting
system available to employees seeking consultation
regarding compliance. We have worked to increase userconvenience by establishing channels not only inside thecompany but also via an external expert service provider
and enabling employees to seek consultation and makereports also outside of business hours and on holidays.
Regarding consultations and reports received, facts areinvestigated with discretion so that the reporting employee
is neither identified nor feels uncomfortable, and if
problems are confirmed, they are dealt with promptly.
There were 65 consultations and reports in the fiscal year
ended March 31, 2018, including those from employees ofGroup companies. The numbers have been increasing
year on year as a result of the permeation of complianceawareness throughout the workforce.

Compliance and Risk Management

Flow after report is received via the Helpline
CSR Committee

When necessary
Recommendation

Disciplinary Committee
Disciplinary action

Compliance Committee

Chairperson ofCompliance Committee

Investigation Committee(Those concerned)

Helpline channel(inside and outside the company)
Both anonymousand non-anonymous
consultations
are accepted

Results

Investigation

Compliance violator

Employees

Risk Management

Basic Philosophy
We will build and operate a company-wide risk management system in order to strategically deal with risks against thebackground of a business environment that is becoming more complex and diversified. To this end, we will implement
measures continuously and in an integrated manner in cooperation with our domestic and overseas Group companies.

Compliance

Basic Philosophy
We work to increase awareness among employees regarding compliance to act in a socially sensible manner, helping
them to bear in mind that our enterprise is a member of society.

and the Compliance Newsletter, which gathers examples
of cases that could occur in an everyday setting.
In particular, taking the antitrust law (the Antimonopoly
Act of Japan) violation that we were confronted with infiscal 2014 seriously, we have been implementing a
program to prevent the recurrence of similar problems,
specifically by appointing a director in charge ofcompliance and founding a team specializing in antitrust
law-related issues and legal compliance.

The Compliance Committee, headed by the
Representative Director and made up representatives ofthe departments in charge of legal and regulatory mattersand of the divisions, meets every three months to monitor
and make corrections on key issues and actions
concerning them. To raise employees’ awareness ofcompliance, we provide ongoing education andedification, using the Compliance Guidebook, which
provides information on rules in the company and society,Compliance promotion system

We have established the Group Information Security
Regulations and Confidentiality Management
Regulations, and strive for the appropriate protection
and management of confidential information including
personal information belonging to the NGK SPARK PLUG

Group, our customers and our suppliers. When we use
wireless LAN, mobile terminals and other electronic
information devices, we give all possible consideration to
information security while also ensuring compliance withthe relevant laws and regulations.

Formulation of Various BCPs (Business Continuity Plans)
In preparation for various risks caused by large-scaledisasters including earthquakes, we have been addressing
the issue of BCM (Business Continuity Management) for
continuing business operations while minimizing any damage
that may be incurred. Especially for functions requiring
prompt response in the event of a disaster, such as businessdepartments, IT, and procurement, contingency frameworks

and handling procedures are specified in BCPs (BusinessContinuity Plans), clarifying the time-limit and the target
state. We conduct training to disseminate and confirm theeffectiveness of the formulated BCPs annually, and issues
that come to light, as well as the degree of improvementin the plans’ effectiveness, are confirmed by the CSR
Committee to be addressed and reviewed.

Board of Directors
Disciplinary
Committee

Committee activities

CSR Committee

Consultation and reporting

Recommendation
Compliance Committee

Reporting

Audit

Chairperson ofCompliance Committee
ReportingAnti-Harassment Committee(Labor Dept. and labor union)

Division in charge of laws and regulations(Acquisition of legal information and its dissemination)
ReportingPlant liaison staff anddivision in
charge of lawsand regulations

Consultation and reporting
Implementation of compliancePreparation against Large Earthquakes

Cooperation

Helpline channel(inside and outside the company)

Consultation andreportingInternal
Auditing OfficeConsultation

NGK SPARK PLUG(Headquarters, branches, sales offices, liaison offices and plants)

Educational tools
Education and training
Awareness survey
Results disclosureGroup companies

Compliance
check
Audit

We restructure the plants of Group companies inconsideration of damage that might be inflicted by large
earthquakes in the future.
We also set out the initial responses to be made andmeasures to be taken to ensure business continuity in theevent of a large earthquake in our guidelines on business
continuity plans (BCPs) against earthquakes. Guidelines
on initial responses include those on employees’ actions,such as evacuation and safety reporting, and on emergency

headquarters, internal firefighting teams and reserves. Every
November, our plants, sales offices and Group companies inJapan concurrently hold evacuation drills, which include theexamination of the guidelines. Guidelines on BCPs include
those on the time required for the recovery of important
operations, recovery plans, organization of recovery teams
and the implementation of BCPs. We hold BCP drills in
December every year, as part of efforts to enhance theeffectiveness of business continuity plans.

Corporate governanceCompliance Promotion

Information Security

61 Information

62

Financial Results Highlights for the Past 11 Years(Millions of yen)

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

Net sales

345,584

292,121

243,914269,232

284,746

302,798

329,758

347,636

383,272

372,919

409,912

Operating income (loss)

35,039(5,222)

10,683

28,77024,47823,754

51,661

62,196

66,28453,59567,279Ordinary income (loss)

34,938(7,528)10,75827,37923,74027,67454,96067,90764,48355,55969,094

Profit (loss) attributable to owners of the parent

22,144(71,669)

13,50923,68025,52420,90932,70436,75330,81525,60244,335

Capital expenditures

63,231

24,173

10,9778,767

14,00424,012

41,03436,37245,33936,32837,591

Depreciation

25,474

31,767

18,825

16,646

15,438

12,798

11,567

13,337

16,834

19,601

20,920R&D expenses

17,444

17,575

13,907

15,763

16,036

17,10019,40021,337

23,123

23,41625,283

Cash flows from operating activities

37,72836,60334,25535,39821,07926,19454,69736,59356,46549,76465,707

Cash flows from investing activities(43,820)(27,153)(17,270)(20,412)(15,850)(15,442)(61,148)(12,865)(82,331)(53,410)(26,422)

Free cash flows(25,520)

3,820

27,83430,684

8,507

8,456

3,541

13,995(25,866)

6,335

29,636

Dividend payout

5,917

2,941

2,396

4,791

4,789

4,788

6,093

7,834

9,140

8,942

12,676

Net assets

288,299

184,384

207,006

218,159

235,613

268,309302,793343,380

341,044354,710388,115

Total assets

412,150

275,995

331,476

337,318

340,295

366,489

458,148

485,497

526,103563,801

607,769

Interest bearing debt

37,28937,04239,81436,69737,39927,41857,33946,15380,212

99,275

98,115(Yen)(328.90)62.01

108.71117.2596.06

150.26168.88141.60119.44209.37

1,312.72

838.11

942.41994.36

1,075.24

1,223.41

1,381.38

1,566.80

1,557.16

1,660.06

1,837.46

Cash dividends per share

27.00

13.50

11.00

22.00

22.00

22.00

28.00

36.00

42.00

42.00

60.00

Operating income ratio (%)

10.1

(1.8)

4.4

10.7

8.6

7.8

15.7

17.9

17.3

14.4

16.4

Return on net sales (%)

6.4(24.5)

5.5

8.8

9.0

6.9

9.9

10.6

8.0

6.9

10.8

Gross profit on sales (%)

24.1

13.8

21.0

27.4

25.1

24.2

32.6

35.8

35.6

33.0

34.6

ROE (Return on equity) (%)

7.7(30.6)

7.0

11.2

11.3

8.4

11.5

11.4

9.1

7.4

12.0

ROA (Return on assets) (%)

5.4(20.8)

4.4

7.1

7.5

5.9

7.9

7.8

6.1

4.7

7.6

ROIC (Return on invested capital) (%)

7.8

(1.3)

3.2

8.0

6.5

5.8

11.0

11.6

11.4

8.5

10.0

Equity ratio (%)

69.4

66.2

61.9

64.2

68.8

72.7

65.6

70.2

64.4

62.5

63.5

Total asset turnover (times)

0.8

0.8

0.8

0.8

0.8

0.9

0.8

0.7

0.8

0.7

0.7

Dividend payout ratio (%)

26.8

—

17.7

20.2

18.8

22.9

18.6

21.3

29.7

35.2

28.7

Net assets per share

Financial and Corporate Data

100.93

Earnings (losses) per share

63 Information

64

Consolidated Balance Sheets
NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
March 31, 2018 and 2017

Millions of yen

2018

Thousands of U.S. dollars

2017

2018

¥ 56,235¥ 45,733$ 530,519

Notes and accounts receivable - trade (Note 9)

93,61591,594

883,160

Short-term investment securities (Notes 9 and 10)

59,90557,210565,142

Inventories (Note 3)

94,95386,857895,783

Deferred tax assets (Note 13)

12,427

11,023

117,236

Other

15,076

14,614142,226

(751)

(463)

(7,085)

331,463306,570

3,127,009

Total current assets

2018

2017

2018

Current liabilities

Current assets

Allowance for doubtful accounts

Thousands of U.S. dollars

Liabilities

AssetsCash and deposits (Notes 7 and 9)

Millions of yen¥ 32,407¥ 30,045$ 305,726

Short-term loans payable (Notes 9 and 20)

10,113

11,25995,406

Current portion of bonds payable (Notes 9 and 20)

25,000—235,849

Current portion of long-term loans payable (Notes 9 and 20)

9,962

—

93,981

43

87

406

13,0407,697

123,019

Accounts payable - trade (Note 9)

Lease obligations (Note 20)
Income taxes payable
Other

39,641

36,486373,972

Total current liabilities

130,208

85,5771,228,377

Bonds payable (Notes 9 and 20)

30,00055,000283,019

Long-term loans payable (Notes 9 and 20)

22,88632,848215,906

Noncurrent liabilities
Noncurrent assets
Property, plant and equipment

Lease obligations (Note 20)

Buildings and structures, net

63,41062,400598,208

Machinery, equipment and vehicles, net

95,28286,358898,887Land

21,27919,659200,745

Deferred tax liabilities (Note 13)

Construction in progress

11,027

9,726

104,028

Other

Other, net

4,101

3,156

38,689Total property, plant and equipment (Note 3)

195,102

181,3021,840,585

Other
Total intangible assets

Total noncurrent liabilities
Total liabilities

80

1,047

29,263258,896

92

—

868

7,967

5,324

75,160

945

998

8,915

89,446

123,514843,830

219,654

209,091

2,072,208

47,86947,869451,594

Shareholders’ equity

307

460

2,896

4,567

4,005

43,085

Capital surplus

54,63954,825515,462

239

234

2,255

Retained earnings

278,374

262,0102,626,170

5,114

4,701

48,245

Treasury stock(6,422)(17,649)(60,585)

374,461

347,056

3,532,651

Common stock

Total shareholders’ equity
Investments and other assets
Investment securities (Notes 3, 9 and 10)

71,68068,252676,226

Deferred tax assets (Note 13)

3,042

1,496

28,698

Other

1,487

2,000

14,028

Allowance for doubtful accounts

(119)

(523)

(1,123)

Total investments and other assets

76,09071,226

717,830

276,306

257,230

2,606,660¥607,769¥563,801$5,733,670

Total noncurrent assets
Total assets
See accompanying Notes to Consolidated Financial Statements.

Accumulated other comprehensive income
Net unrealized gains on available-for-sale securities

31,211

27,580294,443

Foreign currency translation adjustments(16,737)(16,527)(157,896)

Remeasurements of defined benefit plans (Note 12)(3,273)(5,804)(30,877)

Total accumulated other comprehensive income

11,2005,249

105,660

2,454

2,404

23,151

388,115354,710

3,661,462¥607,769¥563,801$5,733,670

Noncontrolling interests
Total net assets
Total liabilities and net assets

Financial and Corporate Data

SoftwareProvision for stock benefits

111
27,443

Net assets

Intangible assets
Goodwill (Note 16)

Net defined benefit liability (Note 12)

65 Information

66

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2018 and 2017

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2018 and 2017

Millions of yen

Thousands of U.S. dollars

Millions of yen

2018

2017

2018

Net sales (Note 16)¥409,912¥372,919$3,867,094

ProfitCost of sales (Note 4)

268,189

250,0172,530,085

Other comprehensive income:Gross profit

141,722

122,901

1,337,000

Selling expenses

33,37725,252

314,877

General and administrative expenses

41,06544,053

387,406

Total selling, general and administrative expenses (Notes 4 and 12)

74,442

69,306702,283

67,27953,595

634,708

Selling, general and administrative expenses

Operating income (Note 16)
Nonoperating income
Interest income

1,123

1,157

10,594

Dividend income

1,398

1,422

13,189

510

604

4,811

Equity in earnings of associates
Other

1,826

1,815

17,226

Total nonoperating income

4,858

4,999

45,830Nonoperating expenses
Interest expense
Foreign exchange loss

511

342

4,821

1,786

963

16,849Depreciation of idle property, plant and equipment

—

201

—

746

1,528

7,038

Total nonoperating expenses

2018

2017

2018

¥44,683¥25,997$421,538

3,655

4,837

34,48116(1,007)151

Remeasurements of defined benefit plans (Note 12)

2,560

2,928

24,151

Share of other comprehensive income of associates accounted for using
equity method

(161)

113

(1,519)Unrealized gains on available-for-sale securities
Foreign currency translation adjustments

Total other comprehensive income (Note 5)
Comprehensive income

6,070

6,872

57,264¥50,754¥32,870$478,811¥50,286¥32,492$474,396

467

377

4,406

Comprehensive income attributable to:
Owners of the parent
Noncontrolling interests
See accompanying Notes to Consolidated Financial Statements.

Other
Ordinary income

Thousands of U.S. dollars

3,043

3,036

28,70869,09455,559651,830Extraordinary income
199

487

1,877

Gain on sale of investment securities

1,117

—

10,538

Total extraordinary income

1,316

487

12,415

1,325

773

12,500

Impairment loss (Note 4)—

20,187—

Loss on valuation of investment securities

5

74

47

Loss on violation of antitrust law

3,987

77

37,613

Settlement package

Gain on sale of noncurrent assets (Note 4)

Extraordinary loss
Loss on sale or disposal of noncurrent assets (Note 4)

99

41,830

559

—

5,274

Total extraordinary loss

10,312

21,212

97,283

Profit before income taxes

60,09834,833566,962

Income taxes - current

18,49911,434

174,519

Income taxes - deferred(3,084)(2,598)(29,094)

Total income taxes (Note 13)

15,415

8,836

145,425

Profit44,68325,997

421,538

347

394

3,274

¥ 44,335¥ 25,602$ 418,255

Profit attributable to:Noncontrolling interests
Owners of the parent
See accompanying Notes to Consolidated Financial Statements.

Financial and Corporate Data

4,434

Environmental expenses

67 Information

68

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash FlowsNGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2018 and 2017

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2018 and 2017

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Millions of yen

Accumulated other comprehensive income

Treasury
stock

Total
shareholders’equityTotal
Net unrealized
Foreignaccumulated
gains oncurrency Remeasurements
otheravailable-fortranslation of defined benefit comprehensive Noncontrolling
sale securities adjustments
plansincomeinterests¥47,869¥54,824¥245,463¥ (7,647)¥340,510¥22,733¥(15,640)¥(8,734)¥ (1,640)¥2,174

Profit before income taxes¥341,044

Dividends of surplus(9,055)(9,055)(9,055)

Profit attributable to owners of
the parent

25,60225,60225,602(10,001)(10,001)(10,001)
0

Disposal of treasury stock00

Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at March 31, 2017

0
4,846

(887)

2,930

6,889

230

7,120

$ 566,962

19,601

197,358—

20,187—

Increase in net defined benefit liability

1,870

1,147

17,642

Interest and dividend income(23,783)(2,521)(2,579)Interest expense

511

342

4,821

Equity in earnings of associates

(510)

(604)

(4,811)

Loss on disposal of noncurrent assets

1,126

286

10,623Gain on sale of investment securities(1,117)—(10,538)

16,546(10,001)

6,545

4,846

(887)

2,930

6,889

230

13,665

Loss on valuation of investment securities

5

74

47

262,010(17,649)

347,056

27,580(16,527)(5,804)

5,249

2,404

354,710

Increase in notes and accounts receivable - trade(1,876)(17,715)(17,698)

Increase in inventories(8,095)(6,348)(76,368)(10,823)(10,823)

Increase in notes and accounts payable - trade

966

2,232

9,113

44,33544,335

Other, net

6,053

1,950

57,104(5,922)(5,922)

Subtotal

77,43053,408730,472
29,89644,335Purchase of treasury stock(5,922)

Disposal of treasury stock0

Retirement of treasury stock(0)

Change in ownership interest ofparent due to transactions with
noncontrolling interests(17,148)000Interest and dividends received

3,169

2,336

17,149——Interest paid

(501)

(353)

(4,726)

Income taxes paid

(14,390)(5,626)(135,755)

Net cash provided by operating activities

65,70749,764

619,877

(184)

(184)

Net changes in items other thanshareholders’ equity

(184)
3,630

(210)

2,530

5,950

49

6,000

—

(185)

16,363

11,226

27,404

3,630

(210)

2,530

5,950

49

33,405¥47,869¥54,639¥278,374¥ (6,422)¥374,461¥31,211¥(16,737)¥(3,273)¥11,200¥2,454¥388,115$451,594 $517,217 $2,471,792 $(166,500) $3,274,113$260,189$(155,915)

Cash flows from investing activities
Net increase in time deposits(1,121)(1,009)(10,575)

Net decrease (increase) in short-term investment securities

10,769(8,973)

101,594

Purchase of property, plant and equipment(37,222)(34,921)(351,151)

858

935

8,094
(15,802)

Proceeds from sale of property, plant and equipment

Thousands of U.S. dollars$(54,755)$ 49,519$22,679 $3,346,321

Changes during the fiscal year
(102,104)(102,104)(102,104)

Profit attributable to owners of
the parent

418,255

418,255

418,255(55,868)(55,868)(55,868)000161,783——(1,675)(1,636)

Purchase of investment securities(837)(8,739)(7,896)

Proceeds from sale and redemption of investment securities

1,927

1,002

18,179Purchase of intangible assets

Other, net

Purchase of treasury stock
Disposal of treasury stock0

Retirement of treasury stock(0)

Change in ownership interest ofparent due to transactions with
noncontrolling interests(161,774)(1,736)(1,736)

Net changes in items other thanshareholders’ equity(1,736)34,245(1,981)

23,86856,132462

56,604

258,528

34,245(1,981)

23,86856,132

462

315,142$451,594 $515,462 $2,626,170 $ (60,585) $3,532,651$294,443$(157,896)$(30,877)$105,660—(1,745)

154,368

See accompanying Notes to Consolidated Financial Statements.

105,906$23,151 $3,661,462

Net cash used in investing activities

879

(69)

8,292

(26,422)(53,410)(249,264)(5,415)

Cash flows from financing activities(574)

10,866

Proceeds from long-term loans payable

—

8,000

—

Repayment of long-term loans payable

—

(10)

—

Purchase of treasury stock(5,922)(10,001)(55,868)

Cash dividends paid

(10,821)(9,056)(102,085)

(725)

(341)

(6,840)(18,043)(544)(170,217)318(1,147)3,000

Net increase (decrease) in cash and cash equivalents

21,558(5,338)203,377

Cash and cash equivalents at beginning of year

65,817

71,155620,915

Net (decrease) increase in short-term loans payable

Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents

Increase in cash and cash equivalents resulting from newly consolidated
subsidiary
Cash and cash equivalents at end of year (Note 7)
See accompanying Notes to Consolidated Financial Statements.

2

—

19

¥ 87,378¥ 65,817$ 824,321

Financial and Corporate Data

Dividends of surplus

Balance at March 31, 2018

¥ 34,833

20,9200Profit attributable to owners of
the parent

Total changes in items during theperiod¥ 60,098

54,825(10,823)

Balance at March 31, 2017

2018

—

Dividends of surplus

Balance at March 31, 20182017

47,869Changes during the fiscal year

Total changes in items during theperiodDepreciation and amortization
Impairment loss

Changes during the fiscal year

Purchase of treasury stock

2018
Cash flows from operating activities

Total net
assetsMillions of yen

Balance at April 1, 2016

Thousands of U.S. dollars

69 Information70

Notes to Consolidated Financial Statements
NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries

1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements of NGKSPARK PLUG CO., LTD. (the “Company”) and its consolidated
subsidiaries (together with the Company, the “NGK Spark PlugGroup”) have been prepared in accordance with the provisions
set forth in the Financial Instrument and Exchange Law of Japanand its related accounting regulations and in conformity withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to applicationand disclosure requirements from International Financial ReportingStandards (“IFRS”).
The accompanying consolidated financial statements
are a translation, with some expanded descriptions, from theconsolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate
Local Finance Bureau of the Ministry of Finance as required by the
Financial Instrument and Exchange Law of Japan.
The amounts indicated in millions of yen are rounded down
by truncating the figures below one million. Totals may not add
up exactly because of such truncation. The translation of theJapanese yen amounts into U.S. dollar amounts is included
solely for the convenience of readers outside Japan, using theapproximate exchange rate prevailing at March 31, 2018, whichwas ¥106 to U.S.$1.00. The translation should not be construed
as a representation that the Japanese yen amounts have been,
could have been or could in the future be converted into U.S.
dollars at this or any other rate of exchange.
Certain comparative figures have been reclassified to conformto the current year’s presentation.
2. Summary of Significant Accounting Policies(a) Principles of consolidation

2018

2017

Domestic

12

11

Overseas

30

30

3

3

Consolidated subsidiaries:

Associates accounted for by the equity method

During the year ended March 31, 2018, Nittoku Denshi Co.,
Ltd. was included in the scope of consolidation in order to improve
the accuracy of the consolidated financial disclosure.
During the year ended March 31, 2017, NTK Ceramic Co.,
Ltd. (new N-CERA) and Ceramic Sensor Nakatsugawa Co.,
Ltd., which were newly established, were included in the scopeof consolidation. The Company merged former N-CERA as ofJanuary 1, 2017.
Investments in the remaining unconsolidated subsidiaries andassociated companies are stated at cost. If the equity method(Unification of accounting policies applied to foreign subsidiaries
for consolidated financial statements)
The Company has adopted Practical Issues Task Force(“PITF”) No. 18, “Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for Consolidated
Financial Statements,” issued by the Accounting Standards
Board of Japan (“ASBJ”). PITF No. 18 requires that accounting
policies and procedures applied by a parent company and its
subsidiaries to similar transactions and events under similar
circumstances should, in principle, be unified for the preparationof the consolidated financial statements. PITF No. 18, however,as a tentative measure, allows a parent company to prepare
consolidated financial statements using its foreign subsidiaries’
financial statements prepared in accordance with either IFRS or
U.S. generally accepted accounting principles (“U.S. GAAP”). In
this case, adjustments for the following four items are required in
the consolidation process so that their impact on profit attributable
to the owners of the parent is accounted for in accordance withJapanese GAAP, unless the impact is not material.
(a) Goodwill not subject to amortization(b) Actuarial gains and losses of defined benefit retirement
plans recognized outside profit and loss(c) Capitalized expenditures for research and development
activities(d) Fair value measurement of investment properties andrevaluation of property, plant and equipment and intangible
assetsare executed are translated at the contracted rate. Measurementof hedge effectiveness is not considered necessary for interest
rate and currency swap contracts that meet the requirements forthe special treatment.
(e) Inventories(Unification of accounting policies applied to associates accounted
for using the equity method)
The Company also has adopted ASBJ PITF No. 24, “Practical
Solution on Unification of Accounting Policies Applied to
Associates Accounted for Using the Equity Method.” PITF No.
24 requires that accounting policies and procedures applied byan investment company and its associates to similar transactions
and events under similar circumstances should, in principle, be
unified for applying the equity method. PITF No. 24, however, asa tentative measure, allows an investment company to apply theequity method using its foreign associates’ financial statements
prepared in accordance with either IFRS or U.S. GAAP. In thiscase, adjustments for the same four items as PITF No. 18 arerequired in the consolidation process so that their impact on
profit attributable to the owners of the parent is accounted forin accordance with Japanese GAAP, unless the impact is notmaterial.
(b) Cash and cash equivalents
The NGK Spark Plug Group considers highly liquid debt
instruments purchased with an original maturity of three months
or less, which are readily convertible to known amounts of cash,
and therefore present an insignificant risk of changes in value tochanges in interest rates, to be cash equivalents.
(c) Investments and marketable securities
The NGK Spark Plug Group classifies certain investments in debt
and equity securities as “held-to-maturity,” “trading” or “availablefor-sale.” The classification determines the respective accounting
method to be applied to the investments as stipulated by theaccounting standards for financial instruments. The NGK Spark
Plug Group has no securities categorized as trading or held-tomaturity securities. Available-for-sale securities are stated at fairvalue if such value is available, and net unrealized gain or loss
on these securities is reported as a component of accumulated
other comprehensive income, net of applicable income taxes.
Gains and losses on the disposal of available-for-sale securities
are computed by the moving average method. Available-for-salesecurities without available fair value are carried at cost determinedby the moving average method. Adjustments in the carrying
values of individual investment securities are charged to income
through write-downs when a decline in value is deemed other than
temporary.
(d) Accounting for derivatives
Derivative instruments are valued at fair value if hedge accounting
is not appropriate or when there is no hedging designation, andthe gains and losses on the derivatives are recognized in current
earnings. According to the special treatment permitted by theaccounting standard for financial instruments, if interest rate andcurrency swap contracts are used as hedges and meet certain
hedging criteria, the interest rate and currency swap contracts are
not remeasured at market price, and the amount to be received
under the interest rate and currency swap contracts is added toor deducted from the interest on the liabilities for which the swap
contracts are executed, and the liabilities denominated in foreign
currencies for which the interest rate and currency swap contracts

Inventories held for sale in the ordinary course of business arevalued at the lower of cost, determined principally by the moving
average method, or net realizable value. If net realizable value
has fallen below cost as of the end of the period, the cost basis
is reduced to net realizable value and regarded as decreased
profitability of inventories.
(f) Allowance for doubtful accounts
Allowance for doubtful accounts has been provided for at theaggregate amount of estimated credit losses based on an
individual review of certain doubtful or troubled receivables and ageneral reserve for other receivables based on the historical loss
experience of a certain past period.
(g) Noncurrent assets and depreciation/amortization
Property, plant and equipment (except for lease assets), including
significant renewals and additions, are stated at cost. Depreciation
is calculated by the straight-line method based on the estimateduseful life of the asset, principally ranging from 8 to 50 years forbuildings and from 4 to 10 years for machinery, equipment andvehicles.
Intangible assets (except for lease assets), including software
for internal use, are mainly amortized using the straight-line
method over the estimated useful life of the asset. The estimateduseful life of software for internal use is mainly 5 years.
Expenditures on maintenance and repairs are charged toincome as incurred. Upon disposal, the cost and accumulated
depreciation are removed from the related accounts and any gainor loss is recorded as gain or loss.
(h) Leases
The Company and its domestic consolidated subsidiaries
capitalize the assets used under finance leases as lessee, except
for certain immaterial or short-term finance leases which areaccounted for as operating leases in accordance with the current
accounting standard. Depreciation is calculated using the straightline method over the lease term and assuming no residual value.
(i) Impairment of fixed assets
The Company and its domestic consolidated subsidiaries haveadopted the “Accounting Standard for Impairment of Fixed Assets”
and the related practical guidance. The standard requires that fixed
assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized in theincome statement by reducing the carrying amount of the impaired
asset or a group of assets to the recoverable amount, measured
by the higher of the asset’s net selling price or value in use. Fixed
assets include land, plants, buildings and other forms of property,
including intangible assets, and are to be grouped at the lowest
level for which there are identifiable cash flows from other groupsof assets. For the purpose of recognition and measurement of an
impairment loss, fixed assets of the NGK Spark Plug Group, otherthan idle or unused property, are grouped into cash generating
units based on managerial accounting classifications.

Financial and Corporate Data

The accompanying consolidated financial statements include
the accounts of the Company and its significant subsidiaries.
Investments in significant unconsolidated subsidiaries andassociates are accounted for by the equity method. Investments
in unconsolidated subsidiaries and associates not accounted
for by the equity method are stated at cost. All intercompany
transactions and accounts have been eliminated. The difference
between the cost of investments in subsidiaries and the underlying
equity in their net assets, adjusted based on the fair value atthe time of acquisition, is deferred principally as goodwill andamortized over the estimated useful life, generally 5-10 years, on astraight-line basis.
The number of consolidated subsidiaries and associates
accounted for by the equity method for the years ended March
31, 2018 and 2017 was as follows:of accounting had been applied to the investments in thesecompanies, the effect on the accompanying consolidated financial
statements would not have been material.
The major subsidiaries that are not consolidated are Bujias
NGK Del Ecuador Cia Ltda., Nittoku Smile Co., Ltd. and Sharing
FACTORY Co., Ltd. for the year ended March 31, 2018 and Bujias
NGK Del Ecuador Cia Ltda. and Nittoku Denshi Co., Ltd. andNittoku Smile Co. for the year ended March 31, 2017, respectively.
There were no unconsolidated subsidiaries accounted for by
the equity method for all periods presented.
The Company has three associates accounted for by theequity method, namely, Woo Jin Industry Co., Ltd., Tokai Taima
Kogu Co., Ltd. and Japan Medical Dynamic Marketing, INC. for all
periods presented.
During the year ended March 31, 2017, Japan Medical
Dynamic Marketing, Inc. became associates accounted for by theequity method due to the acquisition of their stock.
The major unconsolidated subsidiaries that are not accounted
for by the equity method are Bujias NGK Del Ecuador Cia Ltda.,
Nittoku Smile Co., Ltd. and Sharing FACTORY Co., Ltd. for theyear ended March 31, 2018 and Bujias NGK Del Ecuador Cia
Ltda. and Nittoku Denshi Co., Ltd. and Nittoku Smile Co. for theyear ended March 31, 2017, respectively.
The associate that is not accounted for by the equity method
is Hayakawa Seiki Co., Ltd. for all periods presented.
These companies are excluded from the scope of the equity
method because their net income (loss), retained earnings,
accumulated other comprehensive income and others are
immaterial, and the exclusion of these companies from the scopeof companies accounted for by the equity method does not hindera reasonable understanding of the Group’s financial position andresults of operations.
For the year ended March 31, 2018, the fiscal year-end
date of NGK Spark Plug (Shanghai) Co., Ltd., Changshu NGKSpark Plug Co., Ltd., NGK Spark Plug (Shanghai) Trading Co.,
Ltd., Bujias NGK de Mexico S.A. de C.V., LLC NGK Spark Plugs(Eurasia), Woo Jin Industry Co., Ltd. and two other companies is
December 31. However, when preparing the consolidated financial
statements, the Company uses the financial statements of theseven consolidated subsidiaries and one associate that have been
compiled by a temporary closing of their accounts as of March 31.

71 Information

72

Notes to Consolidated Financial Statements(j) Employee retirement benefits
The difference between retirement benefit obligations and plan
assets has been recognized as net defined benefit liability. To
calculate the retirement benefit obligations, the benefit formulabasis is used to allocate estimated retirement benefits to periods ofservice. Past service cost that is yet to be recognized is amortizedon a straight-line basis over ten years, a period not exceeding
the average remaining service period of the employees. Actuarial
gains and losses that are yet to be recognized are amortized ona straight-line basis over ten years, a period not exceeding the
average remaining service period of employees, from the year
following the year in which they arise. Net defined benefit liability
and retirement benefit costs of certain consolidated subsidiaries
are calculated using the simplified method as permitted by theaccounting standard for retirement benefits.
(k) Translation of foreign currency accounts
Receivables, payables and securities, other than stocks ofsubsidiaries and certain other securities, are translated into
Japanese yen at exchange rates prevailing at the fiscal yearend. Transactions in foreign currencies are recorded based on
the exchange rates prevailing on the transaction dates. Resulting
translation gains and losses are included in current earnings.
For financial statement items of the overseas consolidated
subsidiaries, all asset and liability accounts are translated into
Japanese yen by applying the exchange rate in effect at therespective fiscal year-end. All income and expense accounts aretranslated at the average rate of exchange prevailing during theyear. Translation differences, after allocating portions attributable
to noncontrolling interests, are reported in foreign currencytranslation adjustments as a component of accumulated othercomprehensive income in the accompanying consolidated balance
sheets.
(l) Research and development expenses(m) Income taxes
Income taxes are accounted for by the asset-liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities andtheir respective tax bases and operating loss carryforwards.
Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change(n) Enterprise taxes
The NGK Spark Plug Group records enterprise taxes calculated
based on the “added value” and “capital” amounts when levied as
size-based corporate taxes for local government enterprise taxes,
which are included in selling, general and administrative expenses.

“Other nonoperating expenses” in the previous fiscal year, is
included in “Other nonoperating expenses” from the current fiscal
year because the amount was less than 10% of total nonoperating
expenses. In order to reflect the change in presentation, theconsolidated statement of income for the previous fiscal year
has been reclassified to reflect a consistent presentation format.
As a result of this change, ¥311 million ($2,934 thousand) of“Contribution” for the previous fiscal year was reclassified as “Other
nonoperating expenses.”(o) Appropriation of retained earnings
Cash dividends are recorded in the fiscal year when a proposed
appropriation of retained earnings is approved by the Board of
Directors of the Company.
(p) Per share data
Basic earnings per share is computed by dividing income available
to common shareholders by the weighted average number ofshares of common stock outstanding during the year. Diluted
earnings per share is not disclosed as the NGK Spark Plug Group
had no dilutive common shares. Cash dividends per share shownfor each fiscal year in the accompanying consolidated statements
of income represent dividends declared by the Company asapplicable to the respective year.
(q) Consumption Taxes
All figures are net of consumption taxes.
(r) Provision for stock benefits
The provision for stock benefits is provided at the estimatedamount of stock benefits to directors and corporate officers at
the fiscal year-end in accordance with the internal rules for stock
delivery.
(s) New accounting standards issued but not yet adopted(Standards and guidance not yet adopted)
The following standard and guidance were issued but not yet
adopted.
- “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 30, 2018)- “Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 30, 2018)(1) Overview
	The above standard and guidance provide comprehensive
principles for revenue recognition. Under the standard andguidance, revenue is recognized by applying following 5 steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performanceobligation in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation.
(2) Effective date	The effective date of these new standards is underconsideration.
(3) Effects of application
	The Company and its consolidated domestic subsidiaries are in
the process of determining the effects of these new standards
on the consolidated financial statements.
(t) Changing in presentation(Consolidated Statements of Income)“Contribution,” which was presented as a separate item under(u) Additional information(Performance-linked stock compensation plan)
In order to increase the Directors’ awareness of their contribution
to the enhancement of the Company’s medium- to long-term
performance and the improvement of corporate value, theCompany introduced a performance-linked stock compensation
plan (the “Plan”) for Directors and Corporate Officers of theCompany (excluding Outside Directors and nonresidents of Japan,
collectively “Directors, etc.”), which is a highly performance-linked,
transparent and objective compensation plan.
The Company applies the “Practical Solution on Transactionsof Delivering the Company’s Own Stock to Employees, etc.
through Trusts” (PITF No. 30, March 26, 2015) for the accounting
treatment of the Plan.
(1) Transaction summary	The Plan uses an officer compensation BIP (Board IncentivePlan) trust by which Directors are granted shares of theCompany and paid the cash equivalent to the market valueof the shares of the Company after conversion into cash
according to the degree of achievement of performance targets
outlined in the medium-term management plan and otherconsiderations.
(2) The Company’s own stock in the trust	The Company’s own stock in the possession of the trust isrecorded as treasury stock under net assets at book value(excluding ancillary expenses). The book value and number ofshares of treasury stock were ¥919 million ($8,670 thousand)and 433,200 shares, respectively as of the fiscal year ended
March 31, 2018.
(Revised Implementation Guidance on Recoverability of Deferred
Tax Assets)
The Company and its domestic subsidiaries adopted “Revised
Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No. 26, March 28, 2016 (“Guidance No.
26”)) from the fiscal year ended March 31, 2017.

(c) Investment securities
Among investment securities, shares of unconsolidated
subsidiaries and associates at March 31, 2018 and 2017,
amounted to ¥12,349 million ($116,500 thousand) and ¥12,256
million, respectively.
(d) Notes receivable matured at the end of fiscal year
Notes receivable that were to mature at the consolidated balance
sheet date were accounted for at the date of actual settlement.
Since the last day of the current fiscal year was a bank holiday
and the following notes matured on March 31, 2018, they were
included in the consolidated balance sheets as of March 31, 2018:
Thousands of
U.S. dollars

Millions of yen
2018
Notes receivable – trade

2017
¥—

¥66

2018
$623

(e) Contingent Liabilities(1) Guarantee on loans
	At March 31, 2018 and 2017, contingent liabilities in respect
to guarantees of indebtedness, principally of employees,
amounted to ¥11 million ($104 thousand) and ¥14 million,
respectively.
(2)	The NGK Spark Plug Group is subject to investigations byoverseas authorities regarding possible violations of competition
laws in relation to certain past transactions in the automotive
components segment. In connection, compensation fordamage claims have been discussed with some customers
and civil lawsuits have been filed. Additional losses may arise
if new facts related to possible violations become known.
However, the effect of these contingent liabilities on the
consolidated financial statements is not reasonably estimableat this stage.
4. Notes to Consolidated Statements of Income(a) Loss on valuation of inventories
For the years ended March 31, 2018 and 2017, a write-down of¥1,193 million ($11,255 thousand) and ¥274 million, respectively,
was recognized as costs of goods sold.
(b) Selling, general and administrative expenses
Major components of selling, general and administrative expenses
for the years ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen
2018

2017

2018

¥ 2,401¥ 3,044$ 22,651

3. Notes to Consolidated Balance Sheets

Depreciation(a) Inventories

Provision of allowance for
doubtful accounts

223

183

2,104

Retirement benefit costs

1,269

1,356

11,972

Directors compensation andemployee salaries andallowances

27,24625,782257,038

Packing and transportation
expenses

At March 31, 2018 and 2017, inventories consisted of thefollowing:
Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

8,653

6,188

81,632Finished goods¥50,915¥48,911$480,330

Advertising expenses

5,974

5,602

56,358Work-in-process

29,90625,581

282,132

Raw materials

14,132

12,364

133,321

Research and development
expenses*

4,448

4,089

41,962(b) Accumulated depreciation of property, plant and equipment
At March 31, 2018 and 2017, accumulated depreciation ofproperty, plant and equipment amounted to ¥299,878 million($2,829,038 thousand) and ¥301,800 million, respectively.

* The aggregate amounts of research and development expenses included in selling,
general and administrative expenses for the years ended March 31, 2018 and 2017, were
¥4,448 million ($41,962 thousand) and ¥4,089 million, respectively.

Financial and Corporate Data

Expenses related to research and development are charged toincome as incurred. Research and development expenses arise
from a wide range of the NGK Spark Plug Group’s activities,
including basic and applied research for material development,planning and designing of new products and processes andactivities aimed at improving existing products and processes.
For the years ended March 31, 2018 and 2017, research anddevelopment expenses aggregated ¥25,283 million ($238,519
thousand) and ¥23,416 million, respectively. These amounts
included research and development activities for basic andapplied research and the development of new products andprocesses in the amount of ¥4,448 million ($41,962 thousand)and ¥4,089 million at March 31, 2018 and 2017, respectively,
and were recorded as general and administrative expenses.
The remaining expenses were recorded for the respective years
in the accompanying consolidated statements of income as
manufacturing costs.

in tax rates is recognized in the period that includes the enactment
date.

73 Information74

Notes to Consolidated Financial Statements(c) Gain on sale of noncurrent assets

5. Notes to Consolidated Statements of Comprehensive Income

Major components of gain on sale of noncurrent assets for theyears ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen
2017

2018
Buildings and structures

2018

¥287

¥  0

Amounts reclassified as profit in the current period that wererecognized in other comprehensive income in the current or
previous periods and the tax effects for each component of othercomprehensive income were as follows:$    0Thousands of
U.S. dollars

Millions of yen

Machinery, equipment andvehicles

78

59

736

Land

2017

2018

2018

113

136

1,066

Software000

Unrealized gains on availablefor-sale securities

Other

6

2

57

Increase during the year

¥ 6,463¥ 6,879$ 60,972

Reclassification adjustments(1,117)64(10,538)(d) Loss on sale or disposal of noncurrent assets
Major components of loss on sale or disposal of noncurrent assets
for the years ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen
2017

2018
Buildings and structures

¥371

2018

¥337

Subtotal, before tax

5,345

6,943

50,425

Tax effect(1,690)(2,105)(15,943)

Subtotal, net of tax

3,655

4,837

34,481

Foreign currency translation
adjustments$3,500

Increase (decrease) during
the year16(1,007)

151

Machinery, equipment andvehicles

917

287

8,651

Remeasurements of defined
benefit plans

Land

—

0

—

Increase during the year

1,919

2,023

18,104

Software5

1

47

Reclassification adjustments

1,673

2,113

15,783

Other

31

145

292

33,896(e) Impairment loss(f) Environmental expenses
For the year ended March 31, 2018, the NGK Spark Plug Group
recognized environmental expenses for the soil improvement costsof an overseas subsidiary in the amount of ¥559 million ($5,274
thousand) as extraordinary loss.

3,593

4,136

(1,033)(1,208)(9,745)

Subtotal, net of tax

2,560

2,928

24,151

Share of other comprehensive
income of associates
accounted for using equity
method(Decrease) increase during
the year
Total other comprehensive
incomeCash and cash equivalents

Resolution

Type of
SharesTotal
dividends

Dividend per
share

Date ofrecordPayment
date

Board ofDirectors
on May 9,
2017

Commonstock¥4,456
million($42,038
thousand)¥21($198)March 31,2017

June 8,2017

Commonstock¥6,366
million($60,057
thousand)

Board ofDirectors
on Oct 30,
2017

¥30
($283)

September
30, 2017

November30, 2017(Note) Total cash dividends paid in accordance with the resolution of the meeting of theBoard of Directors held on October 30, 2017 included ¥12 million ($113 thousand) of
cash dividends for the stock held by the officer compensation BIP trust.

ii) Dividends for which the date of record falls within the fiscal
year under audit but the payment date occurs in the following
fiscal year
Resolution

Type of
Shares

Source of
Total
Dividend
dividends dividends per share

Board of¥6,309Directors
millionon April Common Retained ($59,519
27, 2018
stock
earnings thousand)¥30($283)

Date ofrecordPayment
date

March 31,2018

June 5,2018(Note) Total cash dividends paid included ¥12 million ($113 thousand) of cash dividends forthe stock held by the officer compensation BIP trust.

For the year ended March 31, 2017(a) Class and total number of issued and outstanding sharesand treasury stock

(161)

113

(1,519)¥ 6,070¥ 6,872$ 57,264

For the year ended March 31, 2018(a) Class and total number of issued and outstanding sharesand treasury stock
Number of Shares
Increase

Decrease

As of March
31, 2018

Issued andoutstanding shares

As of March
31, 2016

Increase

Decrease

As of March
31, 2017

Issued andoutstanding shares
Common stock

223,544,820——

223,544,820

Total

223,544,820——

223,544,820

Common stock

5,923,363

5,397,451

58

11,320,756

Total

5,923,363

5,397,451

58

11,320,756

Treasury stock

Notes: 1) The increase of 851 shares in common stock of treasury stock was due to thepurchase of shares in quantities of less than one share unit.
2) The increase of 5,396,600 shares in common stock of treasury stock was due tothe repurchase of shares pursuant to the resolution at the meeting of the Boardof Directors held on July 29, 2016.
3) The decrease of 58 shares in common stock of treasury stock was due to thesale of shares in quantities of less than one share unit.

Common stock

223,544,820—

11,000,000

212,544,820(b) Dividends

Total

223,544,820—

11,000,000

212,544,820i) Cash dividends paid

Common stock

11,320,756

2,335,168

11,000,036

2,655,888

Total

11,320,756

2,335,168

11,000,036

2,655,888

Reconciliation of cash and cash equivalents on the consolidated
statements of cash flows to the amounts disclosed on the
consolidated balance sheets at March 31, 2018 and 2017, wereas follows:
Thousands of
U.S. dollars

Millions of yen

Number of Shares

6. Notes to Consolidated Statements of Change in Net Assets

As of March
31, 2017

7. Notes to Consolidated Statements of Cash Flowsi) Cash dividends paid

Cash and deposits

2018

2017

2018

¥ 56,235¥ 45,733$ 530,519

Short-term investment securities

59,90557,210565,142

Subtotal

116,141

102,943

1,095,670(9,556)(9,115)(90,151)

Time deposits with deposit termof over 3 months
Short-term investment securities
other than cash equivalents
Cash and cash equivalents(19,205)(28,010)(181,179)¥ 87,378¥ 65,817$ 824,321

8. Lease Commitments(a) Finance lease transactions
Financing lease transactions without transfer of ownership ofleased assetsi) Components of lease assets are as follows:
1) Property, plant and equipment: Mainly equipment (tools,
furniture and fixtures) for development in the automotive
components segment.
2) Intangible assets: Mainly intra-communication systems(software).
ii) Depreciation of lease assets:	Depreciation is calculated using the straight-line method overthe lease term and assuming no residual value.
(b) Operating lease transactions
At March 31, 2018 and 2017, the NGK Spark Plug Group had
annual commitments under operating leases as lessee. The
aggregate future minimum payments for noncancelable operatingleases were as follows:
Thousands of
U.S. dollars

Millions of yen
Due within one year
Due after one year

2018

2017

2018

¥ 804

¥ 644

$ 7,585

2,909

1,840

27,443¥3,713¥2,485$35,028

9. Financial Instruments

Treasury stock

Notes: 1) The decrease of 11,000,000 shares of issued and outstanding shares of common
stock was due to the retirement of treasury stock.
2) The breakdown of the increase of 2,335,168 shares of treasury stock was 1,168
shares from the purchase of shares in quantities of less than one share unit,
1,900,800 shares from the repurchase of shares pursuant to the resolution at themeeting of the Board of Directors held on February 26, 2018 and 433,200 sharesfrom the purchase of shares by the officer compensation BIP trust.
3) The breakdown of the decrease of 11,000,036 shares of treasury stock was
11,000,000 shares from the retirement of treasury stock and 36 shares from thesale of shares in quantities of less than one share unit.
4) The number of shares of treasury stock as of March 31, 2018 included 433,200
shares held by the officer compensation BIP trust.

Resolution

Type of
SharesTotal
dividends

Dividend per
share

Date ofrecordPayment
date

Board ofDirectors
on May 9,
2016

Commonstock¥4,570
million¥21

March 31,2016

June 8,2016

Board ofDirectors
on Oct 31,
2016

Commonstock¥4,485
million¥21

September
30, 2016

November30, 2016ii) Dividends for which the date of record falls within the fiscal
year under audit but the payment date occurs in the following
fiscal year
Resolution

Type of
SharesBoard ofDirectors
on May 9, Common
2017
stock

Source of
Total
Dividend
dividends dividends per share

Date ofrecordPayment
date

Retainedearnings

March 31,2017

June 8,2017¥4,456
million¥21(a) Qualitative information on financial instruments
The NGK Spark Plug Group does not invest surplus funds
in securities other than short-term bank deposits and debt
securities with high liquidity from issuers with high credit ratingsin accordance with its accounting rules and policies. The NGK
Spark Plug Group uses indirect financing from financial institutions
such as correspondent banks and direct financing from financial
markets principally by the issuance of corporate bonds to satisfy
short-term and long-term funding requirements.
The NGK Spark Plug Group is exposed to credit risk primarily
with respect to trade receivables. In order to reduce the credit riskof these receivables, the NGK Spark Plug Group sets payment
terms according to the credit capability of its customers. In somecases, the NGK Spark Plug Group receives security deposits inadvance.

Financial and Corporate Data

Although no impairment loss was recorded for the year ended
March 31, 2018, the NGK Spark Plug Group recognized an
impairment loss on fixed assets in the amount of ¥20,187 million
as extraordinary loss for the year ended March 31, 2017.
For the year ended March 31, 2017, impairment loss consistedof ¥7,513 million on goodwill, ¥8,765 million on other intangible
assets and ¥3,908 million on machinery and equipment and otherassets. The NGK Spark Plug Group revised the future businessplan of a consolidated subsidiary, Wells Vehicle Electronics
Holdings Corp. (hereinafter “Wells”), and its subsidiaries, as
its business results were less than what was estimated uponacquiring Wells. As a result of careful consideration of future
recoverability based on the revised business plan, the NGK Spark
Plug Group recognize an impairment loss of goodwill, intangible
assets and other properties related to Wells. The grouping ofoperating assets is based on managerial accounting categories.
Idle assets are recorded separately in each fixed assets class.
Recoverable amounts were estimated using value in use andamounted to nil.

Subtotal, before tax
Tax effect(b) Dividends

75 Information

76

Notes to Consolidated Financial Statements

The NGK Spark Plug Group holds investments in securities
such as negotiable certificates of deposits, debt securities andequity securities whose fair values are monitored on a quarterly
basis.
The NGK Spark Plug Group is a party to derivative instruments
such as foreign currency forward exchange contracts, currency
option contracts and interest rate and currency swap agreementsin the normal course of business principally for hedging purposesin order to reduce its exposure to fluctuations in exchange rates
and interest rates. The NGK Spark Plug Group does not hold or
issue derivative financial instruments for trading purposes. Under
the NGK Spark Plug Group’s financial management policies,
contract balances of currency derivatives are limited to certain
anticipated export sales and import purchases.

The fair value and carrying value of financial instruments at March
31, 2018 and 2017, other than unlisted equity securities for which
the fair value was extremely difficult to determine, were as follows:
Fair
value

Difference

Millions of yen
At March 31, 2018:
Cash and deposits¥ 56,235¥ 56,235¥—

Notes and accounts
receivable - trade93,61593,615—

Short-term investment
securities:
Available-for-salesecurities

59,90559,905—Investment securities:
Shares of associates
Available-for-salesecurities
Total

6,322

7,903

1,581

56,961

56,961—¥273,040¥274,621¥1,581

Financial liabilities:
Accounts payable - trade¥ 32,407¥ 32,407¥—

Short-term loans payable

10,113

10,113—Long-term loans payable *1)

32,84832,902

54

Bonds payable *2)55,00055,143143

Total¥130,368¥130,567¥ 198

Derivative instruments *3)¥    247¥    247¥—Financial assets:
Cash and deposits

Cash and deposits¥ 45,733¥ 45,733¥—

Notes and accounts
receivable - trade

91,594

91,594—

Notes and accounts
receivable - trade

Available-for-salesecurities
Total

883,160

Available-for-salesecurities

57,210

—

6,333

6,179

(154)

—

565,142565,142

Shares of associates
Available-for-salesecurities

59,64274,557¥209,751¥—¥—¥ 45,733¥—¥—91,594——537,368

537,368—$2,575,849$2,590,764$14,915

Financial liabilities:
Accounts payable - trade$ 305,726$ 305,726$—

Short-term loans payable

95,406

95,406—Long-term loans payable *1)

309,887

310,396509

Bonds payable *2)

518,868

520,217

1,349

Total

$1,229,887$1,231,764$ 1,868$    2,330$    2,330

Notes:(1)	The methods and assumptions used to estimate the fair valueof financial instruments are summarized below:		The fair value of cash and deposits, notes and accounts
receivable - trade, accounts payable - trade and short-termloans payable is approximately equal to the carrying value
due to their short-term maturities. The fair value of investment
equity securities is based on quoted market prices. The fairvalue of bonds and other securities included in investment
securities, bonds payable and derivative instruments is basedon the price provided by correspondent financial institutions.
The fair value of long-term loans payable is computed basedon the total amount of principal and interest discounted at
an interest rate applicable to new loans under the same
conditions.

2017

Unlisted equity securities

2,369

1,662

22,34954,332—¥(154)(3)	Expected maturities of financial assets at March 31, 2018 and2017, were as follows:¥—

Due in one
year through Due later than
five years
five years

Short-term loans payable

11,25911,259—Long-term loans payable

32,84832,982134

Bonds payable

55,00055,287287

Total¥129,153¥129,574¥ 421

Cash and deposits¥—

Notes and accounts receivable- tradeDue in one
year or lessMillions of yen
At March 31, 2018:¥ 56,235¥—¥—

93,615

—

—

9,000

—

—

Investments
Bonds

—

With unrealized gains:——

Equity securities¥ 56,960¥11,870¥45,090

Other

13,600

—

—

Bonds

4,000

3,999

0

¥193,127¥2,000

¥—

Other

7,200

7,200

0

Subtotal

68,162

23,06945,092Thousands of U.S. dollars

With unrealized losses:

At March 31, 2018:
Cash and deposits
Notes and accounts receivable- tradeEquity securities$ 530,519$—$—

883,160——

Investments
Bonds

84,906——

Negotiable deposits

383,962

—

—

Other

96,226——$1,978,783$—$—(4)	Contractual maturities of bank loans and bonds payable atMarch 31, 2018 and 2017, were as follows:

0

0

(0)

Bonds

5,004

5,036

(31)

Negotiable deposits

40,70040,700

—

Other

3,000

3,000

—

Subtotal

48,705

48,736(31)¥116,867¥71,806¥45,060

Total

Millions of yen
2017
Cost

Unrealized
gains (losses)¥39,670¥ 52,154¥12,484

Millions of yen

Equity securities
Bonds

5,004

4,999

4

2018

Other

5,880

5,312

567

Subtotal

63,03922,79640,242Bonds
payableLong-termloans payable2019¥10,113¥25,000¥9,962

2020

—

—

9,924

2021

—

30,000

4,962

2022

—

—

8,000

2023

—

—

—

2024 and thereafter

—

—

—

With unrealized losses:
Equity securities

153

170

(17)

Bonds

10,050

10,112(62)

Negotiable deposits

29,20029,200

—

Other

9,099

9,100

(0)

Subtotal

48,503

48,583(79)¥111,543¥71,380¥40,162

Total

Millions of yen

Thousands of U.S. dollars

2017Year ending March 31,

Fair andcarrying value
With unrealized gains:

Short-termloans payableYear ending March 31,

Short-termloans payable

Bonds
payableLong-termloans payable2018¥11,259

¥—

¥—

2019

—

25,000

9,962

2020

—

—

9,924

2021

—

30,000

4,962

2022

—

—

8,000

2023 and thereafter

—

—

—

2018
Fair andcarrying value

Cost

Unrealized
gains (losses)

With unrealized gains:
Equity securities$ 537,358$111,981$425,377

Bonds

37,73637,7260

Other67,92567,9250Subtotal

643,038

217,632

425,396

With unrealized losses:
Equity securities

0

0

(0)

Bonds

47,20847,509(292)

Negotiable deposits

383,962

383,962—

Other

28,30228,302—

Subtotal

459,481459,774(292)$1,102,519$677,415$425,094

Short-termloans payable

Bonds
payableLong-termloans payable2019$95,406$235,849$93,981

2020

—

—

93,623

Total

2021

—

283,019

46,811

2022——

75,472

2023

—

—

—

2024 and thereafter

—

—

—

Note: For equity investments in nonpublic companies with a carrying amount as of March
31, 2018 and 2017, amounting to ¥2,369 million ($22,349 thousand) and ¥1,662
million, respectively, fair values were not included in equity securities above as
no quoted market prices were available and it was deemed extremely difficult todetermine the fair values due to the impossibility of estimating future cash flows.

Year ending March 31,¥255,050

Unrealized
gains (losses)

2,000

2018

$56,858

Cost

29,2002018¥5,922

Fair andcarrying value

13,000Thousands of U.S. dollars¥6,027¥ 30,045

Millions of yen
2018

Thousands of
U.S. dollars

Investments (equity securities)
in unconsolidated subsidiaries
and associates¥ 30,045(a) At March 31, 2018 and 2017, the cost and fair value ofavailable-for-sale securities were summarized as follows:

Negotiable deposits$—*1) The carrying value of long-term loans payable includes the current portion of long-termloans payable.
*2) The carrying value of bonds payable includes the current portion of bonds payable.
*3) The value of derivative instruments is shown as a net position.

Accounts payable - trade

10. Investment securities

Bonds

14,91554,332¥    253—

Notes and accounts receivable- trade—¥255,205¥    253——

Cash and deposits

Investment securities:

Millions of yen

57,210—

10,200Investments

2018

Financial liabilities:

Derivative instruments *3)$—Carrying value

Investment securities:
Shares of associates

883,160$ 530,519

Short-term investment
securities:

Short-term investment
securities:
Available-for-salesecurities

40,700Other

At March 31, 2017:$ 530,519(2)	The following securities are not included in the table above
because the fair value was extremely difficult to determine.

Financial assets:

Negotiable deposits

Financial and Corporate Data

At March 31, 2017:

Difference

Thousands of U.S. dollars

Derivative instruments *3)

Financial assets:

Fair
value

At March 31, 2018:

Total(b) Fair value of financial instruments

Carrying
value

Carryingvalue

77 Information

78

Notes to Consolidated Financial Statements(b) Available-for-sale securities sold during the years ended March
31, 2018 and 2017 were as follows:

Movement in net defined benefit liability for plans applying thesimplified method:

Thousands of U.S. dollars
At March 31, 2018:

Thousands of
U.S. dollars

Millions of yen
2017

2018

2018

Sale of available-for-salesecurities¥1,918¥—$18,094

Gain on sales

1,117

—

10,538Loss on sales

—

—

—

(floating rate receipt,
fixed rate payment)(U.S.$ receipt, Japanese
yen payment)

2018
Balance at April 1
Long-termbank loans$309,887$215,906$—(c) Loss on the write-down of available-for-sale securities was notmaterial for the years ended March 31, 2018 and 2017.

The above interest rate and currency swaps which qualify
for hedge accounting and meet specific matching criteria are notseparated from the hedged bank loans. The fair values of thederivative instruments are reflected in the calculation of the fairvalues of the related bank loans (see Note 9).

11. Derivative Instruments

12. Employee Retirement Benefits

At March 31, 2018 and 2017, derivative instruments, except forderivative instruments accounted for by hedge accounting, werestated at fair value and recognized for valuation gains and losses
in current earnings as follows:

The Company has a lump-sum retirement benefit plan and adefined benefit pension plan that cover 80% of the retirement
benefits for employees of the Company who retire at thecompulsory retirement age after ten years or more of service.
Certain domestic consolidated subsidiaries have similar retirement
benefit plans. Certain overseas consolidated subsidiaries havedefined contribution plans. The Company contributes certain plan
assets to the employee retirement benefit trust under the defined
benefit pension plan. Net defined benefit liability and retirement
benefit costs of certain consolidated subsidiaries are calculatedusing the simplified method as permitted by the accounting
standard for retirement benefits.
Information about employee retirement benefits for the years
ended March 31, 2018 and 2017 was as follows:

Notional
principal
or contract
amounts

Fair value

Valuation
gains (losses)

Millions of yen
At March 31, 2018:
Foreign exchange contracts:
Forward contracts to sell

¥12,347

¥242

¥242

Currency call options

2,242

(34)

(34)

Currency put options

1,831

39

39
¥247

At March 31, 2017:
Forward contracts to sell

¥18,065

¥205

¥205

Currency call options

2,364

(8)

(8)

Currency put options

1,300

56

56

Movement in retirement benefit obligations, except for plans
applying the simplified method:

Thousands of U.S. dollars
At March 31, 2018:
Foreign exchange contracts:
Forward contracts to sell

$116,481$2,283$2,283Currency call options

21,151

(321)

(321)

Currency put options

17,274368

368

Hedgeditems

Contract
amounts
due after
one year Fair value

Millions of yen
Interest rate and currency
swaps:

Balance at April 1¥68,909¥68,381$650,085

Service cost

3,765

3,751

35,519Interest cost

418

349

3,943

Actuarial loss

(1,492)(1,213)(14,075)

Benefits paid

(2,002)(2,521)(18,887)

—

142

—

Past service cost
Other
Balance at March 31

Long-termbank loans¥32,848¥22,886

Balance at April 1¥—

Interest rate and currency
swaps:¥32,848¥32,848

¥—

¥247

¥245

$2,330Retirement benefit costs

94

43

887

Benefits paid

(24)

(19)

(226)

Contributions paid by theemployer

(22)

(22)

(208)

¥294

¥247

$2,774

Balance at March 31

Reconciliation from retirement benefit obligations and plan assets
to net defined benefit liability:18(3,349)¥68,909$653,226

Thousands of
U.S. dollars

2018

2017

2018

¥39,893¥36,440$376,349

1,130

1,054

2018

2017

2018

¥ 49,558¥ 47,786$ 467,528

Plan assets(42,265)(40,057)(398,726)

7,292

7,729

68,792

Unfunded retirement benefit
obligations

20,15021,533

190,094

Total net defined benefit
liability

27,44329,263258,896

Net defined benefit liability

27,44329,263258,896

Total net defined benefit
liability¥ 27,443¥ 29,263$ 258,896

Note: Includes those under plans applying the simplified method.

Retirement benefit costs:
Thousands of
U.S. dollars

Millions of yen
2018

2017

2018

Service cost

¥ 3,765¥ 3,751$ 35,519

Interest cost

418

349

3,943

Expected return on plan assets(1,130)(1,054)(10,660)

Net actuarial loss amortization

1,661

2,091

15,670

Past service cost amortization

12

22

113

Retirement benefit costs basedon the simplified method

94

43

887

¥ 4,821¥ 5,204$ 45,481

Total

Thousands of
U.S. dollars

Millions of yen
Past service costs
Actuarial losses
Total

2018

2017

2018

¥   (13)¥  119$   (123)

22%

Equity securities

19%

27%

General life insurance accounts

26%

25%

Alternative investments

14%

16%

Other

12%

10%

100%

100%

Total

Notes: 1) Alternative investments are mainly investments in hedge funds and infrastructure
funds.
2) As of March 31, 2018 and 2017, 7% and 8% of plan assets, respectively, wereassets held by the employee retirement benefit trust under the defined benefit
pension plan.

(2) Long-term expected rate of return:Current and target asset allocation and historical and expected
returns on various categories of plan assets have been
considered in determining the long-term expected rate of
return.
Actuarial assumptions:
The principal actuarial assumptions at March 31, 2018 and 2017
were as follows:
2018

2017

Discount rate

Mainly 0.4%

Mainly 0.4%

Long-term expected rate of return

Mainly 1.82% Mainly 2.75%

Note: In calculating retirement benefit obligations, the NGK Spark Plug Group uses mainly
an index for salary increase by age based on a point system.

(b) Defined contribution plans
For the years ended March 31, 2018 and 2017, the amount of
required contribution to the defined contribution plans of theoverseas consolidated subsidiaries was ¥295 million ($2,783
thousand) and ¥218 million, respectively.
13. Income Taxes
The tax effects of temporary differences that gave rise to asignificant portion of deferred tax assets and liabilities at March 31,2018 and 2017 were as follows:

4,000

2,074

3,232

19,566

Benefits paid

(1,261)(1,729)(11,896)

Actuarial losses yet to berecognized

(166)

(38)

(1,566)¥42,094¥39,893$397,113

Total

2017

2018

Net operating loss
carryforwards¥ 4,084¥ 1,119$ 38,528(3,579)(4,256)(33,764)

4,505

5,297

42,500¥(4,136)$(33,896)

Net defined benefit liability

8,476

8,938

79,962

Depreciation

2,481

3,125

23,406

Accrued expenses

4,312

4,368

40,679Inventories

2,921

2,988

27,557

Intercompany profits

5,457

4,762

51,481

Other

2,167

1,663

20,443

Less valuation allowance(8,647)(8,598)(81,575)

Total deferred tax assets

25,75923,666

243,009

Unrealized gains on availablefor-sale securities(13,807)(12,116)(130,255)

Retained earnings ofoverseas consolidated
subsidiaries

2018

932

2018
Deferred tax assets:¥(3,593)

Thousands of
U.S. dollars

Millions of yen

424

Thousands of
U.S. dollars

Millions of yen

Impairment loss on fixed
assetsRemeasurements of defined benefit plans included in accumulated
other comprehensive income (before adjusting for tax effects):

10,660201729%

Remeasurements of defined benefit plans included in othercomprehensive income (before adjusting for tax effects):

Contributions paid by theemployer
Other

Thousands of
U.S. dollars

Funded retirement benefit
obligations

Past service cost yet to berecognized

Balance at March 31

Long-termbank loans(355)¥69,242Millions of yen

Actuarial gain

At March 31, 2017:(floating rate receipt,
fixed rate payment)(U.S.$ receipt, Japanese
yen payment)

2018

Expected return on plan
assetsAt March 31, 2018:(floating rate receipt,
fixed rate payment)(U.S.$ receipt, Japanese
yen payment)

2017

Movement in plan assets, except for plans applying the simplified
method:At March 31, 2018 and 2017, derivative instruments to which
hedge accounting was applied were as follows:
Notional
principal
or contract
amounts

2018

2018

2018
Bonds

¥  (28)2017¥  (14)2018$  (264)

4,557

8,136

42,991¥4,528¥8,121$42,717

Deferred tax liabilities:(3,357)(2,943)(31,670)

Depreciation(798)(1,106)(7,528)

Other

(294)

(303)

(2,774)

Total deferred tax liabilities(18,257)(16,469)(172,236)

Net deferred tax assets¥ 7,502¥ 7,196$ 70,774

Financial and Corporate Data

$2,330Thousands of
U.S. dollars

Millions of yen

¥253

2017

Millions of yen(a) Defined benefit plans

Foreign exchange contracts:

Thousands of
U.S. dollars

Millions of yen

Interest rate and currency
swaps:

Plan assets:(1) Plan assets comprise:

79 Information80

Notes to Consolidated Financial Statements

At March 31, 2018 and 2017, deferred tax assets and liabilities
were as follows:
Thousands of
U.S. dollars

Millions of yen
2018

2017

2018

¥12,427¥11,023$117,236

3,042

1,496

28,698(7,967)(5,324)(75,160)¥ 7,502¥ 7,196$ 70,774

Deferred tax assets:
Current
Noncurrent
Deferred tax liabilities:(b) Business combination under common control

Noncurrent
Net deferred tax assets

As a result, goodwill increased by ¥93 million, other intangible
assets decreased by ¥150 million, and total intangible assets,
total noncurrent assets and total liabilities each decreased by¥57 million. Because sales, general and administrative expenses
decreased by ¥4 million, operating income, ordinary income
and profit before income taxes for the previous fiscal year also
increased by that amount.

In assessing the realizability of deferred tax assets,management of the NGK Spark Plug Group considers whether
some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which
the temporary differences become deductible. At March 31, 2018and 2017, a valuation allowance was provided to reduce deferred
tax assets to the amount that management believed the deferred
tax assets were realizable.
For the years ended March 31, 2018 and 2017, thereconciliation of the differences between the combined Japanese
statutory tax rate and the effective income tax rate on pretax
income reflected in the accompanying consolidated statements ofincome was as follows.

The Company, NTK Ceramic Co., Ltd., (former N-CERA) andNTK Ceramic Co., Ltd. (new N-CERA) and Ceramic Sensor
Nakatsugawa Co., Ltd. which were newly established as of July 1,2016 conducted an absorption-type company split as of October
1, 2016 subject to the Absorption-type Company Split Agreement
concluded as of July 29, 2016.
(1) Overview of the combination
1. Name and nature of the split business		 i) Split company
Company nameName and nature of the split business

NGK Spark Plug Co., Ltd.

Ceramic IC packages

NTK Ceramic Co., Ltd.
(former N-CERA)

Ceramic IC packages
Automotive sensors

		 ii) Successor company
Company nameName and nature of the split business

Percentage ofpre-tax income (%)

NTK Ceramic Co., Ltd.
(new N-CERA)

Ceramic IC packages

2017

Automotive sensors

2018
30.7

30.7

Ceramic Sensor
Nakatsugawa Co., Ltd.

Permanently nondeductible expenses

0.3

0.7

2. Date of the combination
		 October 1, 2016

Tax exempt income

(0.8)

(0.4)

Tax credits for research and development
expenses

(4.7)

(6.2)

Differences between Japanese and foreign
tax rates

(1.0)

(2.9)

Changes in valuation allowance

(1.8)

11.9

Retained earnings of overseas consolidated
subsidiaries

0.7

(7.9)

Loss on violation of antitrust law

2.0

0.1

Transfer of net loss carried forward resulting
from merger of a consolidated subsidiary

—

(6.5)

Impairment loss on goodwill

—

6.6

Other

0.2

(0.7)

25.6

25.4

Combined Japanese statutory tax rate
Increase (decrease) due to:

14. Business combinations
For the year ended March 31, 2017(a) Completion of accounting for the business combination
following provisional accounting
The accounting with regard to the business combination for
the acquisition of Wells as of July 1, 2016 was completed in
the current fiscal year. Due to the completion of accounting forthis business combination, the change in initial purchase priceallocation was reflected in the comparative information included in
the consolidated financial statements of the current fiscal year as
follows:
Millions of yen
Goodwill (pre-adjustment)
Other intangible assets¥10,192
176

Deferred tax liabilities(67)

Total Adjustment

109

Goodwill (after-adjustment)¥10,302

Under Japanese laws and regulations, the entire amount paid
for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one half of the priceof the new shares as additional paid-in capital, which is included incapital surplus.
Under Japanese Corporate Law (the “Law”), in cases inwhich a dividend distribution of surplus is made, the smaller ofan amount equal to 10% of the dividend or the excess, if any, of
25% of common stock over the total of additional paid-in capitaland legal earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve is included
in retained earnings in the accompanying consolidated balance
sheets.
16. Segment Information(a) General information about reportable segments

The reportable segments of the Company are the business units for which the Company is able to obtain financial information separately inorder for the Board of Directors of the Company to conduct periodic investigations to determine the distribution of management resourcesand evaluate business results. The Company has its business units identified by products. Each business unit plans its own comprehensive
domestic and overseas strategies for its own products and conducts its own business activities. Accordingly, the NGK Spark Plug Groupconsists of two reportable segments: “Automotive components” and “Technical ceramics.” The “Technical ceramics” segment consists of
the “Semiconductor” and “Ceramics” subsegments.
• In the “Automotive components” segment, the Company manufactures and sells spark plugs, glow plugs, various automotive sensors,ceramic engine parts and other automotive components.
• In the “Technical ceramics” segment, the Company manufactures and sells IC packages and other semiconductor components in the“Semiconductor” subsegment and manufactures and sells cutting tools and ceramics products for industrial use in the “Ceramics”
subsegment.
(b) Methods to determine net sales, income or loss, assets, and other items by reportable business segment
Accounting methods by reportable segment are principally the same as those written in Note 2 Summary of Significant Accounting Policies.
Profit by reportable business segment is stated on an operating income basis.
(c) Information about reportable segment profit and loss, segment assets and other material items
Information about reportable segments as of and for the years ended March 31, 2018 and 2017 was as follows:

4. Name of the acquired company after the combination
		 NTK Ceramic Co., Ltd. (new N-CERA)
		 Ceramic Sensor Nakatsugawa Co., Ltd.
5. Other matters relating to overview of transaction
		Toward the revitalization of our ceramic IC package
business, we will establish a financially independent
subsidiary with manufacturing and sales functions
consolidated instead of the subsidiary with manufacturingfunctions only. With this reform, we aim to clarify
responsibilities and authority, better visualize the financial
management and achieve a positive turnaround as early as
possible.
			The Company merged former N-CERA as of January 1,
2017.
(2) Overview of accounting treatment adopted
	The combination is accounted for as a business combination
under common control based on the “Accounting Standard
for Business Combinations” (ASBJ Statement No. 21) andthe “Guidance on the Accounting Standard for Business
Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10).

Reportable segments
Technical ceramics
Automotive
components

Semiconductor

Ceramics

Total Technicalceramics

Total

Other

Total

Adjustments

Consolidated¥409,912

Millions of yen
For the year 2018:
Operating revenue - net sales:
External customers¥348,198¥17,901¥39,834¥57,735¥405,934¥3,977¥409,912¥—

Intersegment sales

—

—

—

—

—

—

—

—

—

348,198

17,901

39,83457,735405,934

3,977

409,912—409,912Segment income (loss)¥ 68,098¥ (2,571)¥ 1,589¥  (982)¥ 67,116¥ 163¥ 67,279¥—¥ 67,279

Segment assets¥510,884¥28,924¥66,599¥95,523¥606,408¥1,361¥607,769¥—¥607,769¥ 17,429¥   730¥ 2,754¥ 3,484¥ 20,914¥    6¥ 20,920¥—¥ 20,920

29,525

2,452

5,611

8,063

37,5891

37,591—

37,591

External customers¥318,149¥19,449¥31,855¥51,305¥369,454¥3,464¥372,919¥—¥372,919

Intersegment sales

—

—

—

—

—

—

—

—

—

Total net sales

318,149

19,44931,85551,305369,4543,464

372,919—

372,919

Segment income (loss)¥ 57,988¥ (4,842)¥   400¥ (4,441)¥ 53,546¥   49¥ 53,595¥—¥ 53,595

Segment assets¥478,647¥30,246¥53,603¥83,849¥562,497¥1,304¥563,801¥—¥563,801

Total net sales

Other items:
Depreciation
Increase in property, plant andequipment and intangible
assetsFor the year 2017:
Operating revenue - net sales:

Financial and Corporate Data

Effective income tax rate

3. Legal form of the combination
		Absorption-type company split with the split companies andsuccessor companies as the Company and former N-CERA
and new N-CERA and Ceramic Sensor Nakatsugawa Co.,
Ltd., respectively.

Under the Law, legal earnings reserve and additional paid-in
capital can be used to eliminate or reduce a deficit by a resolutionof the shareholders’ meeting. Additional paid-in capital and legal
earnings reserve may not be distributed as dividends. All additional
paid-in capital and all legal earnings reserve may be transferred toother capital surplus and retained earnings, respectively, which arepotentially available for dividends.
At March 31, 2018 and 2017, respectively, capital surplus
consisted principally of additional paid-in capital. In addition,
retained earnings included legal earnings reserve of the Company
in the amount of ¥5,837 million ($55,066 thousand) at March 31,2018 and 2017, respectively.
The maximum amount that the Company can distribute as
dividends is calculated based on the separate financial statementsof the Company in accordance with Japanese laws andregulations.

15. Net Assets

81 Information

82

Notes to Consolidated Financial Statements(f) Information about goodwill as of and for the years ended March 31, 2018 and 2017 was as follows:

Other items:
Depreciation¥ 17,158¥   308¥ 2,123¥ 2,431¥ 19,590¥   10¥ 19,601¥—¥ 19,601

20,187———

20,187—

20,187—

20,187

Impairment loss on fixed assets

Reportable segments
Technical ceramics
Automotive
components

Increase in property, plant andequipment and intangible
assets27,577

2,364

6,383

8,747

36,3252

36,328—

Semiconductor

Ceramics

Total Technicalceramics

36,328

Total

Other

Total

Adjustments

Consolidated

Millions of yen
March 31, 2018

Thousands of U.S. dollars

Amortization

For the year 2018:

Balance

Operating revenue - net sales:

¥—

¥—

¥153

¥153

¥ 153

¥—

¥ 153

¥—

¥ 153

—

—

307

307

307

—

307

—

307

¥910

¥—

¥153

¥153

¥1,064¥—¥1,064¥—¥1,064

—

—

460

460

460

—

460

—

460

March 31, 2017

External customers$3,284,887$168,877$375,792$544,670$3,829,566$37,519$3,867,094$—$3,867,094

Intersegment sales

—

—

—

—

—

—

—

—

—

Total net sales

3,284,887

168,877

375,792544,6703,829,566

37,5193,867,094—

3,867,094

Segment income (loss)$ 642,434$ (24,255)$ 14,991$  (9,264) $ 633,170$ 1,538$ 634,708$—$ 634,708

Segment assets$4,819,660$272,868$628,292$901,160$5,720,830$12,840$5,733,670$—$5,733,670

March 31, 2018
Amortization$—$—$1,443$1,443$1,443$—$1,443$—$1,443$ 164,425$  6,887$ 25,981$ 32,868$ 197,302$    57$ 197,358$—$ 197,358

Balance

—

—

2,896

2,896

2,896

—

2,896

—

2,896

Other items:
Depreciation
Increase in property, plant andequipment and intangible
assetsAmortization
BalanceThousands of U.S. dollars

Note: For the year ended March 31, 2017, the NGK Spark Plug Group recognized impairment loss on goodwill in the amount of ¥7,513 million in the Automotive components segment.

278,538

23,132

52,93476,066354,6139354,632—

354,632

Note: The “Other” segment includes business such as material sales, welfare program services and transportation not included in reportable segments.

(g) Information about negative goodwill by business segment.
No items to report.

(d) Related informationi) Information on products and services
	Information on products and services is the same as that
already reported in (c) Information about reportable segment
profit and loss, segment assets and other material items.
Therefore, the information is omitted here.
ii) Geographic information
	Information about geographic areas as of and for the years
ended March 31, 2018 and 2017 was as follows:
Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

Japan

¥ 67,467¥ 61,947$ 636,481

North America

108,259

104,357

1,021,311

Europe107,052

96,1701,009,925

Asia

81,46870,109768,566

Other area

45,66340,334

430,783¥409,912¥372,919$3,867,094

Operating revenue - net sales:

Note: Net sales are categorized by country or region based on the location of the customer.

2018

2017

Thousands of
U.S. dollars
2018

Property, plant and equipment:Japan¥154,401¥146,415$1,456,613

Asia

20,923

17,811

197,387

Other area

19,777

17,075186,575¥195,102¥181,302$1,840,585

17. Information on Related Parties
No items to report.

19. Significant subsequent events(a) Repurchase and retirement of stock

18. Per Share Information
Basic and diluted net assets per share and earnings per share forthe years ended March 31, 2018 and 2017, were as follows:Yeniii) Information by major customer
	The NGK Spark Plug Group had no single external customer
which accounted for more than 10% of net sales for the years
ended March 31, 2018 or 2017.

U.S. dollars

2018

2017

2018

Basic net assets per share¥1,837.46¥1,660.06$17.33

Basic earnings per share

209.37119.44

1.98

1. Type of stock repurchased Common stock
2. Total number of shares
repurchased(a) Basis for calculation of net assets per share(e) Information about impairment of fixed asset by businesssegment.
Information about impairment of fixed assets is presented in (c)Information about reportable segment profit and loss, segment
assets and other material items.

The Company resolved at a meeting of its Board of Directors held
on February 26, 2018 to repurchase its own shares pursuant to
the provisions of Article 459, Paragraph 1 of the Companies Act
and to cancel the repurchased shares pursuant to the provisionsof Article 178. The details of the stock repurchase after March
31, 2018 pursuant to the resolution of the meeting of its Board of
Directors held on February 26, 2018 were as follows:

Thousands of
U.S. dollars

Millions of yen
Total net assets

2018

2017

2018

4. Repurchase period¥388,115¥354,710$3,661,462

5. Method of repurchaseMarket purchase on the Tokyo Stock Exchange

2,454

2,404

23,151of which, noncontrollinginterests(2,454)(2,404)(23,151)

Net assets allocated to common
stock385,661

352,305

3,638,311

The repurchase of stock pursuant to the resolution of themeeting of its Board of Directors held on February 26, 2018 has
been completed.
The results of the repurchase of stock were as follows:
1. Type of stock repurchased Common stock
2. Total number of shares
repurchased

209,888

212,224

1,980,075(b) Basis for calculation of earnings per share
Thousands of
U.S. dollars

Millions of yen
Profit attributable to owners of
the parent¥4,999 million ($47,160 thousand)April 1, 2018 to May 30, 2018
(Commitment basis)Amount deducted from total net
assetsNumber of shares of common
stock outstanding at fiscal
year-end used in calculationof net assets per share(thousands)

1,732,400 shares

3. Total price of repurchase

3,633,200 shares

3. Total price of repurchase¥9,999 million ($94,330 thousand)

4. Repurchase period

February 27, 2018 to May 30, 2018
(Commitment basis)

5. Method of repurchaseMarket purchase on the Tokyo Stock Exchange

The Company cancelled the treasury stock resulting from therepurchase pursuant to the resolution of the meeting of its Boardof Directors held on February 26, 2018.

2018

2017

2018

¥ 44,335¥25,602$ 418,255

1. Type of stock cancelled

Common stock

2. Total number of sharescancelled

3,633,200 shares(Percentage to the total number of issued shares
before cancellation: 1.71% )Amount not attributable tocommon stock shareholders

—

—

—

Profit attributable to common
stock owners of the parent

44,33525,602418,255

3. Date of cancellation

June 8, 2018
208,911,620 shares

1,997,717

4. The total number ofissued shares after thecancellation

Weighted average number ofshares of common stock(thousands)

211,758

214,349

Notes: 1) As the Company had no dilutive shares at March 31, 2018 or 2017, the Company
has not disclosed diluted net income per share for the years ended March 31,2018 and 2017.

Financial and Corporate Data

Millions of yen(Change in presentation)	Assets in “Asia,” which was included in “Other area” for theprevious fiscal year, exceeded 10% of total assets in the
consolidated balance sheet for the year ended March 31,2018 and is, therefore, presented separately for and from thecurrent fiscal year. To provide a consistent presentation format,
property, plant and equipment in geographic information for theprevious fiscal year has been reclassified to conform with thecurrent year presentation.

2) Shares held by the officer compensation BIP trust are included in treasury stock,which is deducted from the number of shares at the fiscal year-end and theweighted average number of shares. The number of shares held by the officer
compensation BIP trust at the current fiscal year-end was 433 thousand and theweighted average number of shares was 288 thousand. There were no shares
held by the officer compensation BIP trust in the previous fiscal year.

83 Information

84

Notes to Consolidated Financial Statements

Independent Auditor’s Report(b) Issuance of unsecured straight bonds
The Company issued the eighth series unsecured straight bonds
and the ninth series unsecured straight bonds on June 14, 2018.

(b) Loans payable and lease obligations at March 31, 2018 and2017, comprised the following:Thousands of
U.S. dollars

Millions of yen
2018

2017

2018

Short-term loans payable withinterest rate of 2.85%¥10,113¥11,259$ 95,406

Current portion of long-termloans payable with interest
rate of 0.30%

9,962

—

93,981

Eighth series unsecured straight bonds
1. Total amount of issue¥10,000 million ($94,340 thousand)

2. Issue price¥100 per face value of ¥100

3. Redemption price¥100 per face value of ¥100

4. Interest rate

0.110% per annum

5. Payment dateJune 14, 2018

6. Maturity dateJune 14, 2023

7. Principal redemption
methodLump-sum redemption at maturity

Current portion of leaseobligations

43

87

406

Long-term loans payable (except
portion due within one year)with interest rate of 0.16%

22,88632,848215,906

Lease obligations (except
portion due within one year)

111

80

1,047

Other

—

—

—

Ninth series unsecured straight bonds

Total¥43,115¥44,275$406,745

1. Total amount of issue¥10,000 million ($94,340 thousand)

2. Issue price¥100 per face value of ¥100

3. Redemption price¥100 per face value of ¥100

4. Interest rate

0.370% per annum

Notes: 1) Interest rates shown are weighted average interest rates for the balance
outstanding at March 31, 2018.
2) Average interest rates for lease obligations are omitted because lease obligations
include assumed interest amounts.
3) The aggregate annual maturities of long-term loans payable and lease obligations(except portion due within one year) after March 31, 2018, are as follows:

5. Payment dateJune 14, 2018

6. Maturity dateJune 14, 2028

Capital investment and repayment of corporate
8. The purpose of bond issuebondsLong-term loans payableYear ending
March 31,

7. Principal redemption
methodLump-sum redemption at maturity

8. The purpose of bond issue

Capital investment and repayment of corporate
bonds

Thousands ofMillions of yen U.S. dollars

Lease obligations
Millions of yen

Thousands of
U.S. dollars

2020¥9,924$93,623

¥53

$500

2021

4,962

46,811

29

274

2022

8,000

75,472

20

189

2023

—

—

7

66

20. Borrowings(a) Bonds payable at March 31, 2018 and 2017, comprised thefollowing:

Information is omitted due to immateriality.

Thousands of
U.S. dollars

Millions of yen
0.391% unsecured bonds due
September 2018

21. Asset Retirement Obligation

2018

2017

2018

¥25,000¥25,000$235,849

0.296% unsecured bonds due
October 2020

30,00030,000283,019

Total¥55,000¥55,000$518,868

Note: The aggregate annual maturities of bonds payable after March 31, 2018, are as
follows:

Year ending March 31,

Millions of yen

Thousands of
U.S. dollars$235,849¥25,000——

2021

30,000283,019

2022

—

—

2023

—

—

Financial and Corporate Data

2019
2020

01
85 Information

Information

Corporate Profile and Stock Information

Corporate Data

Treasury Stock
1.05%(2,222 thousand shares)(Number of employees)
20,00014,524

Breakdown ofshareholders
by type

Foreign Corporations
and Investors
32.59%(69,273 thousand shares)

CONTENTS

Number of employees at work (Consolidated)

13,197

Financial Institutions
24.76%(52,628 thousand shares)

Individuals and Others
9.32%(19,814 thousand shares)

October 1936
Non-Consolidated:	  5,851 (March 2018)
Consolidated:
15,322 (March 2018)

Established
Number of Employees

12,760Independent Verification Report

Breakdown of shareholders by type

NGK SPARK PLUG CO., LTD.
Headquarters
14-18 Takatsuji-cho, Mizuho-ku,
Nagoya 467-8525, Japan

15,00086

Securities Companies
1.59%(3,372 thousand shares)

Other Corporations in Japan
6.72%(14,284 thousand shares)

15,322

14,926

Trust Services
23.97%(50,946 thousand shares)

Major Shareholders

10,0005,000

Shares held
(thousands)

Name of shareholders0

2014/3

2015/3

2016/32017/3

2018/3

Number of Shares and Shareholders
Paid-in Capital¥47,869 million
Our Standing PositionTotal number of authorized 390,000,000 Keyword forsharesAbout NGK SPARK PLUG today’s NGK

Listed market

First section of the Tokyo Stock Exchange
and Nagoya Exchange
Mitsubishi UFJ Trust and Banking
Corporation

Accounting auditor
Number of shareholders

KPMG AZSA LLC
16,875

7.96

14,375

6.83

The Master Trust Bank of Japan, Ltd. (Trust Account)

13,460

6.39

6,541

3.11

STATE STREET BANK AND TRUST COMPANY

5,861

27-

2.78

3,929

1.86

3,563

1.69

15-

The Master Trust Bank of Japan, Ltd. (for Toyota
Motor Corporation)
Nippon Life Insurance Company
TOTO Ltd.

15 CEO Message

05 Corporate Philosophy and Long-term

21 NGK SPARK PLUG’s

Stock price of NGK SPARK
PLUG
of ourStrengths

4,000

11 NGK SPARK PLUG’s

3,200

13 Past, Present, and Future

5.46

MUFG Bank, Ltd.

03 Financial and Non-financial Highlights

Management Plan
Stock price/trading volume
07 History of our Challenges and Creation(Yen)

16,752

Meiji Yasuda Life Insurance Company

Commentary on
strategies
to Federation Creating
value
in business
National
Mutual Insurance
of
6,658
3.16
Agricultural Cooperatives
createvalue

212,544,820 SPARK PLUG

03-

The Dai-ichi Life Insurance Company, Limited

Strategic
View
of Business
11,498Japan
Trustee Services Bank, Ltd. (Trust Account) Review

 otal number ofTissued shares hareholder registryS
administrator

Ownership ratio
(%)

3,433
1.63
27 NGK SPARK PLUG’s Key Issues (1)Plug and sensor’s future strategy

Value Creation Process

31 NGK SPARK PLUG’s Key Issues (2)23 Risks and Opportunities

Product development derived

25 Message from Finance Officer

from ceramics

The Nikkei 225(Yen)

33 Review of Business (1)Sales Structure

25,000Automotive Components group
35 Review of Business (2)Management Plans

20,000Technical ceramics group– semiconductor div. –2,400

15,0001,600

Technical ceramics group10,000- ceramics div. 800

0

5,000

Editorial Policy0

By proactively disclosing management plans, business results, CSR and environmental initiatives, and other information, NGK SPARK PLUG intends to foster an■

Trading volume understanding of the company among all stakeholders and create opportunities for communication. As a means to achieve this objective, we issue the Integrated(Million shares)
50

40

30

Report and CSR Report.
Scope and Period Covered

Guidelines for Reference

Period covered: The year ended March 31, 2018 (April 1, 2017 – March 31, 2018)“The International Integrated Reporting Framework,” the International

Some information pertaining to activities in the year ending

Integrated Reporting Council (IIRC)

March 31, 2019 is also included.

“Guidance for Integrated Corporate Disclosure and Company-Investor

Scope: The NGK SPARK PLUG Group20

10

Some information reported by NGK SPARK PLUG (non-consolidated)

Dialogues for Collaborative Value Creation,” the Ministry of Economy,
Trade and Industry

is also included.
Note Regarding Forward-looking Statements
This report contains forward-looking statements regarding the company’s future plans, strategies, and business results. Please note that actual business results may

0

differ from the expectations presented in this report.
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2012
2016
2017
2014
2015
2018
2013
(Year)*Trading volume does not include trades via the ToSTNet system.

Financial and Corporate Data

36 Review of Business (3)NGK SPARK PLUG CO., LTD.
Integrated Report 2018

NGK SPARK PLUG CO., LTD.
14-18 Takatsuji-cho, Mizuho-ku, Nagoya 467-8525

https://www.ngkntk.co.jp/

NGK SPARK PLUG CO., LTD.

Public Relations Dept., Corporate Strategy Gr.
Phone: 81-52-872-5896 Fax: 81-52-872-5951
Risk Management Dept., Corporate Strategy Gr.
Phone: 81-52-872-6248 Fax: 81-52-872-5999

Integrated Report2018