Nisshinbo Industries, Inc. (the “Company”) was founded
in 1907 as a manufacturer of cotton yarns and threads, and quickly assumed
a position of leadership in the industry. The Company’s history has beencharacterized by strategic moves taken in advance of competitors and designed
to raise productivity, improve quality and add value. Today, Nisshinbo is a
total textiles manufacturer, controlling operations from spinning to finishing.
This, together with its accumulated high levels of technology, gives the Company
an advantage in the development of truly distinctive products and in quality
control. Through the application in other fields of technologies and expertise
originally developed in the textiles area, Nisshinbo has diversified its operations into the
manufacture of automobile brakes, machine tools, chemical products, papers, and others. These
non-textile lines have grown steadily, and now account for almost 50% of net sales. Nisshinbo hastargeted certain strategic products to form the basis of future growth: High value-added finishingprocessing and products in the textiles field, including SUPER SOFT, SSP (SUPER SOFT
PEACHPHASE), new-generation anti-lock brakesystems, CNC machine tools, non-fluorocarbon
polyurethane foams, new carbon products, fine papers,
and computer color matching systems. The Company
and its subsidiaries and affiliates are focused on thecreation of a comprehensive range of top-quality
products which appeal to customers globally.

Contents

The paper used for this Annual Report isfrom Nisshinbo's VENT NOUVEAU
series of fine papers.

18

Financial Highlights ............................................................................ 1
Business Lineup .................................................................................. 2
Local Touch, Global Reach .................................................................. 4
Interview with the President ...................................................... 4
In-depth, Broad-ranging R&D .................................................. 6
Quicker to Market ..................................................................... 8
Bridgeheads for Globalization .................................................. 10
Review of Operations ........................................................................ 12
Financial Review ............................................................................... 16
Six-Year Summary ............................................................................. 17
Financial Section ............................................................................... 18
Board of Directors ............................................................................. 38
Corporate Data ................................................................................. 38
Organization Chart ........................................................................... 39

Financial Highlights(Years ended 31st March)

Non-Consolidated:
Net Sales
Net Income
Shareholders’ Equity

Per Share:
Net Income
Shareholders’ Equity
Cash Dividends

1997

1998

1998

¥167,272
1,968
166,163¥170,318
1,808
166,948$ 1,310
14
1,284

(yen)

¥

8.32
702.76
7.00

Consolidated:
Net Sales
Net Income
Shareholders’ Equity

Per Share:
Net Income
Shareholders’ Equity(millions of
US dollars)(millions of yen)

(US dollars)¥

7.64
706.087.00$ 0.065.43
0.05(millions of
US dollars)(millions of yen)
1997

1998

1998

¥234,268
2,359
198,758¥240,249
1,087
199,373$ 1,848
8
1,534

(yen)

¥

9.98
840.62(US dollars)¥

4.60
843.21$ 0.04
6.49

Note
The United States dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥130 =US$1.

191

Business Lineup

TextilesTextile products have been the mainstay of Nisshinbo since its foundation.
These products are distinguished by their quality and competitiveness.
Nisshinbo has the top share in domestic markets for shirt materials (around40%), textile sheets for bedding (around 40%), denim (around 40%), Tetron &cotton blended uniform materials (almost 25%), and spandex for total-support
panty hose (almost 50%). The Company’s state-of-the-art production facilities
and unique, comprehensive in-house production system, which includes thefinishing process, allow the manufacture of products that overseas makers
cannot match for quality. An ability to meet the precise needs of customers
is a particularly strong point of Nisshinbo. Nisshinbo’s original textile
products include MOBILON spandex and OIKOS non-woven cotton fabrics.
The SUPER SOFT, SSP and CELTOPIA finishing processes are also original.

Non-textiles
Automobile Brakes
Nisshinbo is one of Japan’s leading makers of automobile brakes and friction materials, and this sector has an important role in the Company’s drive
to diversification. Product development emphasis is on asbestos-free friction materials, new concept brakes, Anti-lock Brake Systems (ABS) andTraction Control Systems (TCS). The latest original products in the ABS
field are the compact, lightweight, low-cost NT20i and NT20Si, targeted atmarkets worldwide. The Company has also developed a stability control
system, which makes it easier for the driver to control movement of the car
and thus enhances safety.
In parallel with the development of its own technologies, Nisshinbo
exchanges technologies and collaborates with major overseas brake
manufacturers.

2

Machine Tools
Nisshinbo is an acknowledged specialist in the manufacture and sale ofcustomized machine tools and CNC turret punch presses, laser cutting
machines and press brakes. The Company also produces cross-flow fans.
Modular units for FMS and CNC hardware/software systems are developed
and manufactured for the automotive, electronics and aerospace industries.
Through subsidiaries and joint ventures, Nisshinbo is actively expanding
sales of machine tools overseas as well as in Japan.

Chemical Products
Nisshinbo produces rigid-type polyurethane foams for application as heatinsulation material, and flexible types used as cushion material. Processed
products include AIRLITE-FRU, a lightweight, high-strength, corrosionresistant glass fiber-reinforced polyurethane foam widely used in the water
treatment and construction industries, and SETFOAM for civil engineering
applications. The Company is also a pioneer in the introduction ofenvironment-friendly non-fluorocarbon polyurethane foam for application
as heat-insulation material in the construction field. Our original polyurethane
elastomer MOBILON is used in various industrial products and consumer
items. In addition, Nisshinbo offers new carbon products for application insemiconductor production and other electronics fields.
Other materials include CARBODILITE and electromagnetic wave shieldmaterials and molded METTON™ products produced and marketed by
Nisshinbo.

PapersNisshinbo manufactures a wide range of paper products. These include
household papers, such as tissue paper, toilet paper and kitchen-use paper
towels, fine papers used in printing and packaging, and synthetic papers.
In each of these areas, the Company occupies a top-ranking position. Valueadded products of note include VENT NOUVEAU natural-feel fine paperfor high-quality printing and synthetic papers for ink-jet printing.
Nisshinbo is also involved in label printing and the manufacture of label
printers. The product lineup in this field includes small-size, high-speed
printers and integration software for information processing, printing anddistribution.

OthersNisshinbo develops and supplies the production systems which integrate
the CHOSHOKU SENKA fuzzy logic computer color matching (CCM)
system, manufacturing process support system and automatic inspection
system, all based on original technologies.
The Company is also engaged in the real estate business, leasing a new
office building on the site of its former headquarters, and shopping centers
built on land previously occupied by factory facilities. It also leases land
used for model homes. Plans to extend this real estate leasing business for
shopping centers are under way.

3

Interview with the President

Q.Can you outline recent developments
at Nisshinbo, and Nisshinbo’s results forfiscal 1998, ended March 31, 1998?

A. First of all, let me tell you that Mr. Tatsuo
Tanabe stood down as chairman of the Company
and assumed the position of Senior Advisor to theBoard as of June 26, 1998. During his term of office
as president as well as chairman, the Japanese
economy underwent drastic structural changes. In
response, Mr. Tanabe focused on a shift to highvalue-added products, both in textiles and non-textiles, constantly anticipating market trends. I am
confident that his efforts will continue to bear fruit,and serve as a sound foundation for Nisshinbo’s
success in the future.
Turning to our non-consolidated business results,
net sales increased 1.8% over fiscal 1997 to ¥170,318
million (US$1,310 million), while operating income declined 3.2% to ¥3,036 million (US$23 million). Net income was down 8.1% to ¥1,808 million (US$14 million). Sales of textiles amounted to¥88,479 million (US$681 million), down 3.1%.
Sales of non-textiles rose 7.8% to ¥81,839 million(US$630 million). The ratio of non-textile sales tototal sales increased 2.7 percentage points to 48.1%.
During fiscal 1998, there was virtually no growthin the Japanese economy. Consumer spending fell
sharply under the impact of a rise in the consumption tax rate beginning April 1997. Business confidence, already low, suffered as a result of the failureof certain financial institutions and increased fears
about non-performing loans held by banks. Under these circumstances, Nisshinbo concentrated
on improving its business efficiency while continuing the shift to high value-added products. These
efforts resulted in a slight increase in net sales andlimited the drop in net income to less than 10%.
The Textile Division posted a decline in sales but amodestly higher profit, thanks to the Company’s
4Akihiro Mochizuki, President

restructuring efforts. The Non-textile Division recorded a rise in total sales, fueled by growth in salesof ABS, but a decline in profit, due mainly to intensified competition.
On a consolidated basis, net sales for fiscal 1998
amounted to ¥240,249 million (US$1,848 million),up 2.6% over fiscal 1997. Operating income was¥3,989 million (US$31 million), down 12.2%. Net
income came in at ¥1,087 million (US$8 million),a decrease of 53.9%. These decreases were due
mainly to declines in market demand faced by theCompany and one of its domestic affiliates accounted for on the equity method, as well as foreign exchange losses incurred by a consolidated
subsidiary in Thailand and an affiliate in Indonesia, also accounted for on the equity method.

Q. What do you mean by “Local Touch,

Global Reach,” the theme of this year’s
annual report?

A.

The global economy is now a reality, and we
aim to be a leading global company, capable of responding to local market trends in all major mar-kets. The theme “Local Touch, Global Reach” encapsulates that aim. We intend to apply our expertise cultivated in the domestic market to our overseas operations, utilizing our strong technologicalbase and product development capabilities toachieve our goals. In Japan, even though the recession is expected to continue into fiscal 1999, thesame theme will help us to clearly delineate our efforts to respond quickly and flexibly to changing
market needs.

Nisshinbo has created adiverse range of uniqueproducts, such as all-cotton wrinkle-free materials
for shirts, lightweightcompact ABS, non-fluorocarbon polyurethanefoam, new carbon products and computer color
matching systems.

Q. What are Nisshinbo’s strengths interms of technology and product development?

A.

Nisshinbo has a broad range of technological expertise, accumulated over 90 years of operations. Our emphasis has been on the developmentof leading-edge material technologies and processing techniques, and these have allowed us to create
a diversified range of products. Our ability to innovate has earned us an excellent reputation in themarket.
When we identify a business field with great potential, we swiftly invest in facilities to establish versatile development and production systems thatallow us to secure a leading market position.

Q. How are you planning to proceed

During fiscal 1998, theCompany carried out anumber of investments to
expand and improve its
production facilities.
These included expansionof production capacity for
ABS at the Hamakita
Plant, upgrading of facilities for production ofhousehold papers at the
Shimada Plant, expansionof production facilities forfriction materials at the
Tatebayashi Plant, installation of new carbon production facilities at the
Kawagoe Plant, and introduction of leading-edge
spinning facilities at the
Fujieda Plant and otherplants.

production of dress shirts, and P.T. Gistex
Nisshinbo Indonesia, which will undertake dyeing and finishing.
In order to increase export sales, we refined our
textile organization related to exports.
In the non-textile sector, Nisshinbo Automotive
Manufacturing, Inc., a wholly-owned subsidiary of
Nisshinbo Automotive Corporation, has begun
construction of a plant for the production of automobile brake friction materials. In Thailand, oursubsidiary Nisshinbo Somboon Automotive Co.,
Ltd. completed construction of a factory for the
production of automobile brake parts.
We intend to strengthen our international textile
and non-textile operations by capitalizing on theseties with overseas subsidiaries and affiliates.

Q.

What is your policy with regard to
dividends?

A.

We declared an annual per share dividend of¥7.00 (US$0.05) for fiscal 1998. We intend to keep
dividends at this level until such time as profits justify an increase. This decision is based on a judgement as to the level of retained earnings needed tosustain future development.

with business globalization?

A. Our high value-added products are highly
competitive internationally. We are promoting thefurther globalization of our business by balancing
export sales and local production on the basis ofparticular local needs.
During fiscal 1998, we strengthened our textile
production network in Asia with the addition of
two joint venture operations: Shanghai Kaikai
Non-Ironing Garment Co., Ltd., which has started

Nisshinbo’s products
have gained an excellent
reputation in overseas
markets. For example, theCompany’s all-cotton
SSP has received a “Global Recognition Award”
from Cotton Incorporatedof the United States.

Akihiro Mochizuki
President5

Nisshinbo is noted for its development of new technologies and its
ability to transfer them from one field to another, and for its constantfocus on commercial potential.

6

Unique, Diverse Technologies
Building on its accumulated textile-related technologies and expertise, Nisshinbo has successfully
widened its business base. Today, Nisshinbo is also
active in the areas of polymer chemistry,mechatronics, control systems, electronic engineering, advanced materials and biotechnology.
In the textile field, high value-added products developed with original technologies include SUPER
SOFT, SSP, TPP (TREPESCA PEACHPHASE),
CELTOPIA, and health/comfort products include
Shizen-no-Yuragi materials, IONAGE healing materials and SUNSHELTA ultra-violet shield materials. Environment-friendly materials include
ECOLOGIA, produced by recycling PET bottles,
and OIKOS non-woven all-cotton fabrics.
In the non-textile field, the refinement of applied
technologies for such materials as polyurethanes has
resulted in MOBILON, a new polyurethane elastomer, carbon products, molded
METTON™ products and
CARBODILITE, which all have awide application potential. In theareas of automobile brakes andmachine tools, Nisshinbo is capitalizing on its state-of-the-art electronics engineering and precision
machinery technologies to develop products that are more compact or more advanced, or both.
Nisshinbo’s involvement in biotechnology isbased on technologies originally adopted for the
production of textiles and chemical products. Inview of the growth in the medical and pharmaceutical fields, our research and development efforts
are now focused on DNA reagents, and the development of markets for such products.
Another aspect of our expanding technology is
CCM systems technology, which originated fromour textile technology and was further developed
using fuzzy logic. This technology is now applied
not only in the dyed textiles field, but also in thefields of painting, printing, papers, resin, transparent solids and others. Recent refinements cover
CCM for metallic color painting of automobile
bodies and CCM for white and fluorescent colors.

New Businesses, New Markets
Nisshinbo’s recent capital investment in
R&D facilities remains focused on fields
with great commercial potential.
A good example is the Development Center for Paper Products and Coating Technologies at the Fuji Plant, which became operational in April 1998. The Center will develop original paper products, such as thosecombining synthetic paper and fine paper.
Investments in the automobile brakes R&D field
include the Vehicle Research Facility adjacent to the
Asahi Testing Ground at the Chiba Plant. Equippedwith cutting-edge testing devices, the Vehicle Research Facility is used to measure the performanceof brakes for various types of automobiles and ABS.
A new track at the Testing Ground, scheduled forcompletion in October 1998, will allow on-road
testing on a variety of surfaces under different conditions. A testing ground for testing under snow/
ice conditions was constructed in Hokkaido.
In the biotechnology field, the Tokyo ResearchCenter is being expanded to keep pace with thegrowing market for “DNA Origomar,” an essential
product for DNA analysis.
For fiscal 1998, Nisshinbo’s research and development expenditure totaled ¥6,111 million (US$47
million), an increase of 7.9% over fiscal 1997. As ofthe end of March 1998, the total number of patents
held by Nisshinbo within and without Japan was
644. Patent applications outstanding totaled 1,592.

Pattern of electromagnetic wave
shield material (inset, opposite)
Carbon products, shaped for specificapplications (inset)

7

Nisshinbo’s goal in terms of product development is clear: to bringhigh-quality products to market in anticipation of fast-changing
trends, thereby satisfying the emerging demands of consumers faster.
Nisshinbo’s depth of technological know-how is fundamental in thecreation of superior, attractive products that set the pace in the global
market.

8

Making the Most of Materials andTechnology
Nisshinbo seeks to unlock hitherto undiscovered
properties and applications of materials in orderto create products that satisfy existing or as yet
unimagined needs within society.
For example, SUPER SOFT processing technology for cotton cloth has been extended from shirts,
uniform and bedding materials to blouse, pants,
knitted and denim materials. In response to thetrend toward more individualistic, less formal business wear, SUPER SOFT HI-NATURAL is now
used for order-made shirts. The development of
SSP processing has created a significant market for
shirts featuring wrinkle-free properties.
In the non-textiles sphere, the application of
Nisshinbo technology has allowed reductions in thesize and weight of ABS, from the NT20 throughthe NT20i to the NT20Si. As a consequence, thepercentage of new vehicles fitted with ABS has increased.
Nisshinbo is currently looking for new applications in growing fields for its carbon-related technology.
In recent years, “environmentfriendly and amenity” has become an
important theme. In this category,Nisshinbo textile products include
Shizen-no-Yuragi, OIKOS, and
IONAGE, a material used for pants andsuits. Non-textile products noted fortheir human and environment-friendly
properties include non-fluorocarbon
polyurethane foam, various types of recycled papers, and paper produced
from materials other than pulp.
Collaboration with other companies
is yet another aspect of Nisshinbo’s strategies for progress. In cooperation withTEIJIN Limited, a synthetic fiber manufacturer, and
The Japan Wool Textile Co., Ltd., Nisshinbo set up
the Triangle Committee. The first product developedby the committee was ECOLOGIA, a fiber madefrom recycled PET bottle material that is used forwork uniforms. Another was HARMONIX, a brandname for a wide range of men’s “business casual”
wear made from newly developed materials.

Development-oriented Production
Nisshinbo is constantly refining its production system, linking it tightly with product development.
In the textile field, the transition to a developmentoriented production system is well under way. Production capacity for specialty yarns will be expanded to 100,000
spindles by the end of 1998, mainly atthe Hamamatsu Plant. This will facilitate the simultaneous production of alarger number of newly developed products. In the non-textile field, new carbon
product capacity at the Kawagoe Plant
is to be increased, making it Nisshinbo’s
main production center for these products. The emphasis is on products wherehigh growth is anticipated, such as
AIRLITE-FRU, whose applications as alightweight, high-strength, corrosionresistant material are being widened, MOBILON
polyurethane elastomer, and certain papers such as
kitchen-use paper towels.
Chosen Globally
Nisshinbo products are widely respected for their
quality, both in Japan and overseas. They have permeated markets internationally, either through exports or local production. SSP shirts are winningmarket share throughout Europe, especially the
U.K., and elsewhere, while Nisshinbo’s MOBILON
spandex for panty hose has been very well received
in Europe and is also expanding its market there.
Nisshinbo’s brake friction materials are used by the“Big Three” automobile manufacturers of the U.S.,and several Korean companies recently opted for
Nisshinbo’s ABS.

SUPER SOFT is applied to manyhigh-quality textile products (inset,
opposite)SUPER SOFT HI-NATURAL products come in a variety of colors anddesigns (inset)

9

Nisshinbo is determined to make the world market its “homeground.” That is to say, its overseas business strategies will be
increasingly fine-tuned to meet the requirements of different areasof the world for different types of products.

INTERNATIONAL NETWORK

10

Overseas Bases
Nisshinbo’s overseas network has been steadily expanded to ensure that nuances of demand in the
different regions of the world are picked up quickly.
Not only is overseas local production geared to meet
local needs, but it is also exported to third countries.
Production bases in Asia for textiles, automobile
brakes and chemical products have been established as local subsidiaries, affiliates or joint ventures, depending on the local circumstances. In fiscal 1998, Shanghai Kaikai Non-Ironing Garment
Co., Ltd. was established to manufacture SSP shirts
for the Chinese market, and P.T. Gistex Nisshinbo
Indonesia was established as a dyeing and finishing specialist for value-added textiles destined forSoutheast Asia and China.
In the United States, Nisshinbo’s automobile
brakes business is growing. With production facilities located in Michigan, Nisshinbo is ideallyplaced to offer efficient supply to the “Big Three”
as well as Japanese manufacturers. Production capacity at Nisshinbo Automotive Corporation wasincreased during fiscal 1998, and construction work
has begun on a plant to be operated by Nisshinbo
Automotive Manufacturing, Inc. in Georgia. The
plant is scheduled to start production in spring
1999. Nisshinbo is seeking to expand sales in the
U.S. and is also considering exports to SouthAmerica from U. S. plants.
Strengthened Export Capability
Nisshinbo continues to promote exports of its highvalue-added products, including textiles, chemicals,
automobile brakes, ABS and machine tools. Technical and cross-licensing agreements play an important role in expanding exports.
With regard to quantity, an organizational restructuring will allow all Company departmentsin charge of specific textiles products to directly
handle the sales of those products in both domestic and overseas markets, and to be responsible forthe related sales operations of overseas subsidiaries and affiliates and the activities of regional representative offices. To meet rising exports to Europe, production capacity at the Tokushima Plant
is being expanded for the MOBILON spandex
yarns used for panty hose.

With regard to quality, the Mechatronics Division, the subsidiary Nisshinbo Mechatronics, Inc.,and the ABS Division have acquired ISO9001 certification. In the textile field, the Miai
Plant has received ISO14001 certification for environment management systems, and the Tokushima
Plant is currently working towardthat same objective.
Artist’s impression of Nisshinbo Automotive Manufacturing, Inc. plant,
Georgia

Creating Clean Energy for Asia
During fiscal 1998, Nisshinbo was commissioned to produce the manufacturing
equipment for the solar energy modules of Spire, a U.S. company. Spire commands
80% of the world market for such modules. The order came via Marubeni Corp.,
which manufactures and markets the modules in Asia under license. It is expectedthat power generation through solar energy will grow in importance in Asia as theenergy demands of the region continue to rise. That Nisshinbo was engaged toparticipate in this fast-growing sector is testament to the Company’s reputation forengineering excellence.

International Technical Agreements
As licensee:•Cluett Pebody & Co., Inc. of the U.S.A. for textiles finishing technology•Beyeler Machines SA of Switzerland for CNC press brake manufacturing technology•BBA Group PLC of the U.K. for friction materials technology*•LucasVarity PLC of the U.K. for drum brake technology*•LucasVarity PLC of the U.K. for commercial vehicle disc brake technology•ITT Automotive Europe GmbH of Germany for passenger car disc brake technology*•ITT Automotive Europe GmbH of Germany for TCS technology•ITT Automotive Europe GmbH of Germany for NT20/MK20 ABS and TCS technologies*

As licensor:•Rane Brake Linings Limited of India for friction materials technology•Daedong Brake Manufacturing Co., Ltd. of the Republic of Korea for friction materials technology•BBA Group PLC of the U.K. for friction materials technology*•Heng Tong Machinery Co., Ltd. of Taiwan for friction materials and passenger car disc brake technologies•LucasVarity PLC of the U.K. for drum brake technology*•ITT Automotive Europe GmbH of Germany for passenger car disc brake technology*•ITT Automotive Europe GmbH of Germany for NT20/MK20 ABS and TCS technologies*•Mando Machinery Corporation of the Republic of Korea for drum brake technology•Nisshinbo Somboon Automotive Co., Ltd. of Thailand for friction materials and drum brake assembly
technologies*Cross-licensing agreements

11

Review of Operations
SUPER SOFT products, available through
COMFORT PROPOSAL and other channels

TextilesIn fiscal 1998, ended March 31, 1998, theJapanese textile industry faced businessconditions even more difficult thanthose in fiscal 1997, ended March 31
1997. Consumer spending, already low,
declined under the impact of a rise in
the consumption tax rate effective April
1, 1997 and a general lack of confidence
inspired by bankruptcies and fears about
non-performing loans among financial
institutions.
The Textile Division responded by developing new products to strengthen its
lineup, energizing sales activities, expanding exports, and restructuring its business.
The Division posted a modest increase inprofit, thanks to the withdrawal from the lace businessand a downsizing of the synthetic fabrics business, and a
depreciation of the yen. Sales
declined, due mainly to low
consumer demand and a fallin market selling prices. Salesof the Textile Div ision
amounted to ¥88,479 million(US$681 million), a drop of
3.1% from fiscal 1997 andaccounting for 51.9% of total sales, down 2.7 percentage points. Domestic sales
declined by 6.5% to ¥78,188
million (US$601 million),while export sales recorded
an increase of 34.0% to¥10,290 million (US$79
million).
Sales of yarns, knitted
products, and household textiles were sluggish due to weak consumer spending. Export sales of lightweight textiles, mainly
high-class and value-added products, were
up. Sales of materials for shirts, casual wear,
and uniforms remained low due to a further drop in consumer
spending in the second halfof fiscal 1998, a decline inpurchases by companies, andinventory adjustments byapparel manufacturers.
Domestic sales of SSP shirt
materials were stable. Export
sales of Nisshinbo’s original,
all-cotton SSP increased, re-Entry at Annual Nisshinbo Fashion
Contestflecting a strong market presence. Applications of new
products combining SUPER
SOFT and specialty yarns
were extended from shirts,
blouses, and printed textiles
into fields such as pants, jackets, coats, and knitted products. Sales of these products
increased throughout theyear, regardless of season.
The market for basic blue
denim showed an upturn, with particularly
strong sales of SUPER SOFT denim. Export sales also showed strong growth, contributing to increases in both sales andprofit.
Domestic sales of MOBILON spandex
were weak. Helped by higher export salesof spandex for panty hose, however, overall sales and profit showed steady growth.
OIKOS non-woven all-cotton fabrics
expanded their range of applications in
the fields of household goods, including
bacillus-eliminating wet towels and gas
range wiping materials, as well as medical, sanitary materials, nursing goods, andcivil engineering/agricultural materials.

Joint Venture for Shirt
Production in Shanghai
With the aim of exploiting the latent demand forwrinkle-free shirts in the Chinese market,
Nisshinbo Industries, Inc., Shanghai Kaikai(Group) Co., Ltd. (a top shirt manufacturer in
China), Marubeni Corp. and CHOYA CORP. established a joint venture, Shanghai Kaikai NonIroning Garment Co., Ltd., to manufacture shirts
in Shanghai. The joint venture is capitalized at
US$1.5 million, with Nisshinbo holding a 15%
stake. The company will manufacture 640,000
shirts a year by the year 2000, with a sales target of ¥1 billion.

12

We placed particular emphasis on an expansion of sales of our original brandproducts in the household and nursing
goods fields.
COMFORT PROPOSAL, our direct
marketing business, posted a slight decline
in sales for the first time since the commencement of its services as a result of
weak consumer spending.
The difficult business climate is expected
to continue well into the next term. To
counter this, we will focus on a further expansion of export sales, intra-overseas region sales activities and advancement into
overseas markets while accelerating product development, refining production systems, and responding to a variety of userneeds. In fiscal 1998, we reorganized the
Textile Sales Division, establishing overseas
sales systems for each particular productwith a view to reinforcing exports. In addition, we enhanced sales support to ouroverseas subsidiaries and affiliates by increasing staff numbers at our representative offices in
New Yor k andHong Kong.

Non-textiles
Sales of Non-textiles increased 7.8% overfiscal 1997 to ¥81,839 million (US$630
million), due in large part to higher salesof ABS. Profit, however, declined as a result of intensified competition. Sales of
Non-textiles accounted for 48.1% of total
sales, an increase of 2.7 percentage points.
Export sales of Automobile Brakes andMachine Tools were particularly strong,
contributing to a 48.2% increase in totalexport sales to ¥5,294 million (US$41
million).
Automobile Brakes
Sales of Automobile Brakes rose 14.6% to¥39,588 million (US$305 million), fueledby an increase in sales of ABS.
Sales of brake-related products, such as
friction materials and brake assemblies,
were slightly down from fiscal 1997. The
decline was accounted for by weak sales ofcommercial-use vehicles in both the domestic and Southeast Asian markets,
which outweighed a small increase in domestic automobile production.
Sales of ABS posted an increase of

70.8% to ¥13,428 million (US$103 million), thanks to increases in the numberof car models fitted with our ABS and the
proportion of cars equipped with ABS.
Our competitive position was further improved by the release of NT20Si.
Overseas, an expansion of production
facilities at Nisshinbo Automotive Corporation was completed in order to meet arise in demand in the North American
market. Nisshinbo Automotive Manufacturing, Inc. started construction of a plant
during fiscal 1998. Start-up is scheduled
for 1999.
The automobile industry faces an evenmore adverse business environment in fiscal 1999 both at home and overseas, and

Our ABS is fitted in the Mitsubishi Chariot Grandis(© Mitsubishi Motors Corporation)

Excellent Prospects for NT20Si

SUPER SOFT HI-NATURAL,
ideal for “Business Casual” apparelIn August 1997, we introduced NT20Si ABS asa follow-up to the NT20i, released during fiscal
1997. The NT20Si is 20% lighter and 30% morecompact than NT20i, and features improved
low-noise characteristics. It is costcompetitive and can be used in carsfrom compacts to the 3,000cc class.
NT20Si has already been employed
by several automakers in their newmodels and is expected to develop
into a major product for Nisshinbo.

13

Bead finisher for sinks

the demand for brake-related products islikely to decline. In the ABS sector, it will
be difficult to increase sales, due to yetstronger competition and the proportionand unit volume of cars equipped withABS likely to peak.
We must enlarge our business domain
by concentrating on the development of
new products and expansion of our overseas operations. It is also essential to reduce manufacturing costs. With a view todeveloping new products, Nisshinbopressed ahead with the upgrading of its
R&D facilities, refined and expanded
brake-testing facilities at its Chiba Plant,
and constructed a winter testing groundin Hokkaido.
Machine Tools
Sales of Machine Tools increased 4.0% to¥8,327 million (US$64 million). This wasdue to a steady increase in capital investment on the part of our major client industries, which continued from fiscal 1997,
and growth of overseas demand, mainlyin the U.S. and Asian markets, fueled by adepreciation of the yen. Growth in export
sales to the automobile-related industry,

one of our main clients, and a rise in domestic demand contributed to an increasein sales of customized machine tools. Salesof general-purpose machine tools fell, affected by a drop in housing demand andrelated capital investment.
During fiscal 1998, Nisshinbo, under license, started development, design andproduction of manufacturing equipment
for solar energy modules ordered byMarubeni Corporation. The demand forsolar energy equipment for home-use as
well as office-use power generating systems
is expected to increase.
Chemical Products
Sales of Chemical Products increased 4.9%
to ¥11,436 million (US$88 million).
Sales of polyurethane products, our major line in this sector, declined due to weak
demand for rigid polyurethane foams usedas heat-insulation material for housing,pushing down profit.
Sales of polyurethane elastomers posted

steady growth, thanks to a sharp increasein sales of apparel-use products with excellent elasticity and waterproofness.
Our carbon products, used mainly insemiconductor manufacturing equipment, posted decreases in both sales andprofit. This was accounted for by weakness in the domestic semiconductor industry and the severe economic downturn in South Korea, one of our major
markets. We intend to concentrate on development of new applications for our
new carbon products.
During fiscal 1998, we installed production facilities for new carbon products at the Kawagoe Plant and started
construction of a new production line
at the Chiba Plant to make AIRLITEFRU synthetic wood products on a commercial scale. We also began construction of a new production line for elastomers at the Tokushima Plant.

Polyurethane elastomer pellet

14

Review of Operations

PapersSales of Papers decreased 3.3% to ¥19,236
million (US$148 million).
In the household papers field, low consumer spending and an excess of supply
which triggered discount competition
among retailers caused drops in both sales
and profit.
Sales of fine papers leveled off, but ourefforts to cut unit costs through an improvement in productivity helped to improve profit.
In the synthetic papers field, good salesof original products and molded products
using synthetic papers helped to increase
sales and profit.

Synthetic Paper Mouse Pad Kit
Nisshinbo’s FREE STAGE, a kit to make computer mouse pads, uses our synthetic paper,
thereby highlighting the wide range of uses forthese papers. It is environment-friendly in thatit does not contain vinyl chloride and therefore
does not generate toxic gases when incinerated.
A number of junior high schools have adopted
the kits as educational tools.

Computer mouse pads made from synthetic papers

Sales of label system products remainedat the same level as fiscal 1997. However,we were able to increase profit through ourrationalization and cost-cutting efforts.
With the aim of establishing a soundfoundation for future development, we
expanded production of household papers
at the Shimada Plant and established an
integrated product development center at
our Fuji Plant.

real estate leasing ¥2,492 million (US$19
million), and Computer Color Matching(CCM) systems and other products ¥760
million (US$6 million).
Our leasing business proceeded with therental of unused land in Miai, Tosaki and
Shimada for a model home and shopping
centers. At Miai, we leased a permanent
housing exhibition site sponsored by the
Asahi Shimbun newspaper. At Tosaki, aplan has been adopted for a department
store and shopping mall adjacent to theexisting shopping center and their integration into one large shopping center (scheduled to open in April 2000). Constructionof a shopping center at the Shimada site
went ahead smoothly and the center isscheduled to open in March 1999.

OthersSales of this sector totaled ¥3,252 million(US$25 million), an increase of 24.9% overfiscal 1997. Sales broke down as follows:
Artist’s impression of shopping center in Shimada

CCM Systems Business
Strengthened
Our CCM systems business is expanding. In
order to accelerate this progress, on July 1, 1998
we set up a new department for the development and sales of CCM systems.
Meanwhile, during fiscal 1998 Nisshinbo
products were in the limelight at the Sixth Osaka
International Textile Machinery Show, the largest textile machinery exhibition in Asia. Among
the Nisshinbo exhibits to attract the attentionof visitors from the industry were the original
CHOSHOKU SENKA CCM system, fluorescent
CCM system, on-line color analyzing system andautomatic inspection system.

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