NGK SPARK PLUG CO., LTD.
Integrated Report 2019

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

https://www.ngkntk.co.jp/english/
Public Relations Dept., Corporate Strategy Gr.
Phone: 81-52-872-5896 Fax: 81-52-872-5951

NGK SPARK PLUG CO., LTD.

Integrated Report

2019Year ended March 31, 2019

CONTENTS
About NGK SPARK PLUG

Information

03

Corporate Message

77

Financial Results Highlights for the Past 11 Years

04

Corporate Philosophy / The Nittoku Way

79

Consolidated Balance Sheets05

Our History

81

Consolidated Statements of Income

07

Strengths Gained through the Years

82

Consolidated Statements of Comprehensive Income

09

Glossary of Terms for Our Products

83

Consolidated Statements of Changes in Net Assets

11

Performance Data

84

Consolidated Statements of Cash Flows

Stories for Value Creation

85

Notes to Consolidated Financial Statements

100

Independent Auditors Report

15

Value Creation Process

101

Global Network

17

Risks and Opportunities

103

Corporate Profile and Stock Information

19

Enhancement of Competitiveness across theValue Chain

104

Independent Verification Report

21

Interview with the Chairman and the President

27

NITTOKU SHINKARON

29

Seventh Medium-Term Management Plan

31

Message from the Finance Officer

Business Strategy 1
Strengthening current businesse
33

Automotive Components Group
Plug business

35

Automotive Components Group
Sensor business

37

Technical Ceramics Group
Semiconductor business

39

Technical Ceramics Group
Ceramics businessBusiness Strategy 2
Establishing new business pillars
41

Pioneering New Fields by the Versatile Power ofTechnologies

43

Nurturing Corporate Culture that Propels the
Birth of New Businesses

45

NGK SPARK PLUG × Energy and Environment

47

NGK SPARK PLUG × Next-Generation Vehicles

48

NGK SPARK PLUG × Medical Treatment

Business Strategy 3
Establishing strong business
infrastructure
Establishing Strong Infrastructure to Support
Businesses

50

Enhancement of Human Resources

53

Enhancement of Organizations

55

Establishment of Systems

57

Environment

61

Corporate Governance

71

Messages from Outside Directors

73

CSR Management

NGK SPARK PLUG has been issuing an annual integrated report since 2017 with aview to helping all stakeholders deepen their understanding of its medium- to longterm value creation efforts. We have edited this third integrated report with a focus on
outlining the progress with and outlook for the achievement of the goals set in themedium-term management plan toward FY2020 as well as in the long-term
management plan, “NITTOKU SHINKARON,” and on introducing the measurescurrently implemented by the company for the medium- to long-term reform of its
business portfolio.
In our business and IR activities conducted throughout the year, we havereceived various opinions and inquiries from stakeholders, and this integrated
report is intended to serve as a tool to respond to these inputs. We hope that thereport will help readers understand the company as it is and look forward toreceiving your frank opinions.

Scope and Period Covered
Period covered : FY2018 (From April 1, 2018 to March 31, 2019)
This report also includes some information about our
FY2019 activities.
Scope covered : NGK SPARK PLUG Group
Also includes some non-consolidated information
about NGK SPARK PLUG.
Guidelines for Reference“The International Integrated Reporting Framework,” theInternational Integrated Reporting Council (IIRC)“Guidance for Integrated Corporate Disclosure and CompanyInvestor Dialogues for Collaborative Value Creation,” the Ministryof Economy, Trade and Industry

This report focuses on the information that is essential for theenhancement of our corporate value. For details of our technologies,
products and financial affairs, please visit our website. For detailed
information about our corporate social responsibility (CSR), please refer tothe webpages on our CSR activities as well as to our CSR reports andthe Sustainability Databook, which we have newly created this fiscal year.

NGK SPARK PLUG Communication
Summary49

Editorial Policy

NGK SPARK PLUG Integrated Reporthttps://www.ngkntk.co.jp/english/

DetailSecurities
ReportFinancial information

01

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Shareholder Newsletter

Corporate Governance
ReportBusiness Results Briefing
Presentation Materials

CSR website andSustainability Data Book

Non-financial information

NGK SPARK PLUG CO., LTD. Integrated Report 201902

About NGK SPARK PLUG

Stories for Value Creation

Information

Corporate Message
Corporate Philosophy
At NGK SPARK PLUG, we aim to contribute to people all over the world by linking people to technologies and delivering
new values. As a truly global corporation, we want to build stronger ties not only with customers and communities, but the
local and global environments. We are always working to make our corporate philosophy and our commitments a reality.

Three elements constituteour corporate philosophy.

SloganCorporate philosophy

IGNITE YOUR drive, dreams and SPIRIT

We offer a working
environment in which eachone of us is encouraged tomake full use of his or her
personality and capabilities.
With all our power we arededicated to pursue
management based on trustand confidence.

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

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

With full use of the mostsuitable technology and ouraccumulated experience,
we continue striving to offer
new values to the peoplesof the world.

NGK SPARK PLUG has been a leader in manufacturing for 80 years.
Our desire is to live in a healthier and more beautiful world where all our dreams can come true.
Everyday, we continue to ignite the passion in our hearts and spark new ideas in our minds
to focus on achieving our goals for the future.
Our mission is to continue to make the world a better place.
We will pursue future opportunities and improve NGK SPARK PLUG’s unique and advanced technologies.
Our diverse workforce will ignite our company to create new products and to be a leader in innovation.

03

The Nittoku Way
The Nittoku Way refers to a set of philosophies that includes values that are shared by 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

We will enhance our competitive advantage by understanding and adapting to global changes.

Shisei-Shinjitsu

Sincerely, do our very best.

Fueled and motivated by our own drive, NGK SPARK PLUG will continue to IGNITE YOUR SPIRIT, instill passion in your hearts,and deliver cutting edge solutions as a leading manufacturer in the world.

Dokuritsu-Jiei

Believe in one’s own ability, and take actions
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.

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201904

About NGK SPARK PLUG

Stories for Value Creation

Information

Our History
Over the course of its history, NGK SPARK PLUG has made progress by consistently taking on the challenge ofsolving social issues. Its roots can be traced to Morimura Gumi, which was founded by Ichizaemon Morimura andhis brother in 1876. “On-time delivery of quality products at affordable prices”—inheriting this commitment toquality from Morimura Gumi as our corporate DNA, we are continuously working to meet the challengeof creating new value.

Ceramica e Velas de Ignicao NGK do Brasil

1959
1949

Overseas business expansion

Started the production of NTK
Technical Ceramics
After the post-war confusion had settled down and the production ofplugs was stabilized, we began applying ceramics to develop
technologies and products for the diversification of our business. This
marked the birth of the NTK brand. We gradually expanded our productrange to include industrial and environmental products in addition toceramic products.

1876

1936

Founding of Morimura Gumi

Founding of NGK SPARK PLUG

Morimura Gumi was founded by two brothers, Ichizaemon and Toyo
Morimura, who embraced the challenge of foreign trade, being
determined to reclaim the wealth that was then flowing out of the country.
Their honest and passionate attitude was highly appreciated overseas,
helping them substantially develop their trading business, which theylaunched independently without support from the government.

NGK SPARK PLUG was established by spinning off NGK Insulators’
Spark Plug Division. The production of spark plugs was started at theinitiative of Magoemon Ezoe, the first president of the spinoff, who had
decided to produce plugs using ceramics, a specialty item of Japan.
The company has gone on to become the top manufacturer of spark
plugs in the world.

Exports increased as Japan entered the high economic growth period. In
response, we established in Brazil, our first overseas base, Ceramica e
Velas de Ignicao NGK do Brasil in 1959 and proactively expanded ourbusiness overseas ahead of competitors to build a strong overseas
network.

Hydrogen leakdetection sensor

Solid oxide fuel cell (SOFC)2016
Put hydrogen leak detection sensors on sale
Oxygen sensors for automobiles
Temperature sensors for automobiles

1982

1937

Started the production of oxygen sensors
for automobiles

Started the production of NGK Spark Plugs
We began developing spark plugs when the number of domestically
produced automobiles was just 49. In 1930 we put NG Spark Plugs onsale as the first spark plug produced in Japan, and began producing NGK

In Japan in the 1960s, alongside the full-scale motorization of society,environmental pollution such as air pollution became a social issue. In
response, the exhaust gas regulations were made stricter, and we began
developing various sensors to help ensure compliance with theregulations, including exhaust gas sensors, such as zirconia oxygen
sensors and wide-range oxygen sensors.

Spark Plugs in 1937, thereby making Ezoe’s dream of “supplying
domestically produced plugs to Japan’s promising automobile industry” areality.

For the solution of environmental and energy issues, we accelerated thedevelopment of high-performance plugs and sensors and our efforts for ahydrogen energy-based society. The automobile industry began
developing fuel cell vehicles (FCVs) and in response we developedhydrogen leak detection sensors and put them on sale in 2016.
We are also engaged in the development of SOFCs and R&D in the
medical field. We are thus taking on the challenge of applying
the ceramics technologies, which comprise our coretechnologies, to all
2018
possible fields.
Net sales of425 billion yen

NGK Spark Plug

2006
2000

1876
Founding of
Morimura Gumi

Startup period (from 1876)05

NGK SPARK PLUG CO., LTD. Integrated Report 2019

1946

1936
Founding of
NGK SPARK PLUG

Achieved net sales of
100 million yen

1956
Achieved net sales of
1 billion yen

Achieved
net sales of
200 billion yen

1969
Achieved net sales of
10 billion yen

Achieved net sales of
300 billion yen

1990
Achieved net sales of
100 billion yen

Growth period (from 1940)

Establishment period (from 1960)

Development period (from 1990)

NGK SPARK PLUG CO., LTD. Integrated Report 201906

About NGK SPARK PLUG

Stories for Value Creation

Information

Strengths Gained through the Years

Reliable Technologies and Quality
By using the ceramic molding, printing, bonding andsintering technologies, which comprise our coretechnologies, and by combining ceramic materials withother materials, we are creating products in fields in whichhigh reliability and durability are required.
We also work to increase quality regarding every aspect ofour business, including the value that we deliver tocustomers through our products and services, customer
expectations and evaluations, and related people, goods
and processes.
We will continue our growth by proactively performing
tasks with an innovative mindset, being committed toalways providing customers with the best value andsupporting them in terms of quality.

Global Human Resources
As proven by the fact that our overseas sales account for 84% of the total, we are operating across the world and deem it a
top management priority to develop human resources that have international mindsets, and are quick to act. To this end, fairtreatment of personnel is essential. By attributing importance to “global,” “speedy” and “fair” treatment of personnel, and byrespecting the diversity of our workforce and the personalities of individual members, we are developing human resources withan eye to becoming a truly global organization.

Embracing Challenges in New Fields
We are pioneering new fields, mainly the fields of environment and energy, next-generation vehicles
and medical treatment. For the issues that we cannot solve on our own, we will create new value
with partners through open innovation.
We aim to make use of our advanced technologies and underlying corporate DNA in new domains,beyond the framework of the automotive components business.

07

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201908

About NGK SPARK PLUG

Stories for Value Creation

Information

Glossary of Terms for Our Products
We create products in fields where high reliability and durability are required by combining ceramic

Sensors

materials with other materials based on our ceramics technologies,
which comprise our core technologies.

We offer a variety of sensing technologies, which help comply withstricter exhaust gas regulations.

Zirconia oxygen sensor
Used to measure the exhaust-gas
oxygen concentration for air-fuel ratio
control.

Plugs

Spark plugWide-range oxygen sensor

In an internal combustion engine, acts
as a “lighter” to ignite the mixture ofgasoline and air.

Paired with a dedicated interface, used
for wide-range air-fuel ratio control tomaximize output according to theexhaust-gas oxygen concentrationlevel.

Cera

Glow plug
Assists with the startup ofa diesel engine.

Ceramics are artificiallysolid materials that areabrasion and corrosion as
to these properties,
a variety of products,
information &energy devices.

Semiconductor packages and substrates

mics
made non-metal, inorganic,
resistant against heat,
well as being insulative. Dueceramics are used globally inincluding medical,
communication, andTemperature sensor

Medical products

Cutting tools

By making use of our ceramicmaterials, we manufacture medical
products, such as bone prostheses
and oxygen concentrators for medical
use.

Indispensable for the processing of
automotive, industrial, aircraft andother components. We offer a widelineup of products, including ceramic
tools and those made of newmaterials.

Components for semiconductor production equipment

Electrostatic chucks
We offer electrostatic chucks, anindispensable item for semiconductor
manufacturing, by making use of theelectrostatic property of ceramics.

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Used to precisely measure theconcentration of NOx gas, a regulated
substance, to ensure compliance with theNOx regulations, which have recently
been tightened. Can be used toconcurrently measure the concentrationof oxygen.

Used to monitor the exhaust gas
temperature for the protection of exhaustsystem components and for the optimal
control of the exhaust gas aftertreatment
system, thereby contributing to cleaner
exhaust gas and higher fuel efficiency.

We offer IC packages suitable forelectronic and smart devices as well as
substrates used in probe cards forsemiconductor wafer inspection.

09

NOx sensor

Ceramic products for industrial use
Piezoelectric ceramiccomponents
Ceramics generate electricity when force isapplied to them, while expanding/contracting
when voltage is applied. By making use of thisproperty, we manufacture and supply piezoelectricelements for use in sounders and fluid sensors.

Solid Oxide Fuel Cell (SOFC)
Generates electricity and heat throughelectrochemical reaction. We aredeveloping an SOFC stack for power
generation. SOFCs are highly energyefficient fuel cells and are expected to
be downsized and provided at lower
cost.

NGK SPARK PLUG CO., LTD. Integrated Report 201910

Stories for Value Creation

About NGK SPARK PLUG

Information

Performance Data
Financial Highlights

Non-financial Highlights

Net sales/Operating income/Operating income ratio（%）(Millions of yen)

500,000
400,000

347,636

383,272

300,000

17.3

17.9

200,000
100,000

372,919

67,27953,59530

425,013

16.4

14.4

66,28462,196

409,91260,00020

40,00010

20,000

2016

2017

12.0

11.4
9.1
36,75330,815

7.4

44,335（%）

42,813

1,000

2018

500
250

Operating income ratio

■

2015

Profit attributable to owners of the parent

2016

2017

2018

15,000270■

15,994

15,322

14,926

14,524

13,197

10,000

419

542

436

5,829

5,000 5,823

545

5,727

5,719

5,767

0

2014

(Fiscal year)

ROE (return on equity)

411

0

0

2014

441

815
479

397

20,000

953

915

816
465

4

0

(Fiscal year)(Number of persons)

906

750

8

25,602

Number of employees at work

(Number of patents)

12

10.9

58,6720

2015

Net sales ■ Operating income■(Millions of yen)

13.8

0

2014

Number of new patents published

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

2015

2016

2017

2018 (Fiscal year)

In Japan ■ Outside Japan

2014
■

2015

2016

2017

2018 (Fiscal year)

Non-consolidated ■ Consolidated* Non-consolidated number shows the number of regular employees as of March 31.

We recorded an increase in revenue year on year due to increased salesof plugs and sensors, etc., while we recorded a decline in profits year on
year due to an increase in packing and delivery expenses as well as
selling, general and administrative expenses including new businessrelated expenses.

In FY2018, ROE decreased by 1.1% year on year due to the decrease in
the profit attributable to owners of the parent and the effect of purchaseand retirement of treasury stock in FY2017.

Reflecting our R&D initiatives in new fields, the number of patents
published in Japan showed an increasing trend. In addition, since patents
filed outside Japan are published sequentially, the number of patents
published outside Japan stayed at a specific level.

Against the background of M&As in and outside Japan, etc., theconsolidated number of employees tended to increase.

Equity ratio

Return on invested capital (ROIC) ROIC: Operating income after tax/Invested capital

Ratio of overseas employees

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

（%）

（%）

（%）

(Number of persons)

100

11.6

12

80

70.2

60

64.4

62.5

64.3

63.5

8

40

100

11.4

10.0
8.5

80

15

60

8.2

40

4

20

36.0

41.3

42.5

40.6

5

0

0

2014

2015

2016

2017

2018 (Fiscal year)

2014

2015

2016

2017

2018 (Fiscal year)

15.8

15.7

10

43.2

20

0

（%）

20

15.7

20

18.0
15

15

12

10

8

6

18.0

10
5

0

2014

2015

2016

2017

2018 (Fiscal year)

0

2014
■

2015

2016

2017

Number of female employees in managerial posts

2018(Fiscal year)

Ratio of female employees

Although equity capital increased year on year, the equity ratio decreased
year on year because total assets also increased significantly year on year
due to an increase in inventories and an increase in tangible fixed assets
through capital investment.

We have adopted ROIC as a management indicator since April 2016, andset our goal in FY2020 at 13%. In FY2018, ROIC decreased by 1.8% year
on year due to a decrease in operating income.

The ratio of overseas employees showed an increasing tendency as aconsequence of overseas M&As, etc.

We launched the DIAMOND Project designed to promote women’s
empowerment in 2013, and achieved the goal that was set at project
outset. We will continue to promote the development of female
employees.

Earnings per share

Cash dividends per share/Dividend payout ratio

Number of employees who took childcare leave; Percentage of employees
who returned to work after taking childcare leave (non-consolidated)

Fluctuations in CO2 emissions from energy use

(Yen)

(Yen)

250.00200.00150.00（%）

120209.37168.8835.2

205.5829.7

80141.60100.00

36

40

34.0
28.7

21.3

119.44

60
42

40
30

70

0

2014

2015

2016

2017

2018 (Fiscal year)

2014■

Cash dividends per share

2015

80
60

20

40

10

20

0

0

100

96
53

96

2016

2017

2018

40

50

48

30

60

10

20
0

2015

2016

2017

2018

31.17

31.48

32.57

3.28

3.69
1.29

5.04
1.51

5.37
1.29

6.06
1.36

24.33

23.65

24.63

24.82

25.15

0

2014

(Fiscal year)

Dividend payout ratio

28.63

27.61

20

40

2014

(Fiscal year)(10,000 tons)

100
80

58

48

（%）

100

95

42

50.00
0

(Number of persons)

2015

2016

2017

2018 (Fiscal year)■ Groups in Japan (with integrated certification)■ Groups in Japan (without integrated certification) ■ Outside Japan

Earnings per share decreased year on year due to a decrease in the profit
attributable to owners of the parent.

We are aiming at providing stable dividends, with the goal of a payout
ratio of 30% or more. In FY2018, the interim cash dividend was 35 yen
per share and the year-end cash dividend was 35 yen per share;
therefore, the full-year cash dividend was 70 yen per share.

The percentage of employees who returned to work after taking childcare
leave had stayed at a high rate, reaching 100% in FY2018.

CO2 emissions increased by 3.5% compared to the previous fiscal year in
FY2018. This was due to increased energy usage as a result of several
factors, including the preparation for new equipment.

Capital expenditures/Depreciation

R&D expenses

Fluctuations in tap water/well water usage

Waste output(10,000m3)(Tons)(Millions of yen)

(Millions of yen)

60,00056,58740,000 36,372
20,00013,33745,33936,328
16,837

19,601

20,00037,591
20,92023,964

0

2015

2016

2017

2018 (Fiscal year)

23,416NGK SPARK PLUG CO., LTD. Integrated Report 2019

20,000

200
150

162

26

100
10,000

50

136

162

166

163

154

2015

2016

2017

2018 (Fiscal year)

Although our ratio of R&D expenses to sales had traditionally been
approximately 5% to 6%, it reached 6.6% in FY2018.

15,000

28
4

38
5

38
4

36
5

10,000

130

124

120

113

5,000

18,427

17,552

6,453

6,134
595

11,974

10,82319,756

19,031

7,065
697
11,993

20,103

7,305

7,966

773

667

10,953

11,46900

2014

Capital expenditures ■ Depreciation

Capital expenditures increased significantly year on year due to anincrease in investment in facilities for increased production at overseas
bases in plugs and sensors, etc.

1121,337

23,12325,28328,0720

2014■

30,000

2014

2015

2016

2017

2018 (Fiscal year)

2014

2015

2016

2017

2018 (Fiscal year)■ Groups in Japan (with integrated certification)■ Groups in Japan (without integrated certification) ■ Outside Japan■ Groups in Japan (with integrated certification)■ Groups in Japan (without integrated certification) ■ Outside JapanIn FY2018, tap water/well water usage decreased by 5.6% compared tothe previous fiscal year due to the effect of consolidation of production
bases, etc.

Waste output increased by 5.6% compared to the previous fiscal year in
FY2018. We will continue to strive to improve production processes andpromote resource recycling to reduce waste.

NGK SPARK PLUG CO., LTD. Integrated Report 201912

Stories for Value Creation
We are speeding up the measures to attain the goal of the seventh medium-term management plan, whichcorresponds to the third phase of the long-term management plan, “NITTOKU SHINKARON.”
We will steadily implement the management plan to deliver Real Value to all stakeholders in FY2020.

CONTENTS

15
17
19
21
27
29
31

Value Creation Process
Risks and Opportunities
Enhancement of Competitiveness across theValue Chain
Interview with the Chairman and the President
NITTOKU SHINKARON
Seventh Medium-Term Management Plan
Message from the Finance Officer

Business Strategy 1
Strengthening current businesse
33
35
37
39

Automotive Components Group
Plug business
Automotive Components Group
Sensor businessTechnical Ceramics Group
Semiconductor businessTechnical Ceramics Group
Ceramics businessBusiness Strategy 2
Establishing new business pillars
41
43
45
47
48

Pioneering New Fields by the Versatile Power ofTechnologies
Nurturing Corporate Culture that Propels the
Birth of New Businesses
NGK SPARK PLUG × Energy and Environment
NGK SPARK PLUG × Next-Generation Vehicles
NGK SPARK PLUG × Medical Treatment

Business Strategy 3
Establishing strong business
infrastructure
49
50
53
55
57
61
71
73

13

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Establishing Strong Infrastructure to Support
Businesses
Enhancement of Human Resources
Enhancement of Organizations
Establishment of Systems
Environment
Corporate Governance
Messages from Outside Directors
CSR Management

NGK SPARK PLUG CO., LTD. Integrated Report 201914

Value Creation Process

About NGK SPARK PLUG

Investment in mana

Business Model Capitalizing on theManagerial resources

Value chain to gain

FY2018Financial capital

401.7

Net assets

Manufacturing capital

External environment
Decarbonized society

Capital expenditures(overseas):

Technological innovation

Intellectual capital

Aging society with adecreasing birthrate

R&D expenses

International situation

56.6

Production bases (in Japan):

Climate changebillion yen

billion yen

13
14

locations

Planning and R&D

Pro-

gerial resources

Ceramics Technologies
competitive advantage
curement

Production andquality management

Logistics and sales

Automotive Components
Group

Technical Ceramics
Group

We support global motorization with
our product lineup, which is mainlycomposed of plugs, sensors andother components for internal
combustion engines.

Semiconductor business

Ceramics business

By using our ceramics layering
technology, we provide
semiconductor packages andsubstrates, which are used in a rangeof products, such as communicationequipment and smart devices.

By using the properties of ceramics,
we supply products to generalindustry, including cutting tools andcomponents for semiconductor
production equipment.

locations

Information

Stories for Value Creation

Creation of corporate value
FY2018Net sales

Operating income

28.1

425

billion yen

58.7

billion yen

Operating income ratio

13.8 %

ROIC

8.2 %

billion yen

Number of newpatents published

815

Dividend payout ratio

34.0 %

cases

Annual sales volume of plugs

Spark plugs

Cutting tools
About

Human capita

Business issues
Reform of the automobile
industry
Next-generation energy
Expanding demand forsemiconductors
Aged society and extended
healthy life expectancy

Number of employees
Rate of overseas
employees

15,99443 %Overseas sales ratio

Semiconductor IC packages

peopleComponents for semiconductor production
equipment

Glow plugs

84 %Sensors

Natural capital

Materials

Utility gas
LPG
Water

Ceramic products for industrial use

55,000tons

466.880
19.64
7,595
1.54
923

Chemical substances

Growth strategies

MWhSeventh mediumterm management planmil.

“Evolving” to “Real Value”

tons

Accelerating current &new businesses

We aim to deliver “Real Value” toall stakeholders in 2020.

Value provided to society

Cleaner automotive exhaust gas
Higher fuel economy
Contribution for a hydrogenenergy-based society
Reduction of environmental pollutants
Improvement of information infrastructure
Higher performance of electronic devices
Reduction of lead time atmanufacturing facilities
Effective use of equipment
Higher safety
Safety of autonomous driving

mil.

Development of medical technologies
Higher QOL
Safety in surgical operations

tons

Foundation to support
value creation
Solution of
NGK SPARK PLUG CO., LTD. Integrated Report 2019

million units

Contribution to environmental issues
Social capital

Electricity

15

870

Corporate governanceCorporate philosophy & The Nittoku Way

social issues
NGK SPARK PLUG CO., LTD. Integrated Report 201916

Risks and Opportunities

About NGK SPARK PLUG

Stories for Value Creation

Information

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 that look to the future.

Measures
Time horizon assumed for risks/opportunities

Business issues

Decline in the number ofinternal combustion engine
Risk
vehiclesDemand for automobiles is expected to increase on a short- to medium-term basis. Accordingly, we are further enhancing the automotive
components business. We will continue making profit through drastic process management for higher productivity and by building
infrastructures for more efficient supply chain management and boosting our overseas production rate to mitigate the impact of FX
fluctuations. We will also improve our profitability by taking advantage of our superiority in technological development. Moreover, we will
make maximum use of our global sales network to promote the sales and distribution of automotive components other than spark plugs.
We will thereby enhance the business while striving to develop new businesses, such as fuel cell and medical businesses, to achieve net
sales of 30 billion yen in FY2020.

Peaking of demand forautomobiles in developed
Risk
countries

By closely monitoring the trends of each country and each automaker, we will make carefully considered decisions about our future
measures. A shift to high-performance and high value-added products is progressing on a short- to medium-term basis, and we will focus
on the development and sales of such products to meet the demand, while conducting examinations on our production areas and sales
strategies with a stronger focus on profitability.

Downsizing of engines

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 with advanced functionality.”

Risks and opportunities

Opportunity

External environment

Risk

Stricter environmental
regulations
Opportunity

Decarbonized society
Climate change
Technologicalinnovation

Reform of the automobile industry

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

Opportunity

By leveraging synergies with NTK CERATEC (former NIHON CERATEC, all shares of which we acquired in 2015) and in anticipation of therecovery of semiconductor demand in and after 2020, we are expanding the applications and customer base of electrostatic chucks andother components for semiconductor production equipment. In the semiconductor business we are developing semiconductor packages
and substrates to be used in 5G systems, laser diode packages, etc.

Opportunity

Expanding demand forsemiconductors

We have been enhancing the functions of the Strategic Human Resources Dept. since April 2018 in our effort to secure necessary humanresources by global employment and utilization. We are also working to provide employees with comfortable workplaces by implementing
employee loyalty improvement systems. Moreover, we launched the Platinum Project for employees in their late 50s and 60s, whom we callthe “platinum generation,” to assign them to appropriate workplaces in consideration of their skills and career. We will also work to savelabor by fostering outsourcing, production process automation, use of IT and improvement of operational efficiency.

Labor shortageNGK SPARK PLUG CO., LTD. Integrated Report 2019

Environmental regulations are becoming stricter in Europe and other countries. In response, we are developing and offering a range of automotive
sensors, including those to monitor rises in engine temperature and exhaust gas-related sensors. In developed countries we will increase market
share and promote a shift to high value-added products by using our technological capabilities, while in developing countries we will make steadyprofits by taking advantage of the demand for sensors, which is expanding driven by the enhancement of environmental regulations, such as anincrease in the number of sensors to be installed per vehicle.

Advent of a hydrogen energybased society

Expansion of demand for 5G-,
AI- and IoT-related products

17

Long-term

At present, we are working to expand our market share mainly in China and India and are implementing sales strategies tailored to eachregion. In China we are favorably increasing the sales of high value-added products as well as low-priced spark plugs, which we released
into the local market at the end of 2017. We will continue to enhance the local sales network by establishing a network of distributors ininland regional cities and by building relationships with local manufacturers.

Next-generation energy

Aging society and prolonged
healthy life expectation

Medium-term

Expanding demand forautomobiles in emerging
Opportunity
economies

Aging society with adecreasing birthrate
International situation

Short-term

Risk

NGK SPARK PLUG CO., LTD. Integrated Report 201918

About NGK SPARK PLUG

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Enhancement of Competitivenessacross the Value Chain
Capitalizing on its unique strength, NGK SPARK PLUG is improving its corporate value by providing society
with high value-added products and services across the value chain, from planning and R&D, procurement,
and production and quality management through to logistics and sales.

Value chain
Planning and R&D

Identify the needs of customers (automakers) as early asin their engine development planning stage, thereby
developing products necessary for them.
Foster R&D, including research into element
technologies, development of new materials and process
technologies, and advanced engineering forcommercialization.
Develop new businesses through open innovation.

Procurement

Production and quality management

Based on the quality products principle, enhancecooperation with suppliers for globally optimal
procurement.
Foster the appropriate purchasing of materials, parts,
etc. for CSR-oriented procurement.
Conduct surveys on conflict minerals, going upstream in
the supply chain.
Reduce the procurement cost by increasing the local
procurement rate.
Support suppliers in developing human resources andgaining corporate strength.
Conduct follow-up activities after the regular evaluation of
suppliers.

Local procurement rate

Global open innovation bases(Venture Lab)

Meet customers’ demands promptly with production
bases at 13 locations in Japan and 14 overseas.
Increase the overseas production rate by transferring
the assembly process to outside Japan.
Offer high-quality products by the concerted effort ofengineering, production and quality management
staff.
Hold quality campaigns throughout the year.
Conduct “Standardize, do, check and act” (SDCA)
activities to support total quality management (TQM).

Logistics and sales

Reduce the logistics cost by promoting modal shift
to marine transportation.
Shorten the lead time from product receipt, removalfrom warehouses upon shipment instruction andinspection through to shipment.
Global network of official distributors
Gain more market share based on the trust enjoyedby the NGK/NTK brands.

Sales volume of plugs

Production bases（%）(millions of units)

900

30.0

830

865

872

24.0
20.0

Paris
Tokyo

23.0

San Jose

Overseas

In Japan

bases

bases

14

19.0
10.0

13

600

300

0

0

2016

2017

2018

(FY)

2016

2017

2018

(FY)

* Total of spark plugs and glow plugs

19

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201920

Interview with the Chairman and the President

About NGK SPARK PLUG

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Information

Toward achieving the goal of the long-term
management plan, we will address managerial issues
under a new system.
Since April 1, 2019, Shinichi Odo, Representative Director & Chairman of the Board, and Takeshi Kawai, President &Chief Operating Officer, have been leading the company under a new system. Specifically, the Chairman and thePresident are addressing challenging business issues as the top-level leaders for management and execution ofbusiness, respectively, with a view to providing stakeholders with “Real Value.”

Please outline the purpose of launching the new
system in April 2019 and the roles you arerespectively playing under the system.
O d o NGK SPARK PLUG has expanded its business inline with economic development and the progress of
motorization in and outside Japan. We have continued our
growth based on the sales of spark plugs and sensors,which are automotive components for internal combustion
engines, and have been maintaining our position as ahighly profitable company by continuing to increase sales
and profit. However, the automobile industry isapproaching a major turning point due to factors including
the emergence of next-generation vehicles such as electricvehicles (EVs). We now deem it one of our management
priorities to reduce our dependence on automotive
components for internal combustion engines, which
accounts for more than 80% of our net sales, and takesteps forward to create new businesses.
Upon becoming president of the company eight years
ago in 2011, I led the execution of business towardachieving the goal of the long-term management plan,“NITTOKU SHINKARON.” I also led the formulation in April
2016 of the seventh medium-term management plan
toward FY2020. I have thus taken charge of bothmanagement and execution of business over the years.
As for social movements in recent years, the trends oftechnological innovation and global competition among
companies have been accelerated. To these changes wemust respond quickly and make achievements urgently. In
addition, we must make managerial decisions carefully inconsideration of long-term business risks, such as thepeaking of demand for non-hybrid internal combustion
engine vehicles and a decrease in demand for plugs due tothe downsizing of engines.
Under these circumstances, we need to makemanagerial decisions and execute business for total
optimization by considering both short-term and long-term
issues and understanding the whole picture of thebusiness environment. To this end, I began to think that weneeded to separate management from execution ofbusiness, which would help us attain the goal of NITTOKU

Shinichi
Odo
Representative Director & Chairman of the Board

SHINKARON (“Deliver Real Value to all stakeholders in
FY2020”) and subsequently achieve sustainable growth.
I therefore decided to resign from the position ofpresident and COO focus on making managerial decisions
and developing human resources as chairman of theBoard, thereby having managers in charge of businessexecution devote themselves to the achievement of thecompany’s short- and medium-term targets. While I had
started my career as a salesperson, Mr. Kawai had been
engaged in the fields of technology and production sincejoining the company, including leading the development ofwide-range oxygen sensors. In consideration of this fact,
Mr. Kawai was chosen to be the new president, the partnerwith whom I would share the goal and lead the company
to a new stage, discussing the issues with each other fromour different positions and viewpoints.
K a w a i As Mr. Odo said, our company has been taking
the top spot in the market of spark plugs and oxygen
sensors, backed by our great “assets,” namely, thetechnologies that we have independently developed in theceramics field, our brand power, and our relationships of21

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Takeshi
Kawai
President & Chief Operating Officer

trust with customers. However, we should not be satisfied
with the status quo if we want to achieve further
development as a “Monozukuri company.” As such, inorder to ensure our growth we need to speed up
managerial decision-making in line with the reforms
implemented by Mr. Odo. To this end we have fostered
delayering for corporate officers and introduced a system
to promote young employees to the position of corporate
officers. We also need to identify signs of coming changes
and turn them into business opportunities. Under the new
system, we will work to make existing and new businesses
compatible while fostering the establishment of systems toraise all employees’ awareness, including improving thepersonnel/evaluation systems.
You are thus opening the door to a new stage. Please
now look back on and summarize the eight years
during which the company was operated under theleadership of President Odo.
O d o Let me outline the following three points on
which I have focused since I first became president: (1)NGK SPARK PLUG CO., LTD. Integrated Report 201922

About NGK SPARK PLUG

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Interview with the Chairman and the President

Strengthening existing businesses; (2) Making unprofitablebusinesses profitable; and (3) Establishing new businesspillars. For (1), in the automotive components business, wewere able to increase sales favorably, driven by the world
economic boom. In 2015, however, we postponed capital
investment by one year due to the economic slowdown in
China, and as a result of this too meticulous decisionmaking we had back orders in FY2018. I think this is an
issue to be addressed for the future. As for (2), in thesemiconductor business, which had been unprofitable, wewere able to reduce the deficit by consolidating the
production bases, fostering the “selection andconcentration” of products, and promoting the assignmentof the right people to the right positions. In FY2018 we
worked to make profit for a single month and as a result
made profit quarterly in the second quarter. In order tomake profit for the full year for FY2019, we will graduallyshift from “survival” measures to “winning” measures. For(3), we have sown seeds in the three fields of nextgeneration vehicles, environment and energy, and medical
treatment, and are seeing the seeds slowly sprout.
K a w a i In particular, in the fieldof environment and energy, themovement toward thecommercialization of solid oxide
fuel cell (SOFC) has been
accelerated. SOFCs are
attracting attention as a smalland highly efficient power
generation system, and we aim
to participate in the market assoon as possible. For the growth of the seeds sown by Mr.
Odo, we will foster R&D investments while deepening ties
with our partner companies (p.45).

The seventh medium-term management plan isentering the last stage toward completion in FY2020.
For the plan, please describe the specific measures,
achievements and outlook, including the latest
business performance. First, what is the outlook forthe automotive components business, which
accounts for more than 80% of net sales, and forinvestment in the business?
K a w a i While demand for non-hybrid internal combustion
engine vehicles will peak in developed countries, demand forsuch vehicles will be brisk in developing countries including
India and Thailand. Accordingly, the number of these vehicles
sold and owned will continue to increase.
However, in China in 2018, the number of new cars solddecreased year on year for the first time in 28 years and weneed to monitor the supply-demand balance in the country
carefully. For spark plugs, demand for high-performance
products, such as precious-metal plugs, has been expanding
not only in developed countries but also in emerging
economies. There are few players other than us in the market

23

NGK SPARK PLUG CO., LTD. Integrated Report 2019of high-performance spark plugs, and we therefore assume
the social responsibility to ensure the supply of these plugs as
the world’s top supplier in the market. In order to fulfill thisheavy responsibility, we will continue to focus on highperformance products. In the Western markets, we havealready been focusing on high-end products, and in emerging
economies we will also build a system to deliver highly
competitive products to the local high-end product markets byidentifying the performance, quality and pricing needed by
local customers. In the low-end product market, we will
maintain an appropriate supply level in cooperation with othermanufacturers, in consideration of the need to foster“concentration and selection” of measures and investments.
As for our global production system, we aim to achieve theproduction of about 1 billion plugs per year in FY2020. For the
production system after FY2020, we will make careful
investment decisions in consideration of future demand forautomobiles in China and other countries.
Also, for sensors, we are expanding the production ofwide-range oxygen sensors and NOx sensors, aiming tofurther increase profitability by promoting a shift to highperformance products. In China, where the emission gas
regulations known as “China 6”
will start in 2020, we have started
the mass production of widerange oxygen sensors and plan to
introduce a new production line
while paying attention to demand
for the sensors.
Most of the sensors are to beinstalled in new cars, and demand
for this product item will depend
upon the trends of the entire automobile industry, including the
popularization of EVs. In order to increase our productivity
under these circumstances, we need to make use of IoT andother technologies and implement measures with a focus on
the balance between investments and returns.
In the automotive components business, we pressed
forward with large-scale capital investment in FY2018,
including repairing the production facilities and building supply
chains and logistics systems. For example, in Europe, we
introduced robots and fostered automation for logistics
operations. In response to a global rise in personnel and othercosts, we deem the improvement of efficiency inmanufacturing and logistics operations to be an importantmanagement issue and will continue to focus on infrastructure
improvement.

Presently, overseas sales account for more than 80%of the company’s net sales. As a global company,
what kinds of relationships are desirable between thehead office and regional bases for the company torespond to external changes and make decisions
promptly? Also, what is your policy on M&A?
Odo

We have the “Global Headquarters (GHQ) andRegional Headquarters (RHQ) system” in place. It is nolonger possible for the head office to have control over all
businesses conducted in Japan and abroad, and I think it
is important to clarify the local bases’ “authorities andresponsibilities” to empower them in an appropriatemanner.
Now the related departments are cooperatively
discussing how to enhance risk control as the entire groupwhile building an independent, decentralized system and alocal governance system in each region, including how toestablish clear rules and control systems.
As for M&A, we made automotive component
manufacturer Wells a subsidiary in the US in 2015 toenhance our local repair business. In the same year we
also made NIHON CERATEC (presently NTK CERATEC), a
Japanese supplier of components for semiconductor
production equipment, one of our subsidiaries. I think M&A
is an important management method to increase ourcorporate value in a speedy manner. However, for Wells,
the post-merger integration (PMI) process has been
delayed and it will take more time for us to fully enjoy thesynergy effects of the integration.
In 2018, we acquired threecompanies from the US Chart
Group with a view to enhancing
the medical business as one of
our new businesses. They are:
CAIRE Inc., which deals withoxygen concentrators in the US,
and one other company in eachof the UK and China. CAIRE has
a roughly 10% share in theworld’s oxygen concentrator
market and will help our Group boost sales in the medical
business.
For M&A, we need to take a long-term view to decideon the desirable business size of our company for the
future. It would be difficult to create a new businesscomparable to our plug and sensor businesses, each ofwhich posts net sales of 100 billion yen, and so we mightdevelop an aggregate of businesses with net sales of 5billion to 10 billion yen. We also have the option topurchase a company with net sales of about 100 billion
yen. To do this, however, we need to increase our market
value and stock price while redefining our corporate culture
and long-term vision. We are now making examinations forour next long-term management plan, in which we will set
a more specific goal and create a more detailed roadmap
for the goal, while searching for promisingbusiness partners.
In order to establish a new business, we must conduct
R&D and make capital investment on a long-term basis. In
the current unclear business environment, it might beeffective to start making investments in a small to medium
amount and then increase investments in promisingbusinesses by carefully keeping the balance between
investments and returns.

What do you think about building a system tocollaborate with startup companies?
K a w a i For collaboration with startups, we established a
Venture Lab in Silicon Valley in the US in April 2018 as our
first base for overseas venture investments (p. 44). Throughcollaboration with startups, we will foster the exchange ofhuman resources and introduce external viewpoints and asense of urgency for reforms to our company. There are
two collaboration methods. First, we could collaborate withstartups in fields in which the partnership will lead to theeffective use of our technologies, generation of synergy
effects and enhancement of our businesses. Second, we
could cooperate with startups that will provide us with thetechnologies that we lack and need to have for theachievement of the targets set in our plans. We have been
consistently committed to developing technologies
independently, but we can no longer keep doing this andwill therefore foster collaboration with startups, thereby
developing new businesses at speed.

In order to take on new
challenges, you need toenhance the managementfoundation and humanresources that comprise theorganization. Chairman Odo,
you have been fostering thereform of the personnel
system since you wereappointed president,
insisting on the importanceof taking risks. Under the new system, you are also
focusing on developing human resources, as you
have said. Please describe the specific measuresand your ideas.
O d o The business model that we have establishedover long years in the automotive components businessprovides us with an important foundation for stablebusiness management. However, it cannot be denied that
this business model has also been preventing us fromembracing new challenges, keeping us trapped in pastideas and successes.
In response, in order to make changes by ridding
ourselves of old ideas, we started to implement the
DIAMOND Project in FY2012 to provide women withworkplaces where they could display more of their abilities.
Specifically, we reformed the personnel system to provide
women with more diverse job options and provided all
managers with training toward the improvement of theirown workplace culture. As a result, employees, mainly
female employees, made more and more proposals for
operational improvements, and our company received an
external commendation for the achievements. The numberof female managers increased from a few at the start of the
NGK SPARK PLUG CO., LTD. Integrated Report 201924

About NGK SPARK PLUG

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Interview with the Chairman and the President

project to 15 at the end of March 2019 and our company
was selected to be a Nadeshiko Brand company in March
2019. We will continue to promote women to higher
positions in a proactive manner.
Moreover, in FY2016, we started a program to findand develop the next generation of global managerial
human resources, targeting all Group companies. This
program was named the “HAGI Program” after Hagi City in
Yamaguchi Prefecture, where the Shoka Sonjuku school
developed diverse human resources at the end of the Edo
period. Under this educational program to develop futurebusiness leaders, we employ and promote personnel
regardless of their nationality and provide individual
employees with opportunities and environments for each ofthem to display their abilities. Although the program waslaunched only about two years ago, we have already seensigns of changes, including the more proactive exchangeof opinions by participants in various meetings. We are alsoenhancing the employment of new graduates with foreign
nationality. Among the 128 new graduates who joined thecompany in April 2019, five are foreign nationals, including
one who obtained a doctoral degree by conducting
research into all-solid batteries.
In addition, since FY2018 we have been making apersonnel reform targeting older workers under the
Platinum Project. In this project we support employees intheir late 50s and 60s (“platinum generation”) in improving
their skills and taking on challenges in new businesses.
The global situation and the composition of Japan’s
population indicate the need to foster diversity and use arange of human resources as one of our management
priorities, and to meet this requirement we need to reform
our personnel system and establish a fair evaluation
system. For example, we must clearly show the criteria andrules for the selection of participants in the HAGI Programand other programs, thereby helping employees increase
their motivation. To this end we launched the Strategic
Human Resources Dept. in April 2017, through which we
foster the global visualization and central management of
human resources, including the management of
employment, education and assignment.
K a w a i Mr. Odo has been implementing various
measures while promoting reforms with a constant focus
on “global,” “speedy” and “fair” reforms. I feel that theinternal atmosphere has indeed changed as a result of thereforms. However, as for our mindset, sense of crisis andability to act without avoiding challenging issues, we needto do more to step up to the targeted stage.
I therefore think it is necessary for us, as top
executives, to show the right direction in the next long-term
management plan and other plans and build a fairevaluation system, thereby helping employees, especially
young ones, be aware of what they lack and the gaps
between what they are and what they should be. We alsoneed a system that encourages employees to think about

25

NGK SPARK PLUG CO., LTD. Integrated Report 2019the future using the so-called backcasting method
rather than simply performing their immediate tasks,
and a system that gives support to members who are“sticking out.”
You have set the net sales target of 520 billion yen
and operating income target of 100 billion yen for
FY2020, the final year of the medium-term
management plan. What measures will you
implement to attain these targets?
K a w a i It is of course important to achieve the numericaltargets without fail, but we have found ourselves in aperiod in which we should also attribute importance to thespecific details of the measures to attain the targets.
For example, how should we strengthen our existing
businesses while making investments appropriately in new
businesses to expand our field of business in line with ourbasic policy, “Accelerating Current & New Businesses”? In
the process of finding an answer to this difficult question, I
think we will receive both encouraging comments andreprimands from investors. We introduced a new system tomake managerial decisions and execute businessappropriately to achieve our short-, medium- and longterm targets in consideration of related risks. For the longterm management plan to be newly formulated, we will
review both qualitative and quantitative targets to carefully
keep a good balance in both our business portfolio andinvestments.
For existing businesses, we will foster “selection andconcentration” to increase profitability while for the new
businesses that will support the future of our company, we
will input resources mainly in the three fields of environment
and energy, medical treatment and next-generation
vehicles. We are focusing on fuel cells in the field ofenvironment and energy, the respiratory system in the
medical field, including the development of oxygen
concentrators and asthma diagnostic equipment, and on
the lighting business and hydrogen leak detection sensors
for next-generation vehicles. In addition, we are making
examinations for 5G-related products, lead-freepiezoelectric ceramics and all-solid batteries to make useof our ceramics technologies for the expansion of ourbusiness scope.

meticulously to move to the next business stage, with all
employees having a sense of crisis.
Our business sustainability depends on the sustainable
development of society. As a global company, NGK SPARKPLUG became a signatory to the UN Global Compact inNovember 2016, supporting the 10 principles set in four
fields. We will continue to conduct a range of activities tocontribute to society at large as a good corporate citizen
under the corporate slogan, “With established trust andconfidence inside and outside the company, we aim tocontribute to the peoples of the world by creating andputting at their disposal new values for the future.”that has the robust managerial foundation needed tosupply products with stable and high quality on a continual
basis as both a Tier 1 and Tier 2 supplier, thereby
contributing to the sustainable development of society andmaking our company significant to society.
To this end, it is essential for all members of thecompany to share a strong commitment to stepping up toa higher level and the decision to change the company. I
believe it is critical to nurture a corporate culture thatrewards those who have taken actions and encourage allmembers to take on challenges. The management teamwill make strenuous efforts in this direction.

Please describe your ideas about shareholder returns.

K a w a i The company upholds “Dokuritsu-Jiei (Believe in
one’s own ability, and take actions by oneself)” in the Four
Shared Values of the Nittoku Way. I will work to further
reform our corporate culture, believing that we canestablish the core of a new business if each employee has
and demonstrates the Dokuritsu-Jiei spirit.
The automobile industry is said to be facing oncein-a-century changes, and we can no longer depend on
our past successes and conventional thinking. We need
to identify changes in the market and the industry,
clarify what direction we should move in, and contributeto the solution of social issues, thereby establishing“Something New” through the concerted efforts of all
employees. And then we can soar to new heights as acorporate group that can contribute to a better future.
To this end I will work hard as the top leader for the
execution of business.

K a w a i We will continue paying dividends in a stablemanner and maintain the dividend payout ratio of at least
30% in line with the policy set in the seventh medium-term
management plan. We will also acquire treasury stock in atimely fashion in consideration of the stock pricemovements and capital requirements to eventually achievea total return ratio of about 50%.

Finally, please reveal your aspirations for thecompany in 10 years’ time, including your messages
to shareholders.
O d o For plugs and sensors used as automotive
components, we mainly conduct business as a Tier 1(primary) supplier, which delivers components directly toautomakers. However, for our future “survival” and“winning,” I think it is necessary for us to make NGKSPARK PLUG a super-Tier 1 and super-Tier 2 company,
which has products that only the company can develop
and manufacture. We need to become a B-to-B company

We hope that all stakeholders including shareholders will
monitor the future evolution of NGK SPARK PLUG withhigh expectations and from a long-term point of view, andwould ask for your continued advice and support.

O d o During the past eight years we worked to build
the foundation to move to a new stage; and in the future,
as our organization expands into a company with net sales
exceeding 500 billion yen, the speed at which we respondto changes will become slower and we will be faced withmore risks. It will become important for us to improve theorganization, achieve the net sales and operating incometargets, and make investments for the future inconsideration of long-term risks—all concurrently. During
the period in which demand for internal combustion
engines is still expanding favorably, we must take actions

NGK SPARK PLUG CO., LTD. Integrated Report 2019

26

NITTOKU SHINKARON

About NGK SPARK PLUG

Looking back on the management plan

Stories for Value Creation

Information

NITTOKU SHINKARON Looking back on the management plan

The “NITTOKU SHINKARON” is NGK SPARK PLUG’s long-term management plan. Through the 3-year phases of

NGK SPARK PLUG has been implementing the management plan to create new value, while solving managerial“Delving,” “Renovating,” and “Evolving,” we will seek to become the No. 1 leading “Monozukuri” company thatissues identified in the past implementation process. On this page we look back on the three years devoted to thedelivers real value to customers across the world, a highly profitable company, a progressive company, and a“Delving” phase and another three years spent on the “Renovating” phase.

human “asset” company. By 2020, we will strive to be a company that can offer “Real Value” to all our stakeholders.

DelvingRenovating

FY2010 to FY2012

Long-term Management Plan: NITTOKU SHINKARONFY2013 to FY2015

Net sales, operating income and operating income ratio(FY2010 to FY2015)

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

383,272
284,746

269,232

302,798

347,636

329,758

17.9

15.7

NGK existing

Spark business
Plug

DelvingRenovating

Evolving

Real
Value

10.7
28,7702010■

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

Net sales (millions of yen)

Concept

Issues to
focus onAchievements

ESG
measures

RemainingissuesNGK SPARK PLUG CO., LTD. Integrated Report 20197.8

24,47823,754

2011■

Operating income (millions of yen)2012

51,661
2013

62,196
2014

66,2842015(FY)

Operating income ratio (%)

Delving

Basic policy

27

8.6

17.3

Renovating

Delve into existing businesses and seek new business

Launch new products or new business

Establish footing for a strong business foundation andfurther development“Maximize use of management resources, implementing boldchallenges in new business areas and sectors ahead of ‘Evolution’”(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 core competencies(3) Recognize that human “assets” are what will “Renovate”
the company and accelerate the renovation of thecompany via designating and achieving our own
commitments

To enhance our “Monozukuri” abilities, we established a
Monozukuri center to make profound use of our competitive
strength in plugs across all our businesses. We also
separated technological development and new businessdevelopment functions to take speedier actions under the
direct control of the president, while reforming the personnel
system on a global basis. We also reduced the number of
directors to enhance the governance and transparency ofmanagement and to speed up managerial decisions.

Before launching new businesses, we discontinued the productionof the organic package, transferred the dielectric business andmade an asset transfer in the business of ceramic tubes for
vacuum circuit breakers for the “selection and concentration” ofour businesses. Meanwhile, we acquired all shares of NIHONCERATEC (presently NTK CERATEC), put on BIDEMICS on themarket as a new cutting tool, established a division for fuel cells
and released hydrogen leak detection sensors. We thus created arange of new businesses and products.

2010
2011
2012

2013

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

Examination of the direction for the structural reform of thesemiconductor business
Strengthen technical ceramics divisions
Strengthen control functions and globalization of
headquarters divisions
Thorough CSR
Improve organization abilities

2014
2015

Appointed an outside director
Launched DIAMOND (Women Empowerment) Project
Began holding global personnel conferences
Increased number of outside directors to two
Formulated the criteria for the appointment of
independent directors
Began assessing the effectiveness of the Board of
Directors
Established the working style reform committee

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

NGK SPARK PLUG CO., LTD. Integrated Report 201928

About NGK SPARK PLUG

Seventh Medium-Term Management Plan
“Evolving” to “Real Value”

Information

Stories for Value Creation

Seventh medium-term management plan “Evolving” to “Real Value”

Achievements and issues in the three-year Evolving phase

Presently we are implementing the seventh medium-term (five-year) management plan, which includes thethree-year “Evolving” phase of NITTOKU SHINKARON, the final phase, directed toward the coming future.

“Evolving”“Real Value”

FY2016 to FY2020

Net sales, operating income and operating income ratio

Achievements(FY2016 to FY2020)

Target520,000
409,912372,919425,013
Target
20% or higher

16.4

14.4

13.8
53,59567,27958,672

Target100,000
ESG

FY2016FY2017FY2018Substantially increased shipment for both plugs
and sensors and boosted profit by streamlining
production and reducing the cost (but profit
decreased year on year due to stronger yen).
Made progress with the structural reform of thesemiconductor business, “selection andconcentration” of products and with rationalization
including personnel reduction, thereby far
increasing revenue in the business. To solidify the
management foundation, launched neworganizations and programs with a focus onhuman resources.

Successfully implemented the strategy for the
Chinese market, as upheld in the seventh plan,
thereby expanding sales and profit. Increased
operating income by rationalization and cost
reduction for productivity improvement. In the
structural reform of the semiconductor business,completed the consolidation of production bases
for higher productivity. Also improved the productmix by expanding the shipment of packages for
smartphones. For speedier decision-making,fostered the GHQ-RHQ plan and localization.

Increased shipment for plugs and sensors as wellas the ratio of high value-added products, thereby
improving the product mix. However, unable tocover increases in the expenses incurred outside
the scope of existing businesses, such as the
packaging & transportation cost, new businessrelated cost and SG&A expenses forinfrastructure improvement. Fostered the buildingof a system to establish a global supply chain asa core issue identified in the three-year Evolving
stage, and began conducting tests for the system
in Europe.

Increased the number of outside directors to
threeJoined the UN Global Compact
Began a 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 (RHQ)
Designated as ESG investment stock
Certified as Bronze Class at the SustainabilityAward 2017
Certified as one of the Excellent Enterprises of Health andProductivity Management 2018 (“White 500”)
Certified as one of the New Diversity
Management Selection 100 companies
Established the Diversity Promotion Section

Full compliance with the revised Corporate
Governance Codemeasures2016■

Net sales (millions of yen)

■

2017

Operating income (millions of yen)

2018

2020

(FY)

Operating income ratio (%)

Foreign exchange rates (for 1 dollar/1 euro)
FY2016 (108 yen/119 yen) FY2017 (111 yen/130 yen) FY2018 (111 yen/128 yen) FY2020 (115 yen/120 yen)
* Rates as of April 2016, when the announcement was madeRemaining

SloganBasic Policy

Accelerating Current & New Businesses
Delivering “Real Value” to all stakeholders in FY2020.

issuesCertified as a Nadeshiko Brand company
Concluded with Komaki City a cooperationagreement to assist people who need special
medical care for home oxygen therapy
Certified as one of the Excellent Enterprises of
Health and Productivity Management 2019(“White 500”)

Response to contraction in the use of internal combustion engines and movement toward EVs and electrification: We are conducting examinations
about products for EVs in cooperation with external partners, though demand for ICE engines is still growing.
Development of new businesses: We have sown the seeds, which now have to be grown.
Fair corporate culture that allows for diverse individuals to reach their potential: While the number of female managers increased and a foreign national
was appointed to the position of corporate officer in the Evolving phase, the rates should be further increased, and it will take more time for theestablishment of such a corporate culture.
Enrichment of corporate governance: While measures were taken to ensure compliance with the revised Corporate Governance Code, there remain
issues regarding the implementation of rules at the GHQ and RHQ.

Targets for FY2020: Net sales of 520 billion yen and operating income of 100 billion yen.
For further growth, utilize the cash obtained from the FY2016 to FY2020 business activities

In the seventh medium-term management plan, we set (1) Strengthening current businesses; (2) Establishing new

Cash outflow

Cash inflow

business pillars; and (3) Establishing strong business infrastructure as the basic initiatives. Under the plan, we areaccelerating our measures to deliver Real Value to all stakeholders in 2020.

Included in the DJSI Asia Pacific Index for two
consecutive years

Concept

Net income: 280 billion yen

Depreciation: 170 billion yen
cost

In and before FY2018:
Total cash inflow over 3 years:

Expenditure

143.4 billion yen

450 billion yen

Operating capital: 100 billion yen

Growth investment: 250 billion yen

In and before FY2018:
Total cash outflow over 3 years:

Shareholder returns : 100 billion yen

189.7 billion yen

450 billion yen

Management of each businessNet operating income after tax ÷ Invested capital (on an assets basis: Accounts receivable + Inventory assets – Accounts payable)

ROIC
management

Management of the entire company
Net operating income after tax ÷ Invested capital (on a liabilities basis: Interest-bearing debt + shareholders’equity)

Increase ROIC and decrease WACC in
the aspects of business and finance,
respectively

ROIC and WACC for FY2018

ROIC > WACC(About 6%)

ROIC

8.2%

WACC

About6%(1)Fundraising plan made in consideration of the D/E ratio
Fundraising(2)Rating that contributes to low-cost fundraising

Growthinvestment(1)Existing businesses: Make investments so as not to miss any opportunities provided by brisk demand, thereby maximizing profit

Take long-term measures for the two issues in a balanced manner.

Shareholder
returns

29

NGK SPARK PLUG CO., LTD. Integrated Report 2019(2)New businesses: Invest proactively in new and growth businesses to restructure the business portfolio(1)Stable dividend payment(2)Dividend payout ratio of 30%(3)Acquisition of treasury stock

Higher total return ratio
Lowered capital adequacy ratio

NGK SPARK PLUG CO., LTD. Integrated Report 201930

Message from the Finance Officer

About NGK SPARK PLUG

Introducing new management accounting
method and related systems for real-timemonitoring and quick actions
Kenji Isobe
Member of the Board
Executive Officer
Corporate Administration Group

Aspirations as a finance officer
We at the finance department need to play both “defense”
and “offense”: we work to ensure the implementation of
the financial strategies and others, while making
approaches to the divisions and management tocommunicate with them in reference to the financial
figures. In FY2018 we had excessive inventory in a specificprocess due to a mismatch between our supply ability anddemand. As a finance officer, I attribute importance toinventory management. In order to deal with the issue ofmismatches, I thought it necessary to substantially change
our idea about management accounting to visualize moreof the financial and accounting aspects for the divisions.
In the past we mainly concentrated on the
management of revenue with a focus on businesses in ourmanagement accounting process. This, however, does nothelp us recognize and control supply-demand gaps. This
June, we therefore introduced a new system, deciding tochange our approach to management accounting
substantially. The system offers us two benefits: (1) it
enables us to focus on customers, business trends,
regions and other aspects in addition to products andbusinesses and (2) it helps us manage financial figures inreal time. Under the conventional system, the financial
figures for each month were made available to us three tofive business days after the monthly financial settlement
was made at the end of the month, making it difficult toimplement necessary measures quickly. The introduction of
the new system has enabled us to check the financial
results in real time and make simulations for the future. We
can now take actions more quickly by predicting problems.
I hope that the new system will also help us find the issues
that were invisible under the old system in addition toassisting us with appropriate inventory management.

ROIC management
We began implementing the seventh medium-term
management plan three years ago. Before starting ROIC31

NGK SPARK PLUG CO., LTD. Integrated Report 2019

management, we had been managing working capital andfixed assets based on five important asset-oriented
indicators, including inventory turnover, fixed asset turnoverand return on assets. ROIC is an indicator that integrates
these elements. Our company has been maintaining highprofitability and we have long attributed importance toprofit and loss as part of our corporate culture, believingthat “we can remain profitable by continuing to makeprofit.” We adopted the ROIC management, wanting tochange this way of thinking gradually.
We will enter the final year of the medium-term plan in
two years and have yet to raise awareness of and interestin ROIC management among all employees across thecompany. It is necessary to make all employees
understand what we want to achieve by ROIC
management during the remaining two years and onward.
As we expand ROIC management across the board, waste
will decrease in terms of invested capital. However, as
more capital is invested for the creation of future operating
income, the amount of invested capital and that ofoperating income might temporarily become imbalanced. I
think this is inevitable to some extent, but we need to
explain the reason for the imbalance to shareholders. I
think it is my role as finance officer to raise employees’
awareness of ROIC management for more effective use of
our assets.

fact. However, the results were worse than expected.
The ratio of SG&A expenses to net sales eventually
exceeded 20% and contributed to a decrease in profit.
Amid the rapid changes of the business environment, thecost of making R&D investment and upfront investment in
the expansion of the existing businesses as well as theadministration cost to enhance the managementfoundation are also increasing.
In the latter half of the term, capital investment
increased by more than the level assumed after thefinancial results for the second quarter were finalized. Thisis mainly because of the gap between our plant capacityand demand. In order to meet the demand for high valuedadded products, which was larger than expected, we haveworked to enhance the capacity.

Future investment plan and investment management

We had been adopting the business model of limiting theamount of investment to the amount of funds gained
through business. However, in the greatly changing
business environment, the scale of our investment cash
flows has been exceeding that of our operating cash flows
in recent years. As a result, our capital adequacy ratio has
dropped to around 60% and in the future might be below
60% to meet the capital requirements. Evaluation of this“60%” would differ by stakeholder, but at any rate we wantto keep our reputation as a “company with a robust
financial structure” as a matter of principle. However, we
do need to invest in our future growth and will press
forward with investment projects that meet the criteria for
return on investment. In addition to this capital costoriented investment criteria, we will also give consideration
to our business strategies, thereby making bothquantitative and qualitative decisions on investment.

Stories for Value Creation

Information

Shareholder returns
We will maintain the dividend payout ratio of 30% while
making growth investments. As for the acquisition oftreasury stock, we will make decisions in consideration of
the stock price movements and capital requirements. We
would like to return profit to all stakeholders in a fair andbalanced manner.

Conclusion
NGK SPARK PLUG is a highly profitable company in theautomotive components industry and will remain to besuch. We will keep high profitability in the industry until thedemand for internal combustion engines peaks and thenmaximize the benefit of the remaining players. We will takeadvantage of our technological superiority and global sales
channels to maintain high profitability.
During the two years left for the seventh medium-term
management plan, we will strive to achieve net sales of
520 billion yen and operating income of 100 billion yen, as
targeted in the plan.

Evaluation of FY2018 results
Net sales were below the predicted level, being more
affected than expected by the decreased sales of dieselpowered vehicles in Europe. We also missed business
opportunities due to a mismatch between our supply ability
and demand, which caused us to have back orders. In thesemiconductor production equipment business, we were
faced with the rapid downturn of the market. We weregenerally unable to make appropriate responses tochanges in the world economy. At the end of the second
quarter of the term, we saw some signs of economic
slowdown and set our subsequent targets in view of the

NGK SPARK PLUG CO., LTD. Integrated Report 201932

About NGK SPARK PLUG

Business Strategy 1

Stories for Value Creation

Information

Strengthening current businesses

FY2018 Automotive Components Group

Automotive Components Group

Plug businessNet sales:

356.7

billion yen (consolidated; up 2.4% year on year)

61.2

Operating income:billion yen(consolidated; down 10.1% year on year)

Net sales (billion of yen) and operating income ratio (%)

23.3

Net sales composition

22.0

19.6

18.2

A spark plug is installed in the combustion chamber of an engine to serve as a “lighter” for the electrical
ignition of the fuel-air mixture. This component is required to have high thermal conductivity, mechanical292.8

strength and insulation resistance in a harsh environment where it undergoes drastic temperature/pressure changes and is subject to high voltage. Glow plugs assist the autoignition of diesel engines.

2014■

Automotive
Components Group:

356.7

348.2

318.1

322.9

17.2

120.4

133.2

125.1

137.0

142.6

172.4

189.7

193.1

211.2

214.1

2015

Plug business ■ Sensor business

2016

2017

2018

84 %

(FY)

Operating income ratio

Our strengths
The automobile industry aims to achieve higher fuel efficiency
and lower emissions for the environment while also offeringroomier cars, for which the downsizing of engines has
become a trend. Accordingly, spark plugs need to be thinnerand longer. The insulative parts of spark plugs are made ofceramics, which cannot be made thinner without advanced
technologies and without time spent on development.
Because we are involved in the entire process of ceramics
production right from the development of materials, we canmake detailed responses to requests for higher performanceand specifications. Also, because we deal with almost all
automakers, we can identify the latest technological trends

and develop technologies to meet market needs. Recently,
the adoption of precious-metal plugs has been increasing
because of their high ignitability, durability and fuel efficiency.
Spark plugs are consumables and need to be replaced
regularly. We have production and sales bases in 21 countries
and have built our own sales channels. We are giving
technological support locally while meeting the needs of the
global repair market. Capitalizing on our advanced technologies
and trust earned from customers, we are taking the top spot in
the world’s spark plug market.

WeightNormal reach

Downsizing of spark plugs

vehicles to the total number of vehicles will decrease,which we regard as an issue. On the other hand, plug-in
hybrid and hybrid vehicles equipped with internal
combustion engines will continue to sell well, and demand
for spark plugs is indeed expanding. By sales volume,
about 75% of our spark plugs sold are for the repair

WeightLong reachThread diameter

WeightLong reachLong reachthe performance is required to be even higher. We will
foster technological development to supply higherperformance plugs to meet the future demand and makestrategic investments to offer high value-added products,
thereby continuing to meet market needs as a leading
company.

Strategy set in the seventh medium-term management plan, progress with the plan, and outlook andchallenges for the future

Strategy

Business environment and challenges
The automobile industry is going through a once-in-acentury period of changes. Against the backdrop of
globally stricter environmental regulations, automakers aredeveloping electric vehicles (EVs). The impact of EVs will
be minor on a medium-term basis (over five to 10 years),
but the ratio of non-hybrid internal combustion engine

market, but the number of vehicles equipped with internal
combustion engines will continue to increase. Accordingly,
as the responsibility of a manufacturer boasting the top
share in the world’s spark plug market, we need to ensurestable supply toward the future. As the environmental
regulations are becoming stricter year by year, demand forhigh-performance precious-metal plugs is expanding andProvide competitive products in emerging economies by identifying the local performance,
quality and cost requirements
Expand market share in emerging economies (China and India)
Find new applications based on business achievements in the repair market

Progress with the medium-term management plan

Our market share in emerging economies was small before
the formulation of the management plan but has expanded at
an unexpectedly high pace.
In China we have favorably increased the number of“authorized parts shops”* even in small cities. In particular,
partnering with dealers who had wide-area sales channels
helped us make progress toward growth. Moreover, wedeveloped and put on sale highly cost-competitive plugs
under a new brand name for use in low-priced cars made by
local automakers. As a result, we boosted our sales volume in
the Chinese repair market by about 30% year on year.
For the manufacture of spark plugs, we also fostered thetransfer of the metal fittings production and parts assembly
processes from Japan to elsewhere in Asia, thereby lowering
the processing cost for rationalization. Presently our overseas
production rate exceeds 50% and we are ready to meet the
expanding demand in emerging markets.

Outlook for the futuren

We aim to build a system to increase the annual productionof spark plugs by about 20% over the five years from FY2015
to FY2020. We are implementing a plan to achieve the target
by making timely investments to expand production andimprove productivity while carefully monitoring demand.
The adoption of precious-metal plugs has been
expanding among our customers, which is leading to a shift
to plugs made of precious metals across the new car market
and repair market at an unexpectedly fast pace. We will focus
more on the provision of these high value-added products tocontinue our growth.
In consideration of the possibility that demand forinternal combustion engines will peak, we will makeinvestment decisions carefully to keep appropriate inventory
and cash flow and avoid missing any profit-making
opportunities over the short to medium term.

* Authorized parts shops: Authorized merchants operating under primary dealers. They selectand certify the merchants who will sell components to the targeted automobile repair factories
as their main business.

33

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201934

About NGK SPARK PLUG

Business Strategy 1

Stories for Value Creation

Information

Strengthening current businesses

Automotive Components Group

Sensor businessIn order to make automobile exhaust gas cleaner, it is important to check the driving conditions,
including exhaust-gas oxygen concentration and temperature, and then control the conditions based on
the findings. We are developing a range of sensors by using the properties of ceramics, thereby
contributing to cleaner exhaust gas.

Our strengths

Strategy set in the seventh medium-term management plan, progress with the plan, and outlook andchallenges for the future
nitrogen oxide.

Developed countries, including Europe and the United States,

Establish technological superiority, enhance collaboration with system manufacturers andWe have superiority in the technological development ofstarted to introduce exhaust gas regulations in the 1990s and in

expand the application of sensors for compliance with regulations

recent years emerging economies have also enhanced theirceramics to be used as detector elements, and our sensors are

regulations, making regulating exhaust gas a global trend.

highly rated by automakers in recognition of their quick

Moreover, the target of regulations has expanded to include

activation. Oxygen sensors need to be activated quickly after

Promote sales of high value-added products and increase profit margin

motorcycles in addition to automobiles, which is bolstering

the engine starts up, and we help customers comply with strict

demand for exhaust gas control sensors. Performance

exhaust gas regulations by shortening the time required for

Search for next-generation seeds for new products and new domains

improvement of these sensors is also required to ensure

activation to as little as around five seconds.

compliance with the regulations. D emand for sensors that are

One of our strengths is that we can develop and promptly

more technologically advanced than the currently mainstream

release to market products that meet customers’ performanceoxygen sensors is also expanding, including the demand forrequirements.

wide-range sensors to measure exhaust-gas oxygen
concentration more precisely and for NOx sensors to measure

Business environment and challenges
As the exhaust gas regulations are becoming stricter globally,

our sensor development activities might be affected bydemand for wide-range sensors, NOx sensors and oxygen

automakers’ responses to the regulations. We have been highly

sensors for motorcycles will increase in the future. Accordingly,

evaluated by automakers due to our advanced technologies,

we need to enhance our business for these sensors.

but in 10 to 20 years’ time, the number of pure EVs will increase
and cause a drop in the sales volume of sensors for

The exhaust gas regulations will continue to be tightened,

Strategy

Promote sales of existing products to maintain profit

Progress with the medium-term management plan

Outlook for the future

In FY2018, we were unable to achieve the numerical targets set

We are producing wide-area oxygen sensors, which are a highin the plan for oxygen sensors and wide-range oxygen sensors

value-added item, mainly in Japan and the United States. We

due to the delayed implementation of WLTP-related measures

also began producing these sensors in Changshu, China inby European automakers and to the slowdown of the diesel car

February 2019. Moreover, we plan to launch production inmarket. However, the enhancement of exhaust gas regulations

Thailand within FY2019. We plan to increase the production ofhas promoted a shift from oxygen sensors to wide-range

wide-range oxygen sensors by about 57% year on year inoxygen sensors among customers, and our presence has

FY2019. For oxygen sensors for motorcycles, we are expanding

further increased among automakers.

the manufacturing facilities, which will start operation within

As for PM sensors to detect soot and other matter2019 before the enforcement of the BS6 exhaust gas

contained in exhaust gas, we suspended the development of

We are also proactively transferring production overseas

emissions meter due to technological difficulties and in

and will stop producing knock sensors in Japan within 2021.

consideration of the supply-demand balance.

For these sensors we have completed the transfer to China andwill also start preparations for production in Mexico in 2020 toautomobiles. We therefore need to create new businesses also

which we will respond to by using our technologies. However,establish a two-base production system for knock sensors,in the sensor business. While carefully monitoring the trends ofRegulatory trends, element technologies and corresponding products
2016

2017

exhaust gas regulations,

2018

2019

2020

2021

2022

2023

2024

Tier3
LEV3
Eu6d temp
WLTP/RDE

Regulatory trends

LEV4(Undecided)
Eu7(Undecided)

Eu6d

WLTP/RDE
Regulations by
China 6aRegulations by
India BS6
Spread of HEVs

Gasoline

Forced induction gasoline
Imbalance detection

Diesel2025

Quick activation

Spread of
48V systems

NOx reduction(Improved EGR)

Regulations by China 6b
WLTP/RDE
Expansion of operating range =Higher heat resistance
Enhancement of regulations(Review of postprocessing process)Enhancement of regulations in China(Need for GPFs)

Spread of PHEVs

regulations in April 2020.

products other than the sensor for the NCEM compact

thereby increasing our price competitiveness for the item. For

Sales volume of sensors

temperature sensors we are planning to enhance thewe will foster the

production capacity in Thailand.

selection andCapitalizing on the trust we have earned based on ourconcentration oftechnological capabilities, we will continue increasing the sales

technologies to bevolume and market share of our products that contribute toready to develop newcompliance with exhaust gas regulations, while also inputting

businesses.

2015
■

2016

2017

2018

2019

(FY)

resources to create new businesses.

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

Higher fuel efficiency
Postprocessing made complex
due to enhanced regulations

Enhancement of regulations(Review of postprocessing process)

Trends of technologicalrequirements for vehicles

Development of sensors
by NGK SPARK PLUGZFAS-U3
CTAS-T1.1
CTAS-T2(wide-range oxygen sensor)（temperature sensor）（temperature sensor）

ZFAS-S3(oxygen sensor)

35

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Improvement of ZFAS-U3(wide-range oxygen sensor)

Improvement of ZFAS-S3(oxygen sensor)

Next-type(wide-range oxygen sensor)

Next-type(NOx sensor)

Next-type(oxygen sensor)

NGK SPARK PLUG CO., LTD. Integrated Report 201936

About NGK SPARK PLUG

Business Strategy 1

Stories for Value Creation

Information

Strengthening current businesses

FY2018 Technical Ceramics Group Semiconductor businessTechnical Ceramics Group

Semiconductor busines

Net sales:

17.1

billion yen (consolidated, down 4.6% year on year)

1.6

Operating loss
billion yen(consolidated, operating loss of 2.6 billion yen in the previous year)

Net sales (billion of yen) and operating income ratio (%)

25.3

23.8

19.4

Net sales composition
17.9

Since starting the manufacture of ceramic IC packages and substrates in 1967, we have been supporting

17.1

Semiconductorbusiness:the advancement of the semiconductor industry for over half a century as one of the world’s mostexperienced semiconductor package and substrate manufacturers. By employing our technologies(14.4)

backed by our abundant experience, we provide customers with products that meet their needs(31.2)

including both standardized and customized packages.

2014■

Our strengths

Net sales(29.9)
2015

(9.1)

4%

(24.9)
2016

2017

2018

(FY)

Operating income ratio

Strategy set in the seventh medium-term management plan, progress with the plan, and outlook andchallenges for the future

We provide high-quality products by using our advanced andand copper plating, and can deliver small-lot products with a shortprecise manufacturing technologies and applying our strict quality

delivery time. After designing IC chips, we can also make tailored

Revitalize the business by undertaking structural reform, implementing the growth strategy

management. We can meet the needs for complex 3D structure,

proposals on the structure and design of ceramic packages based

and making use of external resources

cavity structure and single- to multi-layered structures, provide aon each customer’s application and basic requirements.

Strategy

range of plating options such as electrolytic, electroless, gold, silver

Turn NTK CERAMIC into a subsidiary independently engaged in the semiconductor package business
Foster the selection and concentration of productsReview the production bases
Invite external business leaders to participate in the management

Business environment and challenges
We launched the ceramic package business in the 1960s andexpanded it to a business with operating income of several
billion yen by FY2006. However, we have continued to post
chronic deficits in the business since the collapse of Lehman

Progress with the medium-term management plan

cost reduction toward the goal of posting profit for FY2019. We

competitiveness, we were faced with tougher price competition

In October 2016 we embarked on business restructuring to “turnexpect that we will record profit on a yearly basis for FY2019 as

and were unable to demonstrate our strength in the business,

NTK CERAMIC into a subsidiary independently engaged in theplanned, but we cannot be optimistic about our business

in which we continued to post deficits as a result. In FY2016,

semiconductor business,” and then visualized the business andenvironment as we see unexpectedly large changes being made to

the first year of the seventh medium-term management plan,

sped up the reform with unwavering resolve.

the world’s economy and semiconductor market. We will work with

we upheld the following four items as the strategy to revitalize

Brothers.

As for “Invite external business leaders to participate in the

all our might for the success of the revitalization plan by further

the ceramic package business, and have since been promoting

management,” we asked Mr. Sakuta (presently CEO of NTK

the revitalization plan with a strong commitment: turn NTK

CERAMIC), who had proven his ability to rebuild business at

off the ceramic IC package business division, with the spinoff

CERAMIC into a subsidiary independently engaged in theRenesas Electronics, to lead the reform of our corporate culture.

including cost reduction, to “winning” measures to expand top-line

taking over the business of the three. NTK CERAMIC

semiconductor package business; invite external business

Under his leadership we have raised employees’ awareness,sales and increase the share that products for STFs and LEDs

leaders to participate in the management; foster the selection

increased the speed of managerial decision-making, and clarified

occupy among our total sales, with a view to building a businessand concentration of products; and review the production

the responsibilities and authorities of the business units set forstructure that does not depend on semiconductor packages forbases.

each product, thereby steadily improving the bottom line.

smartphones.

In October 2009, we established NTK CERAMIC CO., LTD.
by merging our three wholly owned subsidiaries and spinning

manufactured products for us by using the materials and parts
that we had supplied to it, and we purchased the completed
products from NTK CERAMIC to sell them to customers.

For the “selection and concentration of products,” weHowever, due to the emergence of Chinese and othersemiconductor package manufacturers boasting high cost
(FY)

2015

Consolidation of
production bases
Selection andconcentration of products
Appropriate personnel
assignment

2016

2017

2018

2019
(Plan)

Seventh medium-term management plan

Net sales
Operatingincome23.7 billion yen 19.4 billion yen 17.9 billion yen 17.1 billion yen 17.8 billion yen
7.1 billion yen

4.8 billion yen

2.6 billion yen

1.6 billion yen

0.5 billion yen

reducing indirect costs.
We will also shift our focus gradually from “survival” measures,

For STFs, there has been a shift from organic to ceramiccompleted the withdrawal from the business of crystal packages atmaterials as a technological trend. In response we have started tothe end of March 2018, as planned, as we had become unable tomanufacture products for contact image sensors (CIS) by shiftingcompete on price in this business following the commoditization of

our focus from memory applications, and sales are gradually

the item. On the other hand, we have been striving to be an active

increasing. For LEDs, our focus is shifting from LEDs used inplayer in the market of high value-added semiconductor packages

consumer products to those used in automobiles. For otherused in automobiles, medical equipment and high-speed

packages we are receiving more orders, mainly for use in CIS solar

communication devices.

cells for industrial use.

As for “Review the production bases,” we consolidated the

As described above, we are seeing the seeds that we havefour bases into three, thereby reducing the fixed cost whilesown sprouting for the development of new projects and a newpromoting appropriate personnel assignment in line with our shift ofcustomer base, which could lead to the creation of new pillars infocus to high value-added products.

the semiconductor business. In and after FY2020 we will further
accelerate development and sales promotion for stable profit-

Survival
Further reduce indirect costs

37

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Winning
Promote sales of products for STFs and LEDs
Launch the production of various new items in small lots

Outlook for the future

making in the business.

In FY2018 we posted profit on a quarterly basis in the second
quarter and implemented the revitalization plan with a focus on

NGK SPARK PLUG CO., LTD. Integrated Report 201938

About NGK SPARK PLUG

Business Strategy 1

Stories for Value Creation

Information

Strengthening current businesses

FY2018 Technical Ceramics Group Ceramics businessTechnical Ceramics Group

Ceramics businessNet sales:

40.7

2.8

billion yen
Operating income:(consolidated, down 23.4% year on year)

billion yen (consolidated, up 8.0% year on year)

Net sales (billion of yen) and operating income ratio (%)

9.6

By making use of the properties of ceramics, including being heat- and corrosion-resistant and electrical-

6.8

ly insulative, we are developing products that help enrich industry and everyday life. We will continue to

7.4
32.8

25.0

make use of our long-accumulated materials and process technologies to deliver high value-added products necessary for the coming age.

37.7

Net sales composition
6.9
40.7

Ceramics business:

30.0

10 %

1.9
2014
■

Our strengths

Net sales

2015

2016

2017

2018

(FY)

Operating income ratio

Strategy set in the seventh medium-term management plan, progress with the plan, and outlook andchallenges for the future

In the cutting tool business, we supply tools for metal

production equipment (SPE) business, we offer electrostatic

processing and have been holding on to a large market sharechucks and other components indispensable for the

Steadily implement the growth strategies set for each area and each product, accelerate production reforms

for many years. Our BIDEMICS cutting tool is optimal for theequipment. As demand for semiconductors expands in line withand improve our plant productivity.

processing of aircraft engines and has many users because of

the increasing need for higher-performance electronic

its high productivity. In the industrial ceramics business, we arecomponents, we need to develop higher value-added

engaged in an integrated process from the development ofcomponents for the equipment and are customizing products

materials to the manufacture of products and can maketo meet the requirements of individual customers.

Strategy

Make maximum use of synergies with NTK CERATEC (former NIHON CERATEC) to be the top player in thefield of ceramic components for semiconductor production equipment.

Progress with the medium-term management plan

Outlook for the futuren

detailed responses to requests from customers, including thoseIn the cutting tool business, we are earning a greater share in

In the cutting tool business, we will foster the development offor piezoelectric elements and oscillators. In the semiconductor

the US and European markets, but still need to increase our

new cutting tool models that will contribute to higher

sales as our biggest challenge. We will continue working toward

productivity and to the reduction of production cost. We will

the achievement of the plan.

also press forward with automation and the consolidation of

In the industrial ceramics business, we have been increasing

Business environment and challenges

sales of piezoelectric ceramics favorably, and will continue to foster
the selection and concentration of products to make more profit.

Cutting tools are indispensable for the processing of components

production capacity of electrostatic chucks, which will cause aused in automobiles, industrial equipment and aircraft. Recently,

drop in profit due to increased depreciation cost while net sales

against the backdrop of expanding demand for passenger aircraft,have decreased year on year. For the SPE business we regard

we developed and put on sale BIDEMICS as a tool for stable and

FY2019 as a year in which we should make efforts patiently. In thisspeedier cutting. BIDEMICS contributes to higher productivity by

year we will “enhance quality and stabilize the production system,”

cutting heat-resistant alloys smoothly in the aircraft component

and “foster development to meet new demand and receive more

cutting process. In recent years manufacturers have beenorders,” so that we will not miss any opportunities that will arise

increasingly required to shorten the processing time as the public

due to future brisk demand.

environmental awareness grows and work style reforms are further
promoted. In response, we need to develop a new BIDEMICS
model with higher processing performance as soon as possible.

In the SPE business we acquired NIHON CERATEC (presently

processes to improve our cash flow and profitability.
In the industrial ceramics business, we will promote sales of
piezoelectric products for semiconductor production equipment
and other applications, foster the use of silicon nitrogen ceramic

NTK CERATEC) in 2015 in recognition of its advanced

balls in EVs and wind turbines for power generation, and enhance

processing technologies and cost competitiveness in the small-our production capacity for the products.

lot production of various items. We will make maximum use of

In the SPE business we will need to meet the requirement ofsynergies between our overseas sales network and NTK“uniform surface temperature” and “low particle generation” for

CERATEC so that we will become the top player in the field ofelectrostatic chucks, which we are manufacturing by using theceramic components for semiconductor production equipment.

sheet layering technology that we have developed in the

We restructured our organization in April 2018 to establish thesemiconductor business. This technology will be very important in

SPE Division in order to speed up business operations. We will

the manufacture of semiconductor devices with narrow wiring

find new customers for our electrostatic chucks and shorten

pitches, and we will approach semiconductor production

the lead time for higher profitability.

equipment manufacturers by taking advantage of this technology.

In the industrial ceramics business, we are making a range of
proposals to foster the use of piezoelectric ceramics in medical

Amount of sales planned for electrostatic chucks

devices and in semiconductor and automobile components. We
will also work to expand the application of piezoelectric ceramics
and the application of silicon nitride ceramic balls in machine tools,
EVs and wind turbine bearings.
In the SPE business, we will be faced with difficulties in
FY2019, being affected by the sluggish market for memory andlogic semiconductors. In and after 2020 the market will recover
due to increased demand for semiconductors driven by the spreadof 5G, AI and IoT systems, and the profitability of our electrostatic
chucks will be improved accordingly. In anticipation of an increasein demand for semiconductors, we have been enhancing our

39

NGK SPARK PLUG CO., LTD. Integrated Report 2019

BIDEMICS

2018(Result)

2019(Plan)

2020(Plan)

2021(Plan)NGK SPARK PLUG CO., LTD. Integrated Report 2019

(FY)

40

Business Strategy 2

About NGK SPARK PLUG

Stories for Value Creation

Information

Establishing new business pillars

Pioneering New Fields by the Versatile Power of Technologies
NGK SPARK PLUG has been contributing to the solution of social issues by applying its ceramics technologies
accumulated through the development and production of spark plugs to the development and manufacture of
sensors, cutting tools and semiconductor packages.
We are making use of technologies that we have developed to meet the needs of customers in this era of changes,
which include the spread of next-generation vehicles, extended healthy life expectancy and the advent of asustainable energy-based society.

Contribution in the field ofenvironment andenergySpark plugs, oxygen sensors and other automotive
components account for 80% or more of our sales. We
therefore regard it as one of our management priorities tocreate new businesses for the long-term diversification of
our business portfolio. For the direction of new businesses,
we have been conducting examinations to identify fields
where we can grasp business opportunities by taking
advantage of our strength and can eventually contribute to
the solution of future social issues. As a result, we haveidentified the following three as such fields: environment andenergy, next-generation vehicles and medical treatment.
We have also been fostering collaboration with othercompanies and academia and promoting open innovation
to create new businesses, including founding a Venture Lab

in Silicon Valley in the US in April 2018. We started
investing in startup companies through this base forinnovation, aiming to collaborate closely with these startups
to speed up the launch of new businesses.
We will develop new businesses while steadily making
profits in the existing businesses that will continue to growfor at least a couple of years. We are implementing thisstrategy by the concerted effort of all members of ourworkforce. We aim to achieve sales of 30 billion yen for
new businesses in FY2020 as a medium- to long-termtarget.

New business pillars

Environment and energy

P.45 - 46

Next-generation vehicles

Medical treatment

P.47

P.48

Utilization of venture capital
Investing in venture capitalfunds specializing in
supporting hardware
companies

Matching in fields that havegreat affinities with ourbusinesses

Industrial analysis
Evaluation of venturecompanies
Accumulation of know-how

Development in
Challenges posed by

the medical fieldnext-generation
vehicles41

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201942

Business Strategy 2

About NGK SPARK PLUG

Stories for Value Creation

Information

Establishing new business pillars

Nurturing Corporate Culture that Propels the

Birth of New Businesses

We regard “Establishing new business pillars” as a top priority to be addressed across the company. We are

and what new value can be provided from the company’s involvement in the project?)” We will ask “Why NGK

developing new businesses by taking a four-pronged approach: Search for technological seeds; Collaborate toward

SPARK PLUG?” when identifying a promising project, with an eye to creating new businesses that will eventuallybusiness creation; Conceive a scenario; and Identify promising investment projects. We are looking for new projects

give us a competitive edge.

by attributing importance to “Creating customer value” and “Why NGK SPARK PLUG? (What benefit can be derived

Collaborate towardbusiness creation:

Search for technologicalseeds:In reference to external information gained
about the market, customers, exhibitions,etc., foster collaboration with customers andexternal partners to create new businesses
based on our core competence andthrough innovative partnership.

Develop materials/element technologies tocreate customer value as our mission andthereby gain a source of competitiveness.

Why
NGK SPARK PLUG?

Four-pronged
approac

What benefit can be derived from the company’s
involvement in the project?
We will ask ourselves, “What new value can we offer to society and customers by drawing on not only ourto creating new businesses

technologies but also our global sales network, corporate DNA, and the values and abilities of our people?”

Conceive a
scenario:
Conceive a scenario to help solve
social issues and problems facing
customers, thereby grasping opportunities
to create new businesses. To this end, useboth internal and external resources, giving
priority to meeting the identified needs,
conduct marketing activities based on thebusiness scenario to understand thewhole picture, and refine thescenario using the backcasting
method.

Identify promising
investment projects:
Invest in projects that might bring about
synergy effects for us. Look for potential
partners for new businesses, mainly throughthe venture labs founded in San Jose, Parisand Tokyo and invest in the partners todevelop new businesses.

New possibility discovered by NGK SPARK PLUG (1)as described above. However, we do not limit the target to these and are searching for all possibilities. We are still in thestage of groping for new possibilities, but for fuel cells we are starting to follow a path toward commercialization. In the
medical field we will also proactively foster M&A and collaboration to create a new business pillar.

New possibility discovered by NGK SPARK PLUG (2)Venture Lab

Functional components for 5G systems

We established a Venture Lab in Silicon Valley (San Jose) in the United States in April 2018 as a

The fifth-generation (5G) mobile communication systems offer large capacity, multiple simultaneous connectivity and low latency as theirpartnership development and investment base for new businesses, deeming it important to bypass

features and are expected to be applied in the fields of IoT and autonomous driving, among others. For the communication of large

our independent development policy in order to develop new businesses with speed. Accordingly,

volumes of data, the use of “millimeter waves,” which are in a high frequency band including 28GHz, is being considered and is expected

we set rules to allow our representatives to make decisions on investments without the need toto be a new means to make effective use of frequency resources. On the plus side, millimeter waves can transmit voluminous data. But

have them approved by the Board of Directors, provided the amount to be invested does noton the downside they go in a straight line and are much attenuated (absorbed by obstacles and do not flow smoothly).

exceed 500 million yen. The rules on investments include two items that are to be considered for

In response, we developed a wide-band, high-gain antenna by using our own LTCC material and unique structure. By applying ourmultilayer substrate technology to this, we were also able to help reduce the substrate’s transmission loss.

For new businesses, we target the three fields of environment and energy, next-generation vehicles and medical treatment,

Multilayer LTCC for high-frequency applications

The development of components for 5G systems will rapidly progress toward the full-scale adoption of the systems. By taking

each investment project: “Whether it is interesting or not” and “Why NGK SPARK PLUG?” We
cannot tell how many of the projects in which we have invested will lead to the development of new
businesses, but we will continue to find seeds for new businesses through these projects, andadvantage of the fact that we can independently develop materials technologies, we will foster R&D to be an active player in this new

decide whether to make additional investments in them. We will continue to form capital/businessfield.

partnerships with ventures through the Venture Lab and two other similar facilities opened in Parisand Tokyo in 2019.

* LTCC stands for low-temperature co-fired ceramics.
Antenna

Katagiri Architecture+Design / Kakizoe Architects

Investment projects implemented by the venture lab in San Jose, US

Nanoramic Laboratories:
It develops high-performance, highly heat-resistant capacitors.
We can collaborate with the company by using our packaging technology.

Neural Analytics:
It develops diagnostic equipment that measures cerebral blood flow to diagnose
brain diseases.
We can provide the company with our ultrasonic sensors.

43

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201944

About NGK SPARK PLUG

Business Strategy 2

Stories for Value Creation

Information

Establishing new business pillars

NGK SPARK PLUG × Energy and Environment

Solid-state batteries

We are taking on challenges in the energy and environment field by applying our ceramics technologies. We will
provide society with a better living environment by the power of ceramics.

We have been developing all-solid-state batteries since 2010. For

high-capacity oxide-based solid-state batteries. However, we arethese batteries, solid electrolytes are used, as opposed to thedeveloping oxide-based solid-state batteries that can beliquid electrolytes used in lithium-ion batteries. Because the inside

manufactured without sintering, in order to make large productsof ordinary lithium-ion batteries is filled with this solution, thesemore easily while also developing multilayered products inbatteries are liable to catch fire due to temperature changes, theanticipation of their future use in EVs and electric motorcycles.

liquid might leak out, or the battery pack could swell. In contrast,

We will initially develop these batteries for use in the first halfsolid-state batteries, for which solid electrolytes are used, are veryof the 2020s in devices operated at low temperatures, such as insafe and free from these problems.

cold regions, and in refrigerators/freezers as well as for use in

For solid-state batteries, we are working on the development

Solid Oxide Fuel Cell (SOFC)
We have accumulated technologies for ceramic materials in thedevelopment of oxygen sensors for automobiles. We have also

Planar cell stackplugs. By making use of all these technologies and the know-how

oscillating environments, we aim to participate in niche markets,generate hydrogen sulfide if it accidentally contacts the air, but antargeting use in underground excavators and use in automobiles.

oxide-based one does not pose this risk. Moreover, we can

We will press forward with the development with the expectation

manufacture oxide-based solid-state batteries without thethat the batteries will be used in electric vehicles and electric

sintering process, whereas ordinary oxide-based solid-state

motorcycles as well as in household stationary energy storage

batteries require this process for the bonding of solid electrolytes

systems in and after the second half of the 2020s.

solid electrolytes in the sintering process, cannot be used. It is

Tubular cell stack

we have gained over the course of years, we have been developing

cogeneration systems, thereby expanding our business in the field.

SOFCs since 1999. SOFCs derive hydrogen from utility gas and

In March 2019, four Morimura Group companies (NORITAKE CO.,force a reaction with atmospheric oxygen to produce electricity andLTD., TOTO, NGK INSULATORS and NGK SPARK PLUG)

water. SOFCs are more energy efficient than other fuel cells andconcluded a basic agreement on the establishment of an SOFC-

contribute to reducing CO2 and other greenhouse gas emissions.

related joint venture and started conducting specific examinations.

The cells are therefore expected to be used as one of a range of

The four companies will closely cooperate to make more profits

clean energy sources. The heat generated in the chemical reaction

through the venture and thereby maximize their corporate value.

process can also be used for the supply of hot water. Although the

For tubular SOFCs, we installed a tubular SOFC-micro gas

market size for hydrogen fuel cells is still small, it is expected toturbine combined pressurized hybrid power generation system

substantially expand toward 2030. In particular, the market of(made by Mitsubishi Hitachi Power Systems [MHPS]) within thestationary fuel cells, which we are developing, is predicted to grow

Komaki Plant in April 2017 and have been operating it in

at a stable rate.

demonstration tests. We will collaborate with MHPS to launch atherefore technologically difficult to manufacture large-sized,

Performing the world’s first technological demonstration test of solid-state batteries on the moon
In February 2019 we announced that we would participate in the world’s first commercial lunar exploration program in order to carry out theworld’s first technological demonstration test of solid-state batteries on the moon in 2021. Called “HAKUTO-R,” the program will be implemented
by ispace. On the moon, the temperature drops to 150°C below zero or lower at night and in the shaded areas of the polar zones, while it rises to
100°C or higher during the daytime. Conventional lithium-ion batteries cannot be used on the moon without an auxiliary system to keep thebattery temperature within operational range. We will perform the technological demonstration test of our solid-state batteries now underdevelopment on the moon as part of our response to demand for batteries that can supply electricity safely and stably even in harshenvironments such as space. Through the HAKUTO-R project, we hope to contribute to humankind’s exploration of space as well as further
expand the applications of solid-state batteries.

mass production line for the SOFCs and participate in a range ofcells are highly energy efficient and might also be downsized andmarkets whose customers include industrial users and power

provided at lower cost.

plants. In July 2019 we concluded an agreement with MHPS aboutcommercial and industrial systems in addition to products forfactory infrastructure monitoring devices. For batteries used ina whole. A sulfide-based solid-state battery has the potential toby sintering, and high-capacity electrode materials, which react tobonding) technologies for semiconductor packages and spark

For planar SOFCs, we are developing products for use intemperatures of 100°C or higher. We also assume their use in

the development of which has been advanced by the industry aswith cathode and anode materials. Battery materials are warped

developed manufacturing (multilayering and metal-ceramics

We are developing both planar and tubular SOFCs. Theseelectronic and medical devices that need to be assembled atof oxide-based products, in contrast to sulfide-based products,

the establishment and operation of a joint venture to manufactureand sell fuel cell stacks.

household use and are supplying planar fuel cell stacks to Hitachi

We will make further progress for the practical use and spread

Zosen Corporation for use in its 20 kW-class system

of SOFCs, thereby contributing to the improvement of energy anddemonstration tests. Through these externally conductedenvironmental issues.

demonstration tests, we will have more proven records for the fulllaunch of our products for commercial and industrial use, while
participating in the market of SOFCs used in household

Lead-free piezoelectric ceramics

Market forecast for commercial- and industrial-use fuel cells

Market forecast for household-use fuel cells

Piezoelectric ceramics generate voltage when external force

develop lead-free piezoelectric ceramics and are now(Millions of yen)

(Millions of yen)is applied to them and are used widely in a range of fields,

working to commercialize the products and devices made ofincluding in familiar home appliances and industrial

the ceramics.

600,000

600,000

400,000

400,000

200,000

200,000

equipment. However, conventional piezoelectric ceramics
contain lead at a high concentration, and the

0
■

45

Asia

■

commercialization of lead-free environment-friendly
piezoelectric ceramic materials has long been coveted. In

0

2017

Europe■2018

North America

2019

■

Japan

2020

2025

2030
■

Asia

■

2017

Europe■2018

North America

2019

■

Japan

2020

2025

2030

Source: Future Outlook for Fuel Cell Related Technologies and Market 2018 by Fuji Keizai

Source: Future Outlook for Fuel Cell Related Technologies and Market 2018 by Fuji Keizai* Figures for 2018 are estimates and figures for 2019 and onward are forecasts.

* Figures for 2018 are estimates and figures for 2019 and onward are forecasts.

NGK SPARK PLUG CO., LTD. Integrated Report 2019

response, we made use of our unique technologies to

NGK SPARK PLUG CO., LTD. Integrated Report 201946

About NGK SPARK PLUG

Business Strategy 2

Stories for Value Creation

Information

Establishing new business pillars

NGK SPARK PLUG × Next-Generation Vehicles

NGK SPARK PLUG × Medical Treatment

We successfully developed the industry’s first automotive thermal conductivity hydrogen sensor by using our

We are applying our ceramics technologies to conduct the implant and oxygen concentrator businesses in thetechnologies for automotive oxygen sensors. We will continue meeting the challenges posed by the new age of

medical field.

motorization, mobilizing all our technologies and ideas.

Implant business

In Japan, ahead of other countries, a fuel cell vehicle (FCV) was

provide them with high resistance to vibrations and shocks.

developed for mass production toward the creation of a hydrogenSpecifically, the sensors measure the amount of heat taken byenergy-based society. FCVs are powered by electricity generatedhydrogen from the heater (detection elements), thereby checking

by the chemical reaction between hydrogen and atmospheric

for the existence of hydrogen gas very precisely.

oxygen, and with no CO2 emissions are called the “ultimate eco-

Recently, hydrogen energy has proactively been utilized tocars.” However, hydrogen is flammable and gets more explosive

address the issues of global warming and depletion of fossil fuels,

when its concentration exceeds 4%. For FCVs to run on public

and this global trend is pushing automakers to develop androads as passenger cars, their safety must be completely assured.

popularize clean energy-powered cars. However, for the spread of

By taking advantage of our technologies developed for sensors

FCVs, more technologies need to be developed, infrastructure

including those for automobiles, we successfully developed aestablished, and the cost of FCVs reduced. Accordingly, we musthydrogen leak detection sensor for FCVs. We began selling thelower the prices of our hydrogen leak detection sensors to be usedproduct, which could detect even a minor leak of hydrogen, in

as a small component for automobiles. We will develop cost-

2016.

competitive sensors, while making use of the advantages provided

Hydrogen leak detection sensors are used to detect any

In the implant business we have developed bioceramics since theIn April 2016 we concluded a capital and business partnershiplatter half of the 1970s. We began the manufacture and sale of theagreement with Japan MDM, Inc., which has a subsidiary in thebone prosthesis Ceratite® in the 1990s. Presently we also

US, with an eye to expanding our business globally.

manufacture and sell the paste bone prosthesis Cerapaste® as well

We will expand our product lineup in the medical domain toas the absorbable and replaceable artificial bone Cerarebone®.

include orthopedic implant products in addition to artificial bones,

They contain calcium phosphate as the main ingredient and havethereby achieving further growth in the business field.

great affinity with bones.

Oxygen concentrator businessby the “thermal conductive” method.
We will further improve our hydrogen leak detection sensors inminor leak of hydrogen from the hydrogen tanks, stacks and otherfuel cell system components, to warn drivers against the risk ofanticipation of the mass production of FCVs, thereby contributing to

explosion, and to stop the supply of hydrogen to the fuel cells. Our

the creation of a hydrogen-based society.

hydrogen leak detection sensors are not easily deteriorated overtime because they do not rely on chemical reactions to detectleaks. We have adopted the “thermal conductive” detection
method to make the sensors start up and respond quickly and to

In Japan in 1999, we began manufacturing and selling oxygen

Japan to the development of new products by CAIRE, thereby

concentrators for patients with chronic respiratory diseases who

providing patients across the world with high-quality oxygen

were receiving oxygen therapy.

concentrators.

In December 2018 we acquired the shares of CAIRE, which

In the future we will develop new products by using ourdeals with oxygen concentrators as a Chart Group company in thesensing technology and expand the business of products for the

US. We have manufactured and sold stationary oxygen

treatment of respiratory systems, including not only oxygen

concentrators, whereas CAIRE has a full product lineup, including

concentrators but also asthma detection systems.

portable, movable and stationary types. The acquisition of thiscompany will thus help us expand our product portfolio. In
particular, there are great needs for movable and portable types

Thermal conductivity of major gases

among medical facilities and patients, and the market is expected
to grow further. We aim to build a global value chain, from
Hydrogen leak detection sensor

development and production through to sales, by using CAIRE. We
will also apply the technologies developed for our products sold in

Oxygen (O2)Can
detect ahydrogen leak withhigh sensitivity, and theability will not weakenover time due to theadoption of thethermal conductive
methodWill
immediately
stop the fuelsupply when ahydrogen leak isdetected

Hydrogen leakdetection sensor

Motor

Portable oxygen
concentrator

H2

Hydrogen leakdetection sensor
Hydrogen(H2) tank

Fuel cell

0

H2O

47

Providing a full lineup of oxygen concentrators to enhance the product portfolio

HydrogenstationNGK SPARK PLUG CO., LTD. Integrated Report 2019

■

H2

50
■

N2

■

O2

■

CO2

100
■

CO

■

NO

150
■

Air

■

H2O

Movable oxygen
concentrator

Stationary oxygen
concentrators

Apply our technologies to thedevelopment of new products
by CAIRE, thereby improving
the product quality

200

Thermal conductivity (mW/m・K)

NGK SPARK PLUG CO., LTD. Integrated Report 201948

About NGK SPARK PLUG

Business Strategy 3

Stories for Value Creation

Information

Establishing strong business infrastructure

Enhancement of Human Resources

Establishing Strong Infrastructure to
Support Businesses
In order to “strengthen current businesses” and “establish new business pillars,” it is critical to “establish strong business
infrastructure.” To this end, we will execute business with a sense of urgency and from the viewpoint of global total optimization,utilize human resources in a fair and global manner, clarify responsibilities and authorities, and restructure the organization toenhance the business supervisory functions across the board.

Develop the next generation of global managerial human resources
Formulate a professional education system and training programs

ExistingNewbusinesses businesses
P.33 -

Targets for FY2020

Define the competencies that contribute to the implementation of strategies andincorporate the definitions into the personnel evaluation criteria

P.41 -

Assign human resources for total optimization
Promotion of foreign nationals to the position of corporate officer

Activities in FY2018

Development of global business leaders through the HAGI Program
Organization of meetings of the Human Resources Committee
Launch of an internal application system

Establishment
of Systems
Enhancementof HumanResources

P.55 -

Basic philosophy on human resources

Enhancement ofOrganizations

P.50 -

P.53 -

We uphold a human resource policy that states: “We acknowledge

human beings, striving to promote the further development of ourthat employees are the most important management resource. In

Group as a whole.” Moreover, we set down our aspiration to be alight of this, we respect the diversity and individuality of our employ-human “asset” company in “Our Ideal Image in the Year 2020.”

ees and promote the cultivation of physically and mentally healthy

Development of human resources

Shift from administrative human resource management to strategic
human resource management

Our human resource department engaged in “administrative

Develop the next generation of global managerial human resources

Restructure global organizations (to establish regional headquarters)

Formulate a professional education system and training programs

Break up the business headquarters into nine divisions for speedier

Define the competencies that contribute to the implementation ofmanagement

strategies and incorporate the definitions into the personnel

Establish a corporate strategy headquarters to enhance theevaluation criteria

corporate functions as well as a “Working Styles Reforming Office”

Assign human resources for total optimization

to foster operational reforms

To achieve “Our Ideal Image,” we need to foster a “fairhuman resource management” for 80 years, during which time

corporate culture that allows diverse personnel to shine,”

the company conducted existing businesses in a robust manner.

“frameworks to enable autonomy, challenge and growth” andHowever, in view of the need to deal with recent changes in the“high professionalism and love for the company.” Accordingly, we

external environment and with the internal need to expand theregard “personnel development and organizational invigoration toexisting businesses and create new businesses, “administrative

maximize performance” as a mission of the Strategic Human

human resource management” hit its limits, and we decided to

Resources Dept. under the human resource policy. This

shift to “strategic human resource management.” Accordingly, we

department is promoting measures in line with the basic policy oflaunched the Strategic Human Resources Dept. in April 2017 as“Observe, develop and motivate human resources,” aiming toan organization to lead strategic human resource management,

become an HR specialist organization that can implement themainly through the personnel system. Since April 2018, thehuman resource strategies in an integrated manner with thedepartment has been shifting to “strategic human resource

management and business strategies.

Enhance the abilities to propose strategies and manage portfolios

management” in terms of all its functions, including employment,

Build a global SCM system and make it function

development, assignment and treatment of human resources.

Enhance the technological abilities for skillful, speedy and low-cost manufacturing

49

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201950

About NGK SPARK PLUG

Business Strategy 3

Information

Stories for Value Creation

Establishing strong business infrastructure

Effort to “observe human resources”: Human Resources Committee

Diversity

Ongoing effort to promote empowerment of women

In order to “observe and motivate human resources,” we are working

Moreover, since FY2018 the Human Resources Committee has been

In 2013, as our first step toward diversity promotion, we embarked on

Proportion of female employeeson the visualization of our personnel. For candidates for future

holding a monthly meeting to discuss the assignment of employees tocreating workplaces across the company where women could display（％）

business leaders, we have established a database (called “humancore positions with directors. We are thereby motivating human

more of their abilities. Since then we have been working to change theasset bank”) of information about their career, skills, attitude to work

resources for total optimization.

mindset of both managers and female employees themselves,

and willpower, thereby deepening our grasp of our human resources.

regarding the empowerment of women as a driver for the reform of

8

6.68
6

our corporate culture. As part of this effort we implemented the
DIAMOND Project in line with the action guidelines “change the360-degree survey
In FY2018 we conducted a 360-degree survey targeting both executives and general managers. The survey has revealed the need for theseleaders to enhance their progressiveness, but the level of their engagement in the company is high and they are strongly committed to
Monozukuri according to the survey results. The results were fed back to the leaders to encourage them to “observe human resources,”
including themselves.

excellence in the empowerment of women. Moreover, we proactively
introduced systems for shorter working hours and working at home,

2.68

2.81

0.66

0.81

2.68

2.49

1.07

1.24

2015

2016

2017

Section Chiefs

Managers

2

years. The number of female managers was tripled over the period,
and we were also selected to be a Nadeshiko Brand company for our

5.87

4

culture,” “change the mindset” and “change the environment” andreached a milestone in the project in 2017 after implementing it for five

5.54

4.91

7.20

0

2014
Generalists

2.28
1.52
2018

(FY)

which helped change the mindset of the entire company. We will

Interviews with young employees
For young employees, in FY2018 the Strategic Human Resources Dept. began interviewing a total of 253 employees in their first to thirdyear at the company. This is part of our efforts to “observe human resources,” and the interviews indeed help us understand the issues
faced by young employees after they join the company. The job turnover rate for young workers is generally high, and we aim to listen to thefrank opinions of young employees through the third-party interview, conducted not by their managers but by the Strategic Human
Resources Dept. We will also establish a contact point to support their career development, through which we will continue to listen to theiropinions and “observe” them.

continue to foster the empowerment of women under the leadershipof the Diversity Promotion Section, which was newly established within
the Strategic Human Resources Dept.

External commendation for the empowerment of women
Selected to be a Nadeshiko Brand company (for FY2018)
Certified by Aichi Prefecture as an “Aichi Josei Kagayaki Company” (Company Supporting Aichi
Women’s Career Success) (for FY2018)

Development of the next generation of global managerial human resources

Included in “New Diversity Management Selection 100” by the Ministry of Economy, Trade andIndustry (for FY2017)

In response to the global expansion of our business, we have been

Granted the 2015 Japan Productivity Center Incentive Award, Empowerment Grand Prix for
Activities by Women
Received the 2014 Excellence Award, Nagoya City Accreditation and Commendation System for
Companies that Promoted Increased Roles for Women

implementing a program to develop global managerial humanresources (“HAGI Program”) for all Group companies since 2016.
Through this program we work to employ and promote people
regardless of their nationality and provide individual employees with

Launch of the Platinum Project

opportunities and workplaces where they can demonstrate theirabilities. For deep learning, Chairman Odo serves as the“headmaster” in the program and discusses the topic of desirable
leadership with participants, who are candidates to become futurebusiness leaders.

With the aging of society and falling birthrate, a labor shortage isthe platinum generation, with workplaces where they can choose thepredicted as the working population diminishes while the elderly

right career for themselves, enhance their expertise and skills, andpopulation grows. There are also issues affecting older people,

continue to make a meaningful contribution. Specifically, we areincluding the raising of the pension age and difficulties in securing

implementing measures to help them to develop a future vision, makeemployment. Deeming it important to help older workers continue to

use of their individual abilities, and continue to shine in their careers.

demonstrate their abilities by putting their long-accumulated
knowledge, skills and know-how to use, we introduced a postretirement reemployment system in 2001 to provide retirees with
opportunities to work longer.

Launch of regional human resource development programs
Toward the development of global human resources, we also began implementing human resource development programs in North America,
Europe, Asia and other regions. These programs are held about four times a year to develop future business leaders. In FY2018, 16 people
participated in the program launched in North America and 12 in the program held in Asia.

In FY2018 we also launched the Platinum Project as a new reform

Total number of employees using the reemployment system(Persons)

300

initiative, targeting employees in their late 50s and 60s as the“platinum generation.” Presently those aged 55 and older account for
about 10% of the total number of our regular employees and the rate

228

229

2014

2015

251
223

200

204

will rise to about 20% in 10 years. As our business structure reform is
progressing, we think it is essential to help experienced employees
hone their abilities and raise their motivation to contribute to the100

company’s new businesses.
Moreover, we are working to provide all employees, not limited to51

NGK SPARK PLUG CO., LTD. Integrated Report 2019

0

2016

2017

2018

(FY)

NGK SPARK PLUG CO., LTD. Integrated Report 201952

Business Strategy 3

About NGK SPARK PLUG

Stories for Value Creation

Information

Establishing strong business infrastructure

Enhancement of Organizations

Permeation of shared values
We need to expand our business scope to new domains as ourand “Soshi-Kantetsu.” We are promoting the awareness andgreatest challenge, and think it is necessary to share values

permeation of The Nittoku Way among members of the Group,

across the Group toward this goal. In April 2017 we therefore

including employees outside Japan, through measures including

set out “The Nittoku Way – The Nittoku Group’s Shared Values,”

training for managers.

comprised of “Shisei-Shinjitsu,” “Dokuritsu-Jiei,” “Shikai-Keitei”* For how The Nittoku Way is positioned by the company, please see p.4.

The Nittoku Way – The Nittoku Group’s Shared Values

Restructure global organizations (to establish regional headquarters)

Shisei-Shinjitsu

Dokuritsu-Jiei

Shikai-Keitei

Soshi-Kantetsu

Sincerely, do our very best

Believe in one’s own ability,
and take actions by oneself

Unite efforts with the people of theworld, and utilize eachother’s differences

Have cherished desire,and carry it through till the end

Break up the business headquarters into nine divisions for speedier management
Restructured earlier than planned on April 1, 2016

Targets for FY2020

Establish a corporate strategy headquarters to enhance the corporate functions as well as a“Working Styles Reforming Office” to foster operational reforms
Since April 1, 2019, the Strategic Human Resources Dept. has been conducting work style

Promotion of work style reforms

reform activities.

More empowerment of the RHQ

Activities in FY2018

Promotion of work style reforms

Permeation of shared values

We began implementing measures for work style reforms on a

Human Resources Dept. By making work style reforms more

Improvement of management quality

company-wide basis in 2015 and established the Working

closely linked with the human resource strategies, we will foster

Styles Reforming Office in 2016.

human resource development and organizational revitalization.

The work style reform initiatives implemented in and before

More empowerment of the RHQ

FY2018 include raising the productivity of back-office
operations to add more value to them and fostering work at

In response to the globalization of our business environment, we worked

make decisions on investment and financial issues, except for thoseto build regional headquarters (RHQ) in each of the Americas, EMEA andfor which resolutions by the Board of Directors are needed.

Asia to make managerial decisions for their regions at locations nearer to

For personnel affairs, we clarified the rules to allow the RHQ toemploy people locally at their own discretion, excluding thethem in a precise and speedy manner.
In the aftermarket business, in which we had already fosteredemployment of executives. Since April 1, 2019, two locally employed

localization, we clarified the authorities and responsibilities of the headmembers have been serving as corporate officers to supervise

office and regional bases following the adoption of the RHQ system.

business in each of the EMEA and PAMA regions and this is one

We are also transferring corporate authorities from the head office tooutcome of the transfer of authorities to the RHQ. As the next step,

the RHQ for speedier managerial decision-making.

we will enhance our global governance.

home and the use of rental offices across the company as a
new effort. To increase the productivity of back-office
operations, we introduced unique “work style reform indicators”
to the related departments, which can now compare their own
productivity with that of others based on indicators for changes
in the amount of work concerning new tasks and rationalized
operations. We aim to increase productivity by 20% in FY2020,
the final year of the medium-term management plan, relative toFY2015, when the plan was made. This fiscal year, we
integrated the Working Styles Reforming Office into the Strategic

In FY2018 we expanded the scope of authorities given to the

Rental office named “WORK STYLING” provided by Mitsui Fudosan Co., Ltd.

RHQ to include authorities on investment and financial affairs, which
had not previously been granted to them, thereby allowing the RHQ to

For genuine work style reforms
Decision-making structure for the GHQ, RHQ and local companie(example: EMEA region)

Our work style reforms used to be operational reforms, and in FY2019 we began making examinations for “genuine work style reforms.” At
present we define “genuine work style reforms” as those that lead to higher productivity of individuals, for which we deem it necessary toenhance the three elements: willingness to work (motivation and comfortable workplaces); ability (knowledge and experience); andmethodology (management by objectives and by time). To meet this requirement, we have begun conducting examinations.

GHQ (NGK SPARK PLUG)
Supremedecisionmaking body

RHQ Steering BoardNGK SPARK PLUGEUROPENGK SPARK PLUGS(UK)NGK SPARK PLUGS(FRANCE)

LLC NGK SPARK PLUGS(EURASIA)NGK SPARK PLUG
MIDDLE EASTNGK SPARK PLUGSSA

Local companies: Six Group companies located in the EMEA region

53

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201954

Business Strategy 3

About NGK SPARK PLUG

Stories for Value Creation

Information

Establishing strong business infrastructure

Establishment of Systems

Building of an IT system optimal for the entire company
The business environment surrounding companies is rapidly

perspective of management and user departments and build

changing, due to the emergence of AI and IoT technologies

and operate optimized IT platforms to support decision-making

and the rapid spread of robotic process automation (RPA) andon management, business and functions, thereby contributing

other new ICT systems among companies. We regard it as one

to the sustainable growth of the company.”of our top priorities to make use of new digital technologies tocreate new value.

The Information Systems Dept. will support the Group’s
effort to increase its corporate value in terms of IT, attributing

Under the current medium-term management plan, we arebuilding IT systems optimal for the entire company under theimportance to keeping a balance between “new” and “existing”
domains and between “offensive” and “defensive” measures.

leadership of the Information Systems Dept., which aims to“make proposals for the proactive use of information from theActivity targets for the final year of the medium-term plan

Build an IT system to proactively lead and contribute to the business of the company
Enhance the abilities to propose strategies and manage portfolios

Targets for FY2020

Build a global SCM system and make it function
Enhance technological abilities for high-quality and speedy manufacturing

Four actions to be taken to attain the targets
Improvement of
global governance

Strategic IT investment

Building of a global SCM system and appropriate management of logistic operations

Activities in FY2018

Building of an IT system optimal for the entire company

Effective use ofadvanced technologies●

Build a foundation to visualize
business●

Visualize IT-related investments andcosts for strategic IT investment●

Understand the trends of IoT and AI
technologies●

Improve the core operational system●

Improve the IT infrastructure on a
global scale

Promote global governance for higher
security●●

Make investments based on theunderstanding of the trends

Organizational reform●

Transform the Information Systems
Dept. into a contributor to
management●

Develop IT human resources

Establishment of production technologies for high-quality and speedy manufacturing

Interrelations of the four actions

Building of a global SCM system and appropriate management of logistic operations

New domain
Effective use of advanced technologies

Overseas sales account for more than 84% of our net sales, and ourhigh-quality logistic operations to deliver items to the places where

overseas production rate has also been increasing recently, driven by

they are needed in a timely manner. In particular, we will standardize

increased production in emerging markets. We now have 45 bases

the shipment operations for our distribution warehouses locatedoverseas, in 21 countries and regions. As production at our overseas

across regions, in order to ensure the safety, security and quality of thebases increased, we were increasingly faced with the need to enhance

operations. We also send auditors from the head office to the

our supply chain control functions. Accordingly, we established the

distribution bases to check whether they are operated according to

SCM Div. in the first year of the medium-term management plan tothe designed standards and whether there is a room for higher

build a global supply chain system toward profit maximization.

efficiency. For the audit, we have set the KPIs for the execution of the

As the speed of globalization increases, the SCM Div. needs toplay the important roles of (1) designing and overseeing the supply

Toward higher operational efficiency and higher quality, we havebegun preparations to introduce a logistics system equipped with

For the optimization of the entire supply chain, we are working to build

leading-edge AI and IoT devices. We will enhance the functions ofa system to visualize and centrally manage our global inventory andthe SCM Div. to deal with existing businesses and to respond to

striving to collect more detailed information about each base’schanges in the business portfolio, with an eye to building moreproduction, sales plans and inventory in a timely manner. We arerobust business infrastructure for the future of the Group.

level and increase our working capital efficiency. Both the SCM Div.
and all business departments are cooperating to this end.
For the management of the entire supply chain, we will clarify theauthorities and responsibilities of individual bases, including ouroverseas subsidiaries, thereby enhancing the supply chain functions of
the entire NGK SPARK PLUG Group. We have also started to
implement measures to reduce the logistics cost and to maintain55

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Improvement of global governance

Strategic IT investment“Offensive”
IT project implementation

Organizational reform
Existing domain

PDCA cycle.

chain for total optimization; and (2) managing the entire supply chain.

concurrently reviewing our inventory to reduce it to an appropriate“Defensive”
IT system improvement

Establishment of production technologies for high-quality and speedy manufacturing
In order to increase our business competitiveness, we list the

departments for higher efficiency and better IT infrastructure,sophistication of “production design” as one of the important

while also rationalizing the production processes andstrategic items in the medium-term management plan. To

reassigning the saved resources in the personnel andspeed up manufacturing to meet the market demand, we try

production plans.

everything, including designing equipment layout andAs a precondition to transfer production overseas, it istransportation routes as well as optimizing inter-process

critical to establish a technical system for global production. To

transportation and process outsourcing, with a focus on

this end we will enhance governance both in Japan and abroad

reducing our production lead time. Moreover, we are improving

while employing and developing professionals who haveour planning and designing ability to minimize the life cycle

expertise in production technologies and can take a broad view

cost of our plants and equipment for the enhancement of thefor the manufacture of high-quality products.

facilities. We are also increasing our plant productivity byintegrating the functions dispersed among different

NGK SPARK PLUG CO., LTD. Integrated Report 201956

About NGK SPARK PLUG

Environment

Information

Stories for Value Creation

Environment

Basic Philosophy

Material Balance

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

Environmental burdens from business activities ( Fiscal year ended March 31, 2019 )Used in offices and plants

19.64 million m

◯

◯

◯

◯

◯

◯

◯

◯

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

7,595 tons

◯

◯

◯

1,102 kL[crude oil equivalent]

Regional environmental
administrator

Head of the division

Head of the working group

Environmental Committee

Divisions

Working groups

Divisions include the Groups
established at the
Headquarters.

The working groups conduct
cross-divisional activities, suchas examining and conducting
professional surveys andmeasures for energy
conservation and chemical
substances.

Each region
Note: “Each region” refers to the
Headquarters Region,
Komaki Region, Miyanojo
Region, Ise Region, andGroup companies in Japan.

Environmental action plan
Major item

Globalwarming

Minor item

Production

Logistics
Waste

Depletion of
resources

Water

Targets for FY2020
Reduce per-unit CO2 emissions by 15% relative to FY2015** We upwardly revised the target on April 1, 2018.

Reduce defective products to reduce waste

Decreased waste by reducing defective products in each process.
Supported product design by using simulation/evaluation technologies.

Design products in consideration of the saving of raw
Raw materials
materials

Environmentallyfriendly products

Hazardous
chemical
substances

57

Target: Reduce per-unit CO2 emissions by 11.0% relative to FY2015
Result: Reduced the emissions by 10.8% relative to FY2015
We continued to conduct cross-departmental activities under the leadership of the energy conservation working group.
Increased the efficiency of various logistics activities.

Use water more efficiently

Reduced the use of water by reviewing the variety of products to be manufactured.
Saved the use of resources by improving the production processes.
Developed process technology to contribute to the reduction of environmental burdens.

—

Build an environment-friendly product certification systemand expand 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 took necessary measures forregulations under the leadership of the chemical substances management working
group.

—

Foster the replacement of substances of concern with substitutes

Replaced phthalic acid, which will be prohibited by RoHS in 2019, with a substitute.

—Totally discontinue the use of HCFCs

Continued the replacement of air conditioners in which fluorocarbon R22 was used as arefrigerant.

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Chemical substances (PRTR)

Energy-based and non-energy-based
Green House Gas Emissions

Research,
Design,Manufacturing,Sales

325,700 tons-CO

◯

◯

◯

◯

◯

◯

◯

◯

◯

◯

◯ *4

2

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

133 tons◯◯◯

Waste generated(and treated on commission)

Total

Renewable energy
Generated by solar power generators andsmall hydroelectric generators

576 MWh◯◯◯

Products

20,103 tons

Effectively used(including waste sold)18,262 tons◯

Not effectively used

Tap water, well water
Tap water and groundwater used

1,540,000 m◯◯

1,840 tons◯

3

Results for FY2018

Increase efficiency for logistics

Design products in consideration of waste reduction

1,540,000 m

Green house gas emissions

Logistics

PRTR
Handled and notified by sites

923 tons

Fuels used for transportation(outsourced)
Fuels used for transportation bytrucks, ships, and aircraft

1,031 kL[crude oil equivalent]◯◯

Logistics

Environmental
ISO
BureauUsed in offices and plants and for testing,travel and transportation

Chemical substancesInternal
Environmental
Auditor◯Other fuels

Logistics

Chief Central Environmental Administrator◯

3

0.6 tons

Output into air

EnergyLPG

Released into sewerage systems and public
waters; consumption volume of tap water andwell water.

Released into waters and notifiedby sites

Waste

Central Environmental Committee

Suppliers

3

Water

Central Environmental Committee Chairman

Overseascompanies *3

City gas◯

Environmental activity promotion organizations
CSR CommitteeGroup
companies
in Japan *2

466,878 MWh

Environmental Administrator (President)

NGK SPARK
PLUG

Overseascompanies *3

NGK SPARK
PLUG

55,000 tons

Global Eco Vision 2020◯

Wastewater

Ceramic andmetal materials purchased

Used in offices and plants

environment-friendly products),” under Global Eco
Vision 2020. By tackling these tasks through ourbusiness activities and on a foundation of “Education(raising consciousness of the environment),”“Compliance,” and “Open communication” we will work
to enhance our manufacturing power, increase ourbrand value, and contribute to not only the sustainable
development of our company, but of society, also.

OUTPUT

Ceramic and metal materials

Electricity

In our activities for environmental conservation, we set
medium-term environmental targets. From the fiscal
year ended March 31, 2017, we have drawn up a vision
for our company and implemented activities under
Global Eco Vision 2020.
We set four important environmental tasks, “Natural
resources,” “Global warming,” “Toxic, hazardous
chemicals” and “Key quality (development of

Scope covered *1

Output into waters

Raw materials

INPUT

Group
companies
in Japan *2

Scope covered *1CO2 emitted by external transporters
CO2 emissions due to externallycommissioned transportation

2,742 tons-CO

2

Product shipment◯◯
Customers

Customers*1 The covered scope of each amount reported in INPUT and OUTPUT is indicated with ○.
*2 Domestic group companies: (scope of consolidated certification) NITTOKU ALFA SERVICE CO., LTD., CERAMIC SENSOR CO., LTD., NTK CERAMIC CO., LTD., CERAMIC SENSOR NAKATSUGAWA CO.,LTD., NANSEI CERAMIC CO., LTD., KAMIOKA CERAMIC
CO., LTD., Spark Tec WKS CO., LTD., NICHIWA KIKI CO., LTD., Spark Tech TONO CO., LTD., (outside the scope of consolidated certification) NITTOKU Smile NITTOKU DENSHI CO., LTD., NTK CERATEC CO., LTD.
*3 Overseas group companies: (manufacturing & sales organization) 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, (sales organization) TAIWAN NGK SPARK PLUG CO., LTD., NGK SPARK PLUGS (VIETNAM) CO., LTD., NGKSPARK 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., BUJIAS NGK DEL ECUADOR CIA LTDA., NGK SPARK PLUG EUROPE
GmbH, NGK SPARK PLUGS (UK) LTD., LIMITED LIABILITY COMPANY NGK SPARK PLUGS (EURASIA), NGK SPARK PLUG MIDDLE EAST FZE*4 Overseas companies only collect results of CO2 emissins

NGK SPARK PLUG CO., LTD. Integrated Report 201958

About NGK SPARK PLUG

Information

Stories for Value Creation

Environment

Reducing CO2 Emissions

Promotion of Waste Reduction and Resulting Effects

NGK SPARK PLUG Group set its per-unit CO2 emissions target
in its Global Eco Vision 2020 as part of its effort to contribute toyen).

while also implementing new initiatives such as reusing waste

the generation of waste by improving the manufacturing

the mitigation of climate change on a medium- to long-termwith our CO2 emissions totaling 330,000 tons and per-unit CO2

process and promoting the recycling of generated waste.

basis. To attain this target, we have been working to reduce ouremissions amounting to 1.15 tons per 1 million yen, mainly

For FY2018, the amount of waste generated totaledenergy use.

because our energy use increased due to preparations made20,103 tons and per-unit waste generation came to 0.050 ton

for the launch of new equipment.

per 1 million yen, up 5.6% year on year due to an increase in

We were able to achieve the per-unit emissions target set
for FY2020 in FY2017, earlier than planned, and so reset it as a

We will continue our efforts to reduce our emissions andmore ambitious target, which is to reduce per-unit CO2

attain the targets set in Global Eco Vision 2020.

emissions by 15% relative to FY2015 (1.10 tons per 1 million* Target for the calculation of per-unit CO 2 emissions: Group companies in Japan(for integrated certification)

Waste output
Output (tons)

40

30

27.61

20,000

28.63

3.28

6.06

5.37
1.29

5.04
1.51

3.69
1.29

32.57

Africa

1.2%

1.36

Asia

20

36.1%
24.33

23.65

24.63

24.82

25.15

10

Regional
composition ofemissionsoutside Japan

Europe

2015

2016

2017

2018 (Fiscal year)

Groups in Japan (without integrated certification)

18,427

15,00019,756
17,552

19,031

7,065

6,453

697

595

Africa

7,966

7,305

6,134

10,00020,103

667

773

25.4%

Regional
composition of
outputsoutside Japan

Asia

34.9%

5,000

11,974

10,823

11,993

10,953

11,469EuropeSouth
America

5.1%

33.2%

0

2014

Outside Japan

North America

1.4%

34.7%

19.8%

0

2014

For purchased electricity,
the CO2 emission
coefficient set for eachcountry under the GHG
Protocol is used, while forNorth fuel, the same
America coefficients as thoseused in Japan are used.

South
America

8.2%Groups in Japan (with integrated certification)(for integrated certification)

processes.

CO2 emissions (10,000 tons-CO2)

31.48

oil.
* Target for the calculation of per-unit waste generation: Group companies in Japanthe amount of waste generated in our manufacturing

CO2 emissions from energy use

31.17

We will continue to make improvements on the processes

NGK SPARK PLUG Group contributes to society by reducing
For FY2018, we were unable to attain the annual target,

2015

Groups in Japan (with integrated certification)

2016

2017

Groups in Japan (without integrated certification)2018 (Fiscal year)
Outside Japan

Promotion of Efficient Use of Water and Resulting Effects

Hazardous Chemical Substances

NGK SPARK PLUG Group is promoting the efficient use ofuse was 5.19 m3 per 1 million yen. The use of water decreased

To ensure compliance with chemical substance regulations, which

Release of substances regulated by the PRTR law

water resources, such as tap water and well water, used for its

by 5.6% year on year due to factors including the consolidation

have been getting stricter every year on a global basis, we control(Tons)

business activities, thereby contributing to the solution of issuesof production bases.

the use of regulated substances in our products and manage therelated to water resources.

We will review our operations and take other measures to

For FY2018, the total volume of tap water and well waterused by the Group came to 1.54 million m and per-unit water3* Target for the calculation of per-unit water use: Group companies in Japan (forintegrated certification)

28
4

163
38

38

5

Africa

154
4

100

130

124

120

North America

0.5%
36
5

Asia

59.6%
136

113

5.9%

Regional
composition ofusage
outside Japan

South America

32.0%

7.8
3.1

136

7.2
3.2

132

8.6
2.9

80

140

131

130

121

126

40

0

At our plants, we are working to ensure the appropriate
management of chemical substances by identifying the amounttreated, released and transferred for the substances regulated

2014■

Toluene■Xylene

2015
■

2016

2017

2018

(FY)

Othersby the PRTR law.
We will promote the use of substitutes for hazardous

Europe1.9%chemical substances and enhance their management to ensure
legal compliance and to meet the requirements of customers.
* Group companies in Japan (for integrated certification)

0

2014

2015

Groups in Japan (with integrated certification)

59

141

ask them not to use them in their products to be delivered to us.

166

162
26

50

regulations and the level of hazardousness and set the handling

products in our green procurement guidelines for suppliers and

200

6.3
3.2

different hazard ranks according to the strictness of the relevant

chemical substances that should not be contained in our

Volume used (10,000m )

141

3.5
3.9

120

criteria for each of the ranks. We also list the hazardous

3

162

148

use of these substances at our plants.
We have classified hazardous chemical substances into

make more efficient use of water.

Tap water/well water usage

150

160

2016

2017

Groups in Japan (without integrated certification)

NGK SPARK PLUG CO., LTD. Integrated Report 20192018 (Fiscal year)
Outside JapanNGK SPARK PLUG CO., LTD. Integrated Report 201960

Corporate Governance

About NGK SPARK PLUG

Stories for Value Creation

Information

Corporate Governance System
Corporate Governance System Chart (as of June 25, 2019)

General meeting of shareholders

1 Board of Directors
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
for deliberation and determination with respect toissues as prescribed in applicable laws and regulations
or articles of incorporation as well as other key
managerial issues, and also for supervision ofbusiness execution status in response to reports
from the directors.

3 Nomination Committee
Appointment/
dismissal

31Nomination
Committe

Submitting a report

Appointment/dismissal

2

Board ofDirectors

Audit(including outside directors)

Audit &
Supervisory Board(including outside auditors)

Appointment/dismissal/
supervision

Consultation

Mutualcooperation

4 Remuneration

In April 2017, we established the Nomination Committee
as an advisory body of the Board of Directors, whichmainly consists of independent external directors, with the
purpose of ensuring the transparency and rationality innominating director candidates.
Based on the consultation from the Board of
Directors, the Nomination Committee deliberates on bills of
appointment of directors and auditors that will be
submitted to the general meeting of shareholders, and theevaluation of corporate performance and the evaluation of
the management based on it, etc., and reports the resultsof deliberation to the Board of Directors.

Committee

2 Audit & Supervisory Board

5

Audit & Supervisory Board is composed of four
auditors, two of which are outside auditors.
Two full-time auditors serve to audit executionof duties by the directors through attendance ofmeetings of Board of Directors, Management
Meetings and other important meetings, throughregular opinion exchange with Directors andCorporate Officers, and through auditing of major
offices and subsidiaries. Meanwhile, the outside
auditors mainly attend Board of Directors meetings
and receive a report of the auditing results from thefull-time auditors at Audit & Supervisory Board
meetings. They also express their own audit
opinions by providing views based on theirexpertise and useful information within and outsideof the company.

Corporate
Management
Committee

Independent auditors

4 Remuneration Committee

President and CEO

Submitting a report

6

Corporate
Officers’ Meeting

Mutual cooperation

Corporate Officers

Instruction

Internal
Auditing OfficeInstruction
Audit

Internal

OutsideBusiness Operating Section/Group Companies

5 Corporate Management Committee
Various Conferences and Committees(CSR Committee, etc.)

Members of Nomination/Remuneration Committees
Directors

FY2019Name

Auditors

FY2019Remuneration Committee

Shinichi Odo〇〇

Yasuhiko Hotta

Takeshi Kawai

Name

〇

〇

Yoshihiro Matsubara

Nomination Committee

Remuneration Committee

Toru Matsui

Fumiko Nagatomi〇〇

Mikihiko Kato

Akihiko Minato〇〇

Kenji Isobe
Hiroyuki Maeda

61

Basic information

Nomination Committee

Takio Kojima

Morihiko Otaki〇〇

Kanemaru Yasui〇〇

Mackenzie Donald Clugston〇〇

NGK SPARK PLUG CO., LTD. Integrated Report 2019

In April 2017, we established the Remuneration Committee
as an advisory body of the Board of Directors, whichmainly consists of independent external directors, with the
purpose of ensuring the transparency and rationality indeciding directors’ remuneration.
Based on the consultation from the Board of
Directors, the Remuneration Committee deliberates
on the rationality of the policy, procedures andsystem content for directors’ remuneration as wellas the rationality of each director’s remuneration
plan, and reports the deliberation results to theBoard of Directors.

As of June 25, 2019

Legal systems

Company with a boardof corporate auditors

No. of directors

10

Of which, No. of outside directors

3

Term of directors

1 yearNo. of auditors

4

Of which, No. of independent outside directors

2

Independent auditors

KPMG AZSA LLC

We hold Management Meetings composed of directors
regularly once a month for discussion and pre-grasping
about business challenges to be addressed, and any
possible risk that involves our company for enhancing
the system that can be flexible adoptable to change inthe managerial environment.

6 Corporate Officers’ Meeting
We have introduced Corporate Officer framework, andthe Board of Directors nominates corporate officers
under their resolution. Corporate Officers’ Meetings areheld once a month for sharing information andexchanging opinions in a cross-sectional way forenhancing the system that can grasp the situation
quickly and respond to change in the environment.

NGK SPARK PLUG CO., LTD. Integrated Report 201962

About NGK SPARK PLUG

Stories for Value Creation

Information

Corporate GovernanceManagement System
Directors (As of June 25, 2019)

Outside Directors (As of June 25, 2019)

Representative Director and Chairmanof the Board

President & Chief Operating Officer
In charge of all Divisions

Shinichi Odo

Takeshi Kawai

April 1977
February 2003
July 2005
June 2007
June 2010
June 2011
April 2012
April 2016
April 2019

Joined our company
General Manager, Overseas Aftermarket Dept., Sales & Marketing Div.,
Automotive Components Group
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
Representative Director and Chairman of the Board (up to today)

Member of the Board,
Executive Vice President
Assistant to the President
Automotive Components Sales &Marketing Division
AEC Business New Business

April 1987
February 2011
April 2012
April 2015
June 2015
April 2016
April 2019

Joined our company
General Manager, Sensor Engineering Dept. II,
Automotive Components Group Sensor Div.
Corporate Officer
Managing Officer
Managing Officer, Member of the Board
Member of the Board, Senior Managing Officer
President & Chief Operating Officer (up to today)

Member of the Board, Executive Officer
Corporate Strategy Gr.
General Manager, Tokyo Branch Office

Mikihiko Kato

Member of the Board (Outside Director)

Member of the Board (Outside Director)

Morihiko Otaki

Kanemaru Yasui

August 1996
August 2011
June 2013
June 2016
August 2016
June 2018

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.
Outside Director, GIGA PRIZE CO., LTD. (up to today)

March 1981
April 1999
August 2007
June 2008
July 2013
June 2014

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

Outside Director

Mackenzie Donald
Clugston

Toru Matsui
April 1984
April 2011
October 2013
December 2014
April 2015
July 2016
April 2018
June 2018
April 2019

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.
President of NGK SPARK PLUG (SHANGHAI) CO., LTD.
Corporate Officer, NGK SPARK PLUG CO., LTD.
President, NGK SPARK PLUG (SHANGHAI) TRADING CO., LTD.
Managing Officer, NGK SPARK PLUG CO., LTD.
Member of the Board
Member of the Board, Executive Vice President (up to today)

April 1985
February 2012
August 2012
October 2015
April 2016
June 2017
April 2019

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.
Corporate Officer
Member of the Board
Member of the Board, Executive Officer (up to today)

Member of the Board, Executive Officer
Corporate Administration Gr.
Secretarial OfficePlant Manager of Nagoya

Takio Kojima

Kenji Isobe

April 2012
October 2013
April 2014
April 2018
June 2018
April 2019

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

Member of the Board, Executive Officer
In charge of Business PlanningManagement Division,
Automotive Components Business,
Cutting Tools BusinessAugust 2000
August 2003
August 2009
November 2012
June 2016

Joined Department of Foreign Affairs and International Trade of theCanadian Government
Canadian Consul General in Osaka
Minister, Embassy of Canada in Japan
Ambassador of Canada to Indonesia, Timor-Leste and the ASEAN
Ambassador of Canada to Japan
Outside Director, KAMEDA SEIKA CO., LTD. (up to today)

September 2016
June 2017
March 2018
June 2019

Professor, Kwansei Gakuin University (up to today)
Outside Director, Idemitsu Kosan Co., Ltd. (up to today)
Outside Director, Sapporo Holdings Limited (up to today)
Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
(up to today)

Audit & Supervisory Board Members (As of June 25, 2019)

Member of the Board, Executive Officer
Engineering R&D Gr.
Business Development Div.
Medical Div.

April 1984
February 2011

June 1982

April 1986
July 2011
April 2013
December 2015
April 2016
June 2018
April 2019

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
OfficeCorporate Officer
Member of the Board, Corporate Officer
Member of the Board, Executive Officer (up to today)

Audit & Supervisory Board Member,Standing

Audit & Supervisory Board Member,Standing

Yasuhiko Hotta

Yoshihiro Matsubara

April 1980
February 2008
November 2008
June 2009
February 2011
July 2011
April 2016
June 2017

Joined our company
General Manager, Accounting & Finance Dept.
General Manager, Semiconductor Components Div., Communication
Media Components Gr.
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.
Audit & Supervisory Board Member, Standing (up to today)

April 1983
February 2012
April 2012
February 2014
April 2014
April 2019
June 2019

Joined our company
General Manager, Production Engineering Dept., Spark Plug Div.,
Automotive Components Group
General Manager, Spark Plug Production Engineering Dept., Production
Engineering Center, Production Engineering Group
General Manager, Equipment Dept., Production Engineering Center,
Production Engineering Group
Corporate Officer
Corporate Adviser, Standing
Audit & Supervisory Board Member, Standing

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Fumiko Nagatomi

Akihiko Minato

Hiroyuki Maeda
April 1986
February 2012
April 2012
April 2013
April 2014
April 2016
April 2019
June 2019

63

Joined our company
General Manager of Planning Control Dept., Sensor Div., Automotive
Components Group
General Manager of Sensor Engineering Dept. II, Sensor Div.,
Automotive Components Group
General Manager of Procurement Dept., Procurement Div.
Deputy General Manager of Procurement Div., General Manager ofSupplier Relations & Development Office, General Manager ofProcurement Dept.
Corporate Officer
Executive Officer
Member of the Board, Executive Officer (up to today)

NGK SPARK PLUG CO., LTD. Integrated Report 2019

April 1981
April 1989
May 2006
June 2016
June 2017

Registered as an attorney
Opened Nagatomi Law Firm (up to today)
Outside Auditor, UCS CO., LTD.
Audit & Supervisory Board Member (Outside Corporate Auditor),
CHUBU Electric Power Co. Inc. (up to today)
Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD. (up to
today)

April 1976
June 2003
May 2007June 2009
June 2010
June 2012
September 2016
June 2018

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.)Managing Director, MARUNOUCHI YOROZU Co, Ltd
Outside Audit & Supervisory Board Member, The Nanto Bank, Ltd.
Representative Director and Vice President, Mitsubishi UFJ Researchand Consulting Co., Ltd.
Outside Audit & Supervisory Board Member, Mitsubishi Materials Corporation
Chairman, MST Insurance Service Co., Ltd. (up to today)
Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD.
(up to today)

NGK SPARK PLUG CO., LTD. Integrated Report 201964

About NGK SPARK PLUG

Information

Stories for Value Creation

Corporate GovernanceCorporate governance
Basic Philosophy
Corporate Officers (As of July 1, 2019)
Executive Officer

Executive Officer

Executive Officer

Takahiro Suzuki

Yoshitaka Narita

Noboru Ishida

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

Internal Auditing Office
RHQ GovernancePresident of NGK SPARK PLUGS (U.S.A.) Holding, INC.
President of NTK TECHNOLOGIES, INC.

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

Executive Officer

Executive Officer

Executive Officer

Kozo Yamasaki

Masato Taniguchi

Masaki Sumiya

President of NTK CERAMIC CO., LTD.

Fuel Cell BusinessWe believe that it is our foundational and important managerial task to establish and maintain a fair and efficient management
system, while securing soundness and transparency in management, in order to enhance corporate value by fulfilling ourcorporate social responsibilities. We will enhance our corporate governance to ensure the efficiency and soundness of ourcorporate activities in line with our corporate philosophy, thereby fulfilling our responsibilities to our stakeholders.
Chronological table of measures taken for corporate governance

2019

Executive Officer

Executive Officer

Hiroyuki Tanabe

Hiroyasu Ogura

Akiyoshi Kato

President of CERAMICA E VELAS DE IGNICAO NGKDO BRASIL LTDA.

Regional President ASEAN & India
President of SIAM NGK SPARK PLUG CO., LTD.
President of NGK SPARK PLUGS (Asia) CO., LTD.

Spark Plug Business
Glow Plug Business
Plant Manager of Miyanojyo

Established the Internal
Auditing Office
Abolished the retirement
allowance system forofficers

Executive Officer

Koji Suzuki

Yoshiyuki Takayanagi

Automotive Component Sale & Marketing Div.

Medical Div.

Corporate Officer

Corporate Officer

Corporate Officer

Takeshi Mitsuoka

Osamu Shinkai

Masakazu Ota

Business Development

Semiconductor Production Equipment BusinessCutting Tools BusinessCorporate Officer

Corporate Officer

Corporate Officer

Kazunobu Hasegawa

Kazuyoshi Terashita

Keiji Suzuki

Regional President China
President of NGK SPARK PLUG [SHANGHAI] TRADING CO. LTD.
President of NGK SPARK PLUG [SHANGHAI] CO., LTD.

Vice Division Manager, Corporate Administration Gr.
General Manager, Accounting & Finance Dept.

Sensor BusinessCorporate Officer

Corporate Officer

Michael Alan Schwab

Damien Germès

Regional President PAMA
President of NGK SPARK PLUGS (U.S.A.), INC.

Regional President EMEA
President of NGK SPARK PLUG EUROPE GmbH

2014
2013

2012
Increased thenumber ofoutside directors
to two2011
2010

Increased thenumber ofoutside directors
to three
Established the Nomination andRemuneration Committees
Introduced the performance-linked
stock remuneration system

Decreased the upper limit of the number of
directors from 25 to 13
Introduced the corporate officer system

2005
Changed the term ofservice of a director fromtwo years to one year

2016
2015

Established the
CSR Policy

2008
Executive Officer

2017

Appointed an
outside director

SCM Div.
Procurement Div.

Executive Officer

Issued the Corporate Governance Report
Formulated the criteria for the appointment of
independent officers
Began assessing the effectiveness of the Board of
Directors

Partially revised the performance-linked stock remuneration system
Introduced the Employee Corporate Officer System
Eliminated and consolidated the hierarchy of executive officers

Founded the CSR
Committee

Independence of Outside Directors and Audit & Supervisory Board Members(Executive Officers and Corporate Officers who do not concurrently serve as Directors)

Introduction of the Employee Corporate Officer System (in April 2019)
In the conventional system, when employees were appointed as Corporate Officers, they resigned as employees and concluded a

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 bydrawing on their expertise to carry out audits from multifaceted
viewpoints and express their opinions at important meetings
including the Board of Directors meetings.

We appoint independent outside directors andaudit & supervisory board members in line with ourown selection criteria as well as the criteria set by the
securities exchanges to ensure that candidates forindependent positions have no special relationships
with the management team or major shareholders andthat they have no conflicts of interest with generalshareholders.

Appointment reasons for outside directors and audit & supervisory board members (As of June 25, 2019)
Title

Name

Reason for appointment

Frequency of attendanceOutsidedirector

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 all 12 Board of Directors meetings
held during FY2018.

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 12 Board of Directors meetings
held during FY2018.

Outsidedirector

Mackenzie
DonaldClugston*Since, as a diplomat, this person has a great deal of global experience and expertise ininternational affairs and trade, he is expected to supervise the execution of business by
our management and provide advice to them.

—

Audit &
supervisory board
memberFumikoNagatomi

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

Attended 11 of the 12 Board of Directors
meetings held during FY2018.

Audit &
supervisory board
memberAkihiko
MinatoHe has served in important posts at financial institutions and is expected to use hisabundant expertise and knowledge regarding finance and corporate management for the
benefit of the company.

Attended all 10 Board of Directors meetings
held during FY2018 since his appointment
to the position of outside audit & supervisoryboard member on June 26, 2018.

delegation agreement with the company every year to fulfill their duties as Corporate Officers. Under this system, it was difficult toappoint young employees because they needed to resign as employees, and when they could not fully exercise their abilities as
Corporate Officers, the company was not able to take appropriate measures.
With the above as a backdrop, the Employee Corporate Officer System was introduced in April 2019, allowing the company toappoint employees as Corporate Officers even while they remain as employees. Accordingly, the company can boldly appoint
employees as Corporate Officers and flexibly downgrade them from Corporate Officers if they are unable to fulfill their duties.
In addition, we appointed two foreign Corporate Officers in April 2019, which was the first case in which locally hired employees
who are not employees on temporary assignment were appointed as Corporate Officers.

* Mr. Mackenzie Donald Clugston assumed his position as outside director on June 25, 2019.

65

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201966

About NGK SPARK PLUG

Stories for Value Creation

Information

Corporate Governance

Executive Remuneration System
Remuneration for executive officers is based on the basic
policy of heightening their motivation to contribute toimproving business results and expanding our corporate
value over the medium- to long-term, as well as sharing
the interests of shareholders through holding shares. The
remuneration consists of the “fixed remuneration” paid by
cash; the “bonus,” which is linked with the company’ssingle-year business performance, etc.; and the“performance-linked stock remuneration,” under whichstocks are delivered in accordance with each officer’s
position and the achievement of business performancegoals that are set in the medium-term management plan,etc. For audit & supervisory board members and outside
directors, only fixed remuneration is paid.
The authority to decide on the policy associated withthe decision concerning the amount of remuneration for
directors and the method of its calculation lies with Shinichi
Odo, Representative Director and Chairman of the Board,

Audit & Supervisory Board Members and Measures to Strengthen Their Functions
and Takeshi Kawai, President & Chief Operating Officer,
who are delegated by the Board of Directors. They havethe authority to decide on individual directors’ remuneration
within the maximum limits that are resolved at the general
meeting of shareholders by considering individual directors’
job responsibilities, achievements, etc. in the light of the
management environment and the company’s businessperformance. Remuneration for audit & supervisory board
members is decided through deliberations among them.
We have also established the Remuneration
Committee as an advisory body to the Board of Directors.
The committee deliberates the policies, procedures,content of the system for remuneration for directors andthe appropriateness of the remuneration plan for eachdirector, and submits the results to the Board of Directors
to ensure the rationality and transparency of the decision
regarding remuneration for directors. In FY2018, three
Remuneration Committee meetings were held.

The Audit & Supervisory Board of the Company iscomposed of 4 audit & supervisory board members, 2 ofwhom are outside audit & supervisory board members.
Timely and appropriate opinions are expressed fromoutside perspectives. No outside audit & supervisory board
members have interests such as engaging in transactions
with the company and/or belong to any organizations thathave such interests.
Furthermore, in accordance with a request from the audit& supervisory board members, one staff member isappointed 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 andmake reports in response to requests from audit &supervisory board members, and the respective 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, andmakes proposals to the audited companies on
improvements regarding the identified problems.
Departments that receive such proposals formulate andimplement improvement plans, and the Internal Auditing
Office monitors and checks the implementation status. To
ensure the reliability of financial reporting, the Officeassesses the effectiveness of internal 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 oneach of the audit plans and results with audit & supervisoryboard members and/or independent external auditors
regularly or as required.

Evaluation of the Effectiveness of the Board of Directors
The company conducted an evaluation on the effectiveness of the Board of Directors. An overview of this evaluation for
FY2018 is as follows.
1 Method of evaluation
Evaluation was conducted by the Board of Directors based on a survey of directors and audit & supervisory board members.

2 Overview of evaluation results
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 Board of Directors consists of appropriate members not only in terms of the knowledge and experience required to fulfill
the Board’s roles and responsibilities, but also in terms of diversity, including gender.
(2) The Board of Directors conducts deliberations on management and business strategies based on necessary and sufficient
information securing enough time for deliberations. The Board also appropriately supervises the formulation of executionplans for these strategies.
(3) The Board of Directors conducts deliberations regarding acquisitions, business collaborations, etc. from the perspective ofenhancement of our corporate value and having awareness regarding accountability for stakeholders, including shareholders
and institutional investors.
(4) Performance reports from management to the Board of Directors are made based on the indexes associated with the
major management indexes that are used as criteria for deciding on the company’s business strategies and judging
corporate value.
Furthermore, promotion of the more advanced risk management system and other issues were identified as items wanting to
be implemented in order to further enhance the effectiveness of the Board of Directors.

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, according to thefollowing basic matters, we will implement measures continuously and an integrated manner in cooperation with ourdomestic and overseas Group companies.
1 Sharing of the idea/procedures of raising awareness of risks, risk evaluation, and formulation of risk control measures
2 Construction and operation of the risk management system adapted to individual group companies
3 Upskilling of risk assessment and risk control measures

Classification of risks
Human rights and labor
practice

Safety and health
Environment
Information security andconfidential information
management

Harassment
Discrimination
Long hours of work
Labor dispute, strike, demonstration
Occupational accident
Traffic accident
Mental health
Environmental pollution
Violation of laws
Information system failure
Cyber attack
Leakage of confidential information andpersonal information

Fair trade and ethics

Product

Accident

Corruption
Violation of laws
Infringe of intellectual property rights
Export management
Accounting problems
Procurement
Defective productProduct liability
Natural disaster
Infectious disease
Fire and explosion

Promotion system
We have appointed the President to “Chief Administrator”
of risk management and the Director of Risk Management
Department to “Promotion Manager.
Furthermore, at the CSR Committee consisting of all

67

NGK SPARK PLUG CO., LTD. Integrated Report 2019

directors and chairpersons of task force committees, theoperation and achievements of risk management at thelevel of Group management are evaluated on a regularbasis and improved to prevent risks from occurring and todeal with risks in an appropriate manner.
NGK SPARK PLUG CO., LTD. Integrated Report 201968

About NGK SPARK PLUG

Stories for Value Creation

Information

Corporate Governance

Promotion of BCM (Business Continuity Management)

Prevention of Corruption

In preparation for various types of damage caused bylarge-scale disasters including earthquakes, we have been
implementing BCM activities. All Group companies haveengaged in BCM activities as well as activities for

NGK SPARK PLUG Group strives to prevent corruption,
stating in our Corporate Code of Conduct “we shallpromote fair, transparent, free competition and soundtrade. We shall also ensure that our relationships andcontacts with government agencies and political bodies
are of a sound and proper nature.”
In the Compliance Guidebook we issued in 2012, we
set rules concerning the prevention of corruption, including
the prohibition of involvement in political contributions orbribery, and subsequently educated employees about
these. In 2013, we educated employees about ourConduct Guidelines Concerning the Giving and Receivingof Gifts and Entertainment and are raising awareness toeliminate any misconduct. Further, in 2016 we signed theUnited Nations Global Compact, openly reaffirming ourcommitment to undertaking the prevention of corruption.
While addressing the prevention of corruption inaccordance with these and other guidelines, we respond topreventing and mitigating disasters in order to minimize any
damage that may be incurred by large-scale disasters andto resume production as soon as possible after a disasterto maintain our customers’ supply chains.

BCM activities
BCPs (Business Continuity Plans) are formulated for each department, and initial responses and restoration procedures are specified.
IT Department
We are continuously working to minimize the damage to IT systems and improve recovery time when disaster occurs.
To minimize damage, we have been transferring the working environment for the internet base and workload system respectively
to a highly isolated data center. To improve recovery time, we are utilizing cloud services for backups so that we can recover and restartsystems in an undamaged environment.
For domestic Group companies, we will be combining systems into an integrated server base in order to ensure a common levelof BCP measures through system integration. In addition, we are implementing more specific and practical education and training on aregular basis to strictly respond to the BCP in times of emergency.
Procurement Department
We have promoted countermeasures that include multiple purchasing for key products including materials and parts. A diverse range ofmaterials and parts are required for manufacturing our products. Therefore, we are trying to secure systems that respond to the BCP
through sharing our objectives with each supplier and making efforts across the entire supply chain.
Business Department
We set a time limit for recovering our main products in each business department’s BCP and established a system for early recovery byformulating an action plan for the recovery team.

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.

Responding with sincerity to violations of competition law (theAnti-Monopoly Act) uncovered in FY2014, NGK SPARK PLUG
Group has established a system to promote compliance withcompetition law and ensures legal compliance both inside andoutside of the company.
Domestically, we have formulated the Anti-Monopoly Act
Compliance Manual to educate employees and hold various
internal seminars including those for executive officers.
Furthermore, we have introduced an in-house e-mailCorporate Ethics Helpline

The Compliance Committee, headed by the Representative Director and made up of Chairpersons of the five other expert
committees under the CSR Committee and the Chairperson of the Disciplinary Committee, holds meetings in a timely
manner to monitor and make corrections on key issues and actions concerning them.

The Corporate Ethics Helpline is an internal reporting system
available to employees and suppliers seeking consultation
regarding compliance. We have worked to improve userconvenience by establishing channels not only inside thecompany but also via an external expert service provider andenabling employees and suppliers to seek consultation andmake reports also outside work hours and on holidays. This
service can be also used under anonymity.
Regarding consultations and reports received, facts areinvestigated with discretion so that the reporting employee orBoard of Directors
Committee activities

CSR Committee

Consultation and reporting

Disciplinary
Committee
Recommendation

Internal Auditing
OfficeAudit

Compliance Committee

Helpline channel(inside and outside the company)

Reporting

Chairperson of Compliance Committee
ReportingConsultation
andreportingConsultation
andreportingAnti-Harassment Committee(Labor Relations and labor union)
Consultation and reporting

Suppliers

69

Implementationof compliance

Cooperation

ReportingPlant liaison staff and division in
charge of laws and regulations

NGK SPARK PLUG CO., LTD. Integrated Report 2019

DO BRASIL LTDA.

inspection system for monitoring and prevention of recurring
violations of the competition law.
Our overseas group companies are required to report theactivity status regarding compliance with the competition law
to the Headquarters in Japan on a regular basis. In addition,
the domestic competition law and compliance measures teamvisits overseas group companies to conduct audits oncompliance systems and their operational status, and to
confirm that rules are thoroughly promulgated and enforced.
We also hold seminars inviting experts.

supplier is neither identified nor feels uncomfortable, and if
problems are confirmed, they are dealt with promptly.
In FY2018, there were 73 consultations and reports,
including consultations from group companies. They
included matters related to labor and internal regulations,and if problems were confirmed, they were corrected
immediately.
We continuously strive to make this service widely
known by providing training, putting up posters,
distributing carrying cards, etc.

Division in charge of laws and regulations(Acquisition of legal information and its dissemination)
Educational tools
Education and training
Awareness survey
Results disclosure

Consultation

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

Anti-corruption seminar at CERAMICA E VELAS DE IGNICAO NGK

Initiatives Concerning Competition Law

Promotion System

Compliance promotion system

any incident of violation primarily through our Compliance
Committee. We also accept information provided through the
Corporate Ethics Helpline. Our overseas group companies arealso taking action to prevent corruption, especially preventing
bribery towards civil servants, and conduct education for
employees along with surveys of local laws. Through our CSR
Procurement Guidelines, we further require that suppliers
refrain from acts of bribery. In 2018, there were zero related
violations committed by our Group.

Group companies

Compliance
check
Audit

Anti-Harassment Committee
The Anti-Harassment Committee closely examines and verifies reports and consultations that are reported to the harassment
consultation desks set up in every factory, and provides necessary guidance for correction. The content of the committee’s activities
is reported to the Compliance Committee.

NGK SPARK PLUG CO., LTD. Integrated Report 201970

Messages from Outside Directors

About NGK SPARK PLUG

I will raise questions about the
management of business from a different
standpoint, thereby helping improve thequality of the company’s decision-making.

Stories for Value Creation

Information

I will enhance the effectiveness of theBoard for the achievement ofmanagement plans

Outside director

Outside director

Morihiko Otaki

Kanemaru Yasui

Presently NGK SPARK PLUG is working on two important

future. It is impossible for the company to be successful in all

The Board of Directors must fulfill the function of supervising

the automotive components business, which has been themedium- to long-term themes: make investment plans by

new projects. Nevertheless, all of us, including myself, should

the management team, specifically to oversee the progress

main driver for its corporate growth. However, for future

predicting when demand for internal combustion engines will

make a concerted effort to lead as many investment projects

made by the team with the management plans. To increase

growth, we need to make investments proactively in new

peak; and make more investments in new projects toas possible to success.

the corporate value, the company must be managed in line

businesses as well as in existing businesses. We must takewith the management plans, which set the medium- to long-risks in new businesses while maintaining our financial

automobiles. At Board of Directors meetings held during theago. I feel that the company is now taking a strategic

term challenges to be met, and it is important for the Board

soundness. In the diversification of fundraising options,year, we robustly exchanged opinions about these two

approach on a far different level compared with several

to act appropriately to ensure the achievement of the plans.

financial strategies will become more important as athemes. Particularly for investments in new projects, we are

years ago. The company is undergoing dramatic changes,

examining a range of options, including investing in venturesand I believe that the most important role that I can fulfill forenhance the effectiveness of the Board with a focus on

management indicator, which I think is one of its responses toand implementing a large-scale M&A project. In FY2018, theit is that of a “challenger,” which means to raise questions

ensuring the attainment of the management plans. During thethe diversification of fundraising options. For fundraising, thecompany decided to acquire US company CAIRE as its firstabout the plans formulated by the management team andyear, there has been a range of improvements made to Board

Board now also discusses the equity ratio, shareholder returnlarge-scale investment project in fields other than theabout the progress made with the plans from a different

meetings. For example, the business execution results areratio and other balance sheet items as well as the fundraising

automotive components business, a move that signals thestandpoint. For example, I give opinions about local ideas

now reported so as to more clearly show the links with themethod, which I appreciate as a good change made overcompany’s proactive attitude toward new investment

from a global viewpoint and discuss technical issues fromcurrent management plan, and more profound discussions

recent years.

projects.

the viewpoint of an amateur for the improvement of theare had on progress with the plan. For the remuneration

Board’s decision-making quality.

scheme for the management team, which is important ina focus on two issues: whether the Board is adequately

relation to the Board of Director’s supervisory function, a

discussing managerial issues and whether the transparency

establish new businesses, including those targeting

To create a new business, we can purchase a company
by M&A or can launch a new business internally based on

I became an outside director of the company six years

Board meetings should provide us with opportunities to

We therefore must continue implementing initiatives tomanagerial issue. The company has adopted ROIC as a

I am working to fulfill my role as an outside director with

R&D activities. The company has made great progress inhave strategic discussions on medium- to long-term

scheme that is well balanced in terms of short-term andof the decision- making process is ensured. If I find any factor

these two initiatives in recent years. Successful examples ofmanagerial issues. Such discussions must be prioritized overlong-term targets is being established. To further enhance thethat is hindering the progress and achievement of the“intrapreneurship” include the development of a new productthe confirmation and reporting of the decisions made on

effectiveness of the Board, it is desirable to continue

management plan, I will urge the Board to identify the factor

by an R&D team and the proposal of ideas by employees

short-term issues. Based on this belief, I hope to play my role

examinations on such issues as the sophistication of the risk

and implement countermeasures as soon as possible.

under the internal application system. The company has also

as an outside director and fulfill the function of supervising themanagement system. I am paying attention also to financial

steadily moved forward for the M&A and venture investment

management team.

strategies. The company has long been attributing

projects, which were launched several years ago. The

importance to financial soundness and has madecompany needs to continue these measures and achieve

investments in existing businesses in an amount that does

success in new projects as the biggest challenge for the

not substantially exceed the amount of funds gained through71

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201972

CSR Management

About NGK SPARK PLUG

Basic Philosophy - Our CSR We view CSR not just as a responsibility but as anopportunity to be accountable through review of NGKSPARK PLUG Group’s economic, environmental and social
activities from a global perspective, to enhance corporate
value, and to contribute to the sustainable development ofsociety in accordance with our Corporate Philosophy.
Our CSR activities are wide-ranging and diverse, andto provide 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 andothers. In line with the CSR Policy, we review and promote
CSR based on a multifaceted approach.

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.

The CSR Committee is chaired by the president andcomposed of all directors including outside directors aswell as chairpersons of each task force committee. The
Committee meets twice a year.
As well as determining each year’s key tasks for the
implementation of the CSR Policy, the Committee oversees
and evaluates the CSR-related activities of each task force
committee and division and makes proposals about these
activities for the total optimization of CSR activities, thereby
strengthening the business foundation.
Through close collaboration among the CSR
Committee and task force committees, a company-wide
CSR promotion system is put in place.

Stakeholder

Communication

Risk Management Dept.
(Secretariat)

Quality
Committee

Safety andConfidentiality
Environment
HealthManagement
Committee
Committee
Committee

ExportControlCommittee

Compliance
Committee

Customers

Suppliers

Frequency & no. ofparticipants per yearOnce
383 times
Once
Seven times(1,195 people)
Twice
Once
From time to time

We offer information meaningful to customers at our
website and through exhibitions so that they can purchaseand use our products and services with peace of mind.

Communication through sales activities
Provision of information via the website (on products, events, etc.)
Explanation about products and technologies at exhibitions
Communication at venues of events, such as racing events

From time to time
From time to time
From time to time
From time to time

We are working to build relationships of trust with suppliersas their sound partners and achieve growth together. To thisend we conduct activities across the supply chain, such as
holding briefing sessions on our corporate policies.

Communication through daily procurement activities
Organization of briefings on the corporate principles
Organization of seminars on practical issues
Provision of a corporate ethics helpline for suppliers

From time to timeOnce
35 seminars-

We respect the local culture and customs at each of ourbases located across the world and work for smoothcommunication with local communities. We also participate
in various social contribution activities to help create acomfortable society as a corporate citizen.

Communication through social meetings and events
Participation in local events such as festivals
Local cleanup activity
Communication through cultural and sport events
2019 NGK SPARK PLUG Suzuka 2&4 Race
NGK SPARK PLUG FC Gifu football class for children
NGK SPARK PLUG-JAXA one-day science class in Kagoshima
Musical for families held in the NTK Hall
Marathon Festival Nagoya Aichi
Provision of information via the website (environmental information, etc.)

From time to time
From time to time
From time to time at each plant

To maintain safe and sound workplaces and help employees
work with vigor, the management team proactively visits
work sites to have dialogues with on-site employees.

Communication through daily operations and at workplaces
Publication of an in-house magazine
Organization of various labor-management meetings
Utilization of the corporate ethics helpline (for employees)
Organization of various training sessions
Employee satisfaction survey

From time to timeSeven times
From time to time
73 calls received
A total of 10,220 participants
All employees

Contribution to SDGs

Employees

Major activities in FY2018

Organization of the ordinary general meeting of shareholders
Dialogue with institutional investors and securities analysts
Organization of briefings on our technologies for institutional investors and securities analysts
Organization of briefings on the company for personal investors
Publication of the newsletters for shareholders
Publication of an annual integrated report
Provision of information via the website

We disclose information in compliance with the law andalso disclose information promptly via the media and at our
Shareholders website.

Local
communities

About Sustainable Development Goals (SDGs)
SDGs are a set of 17 goals and 169 targets for creating asustainable world by 2030 that were adopted at the UN
summit, and they aim to resolve shared global problems
and issues, including poverty and inequality, and climatechange, etc. with the objective that “not a single person onearth will be left behind.”

CSR Committee
Chairman: President

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

Participation in the United Nations Global Compact
UN Global Compact
Initiative proposed in 1999 by then
Secretary-General of the United Nations
Kofi Annan to address various issues
facing the world, such as global warming, environmental
problems and disparities in society. It was establishedformally at the UN headquarters in July 2000 as a set ofvoluntary action principles to be followed by companies.

CSR promotion system

Communication with Stakeholders

and investors

NGK SPARK PLUG shall focus on achieving the
Sustainable Development Goals (SDGs) adopted by the
UN in 2015.

Information

CSR Promotion System

Risk Management Policy
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

NGK SPARK PLUG Group joined the UN Global Compact
in November 2016. We will continue to support the 10
principles set in four fields of human rights, labor,
environment and anti-corruption and will conduct various
activities as a good corporate citizen, thereby contributing
to the creation of a sustainable society.

Stories for Value Creation

Apr.
June
Oct.
Dec.
Mar.
From time to time

Inclusion in SRI Indexes
NGK SPARK PLUG Group is a member of the following indexes related to SRI (socially responsible investing):(As of March 31, 2019)73

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201974

Information

CONTENTS

77 Financial Results Highlights for the Past 11 Years
79 Consolidated Balance Sheets
81 Consolidated Statements of Income
82 Consolidated Statements of Comprehensive Income
83 Consolidated Statements of Changes in Net Assets
84 Consolidated Statements of Cash Flows
85 Notes to Consolidated Financial Statements
100 Independent Auditors Report
101 Global Network
103 Corporate Profile and Stock Information
104 Independent Verification Report75

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About NGK SPARK PLUG

Stories for Value Creation

Information

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

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

292,121

243,914269,232

284,746

302,798

329,758

347,636

383,272

372,919

409,912425,013

Operating income (loss)(5,222)

10,683

28,77024,47823,754

51,661

62,196

66,28453,59567,27958,672

Ordinary income (loss)(7,528)10,75827,37923,74027,67454,96067,90764,48355,55969,09459,545

Profit (loss) attributable to owners of the parent(71,669)

13,50923,68025,52420,90932,70436,75330,81525,60244,33542,813

Capital expenditures

24,173

10,9778,767

14,00424,012

41,03436,37245,33936,32837,591

56,587

Depreciation

31,767

18,825

16,646

15,438

12,798

11,567

13,337

16,834

19,601

20,92023,964R&D expenses

17,575

13,907

15,763

16,036

17,10019,40021,337

23,123

23,41625,28328,072

Cash flows from operating activities

36,60334,25535,39821,07926,19454,69736,59356,46549,76465,70743,704

Cash flows from investing activities(27,153)(17,270)(20,412)(15,850)(15,442)(61,148)(12,865)(82,331)(53,410)(26,422)(48,380)

Free cash flows

3,820

27,83430,684

8,507

8,456

3,541

13,995(25,866)

6,335

29,636(21,356)

Dividend payout

5,883

1,198

3,594

4,789

4,788

5,223

7,181

8,487

9,055

10,823

13,610Net assets

184,384

207,006

218,159

235,613

268,309302,793343,380

341,044354,710388,115401,683

Total assets

275,995

331,476

337,318

340,295

366,489

458,148

485,497

526,103563,801

599,972

628,970

Interest bearing debt

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

99,275

98,115

110,755(Fiscal year)

Net sales

(Yen)

77

Earnings (losses) per share(328.90)62.01

108.71117.2596.06

150.26168.88141.60119.44209.37205.58

Net assets per share

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

1,917.89

Cash dividends per share

13.50

11.00

22.00

22.00

22.00

28.00

36.00

42.00

42.00

60.00

70.00

Operating income ratio (%)

(1.8)

4.4

10.7

8.6

7.8

15.7

17.9

17.3

14.4

16.4

13.8

Return on net sales (%)(24.5)

5.5

8.8

9.0

6.9

9.9

10.6

8.0

6.9

10.8

10.1

Gross profit on sales (%)

13.8

21.0

27.4

25.1

24.2

32.6

35.8

35.6

33.0

34.6

33.9

ROE (Return on equity) (%)(30.6)

7.0

11.2

11.3

8.4

11.5

11.4

9.1

7.4

12.0

10.9

ROA (Return on assets) (%)(20.8)

4.4

7.1

7.5

5.9

7.9

7.8

6.1

4.7

7.6

6.9

ROIC (Return on invested capital) (%)

(1.3)

3.2

8.0

6.5

5.8

11.0

11.6

11.4

8.5

10.0

8.2

Equity ratio (%)

66.2

61.9

64.2

68.8

72.7

65.6

70.2

64.4

62.5

64.3

63.5

Total asset turnover (times)

0.8

0.8

0.8

0.8

0.9

0.8

0.7

0.8

0.7

0.7

0.7

Dividend payout ratio (%)

−

17.7

20.2

18.8

22.9

18.6

21.3

29.7

35.2

28.7

34.0

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About NGK SPARK PLUG

Stories for Value Creation

Information

Consolidated Balance Sheets
NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
March 31, 2019 and 2018
Millions of yen

2019

Thousands of U.S. dollars

2018

2019

¥ 48,639¥ 56,235$ 438,189

Accounts payable - trade (Note 9)
Short-term loans payable (Notes 9 and 20)

Notes and accounts receivable - trade(Notes 3 and 9)

96,834

93,615872,378

Short-term investment securities (Notes 9 and 10)

34,921

59,905

314,604

Inventories (Note 3)

113,124

94,953

1,019,135

Other

18,426

15,076

166,000

(841)

(751)

(7,577)311,103

319,035

2,802,730

Total current assets

2019

2018

2019

¥ 34,957¥ 32,407$ 314,928

27,587

10,113

248,532

Current liabilities

Current assets

Allowance for doubtful accounts

Thousands of U.S. dollars

Liabilities

AssetsCash and deposits (Notes 7 and 9)

Millions of yen

Current portion of bonds payable (Notes 9 and 20)
Current portion of long-term loans payable (Notes 9 and 20)
Lease obligations (Note 20)—

25,000

—

9,924

9,962

89,405

52

43

468

Income taxes payable

9,126

13,04082,216

Other

40,57539,641

365,541

Total current liabilities

122,224130,208

1,101,117

Bonds payable (Notes 9 and 20)

50,00030,000450,450

Long-term loans payable (Notes 9 and 20)

23,062

22,886

207,766

129

111

1,162

30,25427,443

272,559

Noncurrent liabilities
Noncurrent assets
Property, plant and equipment

Lease obligations (Note 20)

Buildings and structures, net

66,661

63,410600,550

Machinery, equipment and vehicles, net

110,166

95,282

992,486

Provision for stock benefits

201

92

1,811

Land

21,382

21,279

192,631

Deferred tax liabilities (Note 13)

152

169

1,369

Construction in progress

25,625

11,027

230,856

Other

1,262

945

11,369Other, net

4,885

4,101

44,009Total property, plant and equipment (Note 3)

228,720

195,1022,060,541

Net defined benefit liability (Note 12)

Total noncurrent liabilities
Total liabilities

105,062

81,648946,505

227,286

211,856

2,047,622

47,86947,869431,252

Net assets

Intangible assets

Shareholders’ equity

Goodwill (Note 16)

5,422

307

48,847

Software

5,722

4,567

51,550Capital surplus

54,63954,639492,243

Other

1,857

239

16,730Retained earnings

297,930

278,374

2,684,054

Total intangible assets

13,002

5,114

117,135

Treasury stock(1,741)(6,422)(15,685)398,697374,461

3,591,865

Common stock

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

63,31071,680570,360

Deferred tax assets (Note 13)

11,443

7,672

103,090

Other

1,508

1,487

13,586

Allowance for doubtful accounts

(119)

(119)

(1,072)

Total investments and other assets

76,14380,720685,973

317,866

280,9362,863,658¥628,970¥599,972$5,666,396

Total noncurrent assets
Total assets

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

24,872

31,211

224,072

Foreign currency translation adjustments(20,025)(16,737)(180,405)

Remeasurements of defined benefit plans (Note 12)(4,293)(3,273)(38,676)553

11,200

4,982

2,431

2,454

21,901

Total accumulated other comprehensive income
Noncontrolling interests
Total net assets
Total liabilities and net assets

401,683

388,115

3,618,766¥628,970¥599,972$5,666,396

See accompanying Notes to Consolidated Financial Statements.

79

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About NGK SPARK PLUG

Stories for Value Creation

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2019 and 2018

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2019 and 2018
Millions of yen

Thousands of U.S. dollars

Millions of yen

2019

2018

2019

Net sales (Note 16)¥425,013¥409,912$3,828,946

ProfitCost of sales (Note 4)

281,113

268,189

2,532,550

Other comprehensive income:Gross profit

143,899

141,722

1,296,387

Selling expenses

36,45733,377

328,441

General and administrative expenses

48,76941,065439,360

Selling, general and administrative expenses

85,22674,442

767,80258,672

67,279528,577

Interest income

920

1,123

8,288

Dividend income

1,489

1,398

13,414

139

510

1,252

Total selling, general and administrative expenses (Notes 4 and 12)
Operating income (Note 16)
Nonoperating income

Equity in earnings of associates
Other

1,744

1,826

15,712

Total nonoperating income

4,294

4,858

38,685

Nonoperating expenses

Thousands of U.S. dollars

2019

2018

2019

¥ 43,106¥44,683$388,342

Valuation difference on available-for-sale securities(6,321)

3,655(56,946)

Foreign currency translation adjustments(3,297)16(29,703)

Remeasurements of defined benefit plans (Note 12)(1,025)2,560(9,234)

Share of other comprehensive income of associates accounted for using
equity method
Total other comprehensive income (Note 5)
Comprehensive income

(80)

(161)

(721)

(10,725)

6,070(96,622)¥ 32,380¥50,754$291,712¥ 32,167¥50,286$289,793

212

467

1,910

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

Interest expense

576

511

5,189

Foreign exchange loss

335

1,786

3,018

Product compensation expenses

1,072

117

9,658

Other

1,437

628

12,946

Total nonoperating expenses

3,421

3,043

30,82059,54569,094536,441

Ordinary income

Information

Extraordinary income
Gain on sales of noncurrent assets (Note 4)

354

199

3,189

Gain on sales of investment securities

960

1,117

8,649

1,314

1,316

11,838

1,227

1,325

11,054

Total extraordinary income
Extraordinary loss
Loss on sales or disposal of noncurrent assets (Note 4)
Loss on valuation of investment securities

1

5

9

Loss on sales of investment securities

0

—

0

Loss on violation of antitrust law

—

3,987

—

Settlement package

46

4,434

414

Environmental expenses (Note 4)

254

559

2,288

1,530

10,312

13,784

Total extraordinary loss
Profit before income taxes

59,32960,098534,495

Income taxes - current

16,613

18,499149,667(389)(3,084)(3,505)

Total income taxes (Note 13)

16,223

15,415

146,153

Profit43,10644,683388,342

292

347

2,631

¥ 42,813¥ 44,335$ 385,703

Income taxes - deferred

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

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About NGK SPARK PLUG

Stories for Value Creation

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, 2019 and 2018

NGK SPARK PLUG CO., LTD. and Consolidated Subsidiaries
For the Years Ended March 31, 2019 and 2018

Information

Millions of yen
Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Treasury
stock

Total
shareholders’equityTotal
Valuation
Foreignaccumulateddifference on
currency Remeasurements
otheravailable-fortranslation of defined benefit comprehensive Noncontrolling
sale securities adjustments
plansincomeinterests¥47,869¥54,825¥262,010¥(17,649)¥347,056¥27,580¥(16,527)¥(5,804)¥ 5,249¥2,404(10,823)

Profit attributable to owners of theparent(10,823)

44,335(5,922)

Purchase of treasury stock
Disposal of treasury stock0

Retirement of treasury stock(0)

Change in ownership interest ofparent due to transactions with
noncontrolling interests(17,148)¥354,710

Total changes in items during theperiodBalance at March 31, 2018(10,823)

44,33544,335(5,922)(5,922)00

017,149

—

—

(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

33,40547,86954,639278,374(6,422)

374,461

31,211(16,737)(3,273)

11,2002,454

388,115

Changes during the fiscal year
Dividends of surplus(13,610)(13,610)(13,610)

Profit attributable to owners of theparent42,81342,81342,813Purchase of treasury stock(5,002)(5,002)(5,002)

(0)

35

35

35

(9,647)

9,647

—

—

Disposal of treasury stock
Retirement of treasury stock
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at March 31, 2019

(6,338)(3,288)(1,019)——19,555

4,680

24,236(6,338)(3,288)(1,019)¥47,869¥54,639¥297,930¥ (1,741)¥398,697¥24,872¥(20,025)¥(4,293)(10,646)¥(22)(10,668)(10,646)(22)

13,567553¥2,431¥401,683

Thousands of U.S. dollars

Balance at March 31, 2018

$281,180$(150,784)$(29,486)$100,901$431,252 $492,243 $2,507,874$(57,856) $3,373,523$22,108 $3,496,532

Dividends of surplus(122,613)(122,613)(122,613)

Profit attributable to owners of theparent385,703385,703385,703¥ 60,098$ 534,495

23,96420,920215,892

Increase in net defined benefit liability

1,396

1,870

12,577

Interest and dividend income(21,712)(45,063)(45,063)(45,063)

(0)

315

315

315

(86,910)

86,910——(2,410)(2,521)

Interest expense

576

511

5,189

Equity in earnings of associates

(139)

(510)

(1,252)

Loss on disposal of noncurrent assets

873

1,126

7,865

Gain on sales of investment securities(960)(1,117)(8,649)

Increase in notes and accounts receivable - trade(1,211)(1,876)(10,910)

Increase in inventories(16,054)(8,095)(144,631)

Increase in notes and accounts payable - trade

1,109

966

9,991

Other, net(3,677)

6,058(33,126)

Subtotal

62,796

77,430565,730

Interest and dividends received

2,461

3,169

22,171

(571)

(501)

(5,144)

Income taxes paid

(20,982)(14,390)(189,027)

Net cash provided by operating activities

43,70465,707393,730

Interest paid

Cash flows from investing activities(301)(1,121)(2,712)

Net decrease in short-term investment securities

16,981

10,769152,982

Purchase of property, plant and equipment(50,823)(37,222)(457,865)

433

858

3,901

Purchase of intangible assets(2,683)(1,675)(24,171)

Purchase of investment securities(1,498)(837)(13,495)

Proceeds from sale and redemption of investment securities

3,424

1,927

30,847(13,842)—(124,703)

Net increase in time deposits

Proceeds from sale of property, plant and equipment

Purchase of shares of subsidiaries resulting in change in scope of
consolidation (Note 7)
Net cash used in investing activities

(69)

879

(622)

(48,380)(26,422)(435,856)
141,640

Cash flows from financing activities

Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes in items other thanshareholders’ equity

Balance at March 31, 20192019

¥ 59,329

Other, net

Changes during the fiscal year

Total changes in items during theperiod2018

Depreciation and amortization

Profit before income taxes

Total net
assetsChanges during the fiscal year
Dividends of surplus

2019
Cash flows from operating activities

Millions of yen

Balance at April 1, 2017

Thousands of U.S. dollars——

176,171$431,252 $492,243 $2,684,054

See accompanying Notes to Consolidated Financial Statements.

(57,099)(29,622)(9,180)(95,910)(198)(96,108)

218,342(57,099)(29,622)(9,180)(95,910)(198)

122,225$(15,685) $3,591,865$224,072$(180,405)$(38,676)

42,162$

4,982$21,901 $3,618,766

Net increase (decrease) in short-term loans payable

15,722(574)

Proceeds from long-term loans payable

10,100—90,991

Repayment of long-term loans payable(9,962)—(89,748)

Proceeds from issuance of bonds

19,892—

179,207

Redemption of bonds(25,000)—(225,225)

Purchase of treasury stock(5,002)(5,922)(45,063)

Cash dividends paid

(13,604)(10,821)(122,559)

(270)

(725)

(2,432)(8,124)(18,043)(73,189)

Other, net
Net cash used in financing activities

(327)

318

(2,946)

Net (decrease) increase in cash and cash equivalents(13,128)

21,558(118,270)

Cash and cash equivalents at beginning of year

87,37865,817787,189

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)

—

2

—

¥ 74,250¥ 87,378$ 668,919

See accompanying Notes to Consolidated Financial Statements.

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About NGK SPARK PLUG

Stories for Value Creation

Information

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 Japan andits related accounting regulations and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which
are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards(“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 byomitting amounts less than one million. As a result, totals may notexactly equal the sum of the individual accounts. The translationof the Japanese 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, 2019, whichwas ¥111 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
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 inunconsolidated 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 thecost of investments in subsidiaries and the underlying equity intheir net assets, adjusted based on the fair value at the time ofacquisition, is deferred principally as goodwill and amortized overthe estimated useful life, generally 5-10 years, on a straight-line
basis.
The number of consolidated subsidiaries and associates
accounted for by the equity method for the years ended March 31,
2019 and 2018 was as follows:
2019

2018

Domestic

12

12

Overseas

37

30

3

3

Consolidated subsidiaries:

Associates accounted for by the equity method

During the year ended March 31, 2019, CAIRE Inc., CAIRE
Medical Limited (former company name: Chart BioMedical
Limited), CAIRE Medical Technology (Chengdu) Co., Ltd. (former
company name: Chart BioMedical (Chengdu) Co., Ltd.) and their 5
subsidiaries were included in the scope of consolidation due to theacquisition of their stock.
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.

85

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Investments in the remaining unconsolidated subsidiaries andassociated companies are stated at cost. If the equity methodof 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 were not consolidated for the year
ended March 31, 2019 were PARTSFIT SDN. BHD., Nittoku Smile
Co., Ltd. and Sharing FACTORY Co., Ltd. For the year ended
March 31, 2018, Bujias NGK Del Ecuador Cia Ltda., Nittoku Smile
Co., Ltd. and Sharing FACTORY Co., Ltd. were not consolidated.
There were no unconsolidated subsidiaries accounted for by
the equity method for either the year ended March 31, 2019 or2018.
For each of the years ended March 31, 2019 and 2018,
the Company had three associates accounted for by the equity
method, Woo Jin Industry Co., Ltd., Tokai Taima Kogu Co., Ltd.
and Japan Medical Dynamic Marketing, INC.
The major unconsolidated subsidiaries that were not accounted
for by the equity method for the year ended March 31, 2019were PARTSFIT SDN. BHD., Nittoku Smile Co., Ltd. and Sharing
FACTORY Co., Ltd. For the year ended March 31, 2018, Bujias
NGK Del Ecuador Cia Ltda., Nittoku Smile Co., Ltd. and Sharing
FACTORY Co., Ltd. were not accounted for by the equity method.
For each of the years ended March 31, 2019 and 2018,
Hayakawa Seiki Co., Ltd. was not accounted for by the equity
method.
These companies were excluded from the scope of theequity method because their net income (loss), retained earnings,
accumulated other comprehensive income and others wereimmaterial, 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, 2019, the fiscal year-end date of
NGK Spark Plug (Shanghai) Co., Ltd., Changshu NGK Spark PlugCo., 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 ten other companies was December 31.
However, when preparing the consolidated financial statements,
the Company used the financial statements of the 15 consolidated
subsidiaries and one associate that were compiled by a temporary
closing of their accounts as of March 31.
(Unification of accounting policies applied to foreign subsidiaries forconsolidated 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
assets(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 requiresthat accounting policies and procedures applied by an investmentcompany and its associates to similar transactions and events undersimilar circumstances should, in principle, be unified for applying
the equity method. PITF No. 24, however, as a tentative measure,allows an investment company to apply the equity method using
its foreign associates’ financial statements prepared in accordancewith either IFRS or U.S. GAAP. In this case, adjustments for thesame four items as PITF No. 18 are required in the consolidation
process so that their impact on profit attributable to the owners of
the parent is accounted for in accordance with Japanese GAAP,
unless the impact is not material.
(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 change in value, 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 onthese securities is reported as a component of accumulated othercomprehensive income, net of applicable income taxes. Gains andlosses on the disposal of available-for-sale securities are computedby the moving average method. Available-for-sale securities without
available fair values are carried at cost determined by 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

are 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
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
the aggregate amount of estimated credit loss 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 structures and from 4 to 10 years for machinery,equipment and vehicles.
Intangible assets (except for lease assets), including software
for internal use, are amortized mainly 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
As a lessee, the Company and its domestic consolidated
subsidiaries capitalize the assets used under finance leases 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.

NGK SPARK PLUG CO., LTD. Integrated Report 201986

About NGK SPARK PLUG

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Information

Notes to Consolidated Financial Statements(j) Employee retirement benefits(n) Enterprise taxes

The difference between the amount of retirement benefit obligations
and the value of plan assets has been recognized as net defined
benefit liability. To calculate the retirement benefit obligations,the benefit formula basis is used to allocate estimated retirement
benefits to periods of service. Past service cost that is yet to berecognized is amortized on a straight-line basis over ten years, aperiod not exceeding the average remaining service period of theemployees. Actuarial gains and losses that are yet to be recognized
are amortized on a straight-line basis over ten years, a period notexceeding 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 the accounting standard for retirement benefits.

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.

(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 tononcontrolling interests, are reported in foreign currency translation
adjustments as a component of accumulated other comprehensive
income in the accompanying consolidated balance sheets.
(l) Research and development expenses
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, 2019 and 2018, research anddevelopment expenses aggregated ¥28,071 million ($252,892
thousand) and ¥25,283 million, respectively. These amounts
included research and development activities for basic and appliedresearch and the development of new products and processes in
the amount of ¥5,252 million ($47,315 thousand) and ¥4,448 million
at March 31, 2019 and 2018, 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.
(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 inwhich those temporary differences are expected to be recoveredor settled. The effect on deferred tax assets and liabilities of achange in tax rates is recognized in the period that includes theenactment date.

87

NGK SPARK PLUG CO., LTD. Integrated Report 2019(3) Effects of application
The Company and its consolidated overseas subsidiaries are in
the process of determining the effects of the new standard on
the consolidated financial statements.
(t) Changing in presentation(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 estimated amountof 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.
- “Leases” (IFRS No. 16)(1) Overview
The standard requires lessees to recognize most leases on thebalance sheet, resulting in the recognition of lease assets andliabilities.
(2) Effective date
The standard will be applied from the beginning of the fiscal
year ending March 31, 2020.

(Changes due to adoption of “Partial Amendments to AccountingStandard for Tax Effect Accounting”)
Upon application of “Partial Amendments to Accounting Standard
for Tax Effect Accounting” (ASBJ Statement No. 28, February 16,
2018 (hereinafter, “Statement No. 28”)) from the beginning of thecurrent fiscal year, the Company and its domestic subsidiaries
changed the presentation and related notes of deferred tax assets
and deferred tax liabilities such that deferred tax assets anddeferred tax liabilities are classified as part of ‘investments andother assets’ and ‘noncurrent liabilities,’ respectively.
As a result, ¥12,427 million of deferred tax assets classified
as “Current assets” and ¥7,797 million of deferred tax liabilities
classified as “Noncurrent liabilities” have been included in deferred
tax assets (¥7,672 million) in “Investments and other assets,” anddeferred tax liabilities classified as “Noncurrent liabilities” have beenadjusted to ¥169 million in the balance sheet as of the end of theprevious fiscal year.
The notes related to tax effect accounting additionally included
those described in Notes 8 (excluding total amount of valuation
reserves) and 9 of “Accounting Standard for Tax Effect Accounting,”
which are required in Paragraphs 3 to 5 of Statement No. 28.
However, this additional information corresponding to the previous
fiscal year is not disclosed, in accordance with the transitional
treatments prescribed in paragraph 7 of Statement No. 28.
(Consolidated Statements of Income)“Product compensation expenses,” which was included in “Other
nonoperating expenses” in the previous fiscal year is presented
as a separate item under “Nonoperating expenses” from thecurrent fiscal year because the amount has become more than
10% of total nonoperating expenses. In order to reflect the change
in presentation, the consolidated statement of income for theprevious fiscal year has been reclassified to reflect a consistentpresentation format. As a result of this change, ¥746 million of“Other nonoperating expenses” for the previous fiscal year wasreclassified as “Product compensation expenses” (¥117 million)and “Other nonoperating expenses” (¥628 million).

performance targets outlined in the medium-term management
plan and other considerations.
(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 numberof shares of treasury stock as of the fiscal years ended March
31, 2019 and 2018 were ¥884 million ($7,964 thousand)and 416,402 shares and ¥919 million and 433,200 shares,
respectively.
3. Notes to Consolidated Balance Sheets(a) Inventories
At March 31, 2019 and 2018, inventories consisted of the following:Thousands of
U.S. dollars

Millions of yen
2019

2018

2019

Finished goods¥60,544¥50,915$545,441

Work-in-process

32,00829,906288,360

Raw materials

20,57014,132

185,315(b) Accumulated depreciation of property, plant and equipment
At March 31, 2019 and 2018, accumulated depreciation ofproperty, plant and equipment amounted to ¥306,676 million($2,762,847 thousand) and ¥299,878 million, respectively.
(c) Investment securities
Among investment securities, shares of unconsolidated subsidiaries
and associates at March 31, 2019 and 2018 amounted to ¥12,112
million ($109,117 thousand) and ¥12,349 million, respectively.
(d) Notes receivable maturing 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 days of the fiscal years were bank holidays and thefollowing notes matured on March 31, 2019 and 2018, they were
included in the consolidated balance sheets as of March 31, 2019and 2018:
Thousands of
U.S. dollars

Millions of yen
2019
Notes receivable – trade

¥58

2018
¥66

2019
$523

(u) Additional information(Performance-linked stock compensation plan)
In order to increase the Directors’ awareness of their contributions
to the Company’s medium- to long-term performance and theimprovement of corporate value, the Company introduced aperformance-linked stock compensation plan (the “Plan”), which isalso transparent and objective, for Directors and Corporate Officers(excluding Outside Directors and nonresidents of Japan, collectively“Directors, etc.”).
The Company applies the “Practical Solution on Transactionsof Delivering the Company’s Own Stock to Employees, etc. throughTrusts” (PITF No. 30, March 26, 2015) for the accounting treatmentof the Plan.
(1) Transaction summary
The Plan uses an officer compensation BIP (Board IncentivePlan) trust by which Directors, etc., are granted shares of theCompany and paid the cash equivalent to the market valueof the shares after conversion into cash. Share are granted to
the Directors, etc., according to the degree of achievement of(e) Contingent Liabilities(1) Guarantees on loans
At March 31, 2019 and 2018, contingent liabilities in respect
to guarantees of indebtedness, principally of employees,
amounted to ¥8 million ($72 thousand) and ¥11 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 with these investigations,compensation for damage claims have been discussed withsome 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 notreasonably estimable at this stage.

NGK SPARK PLUG CO., LTD. Integrated Report 201988

About NGK SPARK PLUG

Stories for Value Creation

Information

Notes to Consolidated Financial Statements

4. Notes to Consolidated Statements of Income

5. Notes to Consolidated Statements of Comprehensive Income(a) Loss on valuation of inventories

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:

For the years ended March 31, 2019 and 2018, a write-down of¥578 million ($5,207 thousand) and ¥1,193 million, respectively,
was recognized as costs of goods sold.

Thousands of
U.S. dollars

Millions of yen(b) Selling, general and administrative expenses
Major components of selling, general and administrative expenses
for the years ended March 31, 2019 and 2018 were as follows:

Valuation difference on availablefor-sale securities

Thousands of
U.S. dollars(Decrease) increase during theyear

Millions of yen

2018

2019

2019

¥ (8,171)¥ 6,463$(73,613)

2019

2018

2019

Reclassification adjustments(959)(1,117)(8,640)¥ 3,014¥ 2,401$ 27,153

Subtotal, before tax(9,130)5,345(82,252)

Provision of allowance for
doubtful accounts

14

223

126

Tax effect

2,809(1,690)25,306Retirement benefit costs

1,080

1,269

9,730

Subtotal, net of tax(6,321)

3,655(56,946)

Director compensation andemployee salaries andallowances

29,73827,246

267,910(3,297)16(29,703)

Depreciation

Packing and transportation
expenses

10,957

8,653

98,712Advertising expenses

6,389

5,974

57,559Research and development
expenses*

4,448

5,252

47,315* The aggregate amount of research and development expenses included in selling, generaland administrative expenses for the years ended March 31, 2019 and 2018, was ¥5,252
million ($47,315 thousand) and ¥4,448 million, respectively.

Foreign currency translation
adjustments(Decrease) increase during theyear
Remeasurements of defined
benefit plans(Decrease) increase during theyear(2,397)

1,919(21,595)

Reclassification adjustments

918

1,673

8,270

Subtotal, before tax(1,479)3,593(13,324)453(1,033)

4,081(1,025)2,560(9,234)

Tax effect(c) Gain on sale of noncurrent assets

Subtotal, net of tax

Major components of gain on sale of noncurrent assets for theyears ended March 31, 2019 and 2018 were as follows:
Thousands of
U.S. dollars

Millions of yen
2018

2019
Buildings and structures

¥

¥

0

2019
0

$

0

Machinery, equipment andvehicles

283

78

2,550

Land

—

113

—

Software

—

0

—

Other

70

6

631

Share of other comprehensive
income of associates
accounted for using equity
methodDecrease during the year
Total other comprehensive
income

(80)

(161)

(721)

¥(10,725)¥ 6,070$(96,622)

6. Notes to Consolidated Statements of Change in Net Assets
For the year ended March 31, 2019(a) Class and total number of issued and outstanding shares andtreasury stock(d) Loss on sale or disposal of noncurrent assets
Number of Shares

Major components of loss on sale or disposal of noncurrent assets
for the years ended March 31, 2019 and 2018 were as follows:
Thousands of
U.S. dollars

Millions of yen
2018

2019

2019

Buildings and structures

¥329

¥371

$2,964

Machinery, equipment andvehicles

471

917

4,243

Software
Other

7

5

63

417

31

3,757

(e) Environmental expenses
The NGK Spark Plug Group recognized environmental expenses
for the soil improvement costs of an overseas subsidiary as
extraordinary loss in the amount of ¥254 million ($2,288 thousand)and ¥559 million for the years ended March 31, 2019 and 2018,
respectively.

As of March
31, 2018

Increase

Decrease

As of March
31, 2019

Issued andoutstanding shares
Common stock

212,544,820—

3,633,200

208,911,620

Total

212,544,820—

3,633,200

208,911,620

Common stock

2,655,888

1,733,576

3,650,107

739,357

Total

2,655,888

1,733,576

3,650,107

739,357

Treasury stock

Notes: 1) The decrease of 3,633,200 shares of issued and outstanding shares of common
stock was due to the retirement of treasury stock.
2) The breakdown of the increase of 1,733,576 shares of treasury stock was 1,176
shares from the purchase of shares in quantities of less than one share unit,
1,732,400 shares from the repurchase of shares pursuant to the resolution at themeeting of the Board of Directors held on February 26, 2018.
3) The breakdown of the decrease of 3,650,107 shares of treasury stock was
3,633,200 shares from the retirement of treasury stock, 109 shares from the saleof shares in quantities of less than one share unit, and 16,798 shares granted to
Directors by the officer compensation BIP trust.
4) The number of shares of treasury stock as of March 31, 2019 included 416,402
shares held by the officer compensation BIP trust.

(b) Dividendsii) Dividends for which the date of record falls within the fiscal
year under audit but the payment date occurs in the following
fiscal yeari) Cash dividends paid
Resolution
Board ofDirectors
meeting on
April 27, 2018
Board ofDirectors
meeting on
Oct 29, 2018

Type of
SharesTotal
dividends

Commonstock¥6,309million($56,838
thousand)Commonstock¥7,300
million($65,766
thousand)Dividend
per share¥30($270)¥35($315)

Date ofrecordPayment
date

March 31,2018

June 5,2018

September
30, 2018

November30, 2018

Notes: 1) Total cash dividends paid in accordance with the resolution of the meeting of theBoard of Directors held on April 27, 2018 included ¥12 million ($108 thousand) of
cash dividends for the stock held by the officer compensation BIP trust.
2) Total cash dividends paid in accordance with the resolution of the meeting of theBoard of Directors held on October 29, 2018 included ¥14 million ($126 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 ofshares

Source of
Total
Dividend
dividends dividends per share

Board ofDirectors¥7,300meeting on
millionApril 26,
Common Retained ($65,766
2019
stock
earnings thousand)¥35($315)

Date ofrecordMarch 31,2019

June 4,2019

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

Type ofshares

Source of
Total
Dividend
dividends dividends per share

Board ofDirectors
meeting on
April 27,
2018

Common Retainedstockearnings¥6,309millionDecrease

As of March
31, 2018

Issued andoutstanding shares
Common stock

223,544,820—

11,000,000

212,544,820

Total

223,544,820—

11,000,000

212,544,820

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

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.

Payment
date

March 31,2018

June 5,2018

7. Notes to Consolidated Statements of Cash Flows(a) Cash and cash equivalents
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, 2019 and 2018, were as
follows:
Thousands of
U.S. dollars

Millions of yen
2019

2018

2019

Cash and deposits¥48,639¥ 56,235$438,189

Short-term investment securities

34,921

59,905

314,604

Subtotal

83,561

116,141

752,802

Time deposits with deposit termof over 3 months(9,088)(9,556)(81,874)

Short-term investment securities
other than cash equivalents
Cash and cash equivalents(221)(19,205)(1,991)¥74,250¥ 87,378$668,919(b) Assets and liabilities of newly consolidated subsidiaries
through acquisition of shares
Assets acquired and liabilities assumed of CAIRE Inc., CAIRE
Medical Limited, CAIRE Medical Technology (Chengdu) Co., Ltd.
and their 5 subsidiaries, newly consolidated subsidiaries due to theacquisition of shares, as of the acquisition date, related acquisition
cost and net expenditure for the acquisition of shares were as
follows:

Current assets

Millions of yen

Thousands of
U.S. dollars¥11,699$105,396

Noncurrent assets

3,092

27,856

Goodwill

5,517

49,703Current liabilities(3,748)(33,766)

Noncurrent liabilities
Acquisition cost of shares
Cash and cash equivalents of acquiredcompanies
Net cash used for acquisition of acquiredcompanies(b) Dividends¥30

Date ofrecordNote: Total cash dividends paid included ¥12 million of cash dividends for the stock held by
the officer compensation BIP trust.

Payment
date

Note: Total cash dividends paid included ¥14 million ($126 thousand) of cash dividends forthe stock held by the officer compensation BIP trust.

As of March
31, 2017

Resolution(447)(4,027)¥16,113$145,162(2,271)(20,459)¥13,842$124,703

i) Cash dividends paid
Resolution

Type ofsharesTotal
dividends

Dividend
per share

Date ofrecordPayment
date

Board ofDirectors
meeting on
May 9, 2017

Commonstock¥4,456
million¥21

March 31,2017

June 8,
2017

Board ofDirectors
meeting on
Oct 30, 2017

Commonstock¥6,366
million¥30

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 of cash dividends
for the stock held by the officer compensation BIP trust.

89

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201990

About NGK SPARK PLUG

Stories for Value Creation

Information

Notes to Consolidated Financial Statements(b) Fair value of financial instruments

8. Lease Commitments(a) Finance lease transactions
Financing lease transactions without transfer of ownership ofleased assetsi) The components of lease assets were 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 over thelease term and assuming no residual value.

Carrying
value

Fair
value

Difference

At March 31, 2019 and 2018, 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
2019

2018

2019

Due within one year

¥1,168¥ 804$10,523

Due after one year

4,345

2,909

39,144¥5,513¥3,713$49,667

Financial assets:
Cash and deposits¥ 48,639¥ 48,639

Notes and accounts
receivable - trade

96,834

96,834—34,921

34,921

—

6,559

8,617

2,058

¥

—

Short-term investment
securities:

Shares of associates
Available-for-salesecurities
Total(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 ratings inaccordance with its accounting rules and policies. The NGK Spark
Plug Group uses indirect financing from financial institutions suchas correspondent banks and direct financing from financial markets
principally by the issuance of corporate bonds to satisfy short-termand 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 risk ofthese receivables, the NGK Spark Plug Group sets payment terms
according to the credit capability of its customers. In some cases,
the NGK Spark Plug Group receives security deposits in advance.
The NGK Spark Plug Group holds investments in securities suchas negotiable certificates of deposits, debt securities and equity
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 agreements,
in the normal course of business principally 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 arelimited to certain anticipated export sales and import purchases.

47,62447,624—¥234,579¥236,637¥2,058Financial liabilities:
Accounts payable - trade¥ 34,957¥ 34,957

Short-term loans payable

27,587

27,587—

Bonds payable

50,00050,196196

Long-term loans payable *2)

32,98633,04963¥145,530¥145,790

¥ 259

¥

¥

¥

Total

¥

—

(55)

(55)

—

At March 31, 2018:
Cash and deposits

248,532

248,532—

Bonds payable

450,450452,216

1,766Long-term loans payable *2)
Total

$

—

297,171297,739568$1,311,081$1,313,423$ 2,333

$

$

$

(495)

(495)

At March 31, 2019:
Cash and deposits$ 438,189

Notes and accounts receivable- tradeBonds
Negotiable deposits
Other*1) The carrying value of bonds payable includes the current portion.
*2) The carrying value of long-term loans payable includes the current portion.
*3) The value of derivative instruments is shown as a net position.

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 dueto their short-term maturities. The fair value of investment equity
securities is based on quoted market prices. The fair value ofbonds and other securities included in investment securities,
bonds payable and derivative instruments is based on the priceprovided by correspondent financial institutions. The fair valueof long-term loans payable is computed based on the total
amount of principal and interest discounted at an interest rateapplicable to new loans under the same conditions.

$

—

$—

872,378——

Investments—(2) The following securities are not included in the table above
because the fair value was extremely difficult to determine.

1,991

2,991

—

312,613

—

—

—

—

—

$1,625,180$2,991$—(4) Contractual maturities of bank loans and bonds payable atMarch 31, 2019 and 2018 were as follows:
Millions of yen
2019Year ending March 31,

Short-termloans payable

Bonds
payableLong-termloans payable2020¥27,587—¥ 9,9242021—

30,000

4,962

2022

—

—

8,000

2023

—

—

—

2024

—

10,0001002025 and thereafter—

10,00010,000¥Millions of yen¥ 56,235¥ 56,235

93,615¥93,615—

Available-for-salesecurities

59,90559,905—

Shares of associates

6,322

7,903

1,581

Available-for-salesecurities

56,961

56,961

—

2018

2019

—

Short-term investment
securities:

Thousands of
U.S. dollars

Millions of yen

Short-termloans payable

Bonds
payableLong-termloans payable2019¥10,113¥25,000¥9,962

2020

—

—

9,924

2021

—

30,000

4,962

2022

—

—

8,000

2023

—

—

—

2024 and thereafter

—

—

—

Year ending March 31,

Carrying value

Notes and accounts
receivable - trade2019

Investments (equity securities)
in unconsolidated subsidiaries
and associates¥5,552¥6,027$50,018

Unlisted equity securities

3,573

2,369

32,189Thousands of U.S. dollars
2019

Investment securities:

Total¥273,040¥274,621(3) Expected maturities of financial assets at March 31, 2019 and2018, were as follows:¥1,581

Due in one
year or less

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

10,113

10,113—

Bonds payable*1)

55,00055,143

143

Cash and deposits
Notes and accounts receivable- tradeLong-term loans payable *2)
Total
Derivative instruments *3)

32,84832,90254¥130,368¥130,567

¥ 198

¥

¥

¥

247

247

—

Fair
value

Bonds
payableLong-termloans payable

2020$248,532—$89,4052021—

270,270

44,7032022——

72,072Millions of yen

2023

—

—

—

2024

—

90,090901

2025 and thereafter—

90,09090,090¥ 48,639¥ —¥—96,834——$

Investments
Bonds
Negotiable deposits

Carrying
valueYear ending March 31,

Short-termloans payable

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

At March 31, 2019:

Short-term loans payable

Other
Difference

221

332

—

34,700

—

—

—

—

—

¥180,395¥332¥—¥ 56,235¥ —¥—93,615——

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

At March 31, 2019:

Cash and deposits

Financial assets:
Cash and deposits$ 438,189$ 438,189

Notes and accounts
receivable - trade872,378

872,378$—

Notes and accounts receivable- trade—Investments

Short-term investment
securities:

Bonds

9,000

—

—

Negotiable deposits

40,700——Available-for-salesecurities

Other

10,200——¥209,751¥ —¥—Shares of associates
Available-for-salesecurities
Total

NGK SPARK PLUG CO., LTD. Integrated Report 2019

Short-term loans payable

Financial assets:

314,604

314,604—

59,09077,631

18,541

Investment securities:

91$ 314,928

2018
Derivative instruments *3)

9. Financial Instruments$ 314,928

Derivative instruments *3)

Investment securities:(b) Operating lease transactions

Accounts payable - trade

Millions of yen
At March 31, 2019:

Available-for-salesecurities

Thousands of U.S. dollars

Financial liabilities:

The fair value and carrying value of financial instruments at March
31, 2019 and 2018, other than unlisted equity securities for which
the fair value was extremely difficult to determine, were as follows:

429,045

429,045—$2,113,324$2,131,865$18,541

NGK SPARK PLUG CO., LTD. Integrated Report 201992

About NGK SPARK PLUG

Stories for Value Creation

Information

Notes to Consolidated Financial Statements(b) Available-for-sale securities sold during the years ended March
31, 2019 and 2018 were as follows:

10. Investment securities(a) At March 31, 2019 and 2018, the cost and fair value ofavailable-for-sale securities were summarized as follows:

Millions of yen

Millions of yen
2019
Fair andcarrying value

Cost

Unrealized
gains (losses)¥47,257¥11,384¥35,873

Bonds

554

543

11

Other

—

—

—

47,812

11,92735,884Equity securities

34

38

(4)

Bonds

—

—

—

34,70034,700————34,73434,738(4)¥82,546¥46,666¥35,879

With unrealized gains:
Equity securities

Subtotal
With unrealized losses:

Negotiable deposits
Other
Subtotal
Total

Sale of available-for-salesecurities

2019

2018

2019

¥1,425¥1,918$12,838

960

1,117

8,649

With unrealized gains:
Equity securities

Notional
principal
or contract
amounts

Fair value

Valuation
gains (losses)

At March 31, 2019:
Foreign exchange contracts:
Forward contracts to sell

¥14,612

¥(52)

¥(52)

Currency call options

496

(15)

(15)

Currency put options

503

12

¥45,090

Bonds

4,000

3,999

0

Other

7,200

7,200

0

Subtotal

68,162

23,06945,09200(0)Foreign exchange contracts:

12
¥(55)

5,004

5,036

(31)

Forward contracts to sell

¥12,347

¥242

¥242

Negotiable deposits

40,70040,700—Currency call options

2,242

(34)

(34)

Currency put options

1,831

39

3,000

3,000

—

48,705

48,736(31)¥116,867¥71,806¥45,060

Total

39

At March 31, 2019:2019
Fair andcarrying value

Foreign exchange contracts:
Unrealized
gains (losses)

Cost

With unrealized gains:
Equity securities$425,739$102,559$323,180

Bonds

4,991

4,892

99

Other

—

—

—

430,739

107,450

323,279

Subtotal
With unrealized losses:
Equity securities

306

342

(36)

Bonds

—

—

—

312,613

312,613

—

—

—

—

Negotiable deposits
Other
Subtotal
Total

312,919

312,955(36)$743,658$420,414$323,234

Note: For equity investments in nonpublic companies, amounting to ¥3,573 million($32,189 thousand) and ¥2,369 million in the years ended March 31, 2019 and 2018,
respectively, the fair values were not included in equity securities as no quoted market
prices were available and it was deemed extremely difficult to determine the fair values
due to the impossibility of estimating future cash flows.

$2,649Retirement benefit costs

45

94

405

Benefits paid

(8)

(24)

(72)

Contributions paid by theemployer
Balance at March 31

(21)

(22)

(189)

¥310

¥294

$2,793

Reconciliation from retirement benefit obligations and plan assets
to net defined benefit liability:
Thousands of
U.S. dollars

Millions of yen

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

2019

2018

2019

Funded retirement benefit
obligations¥ 51,958¥ 49,558$ 468,090

Plan assets(42,829)(42,265)(385,847)

9,128

7,292

82,234

Unfunded retirement benefit
obligations

21,125

20,150190,315

Total net defined benefit
liability

30,25427,443

272,559

Net defined benefit liability

30,25427,443

272,559

Total net defined benefit
liability¥ 30,254¥ 27,443$ 272,559

Note: Includes those under plans applying the simplified method.

Retirement benefit costs:
Thousands of
U.S. dollars

Millions of yen

Forward contracts to sell

$131,640$(468)$(468)

Currency call options

4,468

(135)

(135)

Currency put options

4,532

108

108
$(495)At March 31, 2019 and 2018, derivative instruments to which
hedge accounting was applied were as follows:
Hedgeditems

Notional
principal
or contract
amounts

Millions of yen
At March 31, 2019:
Interest rate and currency
swaps:(floating rate receipt, fixed
rate payment)(U.S.$ receipt, Japanese
yen payment)¥22,886¥12,962¥—

Long-termbank loans¥32,848¥22,886

¥—

2018

2019

¥3,659¥ 3,765$32,964

Interest cost

405

418

3,649

Thousands of
U.S. dollars

Expected return on plan assets(891)(1,130)(8,027)

Net actuarial loss amortization

907

1,661

8,171

2019

Past service cost amortization

10

12

90

Balance at April 1¥69,242¥68,909$623,802

Service cost

3,659

3,765

32,964Retirement benefit costs basedon the simplified method

Interest cost

405

418

3,649

Actuarial gain (loss)

2,083(1,492)

18,766

Benefits paid

(2,781)(2,002)(25,054)

Other
Balance at March 31

(19)

(355)

(171)

¥72,591¥69,242$653,973

Movement in plan assets, except for plans applying the simplified
method:Thousands of
U.S. dollars

2019

2018

2019

¥42,094¥39,893$379,225

Expected return on plan
assets

891

1,130

8,027

Actuarial (loss) gain

(304)

424

(2,739)Balance at April 1

Contributions paid by theemployer

1,810

2,074

16,306

Benefits paid

(1,929)(1,261)(17,378)

Other

Long-termbank loans

2019

2018

Millions of yen

Contract
amounts
due after
one year Fair value

Service cost

2019

¥247
Thousands of U.S. dollars

Thousands of U.S. dollars

$—

¥247

(a) Defined benefit plans

Bonds

Subtotal$116,775

2019

¥294

Millions of yen
At March 31, 2018:

Other$206,180

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.
Employee retirement benefits for the years ended March 31,
2019 and 2018 were as follows:¥11,870

Equity securities

Long-termbank loans

At March 31, 2019 and 2018, derivative instruments, except forderivative instruments accounted for by hedge accounting, werestated at fair value and recognized for valuation gains and losses incurrent earnings as follows:

0

2018

2019
Balance at April 1

12. Employee Retirement Benefits¥ 56,960

With unrealized losses:(floating rate receipt, fixed
rate payment)(U.S.$ receipt, Japanese
yen payment)

Thousands of
U.S. dollars

Millions of yen

11. Derivative Instruments—

0Millions of yen

Cost

Interest rate and currency
swaps:(c) Loss on the write-down of available-for-sale securities was notmaterial for the years ended March 31, 2019 and 2018.

Loss on sales

2018
Unrealized
gains (losses)

At March 31, 2019:

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).

Gain on sales

Millions of yen
Fair andcarrying value

Thousands of
U.S. dollars

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

Thousands of U.S. dollars

Balance at March 31

84

(166)

757

¥42,647¥42,094$384,207

Total

45

94

405

¥4,138¥ 4,821$37,279

Remeasurements of defined benefit plans included in othercomprehensive income (before adjusting for tax effects):
Thousands of
U.S. dollars

Millions of yen
2019

2018

2019

Past service costs

¥

¥

$

Actuarial gain (loss)

1,490(3,579)13,423¥1,479¥(3,593)$13,324

Total

(11)

(13)

(99)

Remeasurements of defined benefit plans included in accumulated
other comprehensive income (before adjusting for tax effects):
Thousands of
U.S. dollars

Millions of yen
Past service cost yet to berecognized
Actuarial losses yet to berecognized
Total

2019

2018

2019

¥

¥

$

(39)

(28)

(351)

6,047

4,557

54,477¥6,007¥4,528$54,117At March 31, 2018:
Interest rate and currency
swaps:(floating rate receipt, fixed
rate payment)(U.S.$ receipt, Japanese
yen payment)

93

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 201994

About NGK SPARK PLUG

Stories for Value Creation

Information

Notes to Consolidated Financial Statements

Plan assets:(1) Plan assets comprise:

Deferred tax liabilities:
2019

2018

Bonds

29%

29%

Equity securities

12%

19%

General life insurance accounts

26%

26%

Alternative investments

16%

14%

Other

17%

12%

100%

100%

Total

Notes: 1) Alternative investments are mainly investments in hedge funds and infrastructure
funds.
2) As of March 31, 2019 and 2018, 4% and 7% 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, 2019 and 2018
were as follows:
2019

2018

Discount rate

Mainly 0.2%

Mainly 0.4%

Long-term expected rate of return

Mainly 1.82% Mainly 1.82%

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

(b) Defined contribution plans
For the years ended March 31, 2019 and 2018, the amount of
required contribution to the defined contribution plans of theoverseas consolidated subsidiaries was ¥366 million ($3,297
thousand) and ¥295 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,
2019 and 2018 were as follows:
Thousands of
U.S. dollars

Millions of yen
2019

2018

Net operating loss
carryforwards

95

Unrealized gains on availablefor-sale securities(10,996)¥ 4,084$ 44,541(99,063)(3,734)(3,357)(33,640)

Depreciation(1,145)(798)(10,315)

(636)

(294)

(5,730)

Other
Total deferred tax liabilities(16,512)(18,257)(148,757)

Net deferred tax assets¥ 11,291¥ 7,502$ 101,721

Note: Carryforward tax loss and its deferred tax assets by
expiration periods
Carryforward
tax loss *1

Valuation
reserve

Net deferred
tax assets

Millions of yen
2020

¥ 261

(55)

¥ 205

2021

263

—

263

2022

206

—

206

2023

—

—

—

2024

564

—

564

¥

2025 and beyond

3,647(3,617)29

Total¥4,944¥(3,673)¥1,271*2

2020$ 2,351(495)$ 1,847

2021

2,369

—

2,369

2022

1,856

—

1,856

2023

—

—

—

2024

5,081

—

5,081

Thousands of U.S. dollars$

2025 and beyond

32,856(32,586)

261

Total

$44,541$(33,090)$11,450*2*1) Carryforward tax loss shown in the above table is after multiplying the statutory tax rate.
*2) Regarding net deferred tax assets to the carryforward tax loss, a valuation reserve was
not recognized for the portion deemed to recoverable based on estimates of futuretaxable income.

For the years ended March 31, 2019 and 2018, 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.
Percentage ofpretax income (%)
30.6

30.7

Permanently nondeductible expenses

0.3

0.3

Increase (decrease) due to:

Impairment loss on fixed
assets

3,762

4,505

33,892

Tax exempt income

(0.9)

(0.8)

Net defined benefit liability

9,370

8,476

84,414

Tax credits for research and development
expenses

(3.4)

(4.7)

Differences between Japanese and foreign tax
rates

(0.8)

(1.0)

Changes in valuation allowance

0.3

(1.8)

Depreciation

2,375

2,481

21,396

Accrued expenses

4,400

4,312

39,640Inventories

3,487

2,921

31,414

Intercompany profits

6,089

5,457

54,856

Other

2,623

2,167

23,631Retained earnings of overseas consolidated
subsidiaries

0.6

0.7

Deferred tax assets - subtotal

37,05334,407

333,811

Loss on violation of antitrust law

—

2.0

Other

0.6

0.2

27.3

25.6

Valuation reserve forcarryforward tax loss

(3,673)

Valuation reserve fordeductible temporary
differences(5,576)—(50,234)

Valuation reserve - total(9,250)(8,647)(83,333)

Total deferred tax assets

27,80325,759250,477—

NGK SPARK PLUG CO., LTD. Integrated Report 2019

(33,090)

Effective income tax rate(a) Overview of the combination(1) Names and businesses of the acquired companies
Name:
CAIRE Inc.
Chart BioMedical Limited
Chart BioMedical (Chengdu) Co., Ltd.
Business: Manufacture and sale of oxygen concentrators(2) Major reasons for the combination
We plan to further expand the oxygen concentrator businessin the medical field where we expect growth in the future. Byacquiring the businesses of the acquired companies, we aim to
expand our business in the medical field and acquire new sales
channels and customers.
(3) Date of the combination
20 December 2018 (Share acquisition date)
31 December 2018 (Deemed acquisition date)(4) Legal form of the combination
Acquisition of shares(5) Name of the acquired companies after the combination
Chart BioMedical Limited and Chart BioMedical (Chengdu) Co.,Ltd have been renamed to CAIRE Medical Limited and CAIRE
Medical Technology (Chengdu) Co., Ltd, respectively.
(6) Ratio of voting rights acquired
100%(7) Main reason for determining the acquiring company
The Company acquired 100% of the voting rights by acquiring
shares of CAIRE Inc, CAIRE Medical Limited and CAIRE Medical
Technology (Chengdu) Co., Ltd. for cash.
(b) Period of operation of the acquired companies included in the
consolidated financial statements
From January 1, 2019 to March 31, 2019.
(c) Acquisition cost of the acquired companies
Consideration for acquisition$143.1 million

Acquisition cost$143.1 million

Cash(d) Expenses for the acquisition

2018

2019
Combined Japanese statutory tax rate

¥ 4,944(13,807)

Retained earnings of overseas
consolidated subsidiaries

2019

Deferred tax assets:(f) Assets acquired and liabilities assumed as of the date of thebusiness combination

14. Business combinations

Advisory costs ¥756 million ($6,811 thousand)(e) Amount of goodwill, reason for recognition and amortization
method and period(1) Amount of goodwill¥5,517 million ($49,703 thousand)
The amount of goodwill was provisionally calculated because
the allocation of the acquisition cost had not been completed
as of the end of the fiscal year.
(2) Reason for recognition
The acquisition cost exceeded the net amount of assets
acquired and liabilities assumed.
(3) Amortization method and period
Straight-line amortization over 8 years.

Current assets

Millions of yen

Thousands of
U.S. dollars¥11,699$105,396

Noncurrent assets

3,092

27,856

Total assets

14,791

133,252

Current liabilities

3,748

33,766

Noncurrent liabilities
Total liabilities

447

4,027

¥ 4,195$ 37,793(g) Purchase price allocation
As the purchase price allocation had not been completed asof March 31, 2019, the Company has been making provisional
accounting treatment based on the information available at that
time(h) Estimated impact on the consolidated financial results if
the business combination had been completed as of the
beginning of the fiscal year (April 1, 2018)
A description is omitted as it is difficult to reasonably calculate theestimated amount in the current consolidated fiscal year. The note
has not been audited by auditors.
15. Net Assets
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 price of the
new shares as additional paid-in capital, which is included in capitalsurplus.
Under Japanese Corporate Law (the “Law”), in cases in which
a dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% ofcommon stock over the total of additional paid-in capital and 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.
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, 2019 and 2018, 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 ($52,586 thousand) at March 31,
2019 and 2018, 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 and regulations.

NGK SPARK PLUG CO., LTD. Integrated Report 201996

About NGK SPARK PLUG

Stories for Value Creation

Information

Notes to Consolidated Financial Statements(d) Related information

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.
• In April 2018, the segment management division of medical, environmental and energy related products from “Ceramics” in Technicalceramics was changed to “Other”. Segment information for the year ended March 31, 2018 below is based on the reportable segments of
the year ended March 31, 2019.

2018

2019

Japan

¥ 66,278¥ 67,467$ 597,099

North America

118,299

108,259

1,065,757

Europe114,563

107,052

1,032,099

Asia

83,847

81,468755,378

Accounting methods used for 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.

2019

Japan

¥176,006¥154,401$1,585,640

Asia

31,30020,923281,982

Other area

21,412

19,777

192,901¥228,720¥195,102$2,060,541

Operating revenue - net sales:

Other area(b) Methods to determine net sales, income or loss, assets and other items by reportable business segment

2018(3) Major customers
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, 2019 or 2018.

Thousands of
U.S. dollars

2019

2019
Property, plant and equipment:(2) Geographic information
Geographic areas as of and for the years ended March 31, 2019and 2018 were as follows:
Millions of yen

Thousands of
U.S. dollars

Millions of yen(1) Products and services
Information on products and services is the same as that alreadyreported in (c) Information about reportable segment profit andloss, segment assets and other material items. Therefore, theinformation is omitted here.

42,02345,663

378,586¥425,013¥409,912$3,828,946(e) Information about impairment of fixed asset by businesssegment.
No items to report.

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

(f) Information about goodwill as of and for the years ended March 31, 2019 and 2018 was as follows:(c) Reportable segment profit and loss, segment assets and other material items

Reportable segments

Information about reportable segments as of and for the years ended March 31, 2019 and 2018 was as follows:

Technical ceramics
Automotive
components

Reportable segments
Technical ceramics
Automotive
components

Semiconductor

Ceramics

Total Technicalceramics

Total

Other

Total

Adjustments

Consolidated

For the year 2019:
External customers¥356,680¥17,075¥40,677¥57,753¥414,433¥10,579¥425,013¥—¥425,013

Intersegment sales

—

—

—

—

—

—

—

—

—

356,680

17,07540,67757,753

414,433

10,579425,013—425,013

Segment income (loss)¥ 61,196¥ (1,554)¥ 2,796¥ 1,241¥ 62,438¥ (3,765)¥ 58,672¥—¥ 58,672

Segment assets¥510,429¥25,471¥59,696¥85,168¥595,598¥33,371¥628,970¥—¥628,970

Other items:
Increase in property, plant andequipment and intangible assets

Total Technicalceramics

Total

Other

Total

¥ 19,416¥ 1,207¥ 2,657¥ 3,864¥ 23,281

45,614

3,817

6,072

9,890

55,504¥683¥ 23,964¥—¥ 23,964

1,083

56,587—56,587

March 31, 2019
Amortization

¥—

¥—

¥153

¥153

¥153

¥ 169

¥ 323

¥—

¥ 323

Balance

—

—

153

153

153

5,268

5,422

—

5,422

Amortization

¥—

¥—

¥153

¥153

¥153

Balance

—

—

307

307

307

¥

¥348,198¥17,901¥37,650¥55,551¥403,750¥ 6,162¥409,912¥—¥409,912

—

—

—

—

—

—

—

—

—

17,901

37,65055,551

403,750

6,162

409,912—409,912Segment income (loss)¥ 68,098¥ (2,571)¥ 3,650¥ (1,079)¥ 69,177¥ (1,897)¥ 67,279¥—¥ 67,279

Segment assets¥504,231¥28,495¥54,986¥83,482¥587,713¥12,258¥599,972¥—¥599,972

Other items:
Depreciation
Increase in property, plant andequipment and intangible assets¥ 17,429
29,525¥730¥ 2,221¥ 2,952¥ 20,382

2,452

4,893

7,346

36,871¥538¥ 20,920¥—¥ 20,920

719

37,591—

37,591

Operating revenue - net sales:

Total net sales

¥ 153

—

307

Amortization$—$—$1,378$1,378$1,378$ 1,523$ 2,910$—$ 2,910

Balance

—

—

1,378

1,378

1,378

47,45948,847—

48,847(g) Information about negative goodwill by business segment.

17. Information on Related Parties(a) Calculation of net assets per share
Thousands of
U.S. dollars$3,213,333$153,829$366,459$520,297$3,733,631$ 95,306$3,828,946$—$3,828,946

—

—

—

—

—

—

—

—

—

3,213,333

153,829

366,459

520,297

3,733,631

95,306

3,828,946—

3,828,946

Segment income (loss)$ 551,315$ (14,000)$ 25,189$ 11,180$ 562,505$ (33,919) $ 528,577$—$ 528,577

Segment assets$4,598,459$229,468$537,802$767,279$5,365,748$300,640$5,666,396$—$5,666,396$ 174,919$ 10,874$ 23,937$ 34,811$ 209,739

$

6,153

$ 215,892$—$ 215,892

410,937

34,38754,70389,099500,036

9,757

509,793—509,793

2019

2018

2019

¥401,683¥388,115$3,618,766

Amount deducted from total net
assets

2,431

2,454

21,901

Amount which represents
noncontrolling interests(2,431)(2,454)(21,901)

Net assets allocated to common
stock399,251385,6613,596,856

Number of shares of common
stock outstanding at fiscal yearend used in calculation of net
assets per share (thousands)

208,172

209,888—

Total net assets

No items to report.
18. Per Share Information
Basic and diluted net assets per share and earnings per share forthe years ended March 31, 2019 and 2018 were as follows:Yen

For the year 2019:

Intersegment sales

¥—

307

Thousands of U.S. dollars

Thousands of U.S. dollars

External customers¥ 153

Millions of yen

348,198

Total net sales——

March 31, 2019

Operating revenue - net sales:Intersegment sales

Consolidated

No items to report.

For the year 2018:
External customers

Adjustments

March 31, 2018

Operating revenue - net sales:

Depreciation

Ceramics

Millions of yen
Millions of yen

Total net sales

Semiconductor

U.S. dollars

2019

2018

2019

Basic net assets per share¥1,917.89¥1,837.46$17.28

Basic earnings per share

205.58209.37

1.85

Other items:
Depreciation
Increase in property, plant andequipment and intangible assets

Notes: The “Other” segment represents businesses such as medical, environmental and energy related products, material sales and welfare program service which are not included in reportablesegments.

97

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NGK SPARK PLUG CO., LTD. Integrated Report 201998

About NGK SPARK PLUG

Notes to Consolidated Financial Statements

20. Borrowings
Thousands of
U.S. dollars

Millions of yen
2019

2018

2019

¥ 42,813¥ 44,335$385,703———

Profit attributable to common
stock owners of the parent

42,81344,335

385,703

Weighted average number ofshares of common stock(thousands)

208,255

211,758—

Amount not attributable toshareholders of common stock

Note: 1) As the Company had no dilutive shares at March 31, 2019 or 2018, the Company
did not disclose diluted net income per share for the years ended March 31, 2019and 2018.
2) Shares held by the officer compensation BIP trust are included in treasury stockand deducted from the number of shares at the fiscal year-end and the weighted
average number of shares. The number of shares held by the officer compensation
BIP trust was as follows.
Number of shares at the fiscal year end (thousands)
Weighted average number of shares (thousands)

2019

2018

416
419

433
288

19. Significant subsequent events
Issuance of unsecured straight bonds
The Company issued the tenth series unsecured straight bonds
and the eleventh series unsecured straight bonds on June 20,2019.

(a) Bonds payable at March 31, 2019 and 2018 comprised thefollowing:

1. Total amount of issue¥20,000 million ($180,180 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 20, 2019

6. Maturity dateJune 20, 2024

7. Principal redemption method Lump-sum redemption at maturity
Capital investment and repayment of borrowings

Eleventh series unsecured straight bonds
1. Total amount of issue¥10,000 million ($90,090 thousand)

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

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

4. Interest rate

0.270% per annum

5. Payment dateJune 20, 2019

6. Maturity dateJune 20, 2029

7. Principal redemption method Lump-sum redemption at maturity
8. The purpose of bond issue

Thousands of
U.S. dollars

Millions of yen
2018

2019
0.391% unsecured bonds due
September 2018

2019

—

¥25,000

0.296% unsecured bonds due
October 2020

30,00030,000270,2700.110% unsecured bonds due
June 2023

10,000—90,090¥$—0.370% unsecured bonds due
June 2028

10,000—90,090

Total¥50,000¥55,000$450,450

Note: The aggregate annual maturities of bonds payable after March 31, 2019 were as
follows:

Year ending March 31,

Millions of yen

2020

¥

—

Thousands of
U.S. dollars
$

—

2021

30,000270,270
—

2022

—

2023

—

—

2024

10,00090,090(b) Loans payable and lease obligations at March 31, 2019 and2018 comprised the following:

Tenth series unsecured straight bonds

8. The purpose of bond issue

Information

Independent Auditor’s Report(b) Calculation of earnings per share

Profit attributable to owners of
the parent

Stories for Value Creation

Thousands of
U.S. dollars

Millions of yen
2019

2018

2019

Short-term loans payable withinterest rate of 1.66%¥27,587¥10,113$248,532

Current portion of long-termloans payable with interest rateof 0.18%

9,924

9,962

89,405Current portion of leaseobligations

52

43

468

Long-term loans payable (except
portion due within one year)with interest rate of 0.11%

23,062

22,886

207,766

Lease obligations (except portion
due within one year)

129

111

1,162

Other

—

—

—

Total

¥60,755¥43,115$547,342

Notes: 1) Interest rates shown are weighted average interest rates for the balance
outstanding at March 31, 2019.
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, 2019 were as follows:

Capital investment and repayment of borrowings

Long-term loans payableYear ending
March 31,

Thousands ofMillions of yen U.S. dollars

Lease obligations
Millions of yen

Thousands of
U.S. dollars

2021¥4,962$44,703

¥57

$514

2022

8,000

72,072

39

351

2023

—

—

26

234

2024

100

901

6

54

21. Asset Retirement Obligation
Information is omitted due to immateriality.

99

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NGK SPARK PLUG CO., LTD. Integrated Report 2019100

About NGK SPARK PLUG

Global Network
Global Network

Stories for Value Creation

Information(As of March 31, 2019)

NGK SPARK PLUGS (THAILAND) CO., LTD.
NGK SPARK PLUGS (UK) LTD.

NGK SPARK PLUG EUROPE GmbH

SIAM NGK SPARK PLUG CO., LTD.

EUROPE TECHNICAL CENTERNGK SPARK PLUGS (ASIA) CO., LTD.

WELLS VEHICLE ELECTRONICS, L.P.

CHANGSHU NGK SPARK PLUG CO., LTD.
NTK TECHNICAL CERAMICS
KOREA CO., LTD.
WOOJIN INDUSTRY CO., LTD.

LLC NGK SPARK PLUGS(EURASIA)NGK SPARK PLUGS (FRANCE)S.A.S. (HEADQUARTERS)NGK SPARK PLUGS (U.S.A.), INC.
(HEADQUARTERS)
U.S.A. TECHNICAL CENTERWOOJIN TECHNICAL CENTERNGK SPARK PLUG MIDDLE
EAST FZENGK SPARK PLUGS CANADA LIMITEDNTK TECHNOLOGIES, INC.

NGK SPARK PLUGS(INDIA) PVT. LTD.

NGK SPARK PLUGS (FRANCE)S.A.S. (FRANCE FACTORY)NGK SPARK PLUG
(SHANGHAI) TRADING CO., LTD./NGK SPARK PLUG
(SHANGHAI) CO., LTD.

NGK SPARK PLUGS(U.S.A.) HOLDING, INC.

HEADQUARTERS

NGK SPARK PLUGS (U.S.A.), INC.
(WEST VIRGINIA FACTORY)TAIWAN NGKSPARK PLUG
CO., LTD.

CAIRE INC.

BUJIAS NGK DE MEXICO S.A. DE C.V.

NGK SPARK PLUGS MALAYSIA BERHADPT NGK BUSI INDONESIA

HeadquartersNGK SPARK PLUGS(PHILIPPINES), INC.

Manufacturing &Sales Organization
Sales Organization
NGK SPARK PLUGS (VIETNAM) CO., LTD.

Technical Center
Holding Company

NGK SPARK PLUGS SA (PTY) LTD.

Domestic Network

CERAMICA E VELAS DE IGNICAONGK DO BRASIL LTDA.

NGK SPARK PLUG (AUSTRALIA) PTY. LTD.

BRASIL TECHNICAL CENTER(As of March 31, 2019)SAPPORO SALES OFFICE
TAKASAKI LIAISONOFFICENAGANO LIAISONOFFICENTK CERATEC CO.,LTD.
SENDAI SALES OFFICE

KAMIOKA CERAMIC CO., LTD.
CS NAKATSUGAWA CO., LTD.
Spark Tec TONO Co., LTD.
UTSUNOMIYA LIAISON OFFICESAITAMA LIAISON OFFICEKOMAKI PLANT
CERAMIC SENSOR CO., LTD.
Spark Tec WKS Co., LTD.

TOKYO BRANCHNTK CERAMIC CO., LTD.
ATSUGI LIAISON OFFICEHIROSHIMA SALES OFFICEHAMAMATSU LIAISON OFFICEFUKUOKA SALES OFFICEMIYANOJO PLANT

HEADQUARTERS & NAGOYA PLANTNICHIWA KIKI CO., LTD.
ISE PLANTNITTOKU DENSHI CO., LTD.

Headquarters / Plant

NANSEI CERAMIC CO., LTD.

NITTOKU ALPHA SERVICE CO., LTD.

Sales Office

OSAKA SALES OFFICE101

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NITTOKU SMILE CO., LTD.
SHARING FACTORY CO., LTD.

Group Company
NGK SPARK PLUG CO., LTD. Integrated Report 2019102

About NGK SPARK PLUG

Corporate Profile and Stock Information /Independent Verification Report
Corporate Data (As of March 31, 2019)

Breakdown of shareholders by type (As of March 31, 2019)

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

Treasury Stock
0.16%(322 thousand shares)

October 1936
Non-Consolidated: 5,767 (March 2019)
Consolidated:
15,994 (March 2019)

Established
Number of Employees(As of March 31, 2019)

20,00015,00013,197

Individuals and Others
8.92%(18,628 thousand shares)

14,524

14,96815,322

15,994

Independent Verification Report

Trust Services
23.80%(49,727 thousand shares)

Breakdown ofshareholders
by typeSecurities Companies
1.33%(2,779 thousand shares)

Other Corporations in Japan
6.68% (13,964 thousand shares)(Number of employees)

Information

Financial Institutions
25.61%(53,495 thousand shares)

Foreign Corporations
and Investors
33.50%(69,992 thousand shares)

Number of employees at work (Consolidated)

Stories for Value Creation

Major Shareholders (As of March 31, 2019)10,000Name of shareholders

5,000
0

2014

2015

2016

2017

2018

(FY)

Number of Shares and Shareholders (As of March 31, 2019)

Shares held
(thousands)

Ownership ratio(%)

Meiji Yasuda Life Insurance Company

16,794

8.05

The Dai-ichi Life Insurance Company, Limited

16,752

8.03

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

14,2906.85

Japan Trustee Services Bank, Ltd. (Trust Account)

10,456

5.01

National Mutual Insurance Federation ofAgricultural Cooperatives

7,964

3.81

MUFG Bank, Ltd.

4,380

2.09

The Master Trust Bank of Japan, Ltd. (for Toyota
Motor Corporation)

3,929

1.88

Paid-in Capital
Total number of authorized shares
Total number of issued shares
Listed market

47,869 million yen
390,000,000
208,911,620
First section of the Tokyo Stock
Exchange and Nagoya Exchange

Shareholder registry administrator

Mitsubishi UFJ Trust and Banking
Corporation

The nomura Trust and Banking Co.,Ltd

3,872

1.85

KPMG AZSA LLC
15,235

Nippon Life Insurance Company

3,563

1.70

TOTO Ltd.

3,433

1.64

Accounting auditor
Number of shareholders*The percentage of total shares is calculated without this treasury stock.

Stock price/trading volume (As of June 30, 2019)
Stock price of NGK SPARK PLUG

The Nikkei 225
(Yen)

(Yen)

4,000

25,0003,200

20,0002,400

15,0001,600

10,000

800

5,000

0

0

■

Trading volume(Million shares)

50
40
30
20
10
0
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
2013
2017
2018
2015
2016
2014
2019
(Year)*Trading volume does not include trades via the ToSTNet system.

103

NGK SPARK PLUG CO., LTD. Integrated Report 2019

NGK SPARK PLUG CO., LTD. Integrated Report 2019104