2014.6.10.

TOYO TIRE & RUBBER CO., LTD
Akira Nobuki, President

1. Formulation of New Mid-term Business Plan
(Introduction)
2. Review of Mid-term ‘11
3. New Mid-term Business Plan “Mid-term ‘14”Ⅰ）Positioning
Ⅱ）Business Targets
Ⅲ）Business Strategy
Ⅳ）Basic Strategy
4. Business Policy
Business plans and projected results described in the document were created based on projection of
the future economic climate as of this point in time. Actual performance may vary due to a variety
of factors. This document makes no assurance of the Company’s future performance.

1. Formulation of New Mid-term Business Plan
Background of New Mid-term Business Plan
■Mid-term ’11 Progress Status
 “Vision 2020” and “Mid-term ‘11” announced in 2011
 2015 target of 30 billion yen operating income & 7.5% operating marginachieved in 2013

 2015 target of net sales of 400 billion yen expected to be achieved in ‘14■Changes in environment during Mid-term ‘11
 Ex.：Correction of influencing factors/stabilization(exchange rate and raw material price conditions) Ex.：Changes to global economic map (slowdown of growthof developing nations, economic boost in N. America) In.：Improved market responsiveness (expansion of
supply platform, injection of core products)
 In.：Launch of new management structure■Business significance of New Mid-term Business Plan formulation
 Change of mentality from “Survival” to “Sustainable”
 Promote understanding of Company’s unique growth scenario andpositional presence Declaration of intent and commitment to meeting challenges on
new business stage3

2. Review of Mid-term ‘11〔Tire Business〕
Mid-Term ’11
FY2015 Target

Mid-term ’11 Business Strategy

Sales

310.0 billion yen

 Innovation of market & brand strategy

Operating
Profit24.0 billion yen Develop the world’s best embodiment of world’s
premier environmentally friendly

OperatingMargin7.7％

 Establishment of optimal supply system

 Establish proprietary brand strategy

Primary initiatives during period from ‘11 to
‘13








Opened new plants in China and Malaysia (implementing A.T.O.M.
technology)
Completed third expansion of North American plant; started fourth
expansion
Further expanded company’s two top brands: TOYO TIRES & NITTO
Developed new business in ASEAN, Russia, and Eastern Europe markets(establishment of sales subsidiaries, etc.)
Focused on expanding tire sales in North America for SUV, CUV andpickup trucks
Established “Nano Balance Technology” new design platform technology
Launched NANOENERGY fuel-efficient flagship tire series in Japan andEuropeFY2013
ActualSales
Operating
ProfitOperatingMarginFY2014
Outlook

289.7

317.5

billion yen

billion yen

33.8

36.8

billion yen

billion yen

11.7％

11.6％

Note) A.T.O.M.: a new proprietary system that achieves compact, non-skill-dependent
automated tire manufacturing42. Review of Mid-term ‘11〔DiverTech Business〕
Mid-Term ’11
FY2015 Target

Mid-term ’11 Business Strategy
 Expansion of automotive parts business Growth in Asia of urethane business Overseas expansion of railway car parts
business
 Embodiment of world’s premier environmentallyfriendly technology

Sales

90.0 billion yen

Operating
Profit

6.0 billion yen

OperatingMargin6.7％

FY2013
ActualPrimary initiatives during period from ‘11 to
‘13







Start of development of overseas business platform(Establishment of manufacturing & sales bases: China,
Thailand and Mexico)Start of manufacturing of OA devices and components in
Thailand
Establishment of Chinese joint venture company for railway
car components
Launch to market of heat-insulating rigid urethane foam forbuildings (Aitas)
Launch to market of low-GWP spray rigid urethane foaming
agentNoe）GWP：Global Warming Potential

Sales
Operating
ProfitOperatingMarginFY2014
Outlook

80.5

82.5

billion yen

billion yen

2.6

3.2

billion yen

billion yen

3.2％

3.9％
5

2. Review of Mid-term ‘11〔Corporate Function〕
Mid-term ’11 Efforts

Dec. 2013
Opened new R&D center(Kawanishi)

Evolution of CSR initiatives
Prompt response to globalization
Corporate innovation
Creation of new technologies and production
systems for society in near-future Operation of new R&D centerPrimary initiatives during period from ‘11 to ‘13 Formulation and activation of global charter of corporate behavior and code of conduct
 Enhancement of compliance framework (Establishment of responsible person andassessment of internal controls)
 Formulation of BCP at primary sites in Japan and promotion within company group, promotionof BCM Efforts to reduce costs through LCC procurement
 Bolstering of business strategy functions & personnel strategy functions
 Establishment of new R&D Center “Toyo Tires Basic Technology Center ”
 Efforts to “bolster “corporate strength through promotion committee Realization of new factories that minimize energy use and emphasize the environment6

2. Review of Mid-term ‘11〔Mid-term ’11 targets achieved ahead of schedule〕
Mid-term Business Plan
ActualOutlookPlan ’11
Assumedexchange rate

1US$=86 yen
1€=113 yen

3,702

3,205

O.P. Ratio

6,000

4,000

2,911

Sales
O.P.

4,000

Vision’20

129

157

372

400

600

300

FY2011FY2012FY2013

FY2014FY2015

FY2020

4.0%

5.4%

10.0%

10.0%

7.5%

10.0%

※Due to change in fiscal year-end, companies in Japan’s fiscal year ending December 31, 2012 isfor 9-month from April 1, 2012 to December 31, 2012.

7

3.New Mid-term Business Plan ‘14
Ⅰ. Positioning of New Mid-term Business Plan

Coursefor
Corporate
GrowthVision ’20
Long-Term Vision

Mid-Tem Business Plan

Brand Statements

FoundationforCompany’s
Continuance

Corporate Philosophy
Corporate Mission
Statements

Mid-Term
Business Plan ’14
driven to perform
Pursuit of top performance
A Commitment to creating New
Value through Innovation in
Advanced Proprietary Technologies
For each of us to give our bestwhere we work, so that ourcustomers will always have a better
product at a better price, more
today than yesterday.

8

3.New Mid-term Business Plan ‘14
Ⅰ. Formulation of New Mid-term Business Plan

“Vision 2020” is the long-term vision for the Toyo Tires Group in 2020

100th
anniversary

Business policy and new MidMid-term Plan’14
term Business Plan for the 3（2014-2016）
year period through 2018
Redesign of a new mid-term business plan having
achieved FY2015 targets ahead of schedule

Mid-term Plan’11 Milestones to Vision 2020（2011-2015） 5-year mid-term business plan

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2045
9

3.New Mid-term Business Plan ‘14
Ⅱ. New Mid-term Business Plan Mid-term’14 business targets
FY2016
Sales 470.0 Billion yen /O.P.52.0 Billion yen
Business Target O.P. ratio 11.1％ ROA more than 10％
Mid to Long-term Business Plan
ActualAssumedexchange rate

Sales

O.P.

O.P. Margin

Vision ’20

Mid-term Plan’14
1US$=100 yen
1€=135 yen

3,702

4,700

6,000

4,000

372

400

FY2013

FY2014

10.0%

10.0%

520
600
FY2015FY2016FY2018FY202011.1％

More than
10%

More than 10%

Secure an operating margin exceeding 10% and aim
at further business expansion

10

3.New Mid-term Business Plan ‘14
Ⅲ. New Mid-term Business Plan Business Strategy〔Tire Business〕－1）Business challenges, Mid-term ’14 targets
and policies－2）Product strategy－3）Market strategy－4）Brand strategy－5）Supply strategy－6）Technology strategy〔DiverTech Business〕 －1）Business challenges, Mid-term ’14 targets
and policies－2）Business strategy for each business unit
－3）Creation of new businesses

Ⅳ. New Mid-term Business Plan underlying strategy〔Corporate Function〕－1）Mid-term ’14 policies－2）ESG Policy(Environment/Society/Governance)
11－Ⅲ）New Mid-term Business Plan Business Strategy〔Tire Business〕－1）Business challenges, Mid-term ’14 targets and policies
Business challenges
for Mid-term ‘14

Business environment North American market: tire demand on the upswing
 Emerging markets: mainly low-priced products atpresent
 Japan & Europe: growth of environmentally friendly
products expected Commoditization of passenger vehicle tires due topowerful emergence of developing nations
 Increase of light car sales & registrations in theJapanese market

Mid ’14 (2016) Numerical Targets

Sales

380 billion yen

Operation
Profit46 billion yen

O.P. Margin

12.1％








Bolstering of own portfolio
Speedy reinforcement of supply force
Enhanced promotion of salesforce andbrand strategy
Establishment of differentiating
technology
Strengthening of product and costcompetitiveness
Development of new globally
responsive methodologies

Mid ’14 Business Policy

 Establish firm brand position in SUV/CUV
market, a strength of Toyo Tires
 Realize differentiating technology inorder to achieve top-class productcompetitiveness Strengthen product development
capacity in truck & bus tire(TBR)
category
12－Ⅲ）New Mid-term Business Plan Business Strategy〔Tire Business〕－2）Product strategy①

Fortify revenue base by optimizing product mix andexpanding sales
In the global market, aggressively
boost sales in the SUV/CUV/pickup truck
category, a strength of the company,and further solidify the company’s
unique presence
FY2016FY2013〔Global sales ratio〕
SUV/CUV/pick-up trucks

32％

40％

※Sales Volume：45％ up（2016 plan/comparison to 2013 ）13
13－Ⅲ）New Mid-term Business Plan Business Strategy〔Tire Business〕－2）Product strategy②

Strengthen product development capacity
in truck & bus tire(TBR) category
Establish position astire maker with superior
technological advantage◆Achieve top-class product competitivenessthrough differentiating technology
 Development of high-performance, high-quality products
using Nano Balance Technology⇒ Respond with high-level performance and quality to demand bysociety for industrial applications

 Development of business solution sales Target development regions：N. America, Japan, China,
Middle East
⇒ SmartWay verification products for U.S., launch of new products in each14
market14－Ⅲ）New Mid-term Business Plan Business Strategy〔Tire Business〕－3）Market strategy

Enhancement of market mix adapted to market trends①N. America

Markets with bolstered supply capacity and sales force
as sources of income②Japan/Europe/M.E

Markets in which foundation is developed in medium
term to capture potential③China/S.E. Asia/Latin
AmericaMarkets in which strategies match the unique themesfor each market〔Tire Sales ration in each market〕
50%
46%

N. America

45%

39%

39%

35%

15%

16%

15%

FY2013
FY2013

FY2014FY2014

Japan, Europe, M.E.
China, Asia, Latin
America

FY2015FY2015FY201615
15

〔Tire Business〕－3）Market strategy ①North America
Markets with bolstered supply capacity
and sales force as sources of income
DemandOutlook
Policy・Brisk growth expected for economic
climate, with tire demand continuing toincrease・Increase sales volume in SUV/CUV/pickup
truck product category
・Increase market share for same productcategory in North America

Tires for SUV/CUV/Pick up Truck〔Market Share in U.S.〕
6.0%
4.5%

4.6%

FY2013

FY2014FY2015FY2016
Assumptions: based on company’s estimates16
16

〔Tire Business〕－3）Market Strategy ②Japan/Europe/M.E.
Identify market characteristics and develop foundation
inMarketthe medium
term
DemandOutlook
PolicyTrend toward increase ofhigh-value-added products

New TRANPATH products, NANOENERGY sales expansion

EuropeModerate recovery, trend
toward increase

Respond to environmental regulation through
NANOENERGY sales expansion Aggressively develop
markets in Northern and Eastern Europe, where wintertires are used Increase sales of SUV/CUV and wintertires in Russia

M.E.

Steady demand for largesize vehicles

Increase of sales of SUV/CUV

Japan

17
17

〔Tire Business〕－3）Market Strategy ③China/S.E. Asia/Latin America
Markets in which strategies match the unique themes for each market
MarketDemand Outlook

PolicyChina

Trend toward increase focusedon SUV/CUV and other highend vehicles

Improvement of product mix(expand sales ratio of SUV and high-end products)

S.E. Asia

Potential-growth markets(where currently low-priced
products are mainstay)

Boost stratification of target products based on market
needs
Market injection of NANOENERGY products produced at
Malaysian plant

Latin America

Trend toward increase of tire
demandSales increase of UHP & SUV

18
18

〔Tire Business〕－4）Brand Strategy（North America）
Further establish overwhelming presence in North America

TOYO TIRES / NITTO＜2 TOP Brand＞

Deploy market branding in
SUV/CUV/pickup truck product categorythat directly links to image

Demonstrate capabilities andproduce results in off-road andother sponsored racing events
Abundant digital content
Diverse communication

Further solidify market presence
19
19

〔Tire Business〕－4）Brand Strategy（Global）

Boost uniqueness in global market through influential
content
Conclusion of Premium Sponsorshipagreement by TOYO TIRES with Serie A
club AC Milan as part of global branding

Global delivery of prestigious,
influential content
Positioning of TOYO TIRES
as a Premium Brand20
20

〔Tire Business〕－5 ）Supply Strategy①

Increase supply capacity globally
300

FY2013

Production Capacity

FY2016

214,000ton（New Rubber Consumption)

270,000ton

20％

250

200

Asia

150

U.S.A.

100

Japan

50

14％

19％

21％

21％

65％

60％

13年度
FY2013

14年度
FY2014

35%

40%

30％

50％

0

Overseas
production ratio

15年度
FY2015

16年度
FY201650%
21
21

〔Tire Business〕－5 ）Supply Strategy②

Operation of efficient & effective supply foundation
 Enhance portfolio by defining the character of each plant Achieve development of optimal distribution system andsupply combination
 Consider new future production bases

Asia

U.S.A.

 Increase production capacityof Malaysia plant and expand
global supply Increase product variation at
China plants

 Phase Ⅳ production capacity
increase Bolster supply in SUV/CUV
categoryJapan Boost supply of high-valueadded products Transfer to Malaysia ofstandard tire22
22

〔Tire Business〕－6）Technology Strategy

Further improve technological advantage
Boost productcompetitivenessAchieve high dimensions ofaesthetic quality and performancethrough differentiating
technology

Strengthen costcompetitiveness
Perfect
Balance

Decrease costs and speed up
development while reducing
man-hours

Further boost position in
SUV/CUV/pickup truck
 Develop next-generation tires through “Nano Balance Technology” evolution
 Streamline product development through creation of next-generation design
system High quality and performance using revolutionary tire manufacturing
technology that follows A.T.O.M.
23
23

〔DiverTech Business〕－1）Business challenges, Mid-term ’14 targets and policies
Business environment






Business challenges for Mid-term ‘14

Abenomics, Tokyo Olympics keys to domestic economic
recovery
China’s shift from producing to consuming nation
North American shift to producer nation as a result of
shale gas innovation
Intensified competition from further commoditization of
products and technology
Acceleration of response to global orders accompanying
modularization

Mid ’14 (2016) Numerical Targets（※included others）

Sales

90 billion yen

Operating
Profit6 billion yen

O.P. Margin

6.7％







Bolstering of domestic business foundation
Injection of management resources into
strategic markets
Structural reform in order to establish
revenue bases
Development of new key future products
Reinforcement of technology foundation

Mid ’14 Business Policy Build profit structures for promotion of
growth of business management basedon business units Fortify businesses with key advantages
and build solid foundation in Japan
 Strategic development in overseas
markets aimed at improving costcompetitiveness and expanding growth
foundation
24
24

〔DiverTech Business〕－2）Business strategy for each business unit
Business Unit

Policy of each Business Unit

Rubber Autoparts
Business Unit

Secure position as a global supplier and build supply structure

Urethane Autoparts
Business Unit

Reconstruct sales strategy and domestic supply structure basedon technical capability

Chemical & Industrial
Products Business Unit

Expansion and deep cultivation of essential business anddevelopment of new emerging markets

Mid-term Plan’14

Actual（billion yen）

80.5

90.0

82.5

New business

Rubber Autoparts
Urethane Autoparts

57%

8%
35%

Chemical &Industrial
Products

FY2013

50%

54%

10%

7%

40%

39%

FY2014FY2015FY2016FY201825

〔DiverTech Business〕 Business Strategy－①Rubber Autoparts BU
Secure position as a global supplier and build up a global supply system
Business Unit Strategy

Action Plan

Business development : bolster business in
Mexico, ASEAN
Technology strategy : localize development
Sales strategy : boost share, particularly
in Japan
Manufacturing strategy : improve costcompetitiveness Execute scheme for global supply structure Launch overseas technology base in order to handle
European and American OEM Boost orders of high-value-added products focused onJapanese OEM
 Reduce costs (implement automated production lines,
purchased goods cost) Bolster overseas business infrastructure

FY2013

FY2016

Bolster overseas business
infrastructure

Automotive parts
overseas sales ratio

Overseas

Japan

38%

Japan

Overseas

45%

26

〔DiverTech Business〕 Business Strategy－②Urethane Autoparts BU
Restructure sales strategy and domestic supply structure based ontechnical capability
Business Unit Strategy

Action Plan Expand sales of highly functional
products
 Secure optimal supply locationsin Japan

Bolster business foundation by securing orders
Optimize resources for Japanese business bases
Boost product competitiveness and improvecustomer satisfaction through differentiating
technology

FY2013Urethane Autoparts
Standard/Hi-end
Sales ratio

1.6%

FY2016

Hi-Spec

10%

Enhance highly functional
product category

Standard
98.4%

Standard
90%

27

〔DiverTech Business〕 Business Strategy－③Chemical & Industrial Products

Expansion and deep cultivation of essential business and developmentof new emerging markets
Action Plan
Business Unit StrategyGlobal development ofrailway car component
business
Gain dominant share inheat-resistant urethane
products and expand
overseas〔Industrial products business〕
 Concentrate resources in corebusinesses and develop business Consider overseas expansion
based on technological capability
 Start railway car component
factory in China
 Consider overseas production
consignment scheme

Railway parts Business Japan/Overseas Production Ratio

FY2013〔Urethan Buiness〕
 Grow from top share to dominating
share Overseas expansion of liquid concentratebusiness (agriculture panels)
 Expand sales of new products
 Insulation materials for homes “Aitas”
 Liquid concentrate using newenvironmentally friendly foaming agent

Urethane insulation products Sales plan

FY2016

Overseas ratio 5%

Overseas

Japan
100%

20%
up

Japan 35%65%
FY2013

FY201629

〔DiverTech Business〕 －Creation of New Businesses
Effort to create new business in growth sectors

 Material of control of
permeatability to gas
 Material of control of heatflow
 Monitoring of
infrastructure Autoparts for small-scale
mobility Safety monitoring of
infrastructure Monitoring for medical
purpose Material for Rehabilitation in medical purpose Material for horticultural
Industry Material for gardening

30－Ⅳ） New Mid-term Business Plan underlying strategy〔Corporate Function〕 －1）Mid-term ’14 policies
Environment surrounding management foundation






Expansion and diversification of social responsibility
accompanying globalization
Accelerated change of management environment due toadvancement of information infrastructure
Increasing importance of risk management system thatemphasized business continuity
Growth of social awareness toward compliance andenvironment
Diversification of awareness and values resulting fromglobalization of human resources

Challenges
 Improvement ofmanagement transparency
and efficiency
 Establishment of structure
for sustainable growth Proactive contribution to theenvironment and society

Mid ’14 Basic Policy

Enhancement of ESG to support sustainable growth and development

Environment（Environmental initiatives）

Society（Involvement with society）

Governance（Corporate governance）

 Increase of environmentally friendly products Reduction of environmental impact in business
management
 Utilization of a wide range of human resources Enhanced social responsibility and CSR procurement
promotion
 Strengthening of corporate governance Thorough compliance31－Ⅳ） New Mid-term Business Plan underlying strategy〔Corporate Function〕 -2）ESG Policy ①Environmental initiatives
Increase of environmentally friendly products
Development of “environmentally friendly
products” based on prevention of global
warming, resource conservation, safety andcomfortReduction of environmental impact inbusiness activities

 Initiatives to reduce CO2 emissions
Reduction of 15% by end of 2020 (*basic unit, compared to FY2005)
・Energy-saving newly implemented equipment
・Promotion of LED lighting

 Initiatives to reduce waste
Promote achievement of zero emissions at domestic/overseas bases
・Overseas bases: landfill rate of 1% or less・Domestic bases: complete zero emissions(zero landfill)32－Ⅳ） New Mid-term Business Plan underlying strategy〔Corporate Function〕-2）ESG Policy ②Involvement with society

Enhancement of human resources foundation and work environment
 Development and promotion of hiring personnel that can succeed on the global stage

・Aggressive hiring of career personnel in specialized fields
・Creation of opportunities to excel beyond local borders
・Development of the next generation’s leaders(implement high-level tiered training) Fulfillment of social demands

Aug. 2015
To complete new company
headquarters building(Itami)・Promote female activity
・Promote hiring of elderly and physicallychallenged individuals
・Promote work/life balance

Enhanced social responsibility initiatives
 Expansion of Group’s CSR initiatives and promotion of contribution todevelopment of local societies

Enhance promotion of global procurement
 Building and promotion of mutual relationship of trust withdomestic and overseas suppliers
 Expand overseas procurement rate, particularly in Asia andin developing nation

33－Ⅳ）Strengthening of Group governance〔Corporate Function〕 -2）ESG Policy ③Corporate GovernanceImprovement of management transparency Improvement of management transparency
Increase number of external directors and establish appropriate
・ management audit functions

 Reinforcement of regional management functions in orderto respond to globalization
・Maintenance of management functions to support each
BU scale and development stage

 Bolstering of risk management system

・Securement and enhancement of “business continuity
framework” for emergency situations (promotion of BCM)

Thorough complianceStrengthening of global internal control structure
・Internal controls within offices and divisions = Defining of
CSA (control self-assessment)Establishment and reinforcement of global legal framework
・Establishment of global compliance framework
34

４.Management Policy
Investment Plan

Ongoing Execution of Growth Investments
CapitalInvestment

Unit: billion yen

FY2011～FY2013 Actual

FY2014～FY2016 Plan

81.0

130.0

Business
Segments
Tire

69.0

Tire

105.0

DiverTech

9.0

DiverTech

15.0

Others3.0

Others

10.0

４.Management Policy
Return to shareholders/dividend payout
PolicyShareholder
ReturnDivided
Ratio

Upon securing internal reserves in order to fortify the company’s financial
strength and growth, the company will return a stable, ongoing dividend(*shareholder special benefits implemented from 2013)

Dividend payout of more than 20% as an index, upon
consideration of various conditions

12 yen15 yen（⇒※30 yen）

7 yen
Divided

5 yen

FY2011FY2012FY2013

FY2014FY2016※Effective July 1, 2014, the company will merge 2 shares of common
stock into 1 share. As a result, the dividend amount per share will be
modified to double the original amount.

35

４.Management Policy
Interest-Bearing Debt, Debt Equity Ratio
PolicyFinance

Emphasis on fund procurement balance accompanying soundness offinancial strength and growth investments

D/E Ratio

0.9 or below Times

1.5
D/E Ratio

1.3
0.9

FY2011FY2012FY2013

Below 0.9

FY201636

Conclusion

We will work to achieve the growth scenario we have drawn up, and allcompany employees will join as one to go beyond where we are today andstrive to become a “unique company whose presence shines throughglobally.”

Please look forward to Toyo Tire group in the future