Report of Operations
Consolidated results of operations
Progress and outcomes of operations
We are pleased to report results of the operations for the 48th term (the period from April 1st in 2017 toMarch 31st in 2018)
In the beginning of the fiscal year, although outlook of global economies was unpredictable, overall thesecontinued to regain momentum during the period. The US economic recovery continued based on improvement
in employment environment and growth in personal consumption and capital investment, which wereaccelerated by tax reduction stimulus. Europe remained in a mild economic recovery driven by solid domestic
demand, improvement in employment and export growth. China grew its GDP as planned as 6.9% by both
firm domestic demand and growth in export by in virtue of government policies. ASEAN 5’s GDP grew by
5.7% based on economy recoveries across the region. As to developing countries, the economies were in agood shape although the growth rates declined slightly, where India kept a GDP growth of 6% range forinstance.
As for Japan the economies recovered during this period, which was driven by growth in export, capital
investment and industrial production, and robust personal consumption, in fact Nikkei stock average reachedonce JPY24,000 range. Favorable financial results gained by many Japanese companies and shortage ofworkers are driving gradual wage increases.
Under such a circumstance, a new 5-year plan towards 2021 was put in place and executed as a part of themedium-term management program “CREATE NEXT ARB2026”. In February, ARBROWN INDIA TRADING
Pvt. Ltd. was established with the aim to make a step change to become real “Asia AR Brown”.
AR Brown’s FY2017 financials were JPY10,236 million in sales, JPY428 million in operating income andJPY456 million in ordinary income, which were 1.2% increase thanks to Electronics Materials businessgrowth, 12.7% decline due to people addition and HQs’ relocation cost, 8.4% increase thanks to foreignexchange gain etc. compared to the previous fiscal year respectively.
Including AR BROWN (Shanghai) Co., Ltd., AR BROWN (THAILAND) Co., Ltd. and Brown Technologies
Co., Ltd., the consolidated financials were JPY11,278 million in sales, which were a growth of 5.2%
compared to the previous fiscal year. This was brought by a huge growth of 52.7% and 48.0% in salesdelivered by the China and Thailand legal entities. As a result, the consolidated operating income andordinary income resulted in JPY778 million and JPY724 million respectively, which delivered a growth of
9.3% and 35.1% versus the previous fiscal year respectively.
The upcoming 49th term should be the period to get the India legal entity on track so that the group canbecome real “Asia AR Brown” making it possible for all the legal entities to increase intercompany trades
where key success factor should be to take challenges ourselves keeping “Adventurer spirit” in mind.
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Overview of each of the businesses in this period– Consolidated basis –Electronics Materials Business
All the legal entities (AR Brown, AR Brown(Shanghai) and AR Brown(Thailand))’ sales and profits
grew where consolidated sales and profit resulted in a growth of 16.3% and 19.2% respectively. As for
Automotive Electronics segment, Japan and Korea kept growing. In China in addition to businesswith Japanese and Korean customers, an European customer started to be served. As to Home Appliance& IT segment, China and Thailand grew significantly based on a substantial volume increase in Home
Appliance sector. In Japan a server application lifted its segment sales. Regarding Electronics Chemicalsegment, thermally conductive fillers, that had started to be dealt in from the previous year, were qualified
by a few Japanese plastics manufacturers, which made it clear that the fillers should have a strong fit
to the market. NECSIM Co., Ltd., which AR Brown had invested and gained 50% of the equity in theprevious year, did not deliver a big success but several big projects with several Korean customers anda Japanese customer are running.

Performance Chemical Business
Both sales and profit were almost even to the previous year with a negative growth of 2.1% and 0.5%.
Paint & Ink segment struggled due to JPY depreciation and price increases for some of the main products,
which lasted until the calendar year end. Adhesive segment was steady through the period, in the 2 nd
half Tire segment and Chemical Intermediate segment recovered significantly. Personal care & Householdcare segment contributed based on several new customers gained with new products that started to be
dealt in in this period. As for Thailand, both Tire and Biocide businesses grew nicely.

Fine Chemical Business
Sales and profit declined by 2.3% and 8.5% respectively. New Medicine sector grew based on a success in
Bio-medicine intermediate CNI business while Generic Medicine sector showed steady progress
represented by a success in Anticancer agent. Livestock food inspection segment grew nicely and at
the fiscal year end, next generation of Milk-checker and SCC DUNK which is milking cow’s mastitis
medical treatment agent were finally launched. Aerospace & Aviation segment resulted in a negativegrowth.

Life Science Business
Sales grew by 4.3% while profit declined by 8.2%. As for Bioresearch segment, a product family
experienced a quality problem which prevented its sales promotion activities from being active while
Sterilization segment grew by a double digit through business with pharmaceutical customers serving
their QC processes professionally. Livestock Breeding and IVF (In Vitro Fertilization) segment grewsignificantly. In December 2017 an IVF seminar & workshop was organized by Brown Technologies
having several experts presented where many participants showed great interests. Nano-membranesegment struggled due to difficulties in new membrane development at a key customer.

2Test & Measurement Business
Consolidated sales and profit resulted in decline of 13.8% and 19.1% respectively. Having said this,ADAS (Advanced Driver Assistance System) related business in Automotive segment took a good
shape although it did not exceed the previous period's outstanding result. The China ADAS related
business, which had started from middle of the previous period, took off delivering its system anddummies to a few customers where the business has become ready to deliver a further success nextyear. As for Tire sector in Automotive segment increased product offerings. Aerospace & Aviation
segment was steady driven by acceleration sensor business. In Electronics segment, Power Semiconductor
sockets were delivered newly to Power Electronics customer while development of Thermo-Streamer
delayed significantly although it finally completed just before the year end.

Sales Development Business
ESA (Combustion Efficiency Improvement Equipment for Gasses and Oils) conducted series of fieldtests to see how each of parameters would impact on the efficiency improvement. As a result, firmer
promotion basis was built from technical stand point and with a new business model, more aggressive
promotion is expected to start from the new year.

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