Change and Challenge!
For the creation of the futureof Earth and People.
Integrated Report 12/2018
Fiscal Period Ended December 2018

Nisshinbo Holdings Inc.
2-31-11, Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo 103-8650, JAPANTEL +81-3-5695-8833 FAX +81-3-5695-8970

www.nisshinbo.co.jp/english/

Integrated Report Rationale

Nisshinbo Group

Corporate Philosophy
Nisshinbo revised the Nisshinbo Group
Corporate Philosophy on January 1, 2019.
Under the revised philosophy, Nisshinbo
aims to increase corporate value together
with stakeholders as an Environment andEnergy Company group that works to createa sustainable society.

Corporate
Philosophy

Respect human rights, promote
diversity, ensure employee healthand safety, etc.

G = GovernanceCompliance, risk management, etc.

S

— The value we provide and the approach we take to realize
our Corporate Philosophy

VALUE

Business Conduct
Guidelines

Business Conduct Guidelines

PublicEntityConsistent
Integrity

Innovation• Respect for Human Rights • Respect for Diversity• Safety is the Basis for Everything • Boldly Striving Forward• Quality Communication • Thorough-Going Compliance• Awareness and Concern towards our Environmental Impact• Fair and Transparent Business Practices • Innovation

Fundamental Spirit of the Nisshinbo GroupCONSISTENT INTEGRITYINNOVATION

Respecting the diverse cultures and customsof the world, as well as biodiversity, we shallconduct fair and sincere business activities
with pride as a corporate citizen.

Maintaining our spirit of response tochange and unceasing challenge, we shallcreate an affluent future together with
our stakeholders*2.

*1 A sustainable society is a society where environmental preservation and effective resource use are balanced with economic rationality and where, as a result, all people
can enjoy comfortable lifestyles long into the future.
*2 A stakeholder is any person or organization involved in or affected by our corporate activities, including customers, shareholders, employees, business partners,
community residents, and governmental organizations.

activities as an Environment and Energy Company group.
1

Financials

PUBLIC ENTITY
Believing that our companies are public
entities, we shall aim to realize a sustainable
society*1 by proposing solutions to global
environmental problems.

Management Framework“International Integrated Reporting Framework,” International Integrated Reporting
Council (IIRC)“Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for
Collaborative Value Creation,” Ministry of Economy, Trade and Industry (METI)“Sustainability Reporting Standards,” Global Reporting Initiative (GRI)— Standards of behaviour expected of every Group employee

Fundamental Spirit

Management Resources• We provide our customers with eco-friendly products and services tocreate a safer and more secure society with integrity.
• We create new value to inspire and satisfy our customers.
• We improve upon our corporate value and meet the expectationsof our shareholders.
• We hold dear a corporate culture in which our employees can proudly
work with vigor and boldly engage in new endeavors.

Business Segments

Guidelines Used to Prepare the Reportwhich we are working towards through our businessS = Social

VALUE

President
Nisshinbo Holdings Inc.

aims of the Sustainable Development Goals (SDGs),

Prevent climate change andatmospheric pollution, protect
biodiversity, manage water
resources, etc.

StrategyE

Masahiro Murakami

Earth and People.” That philosophy coincides with the

E = EnvironmentGof Earth and People.

Guided by that philosophy, we will continue to help tackle some of mankind’s shared challenges and increase the Group’s corporate value.
In addition to financial data, this Integrated Report includes a broader
range of non-financial information, such as our ESG initiatives and efforts
to realize the Sustainable Development Goals (SDGs). We want the report
to be an informative tool for investors as part of constructive dialog.

“Change and Challenge! For the creation of the future of

Change and Challenge!

Gof the future of Earth and People.

The Nisshinbo Group’s Corporate Philosophy is

Nisshinbo Group Corporate Philosophy

For the creation of the future

Change and Challenge! For the creation

Supporting Efforts to Realize the SDGs

ProfileApril 2019 marked exactly ten years since we divided Nisshin Cotton
Spinning Co., Ltd. into separate business segments and establishedNisshinbo Holdings Inc. as the Group’s holding company.
In the past decade, we have restructured the Group’s portfolio along
three key lines — the environment, energy, and safety and security —and diversified our business to increase corporate value. At the same time,
our operations have become more international. The Group’s overseas
sales ratio has risen from 30% to 50% and we now employ more people
overseas than in Japan.
That diverse corporate culture is supporting innovation. However, wehave to ensure our increasingly diverse business is united in purposeand direction. Three long-held principles in our Corporate Philosophy havebeen key to creating a cohesive Group — Public Entity, Consistent Integrity
and Innovation. However, with the Group becoming even more global,
we have formulated a more relatable Corporate Philosophy that also
reflects our focus on environmental, social and governance (ESG) factors:

Contents

Nisshinbo Group Snapshot

Note: The fiscal period ended December 2018 is a nine-month transitional period (Mar-Dec 2018) due to a change in fiscal year-end.

Net Sales

Operating loss
(billions of yen)

ProfileNisshinbo Group Corporate Philosophy

2

Contents

3

Nisshinbo Group Snapshot

4

The Nisshinbo Group’s Corporate History

49
Research and Development
		  in the Nisshinbo Group12

Analyst Interview

14

The Nisshinbo Group’s Business Model

17

Wireless and Communications

25

Micro Devices

28		

54

Cultivating Diverse Human Resources

56

Safety57

Health

59

34		

66

Risk Management

68

Compliance

Financials

Interview with the President of Nisshinbo Brake

70

The Nisshinbo Group’s Financial Strategy

72

Eleven-Year Summary

Precision Instruments

74

Management’s Discussion and Analysis

42

Chemicals

80

Financial Statements

46

Textiles48

Real Estate

87

History88

Key Companies in the Nisshinbo Group
Corporate Data

ESG Index Selection

Wireless andAutomobile
Chemicals
Real EstateCommunications
BrakesMicro Devices
Precision
TextilesOthersInstruments

Automobile Brakes

Operating income / loss*

EPS

Shareholders’ Equity Ratio
and ROE(billions of yen)

(yen)

(%)

16

200

50

12

150

8

100

Shareholders’ Equity Ratio

ROE

40
30
20

4

50

0

0

−4

−50
2015.3 2016.3 2017.3 2018.3 2018.3 2018.12

10
0
−10
2015.3 2016.3 2017.3 2018.3 2018.12(adjusted)2015.3 2016.3 2017.3 2018.3 2018.12* Operating income for the fiscal year ended March 2018 has been adjusted to facilitate year-on-year comparison.

Number of Employees

Research andDevelopment Expenses

Greenhouse Gas
Emissions per Unit of Sales(thousand)(billions of yen)(t-CO2/million yen)

25

25

1.5

20

20

1.2

15

15

0.9

10

10

0.6

5

5

0.3

0

0

0

2015.3 2016.3 2017.3 2018.3 2018.12

2015.3 2016.3 2017.3 2018.3 2018.12

3

Financials

In addition to the usual financial data and information aboutbusiness strategies, Nisshinbo’s Integrated Report 12/2018
includes an in-depth section about the Group’s environmental,social and governance (ESG) activities to provide readers with amore detailed picture of the Group’s business activities. This
information highlights how the Nisshinbo Group is striving toincrease corporate value in areas such as personnel training andthe environment, complementing efforts to increase value
through earnings growth.

2−6Management Framework

Editing Policy

THE INCLUSION OF Nisshinbo Holdings Inc. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS,
TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF Nisshinbo Holdings Inc. BY MSCI OR ANY OF ITS
AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCIINDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

Micro Devices

Management Resources

38

89¥416.2billion

−4

−8

64
Board of Directors, Audit & Supervisory		  Board Members and Managing Officers

Automobile Brakes

Period ended
December 2018

Corporate GovernanceInterview with the Chairman of New Japan Radio

31

Precision
Instruments−2

Business Segments

At a Glance

ChemicalsManagement Framework

Overview
16

Implementing Environmental Management¥(2.5) billion

0

Wireless andCommunications

Strategy

To Our Shareholders and Investors

52

OthersTextiles51		 Nisshinbo’s R&D Strategy

Strategy
6

Real Estate

Period ended
December 2018

Profile1

Management Resources2

2015.3 2016.3 2017.3 2018.3 2018.12

The Nisshinbo Group’s Corporate History

Long-term Goal: ROE 12% (FY2025)
Strategic business domains

Transforming the Business Portfolio toAddress Society’s Changing Needs

Infrastructure & Safety

Life & Healthcare

Help to prevent or mitigate disasters(including through water management
systems and weather radar).
Support the creation of a hydrogenoriented society (develop fuel cell partsand materials.)

Leverage our strengths in sensor,
ultrasound, wireless and othertechnologies to create new businesses.

ProfileTMD’s brake business has the longest history of any business in the Nisshinbo Group, tracing its
roots back to 1878. Nisshin Cotton Spinning Co., Ltd. was established not long after that in 1907.
From those starting points, the Group has continued to expand by actively reorganizing its
portfolio to align its businesses with society’s changing needs. Nisshinbo’s mission is to contributeto society through its business activities, guided by the Nisshinbo Group Corporate Philosophy– “Change and Challenge! For the creation of the future of Earth and People.”

Mobility
Develop our business in fields such asindustrial machinery, ships, aircraft anddrones, as well as automobiles.
Go beyond the production of parts andmaterials, utilizing the data our equipment
gathers to develop businesses that support
safe ship operation and energy efficiency.

Nisshinbo Group Net Sales (billions of yen)
Electronics (Wireless and Communications, Micro Devices)

Automobile Brakes

Others* Nine months of results due to change in fiscal year-end

600

500
Strategy

400300Business Segments

After 1945, the Group stepped up moves into new business fields such as automobile brakes andchemicals, diversifying its operations during Japan’s recovery and rapid economic growth in the postwar
period. In the 1960s, the automobile brakes business expanded, spurred by the growing popularity ofcars in Japan. Nisshinbo also actively developed its precision instruments and chemicals businesses,
building new plants and adding capacity. The yen’s appreciation after the Plaza Accord in 1985 forced
Nisshinbo to reorganize its operations and actively move into overseas markets. Today, more than 50%of the Group’s sales are generated overseas and over half of the Group’s workforce is outside Japan.
There have also been major changes in the consolidated sales ratio of each business.

200

100

0

1940-

1950-

2000-

1878

1944

1958

2005

Walter Willson Cobbett Ltd.,
TMD’s forerunner company,
foundedProduction of friction materials
startedEstablished Nihon KohbunshikanCo., Ltd., begins production ofplastic bobbins

New Japan Radio Co., Ltd.
becomes a consolidated subsidiary

2010.32011.32012.32013.32014.32015.32016.32017.32018.32018.12* 2019.12 (forecast)Business portfolio reforms

Nisshin Cotton Spinning Co., Ltd.
foundedNisshin Cotton Spinning Co., Ltd.
starts operating its Nishi Arai Plant
as a chemicals production facility

1915

1949

Nippon Radio Telegraph
Manufacturing Co. founded(now Japan Radio Co., Ltd.)

Nagano Japan Radio Co., Ltd.,
Ueda Japan Radio Co., Ltd.,TOKYO SHIRTS CO., LTD. founded

New Japan Radio Co., Ltd. founded2018

CHOYA CORP. soldFoundation brakes business sold
Acquired Ricoh Electronic Devices
Co., Ltd., making it a consolidated
subsidiary
ProNav AS acquired
New Japan Radio Co., Ltd. becomesa wholly owned subsidiary

2011

TMD Friction Group S.A. acquired
2013

2015

TOKYO SHIRTS CO., LTD. acquired
Nanbu Plastics Co., Ltd. acquired
2017

Alphatron Marine Beheer B.V. acquired

Papers business soldJapan Radio Co., Ltd. becomesa wholly owned consolidated subsidiary

2005

2015

2016

2018

Outside director system andmanaging officer system
introduced, term of office fordirectors changed(reduced from 2 years to 1)

Dividend policy revised (dividend raised
from ¥15 to ¥30, consolidated dividend
payout ratio target of 30% adopted)
Number of outside directors increased(from 3 to 4, including one female
director), takeover defense measuresabolished
Stock’s industry classification changed,
trading unit reduced

Corporate Governance Policy formulated
Nomination Committee and Remuneration
Committee established
Number of directors reduced(from 13 to 10, including 4 outside directors)

Fiscal year-end changed

Corporate governance reforms

2017Internal advisor and consultant system abolished5

Financials

4

1959

2014

Japan Radio Co., Ltd. and Nagano
Japan Radio Co., Ltd. become
consolidated subsidiaries

Management Framework

1946

Holding company system adopted

1907

2010

Management Resources

1878-

To Our Shareholders and Investors

Corporate Philosophy and Portfolio Management

6• We will promote group management and global business management, accelerating groupwide
initiatives. We will enhance corporate value by promoting unity amid diversity.
• We continuously adjust our business portfolio in response to society’s needs.
• We raise our game by supplementing tangible items with intangibles and services.
Long-term Goal

ROE 12% (FY2025)

7

Financials

I became president of Nisshinbo Holdings Inc. in March 2019, taking over
the role in Nisshinbo’s tenth year as a holding company. As the person
ultimately responsible for business execution, I plan to lead the Group’s
continued transformation to drive further growth.

• As an Environment and Energy Company group, we help solve the issues facing society andcontribute to a sustainable society through our operations.

Management Framework

Targeting sustainable profits
by expanding into services

Change and Challenge! For the creation of
the future of Earth and People.

Management Resources

Corporate Philosophy

Business Segments

Medium- to long-term business strategy

Strategy

Any role in an organization is part of a wider story.
Every employee, not just the president, has a duty tofulfill the functions of their role. When the timecomes, they have to hand over their roles to the next
person in line. As president, it’s my duty to realize
Nisshinbo’s Corporate Philosophy and lead the Group
into the next phase of growth. The role comes withheavy responsibility, but I will do my best to make mytenure a success.
The Nisshinbo Group is aiming to generate growth
as a diverse, cohesive corporate group by realizing its
Corporate Philosophy – “Change and Challenge!
For the creation of the future of Earth and People.”
Our philosophy is anchored by the concept of thecompany as a Public Entity. Contributing to society is
our raison d’être and sustained contributions are thedriving force behind the Group’s growth. Our businessstrategy of helping to create safe and secure living
environments as an Environment and Energy Company
group also stems from that philosophy.

ProfileAs such, the basic premise of the Group’s businesses
is to play a meaningful role in society. That’s why wehave to constantly adjust our business portfolio toensure it remains relevant to the times and the changing
needs of society. Since moving to the holding company
structure, we have transformed our business portfolioby acquiring and selling businesses to create the optimum
configuration. Going forward, we will continue to ask
ourselves what kind of businesses society needs,
aiming to accelerate growth as an Environment andEnergy Company group by continuing to dynamicallyadjust our portfolio.
Many people know that Nisshinbo’s first business
when it was established in 1907 was textiles. But ouroldest business is in fact brake friction materials, with
TMD tracing its roots back to 1878. Japan Radio Co., Ltd.
was established in 1915. Drawing on the diverse historyof those three businesses, we aim to create innovative
products and services that help solve some of the issues
faced by society today.

To Our Shareholders and Investors

Strategic business domains
Mobility
Develop our business in fields such as industrial
machinery, ships, aircraft and drones, as well as
automobiles.
Go beyond the production of parts and materials,
utilizing the data our equipment gathers to develop
businesses that support safe ship operation andenergy efficiency.

Infrastructure & Safety
Help to prevent or mitigate disasters (including throughwater management systems and weather radar).
Support the creation of a hydrogen-oriented society(develop fuel cell parts and materials.)Life & Healthcare
Leverage our strengths in sensor, ultrasound, wirelessand other technologies to create new businesses.

Financial Results for the Fiscal Period Ended
December 2018
The fiscal period ended December 2018 is a transitional
period due to a change in the Group’s fiscal year-end fromManagement Framework

Method Used for Year-on-Year Comparisons

Year
Month

2017
1-3

4-6

2018
7-9

10-12

1-3

4-6

7-9

10-12

Subsidiaries settlingin March(Domestic subsidiaries)

Subsidiaries settlingin December(Overseas subsidiaries)

Fiscal year

FY3/18

FY3/18 results (adjusted)

FY12/18

FY12/18 results

9

To facilitate comparison, we haveadjusted financial results for the fiscal
year ended March 2018 by deducting
fourth quarter (January-March) earnings for Group companies that
previously had March fiscal year-ends.

Financials

8* Advanced driver assistance systems

Management Resources

We redefined the Group’s strategic business fields in 2019.
We are now focusing on Mobility, Infrastructure & Safety,
and Life & Healthcare. We have added Mobility because
we are seeing an accelerating shift in society’s mobility
needs and in the Group’s operations. Unlike our previous
strategic business field of Automotive Parts and Devices,
Mobility covers all types of modes of transport, from cars
to industrial machinery, ships, aircraft and drones, because
technological barriers between different transport fields
are disappearing. From that perspective, more than 60%of the Group’s net sales are already related to mobility.
The mobility field has a faster business cycle than thewireless and communications field, so decision-making
processes at existing Japan Radio businesses will not beable to keep up. That’s why we established a mobilityfocused company called JRC Mobility Inc. in the fiscal
period ended December 2018.
The automotive business of Japan Radio is steadily
increasing shipments of products for automated vehicle
toll charging systems. We plan to transfer the business
to JRC Mobility in 2020. Meanwhile, JRC Mobility has
been contracted to further develop its automotive radarfor ADAS*.
In the Infrastructure & Safety strategic business field,hydrogen-related businesses are a key focus. We arestarting to get a clearer picture of how fuel cells will be
used in the future. Fuel cells can be refueled withhydrogen more quickly than lithium-ion batteries (LiBs)
can be recharged, and they also have a better energy
density than LiBs. That means we are likely to see
different global applications for LiBs and fuel cells, with
LiBs used in passenger cars and fuel cells used intransport and work vehicles, for example. Drones could
be powered by fuel cells and trains might have a hybrid
setup of LiBs and fuel cells. Our bipolar plates andplatinum catalysts for fuel cells, which both incorporate
the Group’s carbon technologies, have the potential todrive the development of the hydrogen-powered society
by lowering costs. We are currently working with
Canadian fuel cell company Ballard Power Systems Inc.
to develop and grow sales of fuel cells for forklifts andfuel cell vehicles.
In addition to the above areas, we plan to continue
focusing on business projects aimed at preventing andmitigating the impact of disasters – an area the Nisshinbo
Group has been involved in for many years – and leverage

March 31 to December 31. Results for this fiscal period
do not include earnings for the January-March quarter at
Group companies that previously had March fiscal yearends. Results appear much weaker compared with theprevious fiscal year ended March 2018, mainly because
earnings at Japan Radio tend to be weighted to theJanuary-March quarter, which is not included in the fiscal
period under review.
To facilitate a more accurate year-on-year comparison,
we have adjusted results for the previous fiscal year to
strip out those factors.
On an adjusted basis, net sales in the fiscal period
ended December 2018 increased 0.7% year on year to¥416.2 billion. Sales in the micro devices businessincreased sharply following the consolidation of Ricoh
Electronic Devices Co., Ltd., but sales in the automobile
brakes business declined due to the sale of the foundation brake business. Precision instruments andchemicals reported solid growth, but sales fell in textiles
and real estate.
On an adjusted basis, Nisshinbo Holdings reported
an operating loss of ¥2.5 billion, compared with operating
income of ¥7.8 billion last year. The sale of the foundation
brake business pushed down profits, but the deteriorationin profitability largely reflected problems with TMD’saftermarket product shipment system after moving to
a new warehouse. While the issues have now been
resolved, the impact on the bottom line was substantial.
Profits in the micro devices business also fell short of
expectations due to weaker sales to makers of smartphones and industrial equipment amid a slowdown in
the Chinese economy.

Business Segments

Refining our manufacturing capabilities is an importantmission for the Nisshinbo Group, which has typicallyfocused on making products. However, as the boundaries between different businesses dissolve, we needto switch our focus away from only manufacturing andmove deeper into the service sector by providing
value that leverages our manufacturing technology
and products.
One example of how we are doing that is our J-Marine
Navigational electronic Conning Station Table (NeCST).
Supplied by Japan Radio, which manufactures marine
radar and other systems, J-Marine NeCST provides anintegrated package of information services via theinternet, such as digital map, weather and shipping
data, significantly improving the efficiency and safetyof ship navigation.
To make the shift to service businesses, we haveto drive innovation by coordinating the Group’s diverse
business domains, people and values, complemented
by external partnerships and M&A deals in areas
where the Group lacks resources.
Nisshinbo is currently focusing on Group R&D
activities, which draw on expertise from across theGroup to develop new businesses. We also run workshops, primarily for younger employees, to explore
the kind of company we should be in the future.
This is all part of our broader efforts to harness diversity and drive innovation. Group R&D activities areleading to many new initiatives, but most are businessmodels that combine products and services. We arestarting to see a new business approach taking root
across the Group.

the Group’s technologies in sensors, ultrasound andwireless communications to launch new businesses in
the healthcare field.

Strategy

Strategic Business Fields

ProfileShifting Our Focus to Services

To Our Shareholders and Investors

The Path to Growth

The Nisshinbo Group has many promising businesses
with good near-term prospects. In the ten years since
adopting the holding company structure, we havefocused on restructuring the Group’s business portfolio.
However, we have not been able to reliably grow profits
during that period. Solving that issue is my personal
mission. Business leaders need to have bold ideas, butalso an attention to detail. Even with the right approachin theory, they must have empathy with employees andpartners outside the Group to gain their support andmake the approach work.
At Nisshinbo, we believe people are crucial to the
future of our business – encapsulated by the phrase,“people are real, businesses are abstract.” In essence,true corporate value is created when growth is driven by
the personal development of employees. I want our
diverse human resources worldwide to constantly look forways to contribute to society, unified by a single corporate
philosophy. That is my vision for the Nisshinbo Group.

March 201911

Financials

Masahiro Murakami
President
Nisshinbo Holdings Inc.

Management Framework

10

Our Vision for the Nisshinbo GroupManagement Resources

sites in Germany, which is likely to support a significant
improvement in margins. The company is also looking
at integrating or closing other sites worldwide to lift
profitability. In addition, we are planning to pass on theJapanese manufacturing expertise of Nisshinbo Brake
Inc. to TMD to improve product quality, safety and cost.
The wireless and communications business and theautomobile brakes business are the Group’s two largest
businesses. As explained earlier, the loss in the wirelessand communications business mainly reflected theexclusion of the key January-March quarter from thisperiod’s results due to the change in fiscal year-end.
However, underlying profit levels were still unsatisfactory, and Japan Radio, the core company in the business,has reported operating losses on several occasions since
becoming a consolidated subsidiary in 2010. Japan Radio
has focused on public-sector demand in Japan for many
years, but it has been working to reposition its businessto target overseas customers and private-sector demand.
The company has made some progress with businessrestructuring. For example, it has established offices inIndonesia, launched video streaming services to provide

As illustrated by the bottom-line loss in the fiscal period
ended December 2018, the Group still faces issues withearnings stability. In the near-term, we need to restructure the brake business at TMD and the wireless andcommunications business at Japan Radio.
After acquiring TMD in 2011, we completed theamortization of substantial goodwill in five years, but
TMD reported an operating loss of ¥4.0 billion in the fiscal
period ended December 2018. That was partly causedby one-off factors, but the loss is still disappointing.
Underlying profit trends are still below our expectations
at the time the company was acquired. TMD has amanufacturing and sales network across 13 countries
worldwide, but we need to tackle the major issue ofturning around unprofitable locations.
Although we restructured TMD’s operations after
the acquisition, the pace of reform has not been fastenough. We started sending senior managers fromNisshinbo Brake Inc. to TMD in 2018. They are now
accelerating the reform program based on a new list ofpriorities. TMD is currently consolidating production* Non-Asbestos Organic

Business Segments

Near-term Challenges – Business Restructuring

Friction materials that are compatible with new regulations on copper content are currently our mostpromising product. In NAO* materials, Nisshinbo Brake
Inc. has taken the lead over competitors. The company
has already started volume production of copper-reduced
and copper-free materials, and it is now becoming
clearer that automakers intend to steadily increase
adoption of the new materials to complete the shift tocopper-free friction materials by 2025. To meet thatdemand, the Nisshinbo Group plans to invest around¥20 billion from 2018 onwards to increase capacity at
production sites in Japan and the US. After that, thenext step will be to increase production capacity at oursites in Thailand, China and South Korea.
Growth has recently picked up in the micro devices
business. Despite continued uncertainty about theoutlook for the Chinese economy, we plan to increase
investment in production capacity to tap into projected
growth in demand in the automotive sector and otherfields. While the business is exposed to conditions in
the market for communications equipment, we areconfident that trends in mobility and IoT will spur strong
demand for micro devices in the automotive and industrial
equipment fields. We see potential synergies across all
sales, manufacturing and product development functions
between New Japan Radio Co., Ltd., which has a strong
position in signal processing-related products, and Ricoh
Electronic Devices, which is focused more on power
management devices. The main challenge for the micro
devices business is to build even greater trust with large
enterprise customers. To do that, we need to expand
the business further through partnerships and M&A to
increase sales to the ¥100 billion level.
The precision instruments business continues toincrease output, supported by its close links to customers.
However, we are targeting a further improvement in

Strategy

profitability by reorganizing operations at Nanbu Plastics
Co., Ltd. Over the years, Nanbu Plastics has built an
extensive network of production sites in Japan andoverseas. We plan to rebuild that network to create a more
efficient, high-quality manufacturing and sales framework.
The chemicals business is seeing strong demand for
Carbodilite, with sales on track to exceed ¥3.0 billion.
We want to grow Carbodilite into a ¥10.0 billion business.
To increase sales globally, we will need to develop a newsales strategy that includes business partnerships andother initiatives. In bio-carriers for wastewater treatment,
we are making preparations to expand the business inpartnership with a local manufacturer in China.

Profilepublic service messages about natural disasters anddaily life, and above all, has developed a range of new
products for mobility applications. However, we anticipate
a further negative impact on profits if the contraction in
the company’s existing markets outpaces businessrestructuring. Japan Radio became a wholly owned
subsidiary of Nisshinbo Holdings in October 2017.
Using our full control of the subsidiary, we now plan toaccelerate the pace of reform.

Analyst Interview

Nisshinbo has growth potential as a corporate groupmade up of businesses with high shares in niche markets.

Management’s vision for the Nisshinbo Group

Targeting resources on core businesses

12

Financials

I’m positive about Nisshinbo’s strategy of channelingmanagement resources into core businesses. Also,
Nisshinbo is not afraid to sell non-core businesses eventhough they are generating profits, which is somethingother Japanese companies could learn from. In 2017,
Nisshinbo made Japan Radio Co., Ltd. a wholly owned

Management Framework

interfaces. In the automobile brakes business, brakes arelikely to be used more frequently in the early uptake
phase for autonomous vehicles. That should spur growthin demand for environmentally friendly copper-free brakes
and friction materials. However, poor prospects for profits
in other parts of the Group are holding back Nisshinbo’s
market valuation.
Nisshinbo is prioritizing management resources inareas where it has realistic prospects of being competitive. While I think that is the right management approach,
it is not translating into profits. That suggests there is a
gap between business strategy and business execution.

Nisshinbo is a well-known name and is also seen as acompany with considerable potential. However, Nisshinbo
is not attracting a high P/B valuation. I see three reasonsfor that: (1) an uncertain earnings outlook in the electronics business, (2) losses in the automobile brakes
business, which investors had hoped would become astable source of earnings, and (3) a lack of strong growth
drivers, despite a large number of small but promising
growth businesses.
Nisshinbo’s goal of becoming an Environment andEnergy Company group is convincing, but so far we havenot seen that vision feed through to profits. One area
Nisshinbo is focusing on is the super smart society, which
could become a super efficient society with effective useof IT. Nisshinbo’s size means it has no intention of handling the main elements of IT infrastructure, but it has
proprietary technologies that can be used for applications
such as digital-analog conversion to visualize informationin electronic components and at communication

Nisshinbo is targeting ROE of 12% by 2025. It aims to dothat by emphasizing capital efficiency over sales. Capitalefficiency should always be a priority, but I think Nisshinbo
also has growth potential as a corporate group made up
of businesses with high shares in niche markets. The
Group currently faces a tough earnings environment forradar systems used in large ships, but radar systems are
one of Nisshinbo’s core competences and the businessfits with the Group’s vision due to prospects for long-term
growth driven by rising global trade. At the least, I think
Nisshinbo needs to achieve an operating margin of 6–7%.
As I said earlier, Nisshinbo’s corporate vision of
becoming an Environment and Energy Company group is
the right strategy. Nisshinbo tends to use a “backcasting”
approach to business planning, as opposed to “forecasting.” Backcasting is an effective way of bringing all anorganization’s stakeholders together to work towards
future goals. However, problems start to arise when the
future initially envisaged by planners changes constantly.
The best business managers can deliver results in linewith their vision while constantly adapting to changes,
based on dispassionate understanding of current conditions and outstanding strategy execution. If managers areunable to do that, the backcasting approach becomesnothing more than delusional.

Management Resources

How visible is Nisshinbo in capital markets?

As a company with a long history in chemicals and textiles, Nisshinbo has always carefully controlled industrial
waste. Like other Japanese companies, Nisshinbo is fullycommitted to tackling environmental issues. The Group is
focused mainly on B-to-B businesses, which do notprovide much information about their social activities, but
I don’t see any major problem in this area. Nisshinbo hasmade a clear commitment to contributing to the environment and society with its products and services, but I
think it needs to take a more proactive stance through its
business operations.
There is no definitive approach to corporate governance. For me, the important thing is that managers fully
exercise leadership on all matters and tackle any sign ofcorruption. Nisshinbo is poised to move up into the next
rank of companies, centered on its electronics and automobile brakes businesses. That means managers willneed to demonstrate strong leadership and outstanding
business execution. Nisshinbo’s managers understandclearly what issues they have to tackle and are highly
motivated about increasing the Group’s corporate value.
I hope to see senior management show leadership in
outstanding execution and corporate governance, which
will support sustained improvement in earnings over thelong term.

Business Segments

Senior Analyst
Equity Research Dept.
Mizuho Securities Co., Ltd.

Nisshinbo’s ESG activities

Strategy

Mikiya Yamada

ProfileMikiya Yamada is an equities research analyst at
Mizuho Securities Co., Ltd., where he has covered Nisshinbo Holdings, Inc. for many years,
publishing numerous research reports about theGroup. In this section, we talk to him about how
capital markets view Nisshinbo’s management
capabilities and corporate value.

Even at Nisshinbo, some management themes havefailed to deliver results. Examples include unsuccessful
efforts in the wireless and communications field to win
business in the small and mid-size vessel market, as wellas the integration of TMD’s business sites. Going forward, I’d like to see management execute strategy more
effectively based on clear milestones and quantitative
targets for each theme.

subsidiary. My take on that move is positive, as it hascreated a framework that will allow Nisshinbo to more
rapidly implement structural reforms at Japan Radio. The
same goes for New Japan Radio Co., Ltd., which also
became a wholly owned subsidiary. I’m also upbeat about
the textiles and electronics businesses, where Nisshinbo
is using M&A, albeit small-scale deals, to reinforce its
position. One of the key things to avoid in M&A is paying
too high a premium for businesses, but Nisshinbo’s M&A
deals are always conducted on friendly terms, making
issues unlikely.
The fiscal period ended December 31, 2018 was
TMD’s seventh year as a wholly owned Nisshinbo subsidiary, but earnings deteriorated significantly, raisingconcerns about post-merger integration. Nisshinbo has
rapidly increased its proficiency in M&A in recent years,
but investors will now be looking for concrete figures
showing improvements at acquired businesses.

13

The Nisshinbo Group’s Business Model

Innovation and Value Creation Powered by Diversity
The Nisshinbo Group, with its founding businesses of wireless and communications, brake friction
materials and textiles, has grown and developed by constantly mixing and matching technologies andbusinesses. Today, the Group’s business model is based on harnessing the power of diverse businesses,
people and values to drive innovation and address the ever-changing needs of society. Using that approach,
we are allocating management resources to growth fields and developing new businesses.

Strategic business domains

ProfileWireless andCommunications

Mobility
Strategy

Micro Devices

Business Segments

Automobile
BrakesBrake pads

ABS/EBS** Anti-lock Brake System/Electronic Brake System

TextilesPrecision
Instruments

Infrastructure &SafetyMachinery andprocessing
technologies

Management Framework

Fuel cells

Plastic
molding

ChemicalfibersChemicals
Wrinkle-free
shirt fabricprocessing

Life & Healthcare

15

Financials

14

Management Resources

Continental
Automotive(Equity-method
affiliate)

AutomotivepartsOverview of Business Segments — At a Glance

Overview of Business Segments

The Nisshinbo Group is made up of seven distinct businesses — wireless and communications, micro devices,automobile brakes, precision instruments, chemicals, textiles and real estate. Nisshinbo supplies high valueadded products that meet customer needs, driven by innovation born out of business collaboration and portfolio
reorganization that has kept the Group aligned with changing needs.

Main business areas
Marine systems

Segment Share

21.7%

Wireless andCommunications

Supplies solutions such as disaster prevention systems
and weather radars, as well as marine systems andcommunications equipment.

P.17

Marine radar and communications equipment

Communications equipment
for vehicles

GPS receivers, ITS equipment

Solutions and specialized equipment
systems and weather radars
Mechatronics and power supplies
Large-format copiers

Disaster prevention

Power supplies,

Medical equipment Probes for ultrasound diagnostic
equipment, oscillators for catheters

Micro Devices
Segment Share

12.9%

P.25

Automobile Brakes
Segment Share

32.4%

Segment Share

15.0%

P.31

Precision
Instruments
P.38

Chemicals
Segment Share

2.0%

P.42

TextilesSegment Share

10.5%

P.46

Real Estate
Segment Share

1.0%

P.48

Working to expand sales of analog semiconductors andother electronic devices, supported by microelectronics
technologies.

New Japan Radio

The Nisshinbo Group is the world’s leading maker ofbrake friction materials by market share; now expanding
its presence as a true global supplier using its network
covering key markets worldwide.

Friction materials

Manufactures plastic products for home appliance andautomotive applications and supplies processed precision
automotive parts and customized production equipment
for customers worldwide, primarily in Asia.

Plastic products

Manufactures a range of highly promising products inthe environmental and energy fields, such as Carbodilite,a modifier for biodegradable plastics and waterborne
resins, and bipolar plates for fuel cells.

Carbodilite high-performance chemical additive

Mainstay business is products made from natural
cotton; supplies high-quality “Made by Nisshinbo”
dress shirts, denim, uniforms and other products tomarkets worldwide.

ShirtsProcures funds to support the Nisshinbo Group’s growthstrategy by effectively utilizing idle plant sites and otherreal estate assets arising from business restructuring.

Semiconductor devices and SAW filters

Ricoh Electronic Devices

Power management ICs, etc.

Disc pads and brake linings

Precision parts processing including parts for electronic
brake systems (EBS)
Customized production equipment

Wireless and Communications
Thermal insulation products
Bipolar plates for fuel cells
Fine carbon products

TextilesUniform fabric and casual fabric

Denim

Jeans and denim fabric

Sales

Housing lots

Leasing

Japan Radio Co., Ltd. / JRC Mobility Inc.

Dress shirts, casual shirts and fabric

ARIO Nishi Arai and other properties

The wireless and communications business supplies communication and navigation equipment withworld-leading reliability to users in the shipping sector. It also provides various disaster prevention systems,
such as dam and river management systems and weather forecasting systems. In April 2018, Nisshinbo
Holdings, Inc. established JRC Mobility Inc. as a wholly owned subsidiary. JRC Mobility will focus on themobility field, developing communication-related products for autonomous driving applications. It will also
take over responsibility for ITS* products and other existing automotive products from Japan Radio Co., Ltd.
* Intelligent Transport Systems: Systems that use data processing technology to solve traffic issues such as accidents and congestion

P.18

16

Main Business
Areas

P.20

Business Results
and Strategy

P.21

Japan Radio Co., Ltd.
— Message from the President

17

P.22

GrowthStrategy

P.24

Main
LocationsOverview of Business Segments — Wireless and Communications

Main Business Areas

3

The wireless and communications business is active in a wide range of business fields, providing high-quality
products with advanced wireless technologies that contribute to the safety and security of people worldwide
and that help to protect the global environment. We supply products for public infrastructure such as disasterprevention systems and monitoring systems, marine radar and mobile communications equipment for cars,
and power supply and energy equipment focused on environmental performance and energy efficiency.

Marine Systems
Weather and sea
state information

J-Marine Cloud

The solutions business provides total support for key
systems that ensure the safe and reliable operation of public
infrastructure such as dam and river management facilities
and disaster prevention and mitigation facilities. We aresupporting the development of public infrastructure on a
global level by supplying integrated dam management
systems that prevent damage from flooding, disasterprevention information relay systems that help to ensure
the safety of the public during disasters, and weather
forecasting systems used for meteorological reports.

Phased Array
Weather Radars
1 Elevation: electronic

scanning
2 Direction: mechanical

NeCST Manager or
SSV (Smart Ship Viewer)(office)scanning

Mechatronics and Power Supplies

Strategy

Vessel operation
information

NeCST(Onboard)

scanning

Hand-written
information

4
Shipping routeinformation

1 Direction: mechanical

Coil products

Business Segments

In the mechatronics and power supplies business, we develop
and sell production equipment, office printers and power
supplies for electric vehicles (xEV). Electric vehicles areprojected to see rapid uptake, helping to reduce greenhousegas emissions. To address that demand, we plan to expand
the business by harnessing synergies with NJ Components
Co., Ltd., which recently became part of the Nisshinbo Group.

Wireless and Communications

In the marine systems business, we sell wireless communication systems for marine applications (primarily satellite
communication equipment) and navigation systems (mainly
marine radar) for commercial ships and fishing vessels
worldwide. We also supply the J-Marine Navigational
electronic Conning Station Table (NeCST), a vessel navigation
support system that allows users to manage and sharevarious shipping route information such as digital nauticalcharts. The J-Marine NeCST can also be linked to J-Marine
Cloud, a package of cloud-based maritime information
services. We aim to spur uptake of the system to help
realize autonomous shipping operations.

Cloudscanning

Existing Weather
RadarsProfile1

2 Elevation: mechanical

Solutions

2

1

Communication Equipment

5

Medical Equipment

Japan Radio manufactures ultrasound diagnostic equipment
and image processing equipment, as well as mechatronics
devices for X-ray equipment and other medical applications.
We produce many ODM products* using state-of-the-art
technology based on our quality management system,
which is certified to the international ISO 13485 standard
for medical devices.
* Original Design Manufacturer products are designed and manufactured
under contract for supply to other companies.

18

Medical ultrasound equipment

19

Financials

In the communication equipment business, Japan Radio Co., Ltd.
is harnessing its existing radar sensing technologies for ship
and weather radar to develop automotive applications. The
company supplies ADAS products such as high-performancemillimeter-wave radar and ultrasound sensors, as well as
automotive intelligent transport systems (ITS) and electronic
toll collection (ETC) devices, which are contributing to thecreation of safe traffic infrastructure. Japan Radio is also
developing global navigation satellite system (GNSS) chips,
which enable high-precision GPS-based positioning and are
set to become a key technology in a wide range of mobility
markets such as railways, agriculture and construction
machinery. In April 2018, JRC Mobility Inc. was establishedto handle all the Group’s mobility-related operations.

4Management Framework2

5Management Resources3

Overview of Business Segments — Wireless and Communications

Business Results and Strategy

Net Sales(billions of yen)

50

25

(millions of yen)0

18.3 (adjusted)

18.12

Marine systems

28,34528,323

Communications equipment

11,68012,180

Solutions andspecialized equipment

29,83928,252Mechatronics andpower supplies

10,965

13,454

Medical equipment

5,927

6,297

Other businesses/Eliminations

1,710

1,921

Total

88,46690,427

Segment Profit(billions of yen)

8

0

-4

-8

18.3 (adjusted)

18.12(1,950)

953

1,005

(4,497)(5,690)Mechatronics andpower supplies

(245)

168

Medical equipment

439

526

Other businesses/Eliminations

(375)

(569)

(5,133)(6,510)Communications equipment
Solutions andspecialized equipment

Total* New Energy and Industrial Technology Development Organization

Business strategies
for the fiscal year ending December 2019
In the wireless and communications field, we are working tocreate a stable and profitable operating structure by rebuilding
the earnings base in our two main businesses — marine systems
and solutions. We also aim to shift to a high value-added
business model by providing service-based solutions.
In marine systems, we will continue to expand our LCM*
business in the aftermarket. In small and medium-size vessels, we will strengthen products, sales and services and tap
into ProNav’s sales channels in the North European fishing

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

20

President
Japan Radio Co., Ltd.

Overseas, we will focus on increasing sales of disaster prevention systems and marine safety systems, primarily in Asia, while
also moving into the aviation field with products such as ourmultilateration system for airport surveillance.
In mechatronics and power supplies, NJ Components Co.,
Ltd., which took on some of the operations of FDK Corporation,
became a wholly owned subsidiary of Nagano Japan Radio Co.,
Ltd. in July 2019. The acquisition is aimed at reinforcing Nagano
Japan Radio’s capabilities in power supply design, development
and production, potentially opening up new earnings opportunities in the rapidly growing electric vehicle market (xEV).
In medical equipment, we will offer a wider choice ofnext-generation diagnostic imaging equipment and compact
ultrasound image processing equipment, while also steppingup efforts to capture demand in the new fields of disease
prevention and prognosis. We also plan to draw on ourwireless technologies to actively promote the use of wirelessequipment in clinical practice.
* Life Cycle Management: Support services for the entire life cycle ofvessels, from delivery to decommissioning

Main Locations
Key Companies

Japan Radio Co., Ltd.

Main Locations and Key Subsidiaries

Location

Main Products and Services
Disaster prevention systems,
mobile communications equipment

Nagano Plant

Nagano, Nagano Prefecture

Nagano Japan Radio Co., Ltd.

Nagano, Nagano Prefecture

Disaster prevention systems, mechatronics

Ueda Japan Radio Co., Ltd.

Ueda, Nagano Prefecture

Wireless communication equipment,
medical equipment

Alphatron Marine Beheer B.V.

The Netherlands

Navigation equipment,
Wireless communication equipment

ProNav AS

NorwayNavigation equipment,
Wireless communication equipment

21

Financials(1,408)Marine systems

vessel market to increase market share. We also aim to
expand our menu of services that support safe vessel operations through ship-to-shore networks, centered on our
second-generation J-Marine NeCST system, which was
released in December 2018. In April 2019 we also launched
NeCST Manager, a vessel management support service thatshares emergency information between shipping in real time.
In communications equipment, we plan to expand overseas
sales of on-board ITS equipment for vehicles, as well as launcha new business that supplies global navigation satellite system(GNSS) chips to support high-precision positioning in mobility
markets such as railways, agriculture and construction machinery. Communications equipment for automotive applications
will be transferred to JRC Mobility by the end of 2019.
In solutions and specialized equipment, integrated disasterprevention systems will remain our core product, but we will
also focus on capturing maintenance demand for public infrastructure. In the private sector, we aim to move into new fields
with services such as Alertmarker+, which uses monitors toshare real-time information about disasters and other events.

Kenji Ara

Management Framework(millions of yen)In the wireless and communications business, we are bringing together our extensive
range of communication and information technologies and our expertise and know-how
to develop and supply invaluable products that address the needs of the public and ourcustomers and make a significant contribution to society. To achieve sound and stable
growth, we aim to generate solid profit margins and build a robust financial structure.
To establish a highly profitable business, we will switch away from our business model
focused on equipment sales and realign our business portfolio to create a new digitalbusiness based on the provision of information services that make life safer and moresecure for people everywhere.

Management Resources

4Japan Radio Co., Ltd. — Message from the President

Business Segments

In the fiscal period ended December 2018, the wireless andcommunications business reported net sales of ¥90,427
million, up 2.2% year on year on an adjusted basis, and asegment loss of ¥6,510 million, a deterioration of ¥1,376
million on an adjusted basis.
In marine systems, sales promotion activities led to higher
sales in the information services field, but sales of equipment
for merchant vessel retrofit projects declined year on year
amid slowing aftermarket demand. As a result, marine
systems sales fell slightly and higher expenses led to a wider
loss in the business. Targeting market share gains in equipment for fishing vessels, Japan Radio acquired Norway-based
ProNav AS in July 2018, making it a subsidiary.
In communications equipment, sales and profits increased
year on year, supported by firm sales of ITS products forautomotive applications. In 2018, Japan Radio also won anorder to develop a next-generation safety protection system
for railway maintenance workers on bullet train lines.
In solutions and specialized equipment, sales of water andriver information systems increased, but sales declined overall
and losses widened year on year due to a drop-off in shipmentsof disaster prevention systems for local governments. In December 2018, Japan Radio teamed up with several other companies
and NEDO* to test the detection capabilities of the world’s firstcollision avoidance system for unmanned aircraft.
In mechatronics and power supplies, sales increased year
on year and the business moved into profit, supported byrising demand for information equipment and ICT and strong
OEM production of office equipment.
In medical equipment, sales and profits increased on theback of firm sales of ultrasound diagnostic equipment andstrong demand for oscillators used in catheters.

Strategy

75

ProfileSummary of financial results
for the fiscal period ended December 2018

Wireless and Communications

100

Overview of Business Segments — Wireless and Communications

Growth Strategy
In the wireless and communications business, we are targeting further growth by extending our reach into
the services field, backed by the Group’s existing manufacturing technologies. Our goal is to ensure the
Nisshinbo Group plays a meaningful role in society by providing services that make life safer and more secure.

J-Marine Cloud

JRC Remote Maintenance System (RMS): A system thatallows Japan Radio to remotely analyze the latest informationfrom equipment on board vessels to rapidly identify reasons forequipment failures or carry out preventative maintenance,
helping to reduce maintenance costs.

Safety in the Air
Unmanned Aircraft Collision Avoidance System
In Vietnam, we have started operational testing of ourmultilateration system* for airport surveillance.

Alertmarker+
Cloud service

Area-defined emails(Emergency earthquake
warnings)

Alert state

HDMI cable

CMS andother existing
equipment

Alertmarker BoX

Existing displays

Deploying Disaster Prevention Systems Overseas
We are currently deploying dam and river management
systems with radars for customers in the Philippines andVietnam and a digital wireless information and warning
system in Tonga in the South Pacific. In Indonesia, we are
testing a tsunami detection system that uses marine radar toreceive wave height readings.

Japan Radio is actively targeting demand overseas as part ofefforts to transform its business model, which is heavily
reliant on demand from the public sector in Japan. To mitigate the impact of natural disasters in Asia, which has seen alarge number of disasters in recent years, particularly in the
Oceania region, the company is focusing on increasing salesof integrated disaster prevention systems, which incorporate
systems that gather information and warn local residents.

Management Resources* Multilateration systems receive secondary radar signals from aircraft via
multiple receivers located around airports, enabling precise detection of
aircraft positions based on the difference in time between signal
reception at each receiver.

Optical fiber
cable networkat airport
Screen display

JRC Mobility Inc.
JRC Mobility is developing millimeter radar for vehicle collision avoidance systems,
ultrasound sensors for parking-assist systems and a range of other projects in the ADAS
field. We are targeting sales of ¥20 billion in 2025. Onboard ETC devices, GPS receivers
and other automotive products are scheduled to be transferred from Japan Radio to
JRC Mobility by the end of 2019, and we also aim to increase sales of sensors, location
data devices and other products. We plan to use the Group’s traffic counters*1, DSSS*2
and other technologies and products to drive growth in the mobility business.

Equipment room

Aircraft control tower
Interrogation signal

Kinji Kato

Receiving station
Transmitting station*1 Installed on expressways and at other sites, traffic counters monitor vehicle volume and identify cars
driving in the wrong direction.
*2 Driving safety support systems: Transmit information about road conditions, traffic lights and other

Interrogation signal

Reference
signalMode S squitter

Fog

22

traffic data to drivers at intersections and other locations to prevent accidents.

Receiving station

23

Financials

President
JRC Mobility Inc.

Management Framework

Amid growing use of small and mid-size unmanned aircraft ina range of fields, there is an urgent need to develop collision
avoidance technologies to ensure safe operation. With thesupport of Fukushima Prefecture and Soma City, Japan
Radio, NEDO and four companies jointly ran the world’s firsttest of the detection capabilities of an unmanned aircraft witha collision avoidance system. Japan Radio supplied a compact, lightweight radar for the mid-size unmanned aircraft,allowing it to detect obstacles 5km ahead in all directions.

Alerts sent to eachfacility manager(Disaster prevention
emails)Business Segments

JM-Weather: An app for smart devices that gives users accessto weather maps, typhoon information, wave height and othermeteorological and marine information.

Normal state

Strategy

Smart Ship Viewer (SSV): A web-based service that allows
shipping managers to use internet browsers to view all typesof fleet data, such as sea conditions, navigation routes andvessel tracks. Shipping route information generated by J-Marine
NeCST can also be shared ship-to-ship and ship-to-shore.

Japan Radio has launched a new service called Alertmarker+
that sends information such as area-defined messages,
evacuation orders and disaster information to digital signs
and other display equipment. The system automaticallysends J-Alerts and disaster information using existing displays in municipal offices, public halls, hospitals, schools andother facilities where people gather. The service is easy toaccess with Japan Radio’s Alertmarker BoX add-on, whichconnects to displays via an HDMI cable. Existing facilities
require no other external connection, making the service
resilient to cyberattack.

Wireless and Communications

Growing use of the internet in marine environments means
ships can now share information with offices on shore anduse that information effectively. J-Marine Cloud is a total
support package designed to realize safe, reliable and smart
ship operations by giving ships access to a wide range ofcontent and enabling shore-based personnel to visualize all
assets at sea. The package is also available for individual
users, helping to make private leisure boating and marine
fishing trips safer.

Alertmarker+
ProfileSafety at Sea

Disaster Prevention Services

Overview of Business Segments

Overview of Business Segments — Wireless and Communications

Main Locations
Since it was founded in 1915, Japan Radio Co., Ltd. has developed and constantly improved its cutting-edge
manufacturing technologies in the wireless and communications field. In this section, we look at Japan Radio’s
key global business sites and research and development centers, which support the Nisshinbo Group’s
broad range of strategic business fields.

Nagano Plant
and Advanced Technology Center
The Advanced Technology Center at the Nagano Plant site
was constructed in 2015 as part of Japan Radio’s restructuring
program. The building has six aboveground floors and a total
floor area of roughly 13,000m2. Engineers can use the sharedroof space and balconies on each floor to conduct testing,helping to improve links with research work conducted inside
the building. The building has received a Good Design Awardand the Nikkei New Office Award for its office space design,
which improves communication between engineers in
different departments and groups. The Nagano Plant next tothe center manufactures products for Japan Radio’s solutions
and specialized equipment business. Together, the plant andthe Advanced Technology Center play a key role in thedevelopment and production of many technologies for the
Nisshinbo Group’s wireless and communications business.

NJ Components — Sanyo Works

Kawagoe WorksNJ Components Co., Ltd. became a subsidiary of Nagano
Japan Radio Co., Ltd. in July 2019. The company’s Sanyo
Works (Yamaguchi Prefecture) manufactures coils and transformers for electric vehicles, which are expected to see rapid
uptake, helping to reduce emissions of greenhouse gases.
The site also makes high-performance magnetic materials(ferrite) used in those products. Nagano Japan Radio aims to
combine its strengths with those of NJ Components toincrease competitiveness and drive business expansion.

The Kawagoe Works in Fujimino, Saitama Prefecture was built
by Japan Radio as a center for fundamental research and as abase for the solutions business, which provides disaster prevention systems and other products. The site’s excellent locationnear central Tokyo means it can provide after-sales services tothe whole Kanto region, while also focusing on providing
products and services for local governments, such as dam
and river management systems and disaster warning systems
that relay information from local governments to the public.

Micro Devices

New Japan Radio Co., Ltd. / Ricoh Electronic Devices Co., Ltd.
In the micro devices business, New Japan Radio Co., Ltd. supplies analog semi-conductors, SAW filters*
and other electronic devices and microwave products, while Ricoh Electronic Devices Co., Ltd. mainly supplies compact, energy-efficient power management integrated circuits (PMICs). Harnessing synergies
between the two companies, the micro devices business is stepping up the development and production ofdevices for automotive and industrial equipment applications to capture projected growth in demand.
* Surface Acoustic Wave filters: used in smartphones and other communication devices

P.26

24

Business Results
and Strategy

P.27

Key Products

P.28

25

Interview with the Chairmanof New Japan RadioP.30

New Japan Radio’s
Kawagoe Works

Overview of Business Segments — Micro Devices

Business Results and Strategy

Net Sales(billions of yen)

Summary of financial results
for the fiscal period ended December 201860

(millions of yen)0

New Japan Radio
Ricoh Electronic Devices
Eliminations

36,776—

18,073(500)(1,073)53,776(billions of yen)

1.8

1.2

(millions of yen)0

18.3 (adjusted)

18.12
850

Ricoh Electronic Devices

—

1,043

Eliminations

0

(288)

1,509

1,605

Total

New Japan Radio Co., Ltd.

Ricoh Electronic Devices Co., Ltd.

Location

Main Products and Services

Kawagoe Works

Main Locations and Key Subsidiaries

Fujimino, Saitama Prefecture

Electronic devices, microwave products

Saga Electronics Co., Ltd.

Kanzaki, Saga Prefecture

Electronic devices, microwave products

NJR Fukuoka Co., Ltd.

Fukuoka, Fukuoka Prefecture

Electronic devices, microwave products

THAI NJR CO., LTD.

ThailandElectronic devices, microwave products

Yashiro Plant

Kato, Hyogo Prefecture

Electronic devices

Key Products* Micro-electro-mechanical systems: small devices made using semiconductor fabrication technology

Electronic devices
Microwave products

Business strategies
for the fiscal year ending December 2019

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

26

Automotive products

Industrial equipment products

The number of ICs per vehicle continues toincrease amid the shift to vehicle electrification and advances in autonomous driving
technology. ICs are now needed for a
growing array of applications, from car audio
to power control units, which support basic
vehicle functions, electric power-assisted
steering and battery management systems,
as well as sensors that are integral to parking
assist systems, collision avoidance andprevention systems and autonomous driving.

Nisshinbo has a diverse lineup of products
to meet customers’ needs – operational
amplifiers that play a key role in improving
the sensing precision of encoders, which
support movement in industrial robots,
PMICs that support stable, low-noise
operation of various industrial equipment,
and analog front-end ICs that optimally
integrate industrial equipment functions.

27

Satellite communication
system components
VSAT* are satellite ground stations that playa crucial role in satellite-based internet
connectivity, data transmission and telephony.
New Japan Radio is Japan’s only supplier ofkey components for VSAT and one of only ahandful of specialist suppliers worldwide. It
has the top share in the global market.
*Very Small Aperture Terminal

Financials

Demand for automotive devices is firm. The micro devices
business has positioned automotive applications as a growthfield and is strengthening its business to tap into that growth.
Specifically, New Japan Radio and Ricoh Electronic Devices
will build a collaborative business framework covering production through to purchasing, expand their lineup of
products for next-generation vehicles such as electric cars
and autonomous vehicles, and increase their exposure to theautomotive devices market, which is stable and growing at a

Management Framework

1,509

New Japan RadioKey Companies

Management Resources

0.6

Main Locations

Business Segments

Segment Profit

38,35937,859

Total

18.12

* A wholly owned subsidiary of New Japan Radio
Strategy

18.3 (adjusted)

Profile20

expected growth in demand for automotive and industrial
equipment applications. The company is making good progress in line with plans. Meanwhile, New Japan Radio iscurrently expanding its chip package plant run by subsidiary
Saga Electronics Co., Ltd.* The plant’s new wing is scheduled
to start production of automotive sensors in early 2020.
Nisshinbo aims to continue expanding the micro devices
business, targeting segment sales of ¥100 billion to build
even greater trust with customers.

Micro Devices

In the fiscal period ended December 31, 2018, the micro
devices business reported net sales of ¥53,776 million, up
42.0% year on year on an adjusted basis, and segment
income of ¥1,605 million, up 6.3% on an adjusted basis.
In mainstay electronic devices, demand for products usedin smartphones and industrial equipment lost momentum in
China, partly due to weaker domestic consumption amid thetrade dispute between the US and China. Contract manufacturing of components for air conditioners was also weak. In
parts for automotive applications, demand was affected by adecline in car sales in China, but the business received a highlevel of inquiries from major Tier 1 parts suppliers in Europe,
resulting in the start of shipments to some of those companies. In microwave products, the business reported strong
sales of products for satellite communication systems.
Effective from the fiscal period ended December 2018,
earnings from Ricoh Electronic Devices were included inconsolidated results for the whole period, providing a substantial boost to sales and profits. Significant cost savings arealso anticipated in production, with New Japan Radio switching
front-end fabrication processes for MEMS* microphones
from outside contractors to Ricoh Electronic Devices’ Yashiro
Plant, which manufactures 8-inch wafers. Volume productionof wafers for MEMS microphones started in February 2019,
but Ricoh Electronic Devices is now upgrading its 8-inch
wafer lines, aiming to ultimately increase production capacity
to 1.5 times the current level.
In addition, New Japan Radio became a wholly owned
Nisshinbo subsidiary in September 2018, creating the necessary
framework to accelerate growth in the micro devices business.

40

rapid pace. The outlook for the Chinese market remains
uncertain, particularly smartphone-related demand, due tofactors such as the trade dispute between the US and China.
However, we will continue to strengthen the micro devices
business to prepare for an expected recovery led by devices
for IoT and industrial equipment applications. In microwave
products, demand for products used in satellite communication systems is likely to remain strong and sensor-related
demand is also projected to expand.
Ricoh Electronic Devices is working to increase production
capacity by deploying IT tools in manufacturing, preparing forOverview of Business Segments — Micro Devices
How Analog Semiconductor Modules WorkInterview with the Chairman of
New Japan RadioPower management ICs

Sensor

DetectSignal processing
Analog-to-digitalconverter

Operational
amplifierAmplify

Digitize

Micro controller unit

01010

ProfileElectrical signal flow

on areas that are more important to them. We are proud of

have set up joint working groups to start developing

our ability to supply packaged modules, as it is somethingnext-generation products.
In automotive products, we have to meet stringent

that larger competitors cannot typically handle.

Chairman
New Japan Radio Co., Ltd.

safety standards in production processes. Ricoh Electronic

also gained traction in recent months, allowing us to supply

Devices will be able to rapidly expand its lineup of automo-

modules that incorporate power management integrated

tive devices by using New Japan Radio’s production lines,

circuits (PMICs) and other devices.

which have been certified to Japan’s IATF 16949 standard

Unique technologies are another one of the Nisshinbo

Strategy

Ryo Ogura

Cooperation with Ricoh Electronic Devices Co., Ltd. has

and Europe’s VDA 6.3 standard.

Group’s strengths. In sensors, New Japan Radio’s MEMS
technologies help Nisshinbo stand out in the market.
to capture a high share of the market for receivers andtransmitters for satellite communication systems. Microwave

automotive parts suppliers in Europe. We are working moresensors used in vending machines and hygiene applications.

closely with leading Tier 1 suppliers, which has resulted in

In addition, the Nisshinbo Group has a technological lead inan order worth several billion yen. The order is for an auto-

optical semiconductor devices for industrial equipment.

motive device developed jointly by New Japan Radio andOur devices are used in applications such as sensors forencoders that detect the angle of rotation of robot arms.

we have already secured a major order for our new products.

* Analog-to-Digital Converters: Electronic devices that convert analog
signals to digital signals

That positive outlook for orders means we are confident of

Our devices are being adopted by a growing number oftechnologies are also being adopted for human detection

with a Start of Production (SOP) date of 2021 or later, andRicoh Electronic Devices.

Q5

recovering our investment in those products.
In devices for industrial equipment, China’s economic
expansion and other factors have supported sustained

Q3

What progress are you making in
the European market?

Reducing the environmental impact of our production sites

In the smartphone market, shipments have been weak due

growth in demand, uncoupled from the silicon cycle, but

to a slowdown in the Chinese economy. Also, migration to

shipments have been sluggish recently. However, given the

new communication technology tends to spur growth inglobal shift to IoT, we forecast continued growth in theBoth companies have started collaborative projects at theirdevice manufacturing sector tends to have long working

demand, but the shift from 3G to 4G has already faded.

market over the long term, so we have no plans to slow the

manufacturing sites. New Japan Radio has switched

hours. In 2016, New Japan Radio declared its commitment

However, we expect demand to pick up again once thepace of product development.

fabrication of some wafers from outside contractors toto becoming a Healthy Company and started implementing

Ricoh Electronic Devices’ Yashiro Plant, while some of

employee health management. The company provides various

Ricoh Electronic Devices’ assembly processes previously

incentives to employees who want to improve their healthhandled by contractors have been transferred to a plant run

and has installed training gyms and yoga rooms at its plants.

by Saga Electronics Co., Ltd.

Those initiatives have been recognized by the Ministry ofmove to 5G technology gathers pace. The timing of 5G
uptake has the potential to trigger a major shift in market

Q2

share at smartphone manufacturers, which will also have a

What are the Nisshinbo Group’s strengths
in the micro devices business?

knock-on effect for device shipments, depending on the type
Nisshinbo handles a broad range of sensors, operational

highest priority on work practice reforms, as the electronic

Economy, Trade and Industry (METI), which selected New

Cooperation is also having a major positive impact onamplifiers and ADCs*, primarily for signal processing

personnel costs. Device manufacturing plants tend to

Japan Radio as a White 500 company with outstanding

recently, but based on industry practice, we think it isapplications. We can also supply packaged modules cus-

experience labor surpluses and shortages during certain

health management in 2017 and 2018. Our goal is to help

unlikely that customers will cut planned procurement

tomized to meet customer needs. In addition to raising

periods, but we are now sharing personnel between plants

employees achieve the right balance between life and work

volumes. Micro devices being shipped now were developed

quality and lowering costs, module products significantly

run by New Japan Radio and Ricoh Electronic Devices tocommitments by making working hours more flexible,and certified by customers three to four years ago. In fact,

reduce time and effort for customers in design processes

eliminate fluctuations in manpower.

increasing support for employees with children and imple-

we see good prospects for business expansion, as we are

and parts procurement, allowing them to focus resources

In the automotive market, shipments have been slow

28

menting other personnel initiatives.

Design and development teams at both companies
29

Financials

and volume of orders and which manufacturers place orders.

is a routine part of our approach. But we are also putting theManagement Framework

What progress have New Japan Radioand Ricoh Electronic Devices made inbusiness cooperation?

What ESG themes is management
focusing on?

Management Resources

talking to domestic Tier 1 parts suppliers about products

Q4

Business Segments

Q1

In the fiscal period ended December 2018,
micro device shipments for smartphones,
automotive applications and industrial
equipment started declining from around
October 2018. What is the current situationin those markets?

New Japan Radio has also used its microwave technologies

Micro Devices

One of the objectives of the Nisshinbo Group’s medium- to long-term management strategy is tocontribute to the creation of a sustainable society as an Environment and Energy Company groupby providing solutions that help solve some of the issues faced by society today. The role of the
micro devices business is to design and manufacture electronic devices and grow its business infields ranging from mobility, industrial equipment and communication devices to healthcare andsatellite communication.

Overview of Business Segments

Overview of Business Segments — Micro Devices

New Japan Radio’s Kawagoe Works
A “mother factory” supporting the development of world-class devices

New Japan Radio Co., Ltd. was spun off from Japan Radio Co., Ltd.
in 1959 as Saitama Japan Radio Co., Ltd. Over the years, the company’s Kawagoe Works has manufactured semiconductor wafers,
microwave products such as SAW filters, MEMS microphones,
radars and sensors, and microwave tubes and peripheral equipment.
More recently, amid advances in vehicle electrification, the Nisshinbo
Group is reinforcing its electronic devices business to develop someof the many components that will be required for next-generation
vehicles. New Japan Radio’s Kawagoe Works is a key facility with a“mother factory” role in Nisshinbo’s micro devices business.
Location

2-1-1 Fukuoka, Fujimino, Saitama Prefecture, Japan

Opened1959

Site area

57,510m2 (slightly larger than Tokyo Dome stadium)

Building floor area
Electricity consumption
Fuel consumption
Pumped groundwater use

22,437m2 (as of January 2019)53,358MWh (fiscal period ended December 2018)15,079KL (oil equivalent)(fiscal period ended December 2018)
640,981m3 (fiscal period ended December 2018)

Electronic Devices

Microwave Products

The Kawagoe Works supplies a range of SAW, MEMS
and other semiconductor-based electronic devices crucial
to the development of today’s electronics industry. The
factory makes gallium arsenide wafers, as well as siliconwafers. Devices fabricated from gallium arsenide are usedin many smart devices, particularly those with stringent
quality requirements, as they are generally faster, morecompact and more energy-efficient than devices madefrom silicon. Electronic devices are also assembled bysubsidiaries in Kyushu and Thailand, as well as at the
Kawagoe Works, and are held in high regard by customers in Japan and overseas.

New Japan Radio’s oldest business is microwave products. The company has the world’s leading share in
microwave devices for satellite communication components, marine radar components and motion sensor
modules. These products are used in satellite communications and in various radars and sensors for marine,
aerospace, meteorological and defense applications.
Microwave devices are becoming even more important
amid wider use of satellite internet systems. New Japan
Radio is currently working on the development of new
products for medical use (cancer treatment) as part ofefforts to broaden its product applications.

Automobile Brakes

Nisshinbo Brake Inc. / TMD Friction Group S.A.
Nisshinbo is a global supplier with world-class development capabilities in the field of friction materials,
which are key components in automobile brake systems. Our strategy in the automobile brakes business is
to address the specific requirements of each market and customer with three businesses — Nisshinbo Brake,
TMD Friction Group and Saeron Group — aiming to meet global automaker needs for optimum parts procurement as the world’s leading friction materials company.

P.32

30

Business Results
and Strategy

P.33

Key Products

P.34

Interview with the Presidentof Nisshinbo Brake

31

P.36

Developing Our
Business Worldwide

Overview of Business Segments — Automobile Brakes

Business Results and Strategy

Net Sales(billions of yen)

Summary of financial results
for the fiscal period ended December 2018150

(millions of yen)

0

18.12

18,973

12,711NISB —Overseas

44,49337,573

TMD

92,51890,593Eliminations(6,944)(5,870)149,040

135,008

Total

Segment Profit(billions of yen)

7.5

5.0

0

(millions of yen)

-2.5

18.3 (adjusted)

18.12

777

270

NISB —Overseas

4,492

3,479

TMD

1,750

(4,055)

Eliminations

(798)

(507)

Total

6,221

(814)

Business strategies
for the fiscal year ending December 2019

* Nisshinbo Brake Inc.

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

32

Nisshinbo Brake Inc.

TMD Friction Group

Location

Main Products and Services

Tatebayashi Plant

Main Locations and Key Subsidiaries

Ora, Gunma Prefecture

Automobile brake friction materials

Nisshinbo Automotive Manufacturing Inc.

USA

Automobile brake friction materials

Saeron Automotive Corporation

South Korea

Automobile brake friction materials

Nisshinbo Somboon Automotive Co., Ltd.

Thailand

Automobile brake friction materials

Saeron Automotive Beijing Corporation

China

Automobile brake friction materials

Nisshinbo Saeron Changshu Automotive Co., Ltd.

China

Automobile brake friction materials

TMD Friction GmbHGermany, etc.

Automobile brake friction materials

Key Products

Disc pads

Nisshinbo Brake and TMD sell friction materials such as disc pads
and brake linings designed for the original equipment and aftermarket
needs of each region. Our friction materials offer reliable performanceand durability under various conditions, while also achieving powerfuland smooth braking. They are used on a wide range of vehicles, from

Brake linings

light cars, ordinary passenger vehicles and sports cars, to large trucks
and buses. As a pioneer in the market, we are now focusing on
growing sales of friction materials compatible with new regulations
on copper content.

33

Financials

We anticipate a spike in domestic car sales in 2019 ahead of
the planned increase to consumption tax, but the boost to
sales is likely to be more modest than in the past, partly due
to government measures to mitigate the impact of theconsumption tax hike. In the US, where car sales have been
firm, we are watching for any impact on internal demand
from the trade dispute with China. Meanwhile, trade friction
and other factors are weighing on domestic demand in China.
We expect the market to recover over the long term, but
sales in 2019 could be flat or lower year on year. Car sales inThailand are likely to continue growing at a strong pace. We
forecast flat sales year on year in Europe, but customs issues
related to Brexit could paralyze logistics channels.
Against that backdrop, TMD’s top priority is to turn aroundorders for aftermarket products, while also rapidly

Key Companies

Management Framework

NISB —Domestic

Main Locations

Management Resources

2.5* Demand for these products, which are compatible with US regulations
on copper content, is projected to increase worldwide. US environmental
regulations, effective from 2021, prohibit the sale of new friction
materials or vehicles fitted with friction materials that have a copper
content of more than 5%. From 2025, the limit on copper content will be
reduced to 0.5%.

Business Segments

NISB* —Domestic

Strategy

18.3 (adjusted)

Profile50

At Nisshinbo Brake’s Tatebayashi Plant, we are progressively introducing continuous production lines that integrate
multiple processes. We are also adopting innovative new
approaches in manufacturing, such as using IoT technology
to visualize conditions on the production lines, allowing us tobetter predict issues and maintain equipment, and automatically collecting data in testing processes. The measures,
which should be completed by 2021, are expected to reduce
lead times and labor intensity.
Going forward, we expect authorities to start tightening
rules on microparticle emissions caused by wear and tear in
brake systems. After developing products compatible withregulations on copper content, we are now turning ourattention to that issue in research and development.

Automobile Brakes

In the fiscal period ended December 2018, the automobile
brakes business reported net sales of ¥135,008 million, down
9.4% year on year on an adjusted basis, and a segment lossof ¥814 million, a deterioration of ¥7,036 million on an
adjusted basis. The main reasons for the drop in sales andprofits were the sale of the foundation brake business,weaker sales of TMD’s aftermarket products and an increasein personnel expenses.
Despite growth in domestic car sales, led by light vehicles, and higher sales of new products, Nisshinbo Brake
reported lower sales and profits in Japan due to the sale ofthe foundation brake business. In South Korea, the company’s sales declined due to weaker sales at automakercustomers, but cost reduction and other factors lifted profits
year on year. In the US, new car sales were strong, but sales
and profits both declined due to changes in the product mix,
including higher sales of products for light trucks. Sales andprofits fell in China amid weaker car sales, and sales andprofits also declined in Thailand due to the sale of the foundation brake business.
TMD reported a steep drop in sales and profits, reflecting
disruption related to a warehouse relocation started in 2017.
The disruption prevented TMD from shipping aftermarket
products to meet new orders. Orders for original equipment
parts also slowed following a spike in demand before theintroduction of Europe’s new WLTP standards for exhaustgas emission testing in September 2018.

100

implementing its restructuring program, including consolidating plants in Germany and realigning its network of global
sites. Under the new business structure led by Nisshinbo
Brake, which was launched in the fiscal period ended December 2018, we will steadily roll out new tools to improve theearnings cycle, such as monthly earnings and KPI management and a PDCA cycle. We aim to deploy the new tools
across the TMD Group to return it to profitability, allowing us
to resume strategic investment in new product development
and growth fields.
Nisshinbo Brake is already stepping up shipments ofcopper-reduced and copper-free friction materials*. We believe
this is a good opportunity to increase market share, as Nisshinbo
Brake is one of the first companies in the market to develop andlaunch friction materials that meet new environmental regulations. We started production of the new materials in the US andAsia in 2018. Over three years, starting from the fiscal period
ended December 2018, we intend to invest a total of ¥20 billion
to boost production capacity for new friction materials, including
the construction of a new plant in the US.

Overview of Business Segments — Automobile Brakes

Interview with the President ofNisshinbo Brake

Q1

The main reason for the year-on-year drop in sales andprofits (adjusted basis) was the sale of the foundation brakebusiness in April 2018. In our remaining friction materials
business, earnings are steady in Japan and overseas.

materials business, which has a competitive position in
the market. Amid increasing competition spurred by theshift to electronic brake systems (EBS), we realized that
we would have needed to invest heavily in facilities andproduct development to maintain our position.

China. Including investments already made, we plan toto drive a recovery in sales. Costs associated with thatinvest roughly ¥20 billion in increasing production capacity

campaign will persist into 2019.

for those products at our sites in Japan, the US and China.
The type of brake products we need to develop for 2025

In original equipment products, TMD has expanded
over the years through numerous M&A deals. Some of theand beyond will depend on technological trends, but there

brands and business structures inherited from those deals

is already a clear shift towards smaller, more lightweight

have been retained in certain markets. To address thoseand more environmentally friendly products that also

inefficiencies, TMD is consolidating its Leverkusen andensure a high level of safety. We believe that capturing

Essen sites in Germany – the company’s largest market

market share in copper-compatible products will also

– at a single location in Essen. The project, launchedhelp give us a strong position in the development ofseveral years ago, was expected to significantly improvenext-generation products.

profit margins, but targets have not been achieved due topoor local execution.
To resolve the issues, we overhauled TMD’s manage-

Q4

ment structure in mid-2018 and began providing full
support to the company, including even sending personnel
from Nisshinbo Brake to support operations. While implementing our response, we have gained a clearer picture of

What does the automobile brakes businessbring to the Nisshinbo Group, and what
ESG themes are you focusing on at
the management level?

In the mobility field, a key area for the Nisshinbo Group,

the issues faced by TMD in safety, quality, production

Nisshinbo Brake’s credibility with automakers and Tier 1

processes and other areas. By carefully tackling eachautomotive parts suppliers is translating into new businessissue, we expect to see a positive economic impact

opportunities for the Group. Nisshinbo is also imple-

emerge from 2020.

menting a project to reinforce the Group’s production

Why did TMD report weaker sales and a loss
in the fiscal period ended December 2018?

Q3

What is the current situation with
Nisshinbo Brake’s copper-reduced
and copper-free friction materials?

Plant to make production processes more efficient using
IoT and AI technologies.
In ESG, we continue to work on reducing industrial

Most of the products supplied by Nisshinbo Brake are forwaste and other emissions to the bare minimum at our
As of April 2019, roughly one-fifth of disc pads manufac-

manufacturing sites. We are also implementing reforms

aftermarket (replacement) product business, which istured at our Tatebayashi Plant were copper-reduced or

to work practices. We believe that empowering womenroughly the same size or larger than its original equipment

copper-free products. In the automotive parts sector,

and younger employees holds the key to future growth inbusiness. However, the aftermarket business is TMD’s

shipment volumes for orders are decided several years in

the automobile brakes business. We are making constantmain source of profits.

advance, so we already have a good idea of Nisshinbo

improvements to the way we do business, such as giving

Brake’s shipments of copper-reduced and copper-freeyounger employees more responsibility, aiming to create

products through to around 2025.

an organization that attracts and retains the best people.

The aftermarket business was the direct reason forthe loss. In Germany, TMD started consolidating its
warehouse sites in 2017 and relocated to a larger single

At the Tatebayashi Plant, we plan to increase production
capacity by roughly 20% by 2025, compared with April 2019

suited to our global operations. However, disruption tolevels. We forecast more than 60% of output will be

Yasuji Ishii

systems at the new warehouse meant TMD was unableallocated to products compatible with stricter rules on

President
Nisshinbo Brake Inc.

to ship products for new orders. That situation continued

copper content. At our US plant, about 10% of output isfrom early 2018 until around June, which led to higher

currently copper-reduced and copper-free products, but wecosts to fix the problem, as well as lower sales, and theintend to increase the plant’s total capacity by around 40%

loss of some customers.

by 2025. More than 50% of output will be allocated to34

Financials

site as part of efforts to build a distribution system better

Management Framework

original equipment for new vehicles, but TMD also has an

Management Resources

technologies by adopting steps taken by the Tatebayashi

Q2

Automobile Brakes

business to focus management resources on the frictionneeded to run a major promotional campaign at retailers

Business Segments

To recap, we decided to sell our foundation brakecopper-free products has already started at our plants in

Strategy

Earnings were weak in the fiscal period
ended December 2018. What were
the reasons for the decline in sales
and profits at Nisshinbo Brake?

those products. Volume production of copper-reduced andProfileThe Nisshinbo Group’s automobile brakes business is cementing its position as one of the leading
suppliers of eco-friendly products, supported by rising orders of pioneering copper-reduced andcopper-free friction materials, which were developed in-house. With a combined global market shareof roughly 20%, Nisshinbo Brake Inc. and TMD Friction Group S.A. are also contributing to safety inthe global automotive industry as manufacturers of world-class brake friction materials.

We are confident those customers will ultimately
return to TMD because of its powerful brands, but we35

Overview of Business Segments — Automobile Brakes

Developing Our Business Worldwide
Nisshinbo Brake / TMD Friction Group

Nisshinbo Brake Inc., a world-leader in brake friction materials development, started moving into
overseas markets from the late 1990s to meet the needs of global automakers. The company’s
area of operations increased dramatically in 2012 with the acquisition of the TMD Friction Group.
As the world’s top maker of friction materials by market share, Nisshinbo Brake’s strategy is tosupply products worldwide by addressing the unique needs of each market and customer.

TMD Friction Services GmbH
(Tremblay-en-France)

TMD Friction Services GmbH (Leverkusen)

Saeron Automotive (Beijing) Co., Ltd. (Beijing)

TMD Friction Esco GmbH (Essen)Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (Changshu)

TMD Friction Esco GmbH (Leverkusen)

Hangzhou TMD Friction Co. Ltd. (Hangzhou)

TMD Friction GmbH (Coswig)

Shijiazhuang TMD Friction Co. Ltd. (Shijiazhuang)

TMD Friction GmbH (Hamm)

TMD Friction Technology (Shanghai) Co. Ltd (Shanghai)

TMD Performance GmbH (Essen)

TMD Enterprise Management (Shanghai) Co. Ltd (Shanghai)

Strategy

FranceTMD Friction France (Creutzwald)countries worldwide (including Japan)

China

TMD Friction Holdings GmbH (Leverkusen)

 MD business
T
sites

17

business sites acrossRomania MD Friction Romania
T
S.R.L. (Caransebes)

TMD Friction UK Ltd. (Hartlepool)
TMD Friction UK Ltd. (Cleckheaton)

RussiaO.O.O. TMD Friction Eurasia (Moscow)

Management Resources

Spain MD Friction España S.L.
T
(Valencia)

South Korea
 aeron Automotive Corp.
S(Cheonan)



USA

Japan

 isshinbo Automotive
N
Manufacturing Inc. (Georgia)

 atebayashi Plant
T(Gunma Prefecture) MD Friction
T
Middle East
(Branch) (Dubai)

Nami BD Center (Michigan)

MexicoTMD Friction, Inc. (Michigan)

TMD Friction México, S.A. De C.V.
(Querétaro)

India MD Performance, Smllc
T(Michigan)

Rane Brake Lining Ltd.
(Chennai)

ThailandManagement Framework

UAE

Business Segments

Automobile Brakes

UKTMD Friction UK Ltd. (Warrington)

ProfileGermany isshinbo BrakeNbusiness sites

41

Our brands

TMD Friction Do Brasil (Salto)

South Africa
TMD Friction Sa (Pty.) Ltd. (Merrivale)36

37

Financials

BrazilNisshinbo Somboon
Automotive Co., Ltd.
(Rayong)Overview of Business Segments

Key Products

EBS Valve Blocks
ProfileNisshinbo Mechatronics Inc. manufactures EBS valve blocks
for electronic stability control (ESC) systems at a plant in
China operated by subsidiary Nisshinbo-Continental Precision
Machining (Yangzhou) Co., Ltd. ESC systems use information
on driving conditions gathered from sensors to control
vehicle stability and braking. Nisshinbo draws on its longtrack record of expertise to meet client needs for valve
blocks, which require advanced machining technology andhave to meet high standards for quality and cost.

P.40

Business Results
and Strategy

P.41

38

President’s Comment— Nisshinbo Mechatronics Inc.

High Value-added Plastics
Nisshinbo Mechatronics manufactures Eco Cross fans usedin residential air conditioners. The patent-protected fans arelighter and more energy-efficient than existing equivalentfans. By combining its proven expertise in revolving technologies with state-of-the-art molding technologies, Nisshinbo
Mechatronics has created a cost-competitive fan that also
saves energy and resources. Eco Cross is highly regarded by
Japanese air conditioner makers, which are expanding theiroperations worldwide. We are currently increasing production
to address projected growth in demand, mainly in China andSoutheast Asia.

Financials

Key ProductsManagement Framework

P.39

Automotive headlight components

Management Resources

Utilizing various areas of expertise accumulated over more than 70 years, this segment is focused on precision metal parts processing for the automotive sector and plastic products for the home appliance andautomotive sectors. The segment also makes customized production equipment to meet the specific needsof customers. We are working closely with Nanbu Plastics Co., Ltd., which became a subsidiary in 2015, todevelop these businesses globally, centered on Asia.

Using its molding technology for revolving parts, Nisshinbo
Mechatronics has supplied automotive fans for car air conditioners and radiators for many years. However, with theacquisition of Nanbu Plastics Co., Ltd. in 2015, Nisshinbo
Mechatronics is using the subsidiary’s strengths in automotive wire harness connectors and plastic headlightcomponents to expand its reach in the automotive field.
Nisshinbo Mechatronics and Nanbu Plastics are now developing their business worldwide by combining their respective
technologies to generate synergies, while also leveraging
their ability to offer integrated support to clients, from product planning and development through to assembly.

Business Segments

Nisshinbo Mechatronics Inc.

Precision Instruments

Automotive Plastic Parts

Precision Instruments

Strategy

Automotive EBS
valve block

Fans for residential andcommercial air conditioners

39

Overview of Business Segments — Precision Instruments

Business Results and Strategy

Net Sales(billions of yen)

Summary of financial results
for the fiscal period ended December 201875

(millions of yen)

0

18.12

Precision parts

12,297

15,848

Plastic products

50,81751,287

Eliminations(1,899)(4,916)

Total

61,21562,219(billions of yen)

1.8

Key Companies

0.6(millions of yen)0

18.3 (adjusted)

18.12

891

807

Plastic products

1,665

1,811

Eliminations

(769)

(928)

Total

1,787

1,691

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

Main Products and Services

Miai Machinery Plant

Okazaki, Aichi
Prefecture

Plastic products,
automotive precision parts

Hamakita Plant

Hamamatsu,
Shizuoka Prefecture

Automotive precision parts

Nisshinbo Precision Instrument & Machinery Hiroshima Corp.

Higashihiroshima,
Automotive precision parts
Hiroshima Prefecture

Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd.

China

Automotive precision parts

Nisshinbo Mechatronics (Shanghai) Co., Ltd.

China

Plastic products

Nisshinbo Mechatronics (Thailand) Ltd.

Thailand

Plastic products

Nisshinbo Mechatronics India Private Limited

India

Plastic products

Shizuoka Prefecture,
Plastic products
etc.

Nanbu Plastics Co., Ltd.

Financials

40

LocationManagement Framework

Precision parts

Nisshinbo
Mechatronics Inc.

Main Locations and Key Subsidiaries

Management Resources

In the precision instruments business, we are closely watching
the car market in China, where sales are on a downward trend amid
trade friction between the US and China. Nisshinbo-Continental
Precision Machining (Yangzhou) Co., Ltd. is reducing inventories due to a projected decline in orders from customers.
However, the company will continue to invest in its businesswhile monitoring customer demand and market trends. It plans
to start volume production of next-generation products, which
is likely to support rising output over the longer term. To fundthat investment, we increased capital in the company in thefiscal period ended December 2018 and in the fiscal year ending
December 2019. In Japan, we plan to maintain profitability by
installing a production line monitoring system and taking othersteps to lift productivity. In addition, Nisshinbo Precision Instrument & Machinery Hiroshima Corp. has started volume productionof products for a new supply order with a major automaker.
In plastic products, we plan to expand our business network worldwide, using sites in Japan as mother factories totrain personnel, develop technologies and build production
systems. Our subsidiary in India is now growing steadily andwe plan to continue injecting capital and investing in facilities.
Nanbu Plastics Co., Ltd. will leverage synergies with othercompanies in the Group, such as working with Nisshinbo
Mechatronics (Thailand) Ltd. in vehicle hood ornament manufacturing and transferring production of thick-walled headlamp
lenses to Nisshinbo Mechatronics (Shanghai) Co., Ltd.

President
Nisshinbo Mechatronics Inc.

Main Locations

Business strategies
for the fiscal year ending December 2019

1.2

Toshihiro Masuda

Business Segments

Segment Profit

The precision instruments business will build the necessary business base to enhanceGroup management and global management. With respect to Group management, we
aim to create an integrated framework for product development, sales, production
technology and quality assurance to support manufacturing reforms that utilize IoT and
AI technologies. With respect to global management, we will reinforce risk management in areas such as safety, the environment, labor, quality and tax affairs, andupgrade governance systems. Harnessing our strong portfolio of technologies, highlevels of quality and cost-competitiveness, we will take on challenges in new businessfields and strive to dynamically and rapidly supply optimal products to customers.

Strategy

18.3 (adjusted)

Profile25

President’s Comment — Nisshinbo Mechatronics Inc.

Precision Instruments

In the fiscal period ended December 2018, the precision
instruments business reported net sales of ¥62,219 million, up
1.6% year on year on an adjusted basis, and segment profit of¥1,691 million, down 5.4% on an adjusted basis.
In precision parts processing, sales increased year on year,
supported by business expansion at a subsidiary in China that
supplies precision parts to the automotive sector. However,higher depreciation expenses related to an increase in capital
expenditure led to a drop in profits. Sales growth fell short offorecasts amid lower car sales in China, which were affectedby trade friction between the US and China and other factors.
Sales and profits increased year on year in plastic products,
mainly reflecting strong sales of automotive parts at Nanbu
Plastics Co., Ltd. and higher sales at subsidiaries in China andIndia. Volume production at our third plant in Thailand started in
October 2018, helping to lift productivity for cross-flow fans.
We also aim to use the plant to create synergies with Nanbu
Plastics Co., Ltd. in the production of vehicle hood ornaments.

50

41

Overview of Business Segments

Key Products
Carbodilite

ProfileCarbodilite is the collective name for a range of polymer andpolycarbodiimide-based products developed in-house by
Nisshinbo Chemical Inc. Carbodilite is a highly effective modifierand cross-linking agent blended with base materials forpaints, plastics and other products. Countries worldwide aretightening rules governing volatile organic compounds (VOC)
and other regulations to reduce CO2 emissions and restrict
use of certain chemical substances. Due to its highly safecharacteristics, that trend is spurring demand for Carbodilite
in Japan and overseas as an alternative to existing highly toxic
cross-linking agents, and as a key modifier for water-based
paints and coatings with lower drying temperatures. Meanwhile, there is growing concern worldwide about single-use
plastic products, which have led to issues such as marine
micro-plastic pollution, waste plastic disposal and depletionof oil resources. Carbodilite is used as a modifier for biodegradable plastic, which is seen as a solution to those issues.

Bio-carriers: APG

Management Framework

Glass-like Carbon

Nisshinbo Chemical Inc.

P.43

Key Products

P.44

Business Results
and Strategy

P.45

42

President’s Comment— Nisshinbo Chemical Inc.

Demand for glass-like carbon used in manufacturing tools is
growing on the back of several trends, such as increased
demand for high-performance semiconductors spurred by the
spread of IoT and AI, and growing use of OLED screens for
smartphones and other applications. Our unique glass-likecarbon coating has the high heat-resistance of graphite, as
well as low electrical resistance that reduces dust emissions
and ensures impermeability to gases and liquids. Those
special properties mean glass-like carbon is used for manydifferent-shaped products in a wide range of target markets.
We expect glass-like carbon to be used in a growing range ofapplications, such as for the development of tools for molding neodymium magnets and curved glass screens, which
are likely to be key products in smart societies.

Financials

Drawing on a broad base of expertise and intellectual property in the chemical field, this segment is working todevelop products that help protect the environment and make life more comfortable. Our environment- andenergy-related products include bipolar plates for fuel cells and Carbodilite, a high-performance plastic material that increases the durability of biodegradable plastics and waterborne resins, which have minimal
environmental impact. We are investing management resources in these promising growth areas as a matterof priority.

Management Resources

AQUAPOROUSGEL (APG) is a bio-carrier for microorganismsthat improves the effectiveness of microorganisms in systems used to treat wastewater from factories and otherfacilities. APG is a high-performance bio-carrier that settles
rapidly into wastewater, while its sponge-form provides alarge surface area for bacteria to attach to and colonize. APG
is highly regarded in Japan, where it is used by leading water
purification companies. It is also helping to improve water
quality at public sewage treatment facilities in China andcountries in Southeast Asia.

Business Segments

Chemicals

Bio-carriers for Wastewater Treatment

Chemicals

Strategy

Carbodilite

Processed glass-likecarbon products

43Overview of Business Segments — Chemicals

Business Results and Strategy

Net Sales(billions of yen)

Summary of financial results
for the fiscal period ended December 20189(millions of yen)

0

18.12

901

1,081

Carbodilite

1851

1,896

Thermal insulation products

4,138

4,004

Others618

751

Subsidiaries

494

611

Eliminations

(110)

(172)

Total

7,895

8,173

Segment Profit(billions of yen)

1.2

0.6

0

18.3 (adjusted)

18.12

116

169

Carbodilite

470

533

Thermal insulation products

570

645

Others170

244

Subsidiaries

67

72

Eliminations

0

(1)

1,395

1,665

Total

Business strategies
for the fiscal year ending December 2019
In thermal insulation products, we are seeing a rapid shift indemand to foaming agents with a global warming potential*1of 1. In response, we are switching to non-fluorocarbon
products*2 and working to rapidly develop and launch compatible flame-resistant and non-flammable products. We also aim
to increase sales of high value-added products based on
proprietary technologies, such as insulation base solution for
civil engineering applications and railroad ballast materials. In

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

44*1 A measure of how much heat a greenhouse gas traps in the atmosphere relative to carbon dioxide, expressed as a numerical value*2 Urethane foam that uses hydrofluoroolefins (HFOs) or water as theblowing agent*3 Ships that supply LNG fuel to LNG carriers at sea

Main Locations
Key Companies

Main Locations and Key Subsidiaries

Location

Main Products and Services

Toke Plant

Chiba, Chiba Prefecture

R&D Center (Carbodilite)

Asahi Plant

Asahi, Chiba Prefecture

Urethane products, fine carbon products

Tokushima Plant

Tokushima,
Tokushima Prefecture

Carbodilite

Chiba Plant

Chiba, Chiba Prefecture

Carbon bipolar plates for fuel cells

Nisshinbo Chemical Inc.

45

Financials

Fuel cell bipolar plates

develop volume-production technology that can be used
when the market for fuel cell vehicles takes off.
In microorganism bio-carriers for wastewater treatment,
we will strengthen ties with local manufacturers in China toaddress rising demand in the Chinese market. We aim toincrease sales by using those partnerships to build a local
network of manufacturing and sales sites. We will also
explore business opportunities in Southeast Asia, where themarket is likely to take off.
The glass-like carbon products business faces tough market
conditions due to slowing growth in the semiconductor and
OLED panel markets and trade friction between the US andChina. However, we plan to continue rolling out innovative new
products, such as components for semiconductor production
equipment launched in the fiscal period ended December 2018.

Management Framework(millions of yen)refrigeration materials for LNG applications, we are targetingorders for LNG-powered ships and LNG bunker supply
vessels*3, which are likely to gain greater attention due totighter regulations on sulfur oxide (SOx) emissions fromships, due to come into force in 2020.
In recent years, demand for safe materials with low
environmental impact has been increasing steadily in Japanand overseas. Against that backdrop, we plan to promote
Carbodilite’s safety credentials and develop more Carbodilite
products and applications to drive strong growth and achieve
high levels of profitability. To generate strong growth, we plan
to start up a new overseas manufacturing site in a few years
time, while also exploring business alliances and M&A deals.
In fuel cell bipolar plates, we are fielding a growing number of inquiries about fixed fuel cell applications from potential
customers in the global market. We aim to tap into thatinterest to push the adoption of our bipolar plates in more fuelcells. In automotive applications, we are winning orders for
prototype bipolar plates for fuel cell buses, trucks and othercommercial vehicles, and we are using that experience toManagement Resources

1.8

Akihiro Kamei
President
Nisshinbo Chemical Inc.

Business Segments

Fuel cell bipolar plates

The chemicals business handles a wide range of environmentally friendly products andtechnologies. To become the kind of global business partner that our customers need,
we will work to expand our operations and generate strong growth and profits.
We will invest heavily in high-performance resin material Carbodilite and fuel cellbipolar plates, two promising growth products, and further expand our business worldwide. Going forward, we will continue to develop innovative new technologies and shift
our focus to high-performance, high value-added products to provide next-generation
chemical products that society needs.

Strategy

18.3 (adjusted)

Profile3

President’s Comment — Nisshinbo Chemical Inc.

Chemicals

In the fiscal period ended December 2018, the chemicals
business reported net sales of ¥8,173 million, up 3.5% year
on year on an adjusted basis, and segment profit of ¥1,665
million, up 19.3% on an adjusted basis.
In thermal insulation products, the completion of a large
project supplying rigid processed insulation products (refrigeration materials for LNG carriers) and weak sales of urethanebase solution led to a decline in sales. However, an increasein the sales ratio for high value-added products lifted profits
year on year.
In functional chemicals, sales and profits increased year
on year, supported by higher sales of the powdered form ofmodifier Carbodilite. Amid greater efforts to tackle atmospheric pollution and marine plastic pollution, as well as a
growing shift to much safer chemical substances, the functional chemicals business is seeing strong sales of Carbodilite
as a biodegradable plastic modifier and as a waterborne
cross-linking agent, particularly for automotive coatings andheavy-duty anti-corrosion coatings. In the fiscal period ended
December 2018, the business also stepped up efforts todevelop and launch new applications, such as highly safe
packaging film for food products.
In fuel cell bipolar plates, higher sales of products for fixed
fuel cells overseas supported growth in sales and profits. The
business also registered an increase in orders for prototype
products for fuel cell buses, trucks and other commercial
vehicles overseas.
In glass-like carbon products, sales increased on the backof firm conditions in the semiconductor market.
In microorganism bio-carriers for wastewater treatment,
orders are growing strongly in China, which faces serious
environmental issues. Demand in China is being supported by
rapid growth in the number of distributed wastewater treatment facilities.

6

Overview of Business Segments

TextilesIn the domestic market, we see the risk of a short-term
decline in demand for apparel after the upcoming hike toconsumption tax. We also forecast falling demand over the
longer term due to Japan’s shrinking population. However,
the market for wrinkle-free shirts is likely to remain largely

46

10(millions of yen)0

18.3 (adjusted)

18.12

Nisshinbo Textile

14,371

14,982

Japanese Subsidiaries

21,84020,856

Brazil

5,400

5,146

Indonesia

13,653

14,401

China

2,438

2,587

Eliminations(13,056)(14,313)

Total

44,646

43,660

Segment Profit(billions of yen)

2.0

1.5

1.0

0.5

(millions of yen)0

18.3 (adjusted)

18.12

Nisshinbo Textile

231

174

Japanese Subsidiaries

899

663

Brazil555

233

Indonesia

322

373

China

39

78

Eliminations

(227)

(271)

Total

1,819

1,250

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

Main Locations
Key Companies

Kaoru Murata
President
Nisshinbo Textile Inc.

Nisshinbo Textile Inc.

Main Locations and Key Subsidiaries

Location

Main Products and Services

Fujieda Plant

Fujieda, Shizuoka Prefecture

Developed materials

Tokushima Plant, Yoshinogawa Plant

Tokushima Prefecture

Developed materials, denim products

PT. Nikawa Textile Industry

Indonesia

Textile spinning and weaving

PT. Nisshinbo Indonesia

Indonesia

Textile weaving and dyeing

Nisshinbo Do Brasil Industria Textil Ltda.

BrazilTextile spinning

Nisshinbo (Shanghai) Co., Ltd.

China

Textile productsTOKYO SHIRTS CO., LTD., Naigai Shirts Co., Ltd.

Tokyo, etc.

Dress shirts

47

Financials

The textiles business has tightened and deepened its focus on strategic businessareas after several changes of direction. With our focus now firmly on shirts, textiles
and materials development, we aim to generate growth as a dynamic business with ahealthy sense of urgency. Our unshakeable strengths in manufacturing — built throughthe T-KAIZEN program — will underpin our efforts. Drawing on Group management
and global management, we will work to create new markets overseas and strengthen
our presence in the domestic market. We will also relentlessly develop and launch
new products to continue supporting today’s super smart society and environmental
energy society, while also building a highly profitable operating structure.

20

Management Framework

President’s Comment — Nisshinbo Textile Inc.

30

Management Resources

Business strategies
for the fiscal year ending December 201940

Textilessales of unprocessed yarn, but sales declined in yen terms due
to unfavorable exchange rates. Profits at the subsidiary werealso hit hard by high prices for raw cotton. As a result, overseas sales increased but profits declined year on year.

In the fiscal period ended December 2018, the textiles
business reported net sales of ¥43,660 million, down 2.2%
year on year on an adjusted basis, and segment profit of¥1,250 million, down 31.3% on an adjusted basis.
In the domestic market, sales of uniform fabric andnon-woven fabric for cosmetics goods increased year on
year. TOKYO SHIRTS CO., LTD. also reported firm sales ofshirts. However, sales and profits both declined year on year,
reflecting weak export sales of spandex for legwear anddisappointing sales of sports apparel at Nisshin Toa Iwao, Inc.
Overseas, sales of products made by subsidiaries in Indonesia and China for supply to third countries and regions increased
to more than ¥3.0 billion. Our Brazilian subsidiary reported higher

50

Business Segments

Summary of financial results
for the fiscal period ended December 2018(billions of yen)

Strategy

Since its founding in 1907 as Nisshin Cotton Spinning Co., Ltd., Nisshinbo has led the Japanese textile industry with its state-of-the-art technologies and high quality. Nisshinbo subsequently expanded its businessglobally in the fields of spinning, weaving, processing and sewing, and today possesses some of the world’s
most advanced technologies in product development and production. Nisshinbo is currently working toincrease global sales of the APOLLOCOT brand by mobilizing its sophisticated textile processing technologies.

Net Sales

ProfileNisshinbo Textile Inc.

stable, as drastic changes in business fashion are unlikely. In
the uniform and non-woven fabric fields, we anticipate higher
sales of work uniforms for the 2020 Tokyo Olympics. We also
see prospects for higher nursing care-related demand, spurredby Japan’s super-aging population. The outlook is very uncertain in the overseas market, but the global population continues
to rise and we see more business opportunities ahead.
Against that market backdrop, we aim to continue growing sales of wrinkle-free shirt fabric in the shirt business,particularly our APOLLOCOT brand. TOKYO SHIRTS CO.,LTD. will work to improve profitability by improving sales
guidance and strengthening measures to increase the ratio of
shirts sold at non-discount prices. At the same time, thecompany plans to set up a new online sales portal to address
the shrinking market for shirts and reinforce the business by
integrating the management of inventories and customer
data. The goal is to double the ratio of online sales by 2020.
In Indonesia, we will continue to pursue our goal of global
cost-competitiveness and global quality through our companywide improvement program called T-KAIZEN, aiming to growsales by expanding product supply to third countries and regions.
In Brazil, we are currently drawing up plans to replacesome aging spinning machines with new highly efficientequipment in 2020. We plan to continue investing in facilities
and equipment at our Brazilian operations to improve competitiveness, while also monitoring trends in the foreignexchange market and the raw cotton market.
In the textiles business, we will continue to target orders forcustom-made uniforms and increase sales of uniforms for theservice sector. In medical wear, we will focus on developing new
products that are compatible with industrial laundry processes.
In product development, we are working with Japan Radio
Co., Ltd. and New Japan Radio Co., Ltd. to develop smart
textiles. In December 2018, we signed a comprehensive joint
development agreement with Nara Medical University todevelop a waist band that can predict the onset of labor pains bytransmitting the baby’s heartbeat to medical equipment. We
plan to look into the feasibility of using the belt as an infant healthprotection device as part of a suite of monitoring services.
We also continue to conduct research and development into
anhydrous dyes, formalin-free processing and non-starch textile
manufacturing, which all have the potential to significantly reduce
environmental impact in the natural textile manufacturing sector.

Overview of Business Segments

Management Resources

Research and Developmentin the Nisshinbo Group— Helping to make the hydrogen society a reality —Real Estate

Net Sales(billions of yen)2

(millions of yen)0

18.3 (adjusted)
5,460

Segment Profit

18.12
4,237

(billions of yen)

4

3

2

1

(millions of yen)0

18.3 (adjusted)
3,706

18.12
2,681

Note: Figures for the previous fiscal year have been adjusted tofacilitate comparison with figures for the fiscal period ended
December 2018, which is a transitional period due to a change
in the Group’s fiscal year-end from March 31 to December 31.

*1	Polymer electrolyte fuel cells: Significantly lower operating temperatures
than solid oxide fuel cells (SOFCs) mean PEFCs are likely to become
the main type of fuel cell.
*2	Fuel cell forklifts are gaining ground, especially in North America, as theirsmall areas of operation make it easy to install refueling infrastructure.

Financials

The real estate business will continue to fulfill its role as asource of funds to help Nisshinbo attain its managementtargets by effectively utilizing the real estate assets of thewhole Group. We plan to continue generating stable earnings
by focusing on the following projects.
Plans for the redevelopment of the north section of theformer Japan Radio Co., Ltd. site in Mitaka (Tokyo) include thesale of around 680 condominium units in 2020 and 2021. Sales
have been strong since marketing activities started in 2018, withall 140 units in the first phase being sold immediately.
We are also redeveloping the former Miai Plant site
(Aichi). We plan to sell around 360 detached homes and landfor commercial, medical and welfare facilities between 2019and 2024.

Bipolar Plates for Fuel Cells
Carbon bipolar plates manufactured by the Nisshinbo
Group are used in the Ene-Farm system and other fixed
PEFCs*1 for residential and commercial use. To improve
productivity, we are accelerating the automation of production lines for bipolar plates used in residential applications,where Nisshinbo already has a high market share, and forother increasingly popular fixed fuel cell applications.
Our carbon bipolar plates are lighter than metal
versions currently used in FCVs, but they are also easier
to mold into the required flow channel shapes and are
more resistant to corrosion. We aim to harness thosecharacteristics to improve the performance and durabilityof fuel cells to support full-scale uptake of FCVs.
Nisshinbo has also invested in Canadian fuel cellmaker Ballard Power Systems Inc. and is working withthe firm on joint research projects. Our carbon bipolar
plates have been adopted by Ballard for a fuel cell stackused in forklifts*2 and we are now aiming for early
adoption in fuel cells for buses and trucks.

Fuel cell bipolar plates

48

Management Framework

Business strategies
for the fiscal year ending December 2019

Currently, fuel cells are mainly used as fixed powersources for household and commercial facilities, but
progress is being made in R&D and real-world applications
to extend their use into vehicles and other areas of themobility field. Stricter fuel efficiency standards worldwide
are spurring growth in the market for eco-friendly carssuch as hybrid vehicles, electric vehicles (EVs) and fuel cellvehicles (FCVs). The characteristics of EVs and FCVs mean
they are likely to be used for different applications.
FCVs currently face obstacles to uptake, such as cost
and the lack of refueling infrastructure, but refueling isquick and the vehicles are lightweight and have large
fuel capacities. That makes fuel cells ideal for commercial
vehicles, as they tend to be used for long hours and overlong distances. Users are also able to select specificrefueling stations for their fleet. Those factors are
already spurring strong uptake of fuel cell forklifts,
which are used in large numbers by major logistics
firms, as well as fuel cell trucks and long-distance buses.
Electric trains powered by fuel cells can be used on raillines with no overhead power cables. Hydrogen fuelcells are also a promising power source for drones,
which are being used in a growing number of applications.
Lightweight, high-capacity fuel cells may help extend
drone flight time and increase payloads.
Against that backdrop, automakers and fuel cellmanufacturers are actively building refueling infrastructure worldwide. The Japanese government, which has
approved a plan to reduce CO2 emissions to zero,announced a New Strategic Roadmap for Hydrogen and
Fuel Cells in March 2019. The roadmap includes anaction plan to expand refueling infrastructure andcreate a low-cost hydrogen distribution network.

Management Resources

In the fiscal period ended December 2018, the real estatebusiness reported net sales of ¥4,237 million, down 22.4%
year on year on an adjusted basis, and segment profit of¥2,681 million, down 27.7% on an adjusted basis.
In the property leasing business, leasing operations werefirm for land, office buildings, commercial facilities and otherproperties, but rental income declined due to the sale of alarge commercial facility in 2017, pushing down profits.
In the housing lot sales business, sales and profits both
declined following the completion of housing lot sales atsites in Kawagoe (Saitama) and Okazaki (Aichi).

4

The Nisshinbo Group’s Hydrogen-related Products

Business Segments

Summary of financial results
for the fiscal period ended December 20186

The Road to the Hydrogen Society

Strategy

Nisshinbo’s real estate business redevelops properties that have become vacant as a result of business changes at
Group companies. Income from those activities is used to fund the Group’s growth strategy, such as launching
new businesses and expanding global operations. Income is generated from two main sources — property leasing
and the sale of housing lots. Nisshinbo has actively developed the housing lot sales business since 2009, when theGroup moved to a holding and operating company structure. The Group’s domestic real estate portfolio includes
many land and property sites with excellent locations, generating strong earnings for the real estate business.

ProfileNisshinbo Holdings Inc.

As an Environment and Energy Company group, Nisshinbo has positioned eco-friendly products
and services as the value it can provide to society, in line with its Corporate Philosophy,“Change and Challenge! For the creation of the future of Earth and People.” Supporting uptake offuel cells powered by hydrogen is one area that fits that philosophy. Hydrogen fuel cells are
the ultimate clean source of energy, emitting no CO2 emissions during use.

49

Management Resources

Carbon Bipolar Plate Sales(billions of yen)

1.5

1.0

0.5

15.3

16.3

17.3

18.3

18.12 ** Nine months of results due to change in fiscal year-end

Yasuo Imashiro
Managing Officer
General Manager
Business Development
Divisionmindset among our researchers. We are also reinforcing
intellectual property (IP) management, such as usinge-learning programs and other tools to educate employees
about the importance of IP.

Fuel Cell Development

Basic Policy for 2019
One of the business development division’s priority
measures in 2019 is to create and cultivate new businesses and expand its core competences. Currently,
representatives from across the Group meet once every
two months at a New Business Group Meeting to discuss
new business opportunities. Senior and mid-level managers from each of the Group’s core subsidiaries attend themeeting to constructively share information on eachbusiness development theme. In addition, we conductbusiness feasibility studies to assess the prospects of key
themes and we are fostering a more entrepreneurial

Fuel cell stack

50

51

Financials

Fuel cells are different to batteries, as they generate
power using hydrogen fuel and they are likely to gain
popularity as a promising alternative source of energy. In
the automotive field, electric vehicles (EV) with lithium-ion
batteries are currently gaining ground in the market.
However, the Japanese government is targeting fuel cellvehicle (FCV) uptake by 2030, and the industry is working
to resolve issues that stand in the way of that goal, suchas building a network of hydrogen refueling stations.
The Nisshinbo Group is focusing on the developmentof carbon bipolar plates for fuel cells and carbon alloy
catalysts as a replacement for fuel cell platinum catalysts.
We are now working on developing thicker, more durable
bipolar plates to support widespread use in automotive
applications. Meanwhile, we are deepening collaboration
with Ballard Power Systems, Inc., a leading fuel cellmanufacturer in Canada. Our bipolar plates have alreadybeen selected for the company’s fuel cells used in forklifts and we are now working to drive sales so that our
carbon alloy catalysts are also adopted for forklifts.

Management Framework

The goal of the Nisshinbo Group’s long-term R&D strategy is to provide value for the super smart society byfocusing on providing solutions in four areas — hydrogen,mobility, medical & healthcare and public infrastructure.
To achieve that goal, we conduct Groupwide collaborative
research and development activities, supported by ourGroup R&D system. Representatives from each businessfield – wireless and communications, micro devices,brakes and chemicals – meet regularly to drive innovation
by bringing together the Group’s businesses.
We are currently working on around 30 cross-business
R&D projects. Helium gas sensors, one of the research
projects, are closest to commercialization. We started trial
sales in the fiscal period ended December 2018 and weplan to launch them officially in 2019. Our sensors, which
are designed to detect gas leaks in factories and otherenvironments, are lighter, more compact and significantly
cheaper than existing sensors, and can also operate inhumid conditions. They are the first portable helium gas
sensors on the market. We expect those features to support
growth in the number of installed sensors and applications,potentially driving growth in the broader gas sensor
market. Our sensors also have the potential to be used ashydrogen gas sensors in future fuel cell vehicles (FCVs).

Management Resources

MoLeTELL®
Portable gas leak detector

Leveraging Our Group R&D System

Business Segments

Carbon Alloy Catalysts
Nisshinbo is taking a completely new approach tocatalysts for PEFCs by developing carbon alloy catalysts. Existing catalysts use platinum, a scare resource.
By switching to carbon-based catalysts, we can significantly reduce costs and ensure stable supplies.
Our carbon alloy catalysts were adopted by Ballard in2017 for its portable fuel cell, marking the first-ever useof a non-platinum catalyst. Ballard’s portable fuel is
attracting interest for outdoor and emergency backup
supply applications.
We are currently working to improve the performanceof our carbon alloy catalysts, aiming for adoption in
forklift fuel cells in around 2022 and for the full-scale
uptake phase of FCVs.

Promoting Groupwide collaborative research and development activities

Strategy0

Nisshinbo’s R&D Strategy
ProfileUltrasonic Gas Sensors
Ultrasonic gas sensors measure differences in thespecific gravity of hydrogen, helium and other atmospheric gases. The sensors have been developed by
combining technologies from across the Nisshinbo Group– ultrasound technologies developed by Ueda Japan
Radio Co., Ltd. for the medical field, and signal processing
technologies created by Japan Radio Co., Ltd. for radar
and wireless communication products. Unlike existingproducts, our sensors do not require heaters or rare
metal catalysts, helping to extend their usable lives.
Response time is also fast and they can detect gas overa wide area. We started trial sales of a portable heliumgas sensor in 2019.
Compared with large, heavy and expensive existingproducts, our new sensors are small, light and battery
powered, meaning they can be used easily whenever
and wherever they are needed. We are now moving intohydrogen gas sensors, with trial sales of a portable hydrogen gas sensor scheduled to start at the end of 2019.
We are also working on sensors for use in FCVs as partof our efforts to make the hydrogen society a reality.

Management Resources

Implementing Environmental Management

Medium-term Environmental Targets: Key Themes and Results

6
5

We are actively installing solar power generation
systems at business sites that require large amountsof energy, such as facilities that use thermal processing.
In the fiscal period ended December 2018, installation
work was mainly carried out at domestic sites,
resulting in total solar power generation of 3.8GWh.

4
3
2Business sites and subsidiaries with solar power systems:
Miai Machinery
Chiba
Tatebayashi
Tokushima
Nisshinbo Precision Instrument & Machinery Hiroshima
Nagano Japan Radio
Other sites

ProfileThe Nisshinbo Group is aiming to increase corporate value as a more united corporate group by realizing its Corporate Philosophy — “Change and Challenge! For the creation of the future of Earth andPeople.” As an Environment and Energy Company group, we will continue to offer new products andsystems that help protect the environment, save energy and create alternative sources of energy, while
also providing solutions that address some of the greatest issues faced by humanity today, such asenvironmental destruction and natural disasters caused by climate change, to make life safer and moresecure for people everywhere.

(GWh)

Solar power generation in the
Nisshinbo Group

1
0
15.3

16.3

17.3

18.3

18.12** Nine months of results due to change in fiscal year-end

Improve therecycling rate

Reduce the volume of
PRTR substanceemissions per unitof salesReduce greenhousegas emissions per unitof salesWater usage perunit of sales(new category)Promote Life Cycle
Assessments(LCAs)

Increase the sales
ratio for productsthat contribute to asustainable society

Targets for the
fiscal year ended
December 2018

Deploy model businesses that put
priority on conserving
the ecosystem—

Ratio of total sales:

Ratio of total sales:

40% or more

40% or more

Reduction of% or morecompared with fiscal year
ended March 2015

Reduction of% or morecompared with fiscal year
ended March 2015

Reduction of% ormore compared with fiscal
year ended March 2015

Fiscal period
ended December
2018 (adjusted*)

Currently being
implemented at—

Ratio of total sales:

Ratio of total sales:

Energy usage reduced byEmissions of greenhouse

Emissions of PRTR
substances reduced byyear ended March 2015

gases reduced by %compared with fiscal
year ended March 201526%

nine business sites

Number of businesssites decreased by
one due to the sale of
the Toyota plant ofNisshinbo Brake Inc.

More thanfivebusiness sites
overseas

3

Reduction of % ormore compared withfiscal year ended
March 2018104

90% or more
77%

36% compared with fiscal
year ended March 2015

X

X

X

Target not achieved as
the papers business
was trending ahead ofits targets, but thebusiness was sold.

Target not achieved due tooverseas expansion in the
precision instruments businessand large orders for insulationmaterials for LNG carriers in
the chemicals business.

Target not achieved as theCompany was unable toidentify highly reliable
recycling contractors
overseas.

Ratio of total sales:

50% or more

Ratio of total sales:

55% or more

10

Reduction of% or morecompared with fiscal year
ended March 201510

10

Reduction of% or morecompared with fiscal year
ended March 2015

Reduction of% or morecompared with fiscal year
ended March 2018

Recycling rate

90% or moreManagement Framework

Targets for the
fiscal year ending
December 2021

5% compared with fiscal

5Management Resources—

Performance48%

5

Business Segments

Step up activities
to maintainbiodiversity

Strategy

Reduce energy
consumption per unitof salesKey themes* For reference purposes, performance versus benchmarks has been adjusted to reflect a 12-month fiscal period.

https://www.nisshinbo.co.jp/english/csr/

1

Increase the ratio of productsthat contribute to a sustainable
society tototal sales

52

65% or more of2

Reduce greenhouse gas
emissions per unit of sales by

15% or more compared withfiscal year ended March 2015

53

3

Improve the recycling
ratio to95% or moreFinancials

Long-term Environmental Targets (fiscal year ending December 2025)

For more details, please visit the Nisshinbo Group’s CSR website.

Management Resources

Cultivating Diverse Human Resources
Based on the belief that people are vital to the success of companies, the Nisshinbo Group puts
considerable effort into training personnel. In addition to our systemized training scheme andprogram to develop future leaders, we offer a wide range of opportunities for employees totransform themselves and take on new challenges, while also empowering every person to
maximize their potential, whatever their background and ability.

Empowering Women

We surveyed our employees in May 2018 to gain a moreAt the moment, our priority issue is empowering women.

accurate picture of the Nisshinbo Group’s organizational

We hold a range of training courses and lectures for every

culture and climate to help us develop future initiatives.

level of employee across the Group, including joint seminars

We also launched an Employee Survey Promotion Team tofor managers and their female staff to raise awareness aboutshare information and ideas about solving issues raised

this issue. In December 2014, we announced a voluntaryby the survey with each Group company. The team has

action plan to promote women to executive and management

identified issues that need to be tackled and has started

positions. In line with the plan, Group companies have devel-

implementing responses.

oped general business operator action plans based on the Act

Training System and Future Leader Development

New Personnel System

Human resources training starts as soon as new graduates

In the fiscal year ending December 2019, we introduced

enter the Nisshinbo Group. Our general training program isa new personnel system for all employees at Nisshinbo

separated into streams that will eventually lead to promotion

Group companies. The new system puts more emphasis on

to mid-level manager, section head and division head positions.

the job type and role of each employee to make human

Employees also take courses for specific skills and learn

resources more responsive to developments inside and

The Nisshinbo Group aims to create a working environment

recruits as part of efforts to support women in the workplace.

about safety, human rights and the environment. In ouroutside the Group, such as changes in business structure

where employees with diverse values and abilities can reach

We also hold annual meetings for personnel tasked withspecialist training program, they acquire knowledge in areasand increasingly diverse ways of working. A new job grade

their full potential.

promoting diversity at each Group company. The meetings

specific to each business and job function, such as technology,

system has reduced the number of grades from 17 to seven,accounting and intellectual property. These training units andcourses combine to form a systemized training scheme.

on Promotion of Women’s Participation and Advancement in
the Workplace. Under their plans, Group companies have set

Work Style Reforms

specific targets for the number of female managers and new

making it easier for talented individuals to advance more

Style Reform Action Plan, which is based on three themes

initiatives such as female recruitment and participation in

rapidly, while a new performance evaluation system that— rectifying long working hours, encouraging employees toexternal seminars.

We also run a special program for employees earmarked tomeasures a wider range of metrics is helping to strengthen

use annual paid holidays, and promoting flexible working.

become senior managers. The program is designed to foster

our organization.

We are pushing ahead with several initiatives, including

New Performance Evaluation Systemmanager roles before they are promoted. In addition, as
part of efforts to cultivate future leaders, we run workshops

Role evaluation

for young managers on how to improve businesses, andTarget evaluation

Action Plan

the opening of a new satellite office in June 2018.

Targets for 2020

Nisshinbo Holdings has formulated a general business
operator action plan based on the Act on Advancement of
Measures to Support Raising Next-Generation Children*.

ness strategy.

Behavior evaluation

Corporate Philosophy inpractice evaluation

balancing work and life commitments. To achieve that goal,

Support for Older Workers
The Nisshinbo Group launched a new training program inare being implemented by 12 Group companies in Japan.

October 2018 to help older employees prepare for life and* A law enacted on April 1, 2005 to create healthy and supportive environments for having and raising children.

work after they reach the mandatory retirement age. During
the program, they learn how to prepare financial plans, lookafter their health and continue their careers if they choose to,Define role and evaluate performance for key positions

so they can live life to the fullest as they approach retirement.

18 months

Development program

3 – 1 Selective external training

In 2019 we also started offering career seminars run by

Next-generation businessleader program

3 – 2 Practical workshops

Led byNisshinbo
Holdings

2 Training to attain management mindset

Stream-based training for
future managers

1 Recognize own abilities

Selective

Identify future business leader candidates

Led by Group
companies< Regular review >Define role and evaluate performance for key positions

54

Training programs at individual companies orfor specific roles
OJT

instructors from inside the Nisshinbo Group.

New Japan Radio’s “social office”
In June 2017, New Japan Radio Co., Ltd. established a specialist department for employees with disabilities.
Led by a full-time manager, the “social office” is mainly staffed by people who have mental disability certificates.
The office handles requests from internal departments for straight-forward routine jobs with comfortable turnaroundtimes, such as fabrication work, data input, document preparation and prototype assembly and disassembly.
Staff have regular meetings with the manager to ensure there are no concerns in the workplace, helping to
improve staff retention.

55

Financials

Workshops for younger employees
Training exchange programs with other sectors

Recommend participants for program

Define role
Evaluate
performancemale employees and diverse work practices. Similar measures< Regular review >4 Management mindset follow-up training

Selection

Office position stream 40%,
specialist position stream 20%

Management Framework

Define role
Evaluate
performance

Systematic Process for Cultivating the Next Generation ofBusiness Leaders — Training Framework

Female graduate recruit ratios

ees can fulfill their potential and maintain their careers while
the plan includes a number of targets for paternity leave for

Systematic Process for Cultivating the Next Generation ofBusiness Leaders — Overview

Triple number compared with
December 2014

Management Resources

Under the plan, we aim to create a workplace where employ-workshops for young employees to discuss future busi-

Number of female managers

Business Segments

are used to report on steps being taken and share views on

Strategy

In April 2018, we formulated and disclosed our Workapproaches, knowledge and behavior for their future senior

ProfileEmployee Surveys

Management Resources

SafetyGuided by the principle that “Safety is the Basis for Everything,” the Nisshinbo Group places
the highest priority on safety in all its activities to deliver high-quality products to customers.

Thorough Risk Assessment

Average for Japanese manufacturing industry

policies: consistently implement detailed risk assessments,

Nisshinbo Group (Japan)

verify workplace rules such as operation standards for safety

safety and health audits at 31 manufacturing sites in Japanpotential risks and communicate good practices to theand one manufacturing site overseas. We also verified

whole Group as part of workplace health and safety

health and safety conditions and carried out safety checks

activities in subsequent fiscal years.

at four overseas manufacturing sites.

Frequency of Injuries with Lost Work*basis, the Nisshinbo Group has developed a number of priority

We compile the results of all audits and checks in
a comprehensive audit report, which is used to analyze

HealthNisshinbo Group (overseas)

1.2

equipment and inspection anomaly procedures and rules forequipment shutdowns, and increase opportunities to identify
unsafe work practices.
about safety issues. Each business site provides safety
training for new employees and employees transferring fromNisshinbo Group Health Management Policy

0.4

other sites. In addition to that training, we run courses to

Nisshinbo Group, through the establishment of an environment where each individual member can play an active role by promoting employee health and sound workplace, aims to be a corporate group which is indispensable, at any time, for our society.

raise skill levels and small group activities on topics such as
0hazard awareness and near miss reporting. We also conduct
chemical substances in accordance with annual plans and

17.3

18.3

18.12

* Frequency of injuries with lost work = number of employees injured with lostwork ÷ aggregate number of working hours x 1 million

progressively implement preventative safety measures inorder of priority.

providing ongoing targeted guidance as part of efforts toraise safety management standards across the Group.

Occupational Injuries

Framework for Health Management Initiatives

To drive health management efforts across the Group,
we established the Group Health Management Department

Improve health
Raise productivity

Meeting in the fiscal period ended December 2018.
The meeting is attended by health management department

Improve lifestyle habits(smoking, exercise, diet,sleep) based on resultsof medical checkups

nating the Group’s activities.

The Nisshinbo Group conducts regular occupational safety

7 or higher injuries). The frequency of injuries with lost workand health audits of its manufacturing sites. A monitoring(1) Personal health: improve lifestyle habits based on dataat the Group’s domestic business sites was 0.71, which isteam composed of the Health & Safety Group from Nisshinbo

from medical checkups conducted by health insurance

lower than the average for the Japanese manufacturing sector,

Holdings Inc., labor unions, safety and health management

societies; (2) organizational health: reduce general healthbut worse than the 0.49 level achieved in 2017. At business

staff representing each business, and safety and healthrisks by implementing workplace improvement activities

sites with a particularly high number of injuries, we are

officers of other business sites, checks the state of safety

based on stress check analysis; and (3) safety awareness:

Specifically, the meeting is focusing on three key areas.

ensure all employees are fully aware of their safety obligations

Strict adherence
to fundamentals
Rule compliance andequipment inspections(Zero occupational injuries)

Reduce frequency of injuries with lost work to zero
Reduce frequency of all levels of injuries to zero

Preemption principle

Implement risk assessments(Identify early signs of danger)(Work practices, equipment, chemical substances)

Raise employee awarenessof safety issues
Training / guidanceParticipation principle

Prioritize safety at all times(Cooperation of all employees)(High awareness)

Increase the ability of all employees to anticipate danger
by implementing safety training and KYT activities

56

2

Organizational health

3 Ensure safety awarenessand work practices and more frequent personnel transfers

Manage risks

related to business restructuring and organizational reforms.

Start using work management
standards for heavy work

New Japan Radio Selected as White 500 Company for Third Straight Year
New Japan Radio Co., Ltd. started implementing employee health management from April 2016, aiming to becomea Healthy Company. The company’s initiatives, such as hands-on fitness seminars, visceral fat measurement andsteps to reduce passive smoking, have been recognized by the Ministry of Economy, Trade and Industry (METI) andNippon Kenko Kaigi, which have certified New Japan Radio as a White 500 company with outstanding healthmanagement for three consecutive years since 2017.

57

Financials

Systematic risk reduction measures based on audits of hazards
and harmful chemical substances

1

Individual
healthamid the increasingly diverse nature of the Group’s businesses

No major accidents

Eliminate major
workplace accidents

Zero injury activities

Strong messaging andfocus on frontline operations

Zero injury principle

Reduce general healthrisks based on stresscheck analysis

Management Framework

instances of major workplace accidents (accidents with level

Management Resources

leaders from each Group company and is tasked with coordi-

Safety and Health Audits

In the fiscal period ended December 2018, there were no

Promoting Groupwide Health Management

Business Segments

16.3

risk assessments related to facilities, work processes andLevel of senior
management commitment

Strategy

We have formulated the Nisshinbo Group Health Management Policy to clearly define our healthmanagement initiatives. We will promote various health measures from now on in line with this policy.

0.8

Nisshinbo is also working to raise employee awarenessProfileTo ensure zero major workplace accidents on an ongoingand health management at the targeted business sites.
In the fiscal period ended December 2018, we conductedCorporate GovernanceManagement Framework
Corporate Governance64	Board of Directors, Audit & Supervisory Board Members and Managing Officers
66

Risk Management

68

Complianceexecution of duties by directors in accordance with audit
policy and plans determined by the board.

Business Segments

Corporate Governance Structure
Nisshinbo has separated decision-making and oversight frombusiness execution and adopted a managing officer system toreinforce those functions. By transferring responsibility for businessexecution to managing officers and strengthening oversight by
the Board of Directors, we are improving management efficiency
and transparency and creating an effective governance structurethat will support the Group’s sustained growth and enhance
corporate value over the medium and long term.
Nisshinbo has established an Audit & Supervisory Board.
The members of the Audit & Supervisory Board monitor theStrategy

Corporate Governance Policy
We have formulated the Nisshinbo Corporate Governance Policy,
which clearly states our basic thinking on corporate governanceand related initiatives. By steadily implementing the principlesof the policy and revising and improving its content as needed,
we aim to improve the effectiveness of governance and createa framework for rapid and bold decision-making that contributes
to sustained growth and increased corporate value overthe medium and long term (policy formulated February 2016,
revised July 2017 and January 2019).

Profile59

Nisshinbo believes it needs to increase corporate value over the medium and long term as an Environment
and Energy Company group by operating its various businesses based on global business management
and cash flow management. To achieve this, we are improving the quality of corporate governanceand other aspects of our organizational culture. In parallel, we are striving to deliver quantitative
growth in earnings and shareholder value, focusing on ROE to improve profitability and placing
importance on the share price in management decisions.
By making rapid and bold decisions based on risk-taking in line with our management principles,
we are working to enhance management efficiency while ensuring transparency, improve accountability,
act ethically and build a stronger corporate governance structure founded on our Corporate Philosophy.

Corporate Governance Structure

Coordinate

Board of Directors
AdviseAudit & Supervisory Board

Audit

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

11 directors (including four outside directors)
Recommend

Nomination Committee
Remuneration Committee

Discuss /ReportReport<Business execution functions>

Coordinate

Instruct

Accounting audit

Internal Audit Officer

ReportDiscusses business execution matters

Financial Auditors

Reappoint

Coordinate

Instruct

Representative Directors

ReportReport

Audit<Audit functions>Management Framework

Appoint /Oversight

Audit

Board of Management

Appoint / Dismiss

Appoint / Dismiss<Decision-making and oversight functions>Management Resources

General Shareholders’ Meeting
Appoint / Dismiss

Managing Officers, Business Divisions, Group Companies

58

Directors

Managing Officers

Representative directors are appointed by resolutionsof the Board of Directors. As of March 28, 2019, thechairman and president were the Company’s two
representative directors.

As of March 28, 2019, the Company had 11 directors,
including four outside directors. The Board of Directors
is responsible for making decisions on importantmanagement matters and for monitoring the executionof duties by directors. Directors are appointed for
one-year terms in order to clarify management
responsibility each fiscal year.

Nisshinbo has adopted a managing officer system tospeed up decision-making for business execution andclarify operational responsibilities. As of March 28,
2019, the Company had 15 managing officers,
including the president and five with dual roles as
directors. Managing officers are also appointed for
one-year terms.

59

Financials

Directors and Audit Supervisory Board Members of Nisshinbo Holdings, Inc. Please see page 64-65 for more details.

Representative Directors

Alignment with corporate philosophy and management
policyCompliance with laws and regulations and corporate ethics
Increasing medium- to long-term corporate value
Securing the trust of various stakeholders including
shareholders, customers, employees, business partners,
and local communities

mentation of M&As. These management matters are determinedbased on the criteria for agenda items stipulated under the Companies Act of Japan, other statutory and regulatory requirements,and various internal rules that govern the Board of Directors andthe delegation of authority. Further, in its deliberations anddecisions, the board keeps the following matters in mind.

Independent Outside Directors at Nisshinbo Holdings Inc.

Appoint
The Board of Directors selects directors for top management
positions from candidates proposed by the committee, whichputs forward individuals with the necessary outstanding
attributes, aptitude and achievements to fulfill the role.

Directors

The Board of Directors selects directors from candidates
proposed by the committee, which puts forward individuals witha strong track record in corporate management and the necessarycommitment and ability to realize Nisshinbo’s Corporate
Philosophy and increase corporate value.

Managing
officers

The Board of Directors selects managing officers from candidates
proposed by the committee, which identifies and proposes
outstanding individuals from among the Group’s businesssubsidiary leaders and management grade-employees who havethe necessary specialist skills and management capabilities,
backed by a firm commitment and resolve.

Succession
planning

The president develops succession plans for top managers and other directors (excluding outside directors) and managing officers andcultivates candidates to take over their roles. Details of those plans and progress with succession planning are shared with and discussed
by the Nomination Committee, which includes outside directors, and adjusted and improved as necessary. The Board of Directors
monitors progress with succession planning based on necessary reports received from the committee.

Remuneration for Directors and Senior Managers
To increase transparency and objectivity in processes for determining remuneration, Nisshinbo has established a Remuneration
Committee as an advisory body for the Board of Directors. The
committee comprises two directors and four outside directors.
Remuneration for directors is set within maximum limits
approved by the General Shareholders’ Meeting and comprises
basic remuneration (monthly payments), bonuses and stockbased remuneration (restricted stock compensation plan).
However, outside directors receive only basic remuneration(monthly payments) and retirement benefits are not paid to
directors. Remuneration for managing officers is based on
the same policies and procedures.

Concurrent positions ofoutside directors

NoboruMatsudaMr. Matsuda has experience as a public prosecutor and lawyer and has specialist legal knowledge.
Drawing on his highly specialist expertise, long track record and judgment, Mr. Matsuda provides
oversight of management activities at the Nisshinbo Group.

Hakuhodo DY Holdings Inc.
Mitsubishi UFJ NICOS Co., Ltd.
Yomiuri Giants Co., Ltd.

Nomination
Remuneration

Classification

Yoshinori
Shimizu

Mr. Shimizu has specialist knowledge, mainly in the fields of finance and monetary affairs, in hisrole as a university professor. Drawing on his highly specialist expertise, long track record andjudgment, Mr. Shimizu provides oversight of management activities at the Nisshinbo Group.

Tokyo Century Corporation

Nomination
Remuneration

Directors(Excluding outside directors)

Shinobu
FujinoMs. Fujino has specialist knowledge and experience, mainly in the field of personnel development,in her role as a career counselor. Drawing on her extensive expertise and experience andher perspective as a woman, Ms. Fujino provides oversight of management activities at
the Nisshinbo Group and contributes to the promotion of diversity management.

Nomination
Remuneration

Keiji
Taga

Mr. Taga has a long track record in corporate management as the director of a government-affiliatedfinancial institution and the president of a business corporation. Drawing on his extensive management experience and achievements and his high level of expertise, Mr. Taga provides oversight ofmanagement activities at the Nisshinbo Group.

60

SEIKO PMC CORPORATION

Nomination
Remuneration

In cases where managing officers are deemed no longer
qualified for their role due to reasons such as the lack ofnecessary qualities and aptitude for management, the committee
recommends dismissal of the managing officer to the Boardof Directors, supported by reasons for the recommendation.
Based on the committee’s recommendation, the Board of
Directors decides whether to dismiss the managing officer.

To attract outstanding management talent and ensure
appropriate conditions for directors and senior managers,
the Remuneration Committee formulates remuneration tables
for each role based on pay levels at peer companies, ratios
for performance-linked remuneration and the Company’s
relative position in the industry. The tables are tested andrevised as necessary.
Basic remuneration: Determined through discussions by
the Remuneration Committee based on remuneration tables foreach role and taking into account the Company’s earnings andthe role, responsibilities and contribution of each individual.

Remuneration for Directors and Auditors (Fiscal period ended December 2018)
Total remuneration(Millions of yen)

Remuneration breakdown (Millions of yen)Basicremuneration

Stock
options

Restricted stockcompensation plan

Bonus

Total numberof payees

158

109

4

8

35

6

Audit and Supervisory Board members(Excluding outside audit andsupervisory board members)

25

25

—

—

—

2

Outside directors and outside Audit andSupervisory Board members

39

39

—

—

—

6

Notes: 1.	Total maximum compensation
		Directors: No greater than ¥400 million per year (Employee salaries of individuals simultaneously appointed as employee and director are not included in payments to directors.
Directors are also eligible to receive compensation through a restricted stock compensation plan, up to a maximum value of ¥40 million per year).
		Audit & Supervisory Board members: No greater than ¥70 million per year
2.	The Company had 11 directors and four Audit & Supervisory Board members as of March 28, 2019.

61

Financials

Reasons for appointment

In cases where directors, including top managers, are deemed
no longer qualified for their role due to reasons such as the lackof necessary qualities and aptitude for management, thecommittee recommends dismissal of the director to the Boardof Directors, supported by reasons for the recommendation.
Based on the committee’s recommendation, the Board of
Directors decides whether to dismiss the director or submits
a proposal seeking approval for the dismissal of the director to
the General Shareholders’ Meeting.

Management Framework

Name

Committees

Dismiss

Top management
positionsManagement Resources

appoint them after carefully determining their eligibility as
an independent director, taking into consideration the externalrequirements set forth in the Companies Act and the independence standards set by securities exchanges. To ensure thatoutside directors and outside Audit & Supervisory Board members are able to properly fulfill their roles and responsibilities,
when nominating a candidate, the Company shall understandthe status of officers who concurrently serve in other listedcompanies or companies and organizations that correspond tosuch, and verify that it will not interfere in their attendance of
the Company’s Board of Directors meetings, Audit & Supervisory Board meetings, or their work.

Role of Nomination Committee

Business Segments

Responsibilities of the Board
Directors and the Board of Directors recognize that they havea fiduciary duty to shareholders and thus strive to appropriatelyreflect shareholders’ intentions within the board. By overseeing
the preparation and management of internal control and risk
management systems, directors and the board help to monitor
business execution and decision-making. At the same time,
the Company fearlessly confronts risk and works to achieve
governance that is focused on quick and bold decision-making.
In this manner, the Company aims to achieve greater accountability to stakeholders, increased profitability, and higher returns
for shareholders.
In light of the above, the Board of Directors deliberates anddecides on important management matters at board meetings,
such as the formulation of management strategies and plans,changes to the business portfolio group structure, and the imple-

a Nomination Committee as an advisory body for the Boardof Directors. The committee comprises two directors andfour outside directors.

Strategy

To promote the globalization of each Nisshinbo company
along the lines of environment and energy, the Board of Directors selects management talent as candidates for directors who
possess outstanding management experience, have the necessary firm commitment and ability to realize the Company’s
Corporate Philosophy and increase corporate value, and whoenhance the composition of the board through greater diversity
in areas such as gender and nationality. As of March 28, 2019,
the Board of Directors is composed of 11 directors, of whichfour are independent outside directors (including one woman).
The maximum number of directors is set at 14 in the Company’s
Articles of Incorporation.
With respect to independent outside directors, the Board of
Directors shall obtain the consent of the person in question and

Selection and Dismissal of Directors and Senior Managers
To increase transparency and objectivity in processes forselecting and dismissing directors, Nisshinbo has established

ProfileNisshinbo has appointed several outside directors andoutside audit & supervisory members. These outside appointments
also sit on the Company’s voluntarily established Nomination
Committee and Remuneration Committee.
We have adopted this structure as we believe it ensures
operations are conducted in an appropriate manner. Under thisstructure, outside directors draw on their depth of experienceand expertise to monitor business management from an objective
and independent standpoint, while outside members and internallyappointed standing members of the Audit & Supervisory Board
work closely with the Internal Audit Office.

Bonuses: Paid to directors, except outside directors, as anincentive linked to fiscal year earnings performance. The basebonus amount is determined by the Remuneration Committee
each year. A proportion of that amount is paid to each individualcommensurate with their role, in line with the performance ofbusinesses in their respective areas of responsibility against
targets for sales, pre-tax profits, operating cash flow andother indicators.
Stock-based remuneration: Paid to directors, except outside
directors, in the form of restricted stock allocations to provide
greater incentive to directors to increase the Company’s shareprice and corporate value by aligning their interests more closelywith shareholders with respect to the risk and reward of shareprice fluctuations. Stock-based remuneration for each role is set

Ensuring Appropriate Information Disclosure and Transparency
The Company carries out active corporate communication byappropriately combining statutory disclosures with voluntary
information. When disclosing information, the Company takes
into account the convenience and accessibility of the information
for the user, including high-value-added non-financial information.
In addition, the Company shall disseminate information in English
such as by preparing English-language annual integrated reports.

Changes in Cross-Shareholdings(billions of yen)

80

(73 companies)

74.8

61.5

60

40

20

0

31.03.18

31.12.18

62

Number of inside directors

2015

‌
‌

Increased number of outside directors from three to four
Abolished takeover defense measures

Corporate Governance Policy formulated
Established Remuneration Committee and Nomination
Committee (both discretionary bodies), started evaluating
effectiveness of Board of Directors
Abolished internal advisor and consultant system

2017
2018
‌

of which are women)

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Reduced number of board members from 13 to 10(including four outside directors)

2016

Number of outside directors ((year)

Introduced restricted stock compensation system

0

5

10

15 (people)

Survey of Directors and Audit & Supervisory Board Members
Each year, the Company surveys all directors and all audit &supervisory board members about the effectiveness of theBoard of Directors (this year’s survey was conducted in January).
Responses to the survey are collated and reported to the board.
The survey is used to assess the effectiveness of the Board of
Directors and to discuss improvements by helping the board
understand the current situation, identify and analyze any issues
and compare responses with those in the previous year’s survey.
The results of the survey indicate that the 10 directors(as of the time of the survey), including four outside directors,
have dynamic discussions during board meetings, drawing on
their extensive management experience and achievements andspecialist knowledge. Responses also indicate that there has
been a quantitative and qualitative improvement in documents

and explanations supporting each agenda item, leading to an
improvement in the quality and efficiency of board discussions.
The survey also identified two key areas that require improvement
to further increase the effectiveness of the Board of Directors:
To increase corporate value and improve earnings capabilities,
the board should allocate more time to discussions focusing
on broader management issues such as the Group’s
management strategy.
To ensure steady execution of business strategy, the board
should receive more detailed and timely reports on businessexecution from each line manager and feedback frommonitoring activities.

63

Financials

Dialogue with Shareholders
The IR Director, who oversees policies and measures related tocommunication with shareholders and investors, accurately andfairly disseminates information outside the Company and proactively conducts IR activities. The IR Director also strives toenhance the General Shareholders’ Meeting, where senior
management can interact directly with shareholders, and theresults briefings and briefings to overseas investors. In addition,
the Company plans and conducts individual meetings withdomestic and overseas investors throughout the year.

(66 companies)

Composition of the Board of Directors

Introduced outside director system and managing officer
system, reduced term of office for directors from two
years to one

2006

Management Framework

To increase the transparency and objectivity of selection,
dismissal and remuneration processes for directors, Audit &Supervisory Board members and managing officers, the Company
has established a Remuneration Committee and a Nomination
Committee with outside directors as members to act as
independent advisory bodies for the Board of Directors.

Corporate Governance Reforms

Management Resources

Protecting the Rights and Ensuring the Equal Treatmentof Shareholders
The Company shall ensure that the exercise of minority shareholder rights is not impeded and will take appropriate measures
to fully protect shareholder rights. The Company will implement
various measures related to communication with shareholders
and investors and ensure the appropriate operation of the General
Shareholders’ Meeting.
The Company has set out a policy for cross-shareholdings.
In line with that policy, it regularly assesses the purpose andeconomic rationale for cross-shareholdings based on capitalcosts and other indicators. The results of the assessments arereported to the Board of Directors, which discusses the meritsof continuing to hold the shares or selling them. If the Company
receives approaches from companies about selling its holdings oftheir shares, it will respect their wishes and not hinder the sale ofshares, while also putting forward its views.
The Company regularly assesses its holdings of shares inbusiness partners to ascertain the size and scope of the holdings
and to evaluate the economic rationale for holding the shares.
Shares with diminished strategic value are sold incrementally andMeasures to Improve the Effectiveness of the Board of Directors
Each year, the Company surveys all board members about theeffectiveness of the Board of Directors. The results of the survey
are collated, analyzed and compared with the results of theprevious year’s survey to evaluate the board’s effectiveness.
The results are also used to discuss and develop measures
aimed at improving effectiveness. A summary of the survey isdisclosed publicly.

Business Segments

Appropriate Cooperation with Stakeholders Other
than Shareholders
As values shared by all officers and employees that serve as
the basis for corporate governance initiatives, the Company
has established the Nisshinbo Group Corporate Philosophy.
The Company has also established the Business Conduct
Guidelines of the Nisshinbo Group to define standards of
behavior expected of each Group employee. Directors andmanaging officers take the initiative to provide this guidanceby themselves and constantly educate employees on compliancewith these guidelines and widely disseminate them.

To maximize the effectiveness of the Board of Directors, theCompany is taking a number of steps to ensure outside directors
can participate appropriately in board meeting discussions by
putting forward their opinions. In the case of highly specialist
topics, outside directors are briefed beforehand to deepen theirunderstanding. Key statements made during meetings arerecorded in the minutes, allowing for appropriate feedback.
When necessary, board members are also given the opportunity to visit business sites and attend business briefings.
In addition to board meetings, regular meetings are held between
outside directors, Audit & Supervisory Board members andthe president. Board members are also required to attend
twice-yearly Management Policy Meetings with business
managers and candidates for management posts, in order todeepen their understanding of the Group’s business activities.

Strategy

within maximum limits for amounts and shares determined by
the General Shareholders’ Meeting.

If deemed necessary, the IR Director and other directors andmanaging officers take part in responding to applications forinterviews from shareholders and investors.
The status of IR activities including measures and policies
about communication with shareholders and investors is routinely reported to the Board of Directors where it is reviewed.

Profilesystematically. In addition, the exercise of voting rights related tocross-shareholdings shall be performed after deciding in eachindividual case the purpose of the holdings from the standpointof increasing the corporate value of the Company and the relevantbusiness partner. In the event of resolutions with the potential fora large impact on corporate value, such as the appointment or
dismissal of directors or the introduction or extension of takeover
defense measures, the Company will conduct a particularly rigorous
assessment of the rationale and necessity for holding the shares.
Nisshinbo has not adopted takeover defense measures.
In the event that the Company decides to implement a capital
policy that could harm the interests of shareholders, theCompany will provide a clear explanation to shareholders
about the necessity and rationale for the policy and follow
the necessary procedures.

Board of Directors, Audit & Supervisory Board Members and Managing Officers(As of March 28, 2019)

Board of Directors

Audit & Supervisory Board Members

ProfileToshihiro Kijima

Takumi Ohmoto

Atsushi Yamashita* Mitsunori Watanabe*
LawyerMasaya Kawata

Director,*
President

Director,
Senior Executive Managing Officer

1

Masahiro Murakami

Kenji Ara

Director and Managing
Executive Officer,
Shikoku Chemicals Corporation* Outside Audit & Supervisory Board member

Managing Officers

President, Japan Radio Co., Ltd.

Strategy

Director,*
Chairman1

President

Masahiro Murakami*

Kenji Ara*
Executive Managing Officers

Ryo Ogura*
Takayoshi Okugawa*

Executive Managing Officer

Executive Managing Officer

Managing Officer

Koji Nishihara

Akihiro Ishizaka

Makoto Sugiyama

Toshihiro Masuda

Senior Manager ofAutomotive Business
Strategy Department

Senior Manager ofCorporate Strategy
Department andCorporate Governance
Department

Senior Manager of CSR
Department, Diversity
Development Department,
Human Resources andAdministration Service
Department andOverseas Administration
Service Department

President,
Nisshinbo Mechatronics Inc.

Managing Officer

Managing Officer

Managing Officer

Managing Officer

Managing Officer

Shuji Tsukatani

Akihiro Kamei

Yasuo Imashiro

Kazuo Saito

Kaoru Murata

Senior Manager of Finance,
Accounting and IT Service
Department

President,
Nisshinbo Chemical Inc.

General Manager,
Business Development
DivisionManaging Director,
Nisshinbo Singapore Pte. Ltd.

President,
Nisshinbo Textile Inc.

Managing Officer

Yasuji Ishii*
Director,
Executive Managing Officer

Director,
Executive Managing Officer

Director,
Executive Managing Officer

Director,
Managing Officer

Ryo Ogura

Takayoshi Okugawa

Kazunori Baba

Yasuji Ishii

Chairman, New Japan Radio Co., Ltd.

Chief of Business Support Center

Chief of Corporate Strategy Center

President, Nisshinbo Brake Inc.

* Concurrent board member

Management Resources

Executive Managing Officer

Kazunori Baba*

Business Segments

Senior Executive
Managing Officer

Management Framework

Director*2

Director*2

Director*2

Noboru Matsuda

Yoshinori Shimizu

Shinobu Fujino

Keiji Taga

LawyerProfessor Emeritus at
Hitotsubashi University

Career Counselor*1 Representative director*2 Outside director

64

65

Financials

Director*2

Risk Management

In order to fulfill its corporate social responsibility by contributing to society through ongoing
business activities, the Nisshinbo Group has established systems to ensure stable operations by
mitigating a range of risks that could have a serious impact on the smooth operation of its business.

Crisis Management System

deploying business continuity management (BCM) throughsystem and business continuity plan (BCP).

ment Regulations to ensure a rapid response in the eventof an earthquake, fire or other emergency. Furthermore,

BCM Training

to prepare for a large-scale earthquake or other emergency
from the perspective of business continuity, we conduct

Every year, head office conducts a BCM drill based on thean annual drill that involves gathering information needed
to confirm the safety of employees and restore operations

Initiatives to Ensure Information Security

The Nisshinbo Group recognizes that one of its key corporate

The Nisshinbo Group is constantly reinforcing informationsocial responsibilities is to ensure important information

security measures to prevent leaks of confidential information,

related to all its stakeholders is protected and managed

including customers’ personal information.

appropriately. In order to fulfill this responsibility, the Company

To prevent computer virus attacks, we monitor e-mails

handles personal information in accordance with its internal

through a targeted e-mail attack prevention system andprivacy policy. In addition, internal audits are conducted in line

use anti-virus software and security patch programs widelywith Company regulations to ensure systems are working

on our IT equipment. We also employ information security

properly, and steps are taken to prevent data leaks andmanagement systems to monitor access to important data

realize ongoing improvements.

and limit access to information networks from unauthorized
IT equipment. Through these measures, we work to pre-scenario of a major disaster. The goal of the drill is to gather

protecting personal information among all our employees,

vent leaks of information from internal fraud and prevent

all the necessary information to decide whether to activate

we provide training when employees join the Group or on

external threats.

as soon as possible after a disaster. We have developed andthe BCP within 72 hours. The key elements of the drill inpromotion, and run training programs at individual businessintroduced a safety confirmation and emergency contact

the fiscal period ended December 2018 were as follows:sites in line with annual plans. Also, with the start ofas rules for Group companies to follow. To ensure compliance

Safety confirmation and emergency contact system drill:

Japan’s new national identity system in January 2016,

with these rules, we regularly conduct IT internal audits on

All of the Group’s approximately 12,000 domestic employ-

we formulated new regulations governing the handling of

our subsidiaries both in Japan and other countries, and work

ees participated in the drill.

personally identifiable information and responded to changes

continuously to improve their status.

Emergency reporting drill: The 13 emergency contacts atto the EU’s system for protecting personnel information,

The Company and key business sites in the Nisshinbo Group

each Group company reported the situation at their sites

which came into effect in May 2018.

have formed self-defense fire brigades, which conduct

to the Group Crisis Response Team. The method of report-

group-wide training to raise awareness of our information

regular inspections of fire-fighting equipment and othering emergencies (emails sent to a designated address)

security measures among all users in the Group.

facilities and run water discharge checks and other drills.

was carefully rechecked.

Moreover, for more than 50 years, Nisshinbo has conductedGroup Crisis Response Team drill: A Nisshinbo Holdingsof a large-scale disaster, we are in the process of migrating

annual disaster prevention inspections to strengthen its

Emergency Headquarters led by the president, was set up

the business servers located in our in-house server room toability to respond immediately after a disaster occurs andat Nisshinbo’s head office building and used to conduct

external data centers.

build a first response system. We are also in the process ofpractical training drills.

system to rapidly and accurately confirm employee safety.

Disaster Prevention System

We have established Guidelines for Information Security

We have prepared training materials that include rules

From the standpoint of business continuity in the event

Tatebayashi
Kawagoe

Kato
Higashihiroshima

FujiedaOsaka

Miai
Hamakita

Tokushima
Yoshinogawa

Yoshida-cho

Asahi
Toke
7
6 Upper
6 Lower
5 Upper
5 Lower
4
3

Access monitoring
Prevention of internal impropriety
Restricted connection to unauthorized devices
Targeted e-mail attack countermeasures
Virus countermeasures

Prevention of attacks of external origin

Firewalls
Utilization of external data centers
Countermeasures for large-scale disasters
Utilization of cloud systems

Financials

Earthquake (Magnitude 8.0)

66Management Framework

Ningyo-cho (Head office)Yokoyama-cho, Nakano

Internal IT auditing

Management Resources

Ueda

Information security guidelines

NaganoContinuous stability of operations
Prevention of leaks of confidential information

Security training

Business Segments

for information system users, and we periodically conduct

Compliance with rules

Assumptions Used in BCM Drills for Fiscal Period
Ended December 2018

Strategy

In addition, to raise awareness about the importance ofProfileout the entire Group that organically links to our first response

We have established the Nisshinbo Group Crisis Manage-

Initiatives to Protect Personal Information

67Compliance

Based on Public Entity and Consistent Integrity – the fundamental spirit of Nisshinbo’s Corporate
Philosophy, – the Group’s mission is to act with fairness and integrity to contribute to society throughits business activities. To achieve our mission, we have formulated Business Conduct Guidelines inorder to win trust from the public through fair and honest business activities.
Corporate Ethics Committee andCorporate Ethics Reporting Systemoverseas. In addition to information about Article 18 ofNisshinbo has established a Corporate Ethics Committee toprovision of illicit profit, etc., to foreign public officials, etc.),

handle all compliance matters across the Group.

the guidebook provides information about international

ProfileJapan’s Unfair Competition Prevention Act (prohibition oftreaties and laws designed to prevent corruption, such as

Nisshinbo has also established a Corporate Ethics

the United Nations Convention Against Corruption (UNCAC),

reoccurrence of suspected or actual legal violations.

OECD treaties on preventing corruption of overseas publicGroup employees and external parties can submit reports

officials in international transactions, the US Foreign Corrupt

to the system. Group employees can report their concerns

Practices Act (FCPA) and its related guidelines, and the UK

internally to the Corporate Ethics Committee or directly toBribery Act. Nisshinbo updates the guidebook as necessary

an outside corporate attorney. All information provided by

and uses it as part of its corruption prevention measures inwhistleblowers is treated in the strictest of confidence and

the Group.

every effort is made to protect whistleblowers from unfair
treatment. The Corporate Ethics Committee takes appropriate steps to deal with issues raised by reports.

Nisshinbo signs non-disclosure agreements with suppliers
to prevent any leak of confidential information such as

Compliance Education

intellectual property, technologies and expertise disclosed

In order to ensure fair and honest business practices,to them during the product design and development stage.

the Nisshinbo Group conducts compliance training for

We also conduct annual internal audits to check whether

different employee levels and work sites and provides

the Group’s trade secrets are being managed appropriately.

From the fiscal year ended March 2017, we added

CSR Procurement Basic Policy

annual compliance training for all manager-grade employees
in the Group to our list of KPIs in order to raise awareness

Nisshinbo has formulated the Nisshinbo Group CSR Procure-

about compliance. We also created a compliance training

ment Basic Policy, clarifying its stance on seven specificmanual for managers in both Japanese and English to beareas: legal compliance, fair trade, information security,used in training sessions across the Group.

environmental protection, human rights, health and safety,

In addition, compliance training is provided at each

The Nisshinbo Group’s Financial Strategy

72

Eleven-Year Summary

74

Management’s Discussion and Analysis

80

Consolidated Balance Sheet

82

Consolidated Statement of Profit or Loss

83

Consolidated Statement of Comprehensive Income (Loss)

84

Consolidated Statement of Changes in Equity

85

Consolidated Statement of Cash Flows86

Segment Information

Management Resources

training to employees prior to overseas assignments.

70

Management Frameworkand quality assurance.

subsidiary in accordance with conditions in each country,
region and industry.

1. To strictly observe all legal obligations and social norms
2. To always pursue business in a sound and fair manner

Initiatives to Prevent Corruption

3. To properly manage all information
4. To give due consideration to protection of the environment

In recent years, countries worldwide have been reinforcing

Business Segments

Ensuring Business Confidentiality

Financials
Strategy

Reporting System to rapidly identify and prevent any

5. To respect all basic human rights

regulatory systems and stepping up efforts to prevent and6. To strive for a secure and healthy living and working environment

expose bribery and corruption. Nisshinbo is working to

7. To aim to ensure the quality and safety of all products and services
Financials

prevent any such illegal activity, in line with rules in the
Nisshinbo Group Business Conduct Guidelines. In the fiscal
year ended March 2016, we published a Corruption Preven-

We are working to extend our CSR initiatives acrosstion Guidebook with information about related laws andthe entire supply chain by asking suppliers to adhere to

regulations overseas, as well as in Japan. The guidebook is

our principles in those seven areas.

provided to all Group companies, including subsidiaries

68

69

The Nisshinbo Group’s Financial Strategy

The role of senior management is to develop and execute growth strategies, but as part of that process, they also have to be prepared to put the brake on some plans in a constructive way. Investing
aggressively while taking a disciplined approach to spending will support healthy growth.

Cross-shareholdings(billions of yen)

Streamlining Assets

Shuji Tsukatani

50

50

25

25

0

0
15.3

Value

16.3

17.3

Number of companies

18.3

18.12

Financials

70

75

Management Framework

We keep a close eye on Nisshinbo’s weighted average
cost of capital (WACC) when reviewing growth strategy.
At the moment, we assume WACC of around 6%, so wetherefore need to achieve ROIC of at least 6%.
But we need to be aware that each Nisshinbo business is at a different point in the growth cycle. We use
the all-encompassing term “growth strategy,” butrequired rates of return on investments are different
depending on where businesses are in that cycle. Maturebusinesses still have potential for organic growth, while
recently acquired or merged companies and new businesses are expected to generate high rates of non-organic
growth. Obviously, with underperforming businesses, weneed to look closely at their future viability.
M&A activity has an important role to play in businessportfolio reorganization, but when considering targets, weneed to stay true to Public Entity, the fundamental spirit

75

Management Resources

Growth Strategy

100

Business Segments

Managing Officer
Senior Manager
Finance, Accounting & IT Service Dept.
Business Support Center

Streamlining assets is crucial to improving ROE. We needto liquidate poor-performing assets to secure funds forreinvestment. One example is our real estate business,
which is using idle land resulting from business portfolio
restructuring and the globalization of our operations togenerate funds for the Group. We are also cutting backcross-shareholdings as part of our commitment to Japan’s
Corporate Governance Code. We have entered the final
stretch of asset streamlining, but the process should still
continue to generate funds for the Group for two or three
more years. We need to use that opportunity to continue
reforming our business portfolio.
Conservative use of debt is key to ensuring a healthyfinancial position. We know there are clear cases whenusing leverage is the best approach, but we have to keep
profit levels in mind when taking on debt. Nisshinbo’s
liabilities currently stand at around ¥170 billion, while
EBITDA is roughly ¥33 billion, giving a debt-to-EBITDA
ratio of around 5x, which does not look too high or low.
However, our program of continued heavy investment has
led to a large increase in depreciation and amortization.
Excluding those items, the debt-to-EBIT ratio is muchhigher at roughly 20x. That reflects the fact that investments are yet to feed through to profits, and we are wellaware that the next two to three years will be a crucial
period for generating returns. In the meantime, we willcontinue to streamline assets and carefully balance
investments and debt.

100

Strategyof our Corporate Philosophy, and our strategy of becoming an Environment and Energy Company group. To avoid
implementing M&A deals simply as means to an end,
Nisshinbo does not have a specialist M&A team. Whenneeded, we form temporary project teams made up of
personnel from various departments. If we need to findpieces to complete our growth strategy picture, we reachout to contacts in the business community to ensure
opportunities are not missed.

Improving business profitability is a pressing issue for
Nisshinbo.
That is especially true in core businesses – wirelessand communications, micro devices and automobile
brakes. All our businesses have product lines that are
exposed to changes in market conditions, but we have toraise the marginal profit ratio to ensure a certain level ofprofitability even if sales decline. Cost reduction is aperennial issue for manufacturers and we have no plans
to step back in that respect.
Corporate departments can help to improve profitability by adjusting key performance indicators (KPIs). We
have been using a Groupwide ROE target to measureearnings performance for some time, but capital markets
now want more benchmarks than just sales, operating
margin and return on assets (ROA). Investors want to see
KPIs that give a more accurate picture of frontline business performance, so we are looking at introducing returnon invested capital (ROIC) as a new benchmark, which is
directly related to improvements in capital efficiency.
Adding ROIC to our list of KPIs would give a clearer
picture of how our investments contribute to profits. But
using a shared benchmark for investment to assess
performance across our diverse business segments would
mark a major change for Nisshinbo. However, we expect
the change to have various benefits, such as improving
the investment PDCA cycle, increasing the accuracy ofbusiness plans and helping management to rapidly
develop measures to tackle poor investment efficiency.
I believe the subsequent improvement in profitability
can help us achieve our ¥25 billion operating incometarget as early as possible. Assuming after-tax profit for¥17.5 billion, based on an effective tax rate of 30%, anddividends of just over ¥5 billion (dividend payout ratio of30%), operating income of ¥25 billion would allow us toachieve ROE of around 6%. We aim to reach that initiallevel in the next two-to-three years, giving us a springboard to achieve our 2025 ROE target of 12%.

ProfileIssues to Be Addressed71

Eleven-Year Summary(millions of yen)

2009.032010.03

2011.032012.032013.03

2014.032015.032016.032017.032018.032018.12

Operating Results
Net Sales¥242,409¥325,555¥379,340¥450,693¥494,350¥523,758¥533,989¥527,274¥512,048¥416,221

60,54951,699112,820

169,907

175,308

187,743

209,116

205,368

190,852

193,621

144,204

Automobile Brakes

49,23041,046

46,11947,450118,849

148,699

161,887

165,037

146,062

154,205

135,008

Precision Instruments

35,602

24,90832,02025,191

24,52028,65528,60829,52560,68764,91862,219Chemicals

8,059

6,309

7,284

8,258

8,150

8,810

8,138

8,285

9,483

11,285

8,173

Textiles

64,39253,222

57,40060,96454,73654,63051,07360,12755,84254,64043,660Papers34,214

31,53630,32630,22030,524

31,686

31,28032,58532,648

—

—

6,011

6,298

12,437

9,082

15,367

10,567

9,246

8,358

8,084

8,406

4,237

Other Businesses

28,11027,391

27,14928,26823,23923,56024,41024,704

23,61624,97318,720Operating Income (Loss)

408

3,570

19,843

4,170

13,394

13,175

13,744

12,617

4,890

15,086(2,506)(1,286)

1,896

11,185

9,416

6,418

9,012

13,694

10,776

3,575

26,352(7,183)Equity¥193,698¥193,639¥211,557¥213,751¥242,623¥276,865¥306,938¥284,472¥275,753¥290,434¥264,849

Total Assets

366,858

358,110479,852

534,584

551,933

611,311

678,486

651,793646,288

651,959622,381

Capital Expenditures

16,872

13,027

12,80015,705

20,12319,89636,90922,86230,50530,10327,199Depreciation and Amortization

18,025

12,96013,15814,55018,96921,48623,111

22,571

22,264

22,183

19,816Net Cash Provided by Operating Activities¥11,939¥27,538¥16,529¥12,974¥34,095¥26,075¥37,120¥39,566¥26,768¥32,415¥15,495

Net Cash Provided by (Used in) Investing Activities(14,393)(9,949)11,591(57,861)(10,973)(19,862)(21,271)(22,793)(31,429)(1,798)(20,723)

Net Cash Provided by (Used in) Financing Activities

11,940(30,347)703

16,835(24,073)(2,321)(6,238)(9,044)

3,595(34,785)

11,936Net Income (Loss) Attributable to Owners of
Nisshinbo Holdings Inc.

Strategy

Real Estate

Profile¥286,167

Electronics

Financial Position

Business Segments

Cash Flows(yen)

Net Income (Loss) Attributable to Owners of
Nisshinbo Holdings Inc.

¥(7.08)¥10.38¥63.32¥53.83¥36.74¥51.60¥80.33¥67.93¥22.52¥160.59¥(43.26)

Shareholders’ Equity

985.191,034.04

1,036.80

1,063.19

1,198.67

1,369.78

1,634.07

1,472.26

1,444.94

1,659.29

1,457.26

Cash Dividends

15.00

15.00

15.00

15.00

15.00

15.00

15.00

30.00

30.00

30.00

30.00
(%)

Management Resources

Per Share

Key Ratios
49.0

51.1

38.0

34.7

37.9

39.1

38.2

35.9

35.5

41.2

40.1

Return on Assets (ROA)

(0.3)

0.5

2.7

1.9

1.2

1.5

2.1

1.6

Return on Equity (ROE)

(0.6)

1.0

6.1

5.1

3.2

4.0

5.5

4.4

0.6

4.1

(1.1)

1.5

10.6

Payout Ratio

—

144.5

23.7

27.9

40.8

29.1

18.7

(2.8)

44.2

133.2

18.7

—

ESG Indicators
Number of Employees

12,48818,292

22,30422,08322,052

21,387

23,05523,256

23,10422,850

—

—

1,986

1,986

2,293

2,448

2,424

2,441

2,402

2,400

2,682

Greenhouse Gas Emissions per Unit of Sales(t-CO2/million yen)

—

—

—

—

—

1.372

1.330

1.267

1.311

1.279

1.320

Notes: 1. In the fiscal year ended March 2017, Iwao & Co., Ltd. was merged with Nisshin Toa Inc., both of which are consolidated subsidiaries. The appareltextile operations of Iwao & Co., Ltd. included in the other businesses segment were reclassified under the textiles business segment as a result.
Figures from the fiscal year ended March 2013 have been adjusted to reflect this change.
2. The Group’s elastomer operations were transferred from the chemicals business to the textiles business in the fiscal year ended March 2016.
Figures from the fiscal year ended March 2015 have been adjusted to reflect this change.
3. The Company changed its fiscal year-end from March 31 to December 31, effective from the fiscal period ended December 31, 2018.

72

73

Financials

12,726

Number of Patents Approved

Management Framework

Shareholders’ Equity Ratio

Management’s Discussion and Analysis

Highlights• Due to the change in fiscal year-end, figures for the previous fiscal year have been adjusted to facilitatecomparison with figures for the fiscal period under review.
• Despite lower sales in the automobile brakes business due to the sale of the foundation brakes business,consolidated net sales increased year on year, mainly reflecting the acquisition of Ricoh Electronic Devices
Co., Ltd., which became a consolidated subsidiary.

Operating Results(billions of yen)

600

20

500

15

400

Net Sales (millions of yen)

16.3

17.3

18.3

18.3

18.12

(814) deterioration of ¥7,036 million

62,219 up 1.6%

1,691 down 5.4%

8,173 up 3.5%

1,665 up 19.3%

5

43,660 down 2.2%

1,250 down 31.3%

Real Estate

4,237 down 22.4%

2,681 down 27.7%

Other Businesses

18,720 down 0.2%

(4,074) deterioration of ¥563 million

Note: Changes in net sales and segment profit (loss) are adjusted year-on-year figures; please refer to pages 17 to 48 for details on performance in individual segments.

15.3(adjusted)

135,008 down 9.4%

Precision Instruments
Textiles-5
15.3

Automobile Brakes

16.3

17.3

18.3

18.3

18.12

(adjusted)

74

75

Financials

0(4,905) deterioration of ¥1,282 million

Chemicals

0100

144,204 up 14.2%

10

300
200

Segment Profit (Loss) (millions of yen)

Electronics

Management Framework(billions of yen)Segment Results

Management Resources

Operating Income / LossAs the Group becomes more diversified, Nisshinbo is aiming to increase corporate value by uniting its various businesses under its Corporate Philosophy, “Change andChallenge! For the creation of the future of Earth and People.” Nisshinbo will also work to enhance Group management and global management.
Based on the view that the quality of a company is thesum of its people, the Group will also continue to adapt its
business to the changing demands of modern life and society, while also increasing the focus on “experiences”
and “services,” as well as “things.”
The Nisshinbo Group has been shifting its strategic
focus to the environmental and energy fields, guided by thethemes of protecting the global environment and creating asustainable society. As an Environment and Energy Company group, we will continue to propose new products andsystems that help protect the environment, save energy
and create alternative sources of energy, while also providing solutions that address some of the biggest issues facedby humanity today, such as environmental destruction andnatural disasters caused by climate change, to make life
safer and more secure for people everywhere.
Based on that thinking, we will enhance and expand ourpresence in the mainstay mobility field and supply products
and services in the infrastructure & safety field and the life &healthcare field to contribute to the creation of future societies.

Business Segments

Net Sales

Medium-term Management Strategy

Strategystatements from the fiscal period ended December
31, 2018.
In the fiscal period ended December 31, 2018, the Nisshinbo Group reported net sales of ¥416,221 million(US$3,784 million), up ¥2,885 million (0.7%) year on year
on an adjusted basis. Growth in net sales was mainly supported by the consolidation of Ricoh Electronic Devices
Co., Ltd. in the electronics business, which offset lower
sales in the automobile brakes business due to the sale ofthe foundation brakes business and other factors.
The Company reported an operating loss of ¥2,506 million (US$23 million), a deterioration of ¥10,302 million on
an adjusted basis. The deterioration in profitability largely
reflected weaker sales of TMD aftermarket products in theautomobile brakes business.
In addition, the Company reported net loss attributableto owners of Nisshinbo Holdings Inc. of ¥7,183 million(US$65 million), a deterioration of ¥27,719 million year on
year on an adjusted basis. That reflected the decline in operating income, as well as the absence of gains on the saleof shares of subsidiaries and associates due to the transferof the papers business and gains on the sale of property,
plant and equipment in the real estate business, whichwere booked in the previous fiscal year.

The fiscal period ended December 31, 2018 is a transitional period due to a change in fiscal year-end. The period
covers nine months of results (April 1, 2018 to December
31, 2018) for the Company and consolidated subsidiaries
that had March fiscal year-ends, 10 months of results(March 1, 2018 to December 31, 2018) for consolidated
subsidiaries that had February fiscal year-ends, and 12
months of results (January 1, 2018 to December 31, 2018)
for consolidated subsidiaries with December fiscal yearends, which coincides with the new consolidated fiscal
year-end. For reference purposes, figures for the previous
fiscal year have been adjusted to facilitate comparison with
figures for the fiscal period under review (referred to as"adjusted basis”).
In March 2018, the Company acquired 80% of outstanding shares in Ricoh Electronic Devices Co., Ltd., making it a consolidated subsidiary. The company, which is
focused on analog power management integrated circuits (PMICs), will help the Nisshinbo Group accelerate the expansion of its semiconductor and electronic
devices businesses, particularly in the promising automotive and IoT fields. The company’s operating results (Statement of Profit or Loss) and goodwill
amortization are reflected in the Group’s consolidated

In the mobility field, we are expanding our business bypromoting Groupwide collaboration that combines ourwireless communication technologies with technologies inelectronic devices, mechatronics and chemicals.
In automotive products, we are establishing our positionin the global market by pioneering the development and saleof copper-free friction materials and pushing ahead with thedevelopment of components and materials for fuel cell vehicles, such as carbon bipolar plates and alternatives to platinum catalysts. The Group is also supplying devices andstepping up the development of sensors for autonomousvehicles and working to develop communications networks
that link vehicles and traffic infrastructure.
In addition, we are developing radar, sensors and other devices needed for autonomous ship operation, satellite communication, and aircraft and drone control systems, as well as
using the data gathered from the products developed by theGroup to support safe and energy-efficient operations.
The Nisshinbo Group is targeting ROE of 12% in 2025.
In the fiscal year ending December 31, 2019, we willcontinue to channel management resources into the mobility field and execute our growth strategy.
Effective from the fiscal year ending December 31,
2019, we have separated the electronics business into two
distinct business fields – wireless and communications,and micro devices. This will allow us to clearly define thechallenges facing our business in each area and accelerate
our growth strategy. In the automobile brakes business,
we plan to expand our business by upgrading the production framework for copper-free friction materials, demand
for which is projected to expand worldwide. We will also
rapidly turn around operations at TMD to address the deteriorating earnings situation. In the precision instruments
business, we aim to grow the business by steadily integrating the operations of Nanbu Plastics Co., Ltd.

Profile• The Group reported an operating loss, largely due to lower sales of TMD aftermarket products in theautomobile brakes business.

Japan Radio Co., Ltd., which is part of the electronics
business, tends to book a large proportion of sales andprofits in January, February and March, because it supplies
equipment to central government and local government
agencies. As a result, the period April through December
accounts for a relatively low weighting of net sales andprofits in the Nisshinbo Group’s results.

Dividend

Cash Flows
return profits to shareholders through share buybacks and other means after considering factors suchas financial stability.

Cash Dividends
(yen)

30

Cash Flows from Operating Activities

Cash Flows from Financing Activities

Cash provided by operating activities totaled ¥15,495 million(US$141 million), mainly reflecting cash provided of ¥19,816
million from depreciation and amortization and ¥26,421 million
from decrease in receivables, against cash used of ¥8,983
million for income taxes–paid, ¥15,466 million for increase
in inventories and ¥7,992 million for decrease in payables.

Cash provided by financing activities totaled ¥11,936 million (US$109 million), mainly reflecting cash provided of¥3,249 million from proceeds from long-term debt and¥20,159 million from increase in short-term bank loans–net, against cash used of ¥5,998 million for repayment oflong-term debt and ¥4,999 million for cash dividends paid.
As a result of the above, cash and cash equivalents at
the end of the fiscal period totaled ¥42,434 million (US$386
million), an increase of ¥5,956 million from the end of theprevious fiscal year.

Cash Flows from Investing Activities
20

Cash used in investing activities totaled ¥20,723 million(US$188 million), primarily reflecting cash provided of¥6,273 million from decrease in time deposits, against
cash used of ¥26,992 million for the purchase of property,
plant and equipment.

10

14.3

15.3

16.3

17.3

18.3

18.12

Strategy0ProfileThe full-year dividend for the fiscal year ended December
2018 is ¥30 (US$0.27) per share, the same amount as forthe previous fiscal year.
By focusing on ROE, Nisshinbo is aiming to deliver
sustained increases in shareholder value through the
distribution of profits and other means. We also intend
to accelerate investment in areas that drive growth,such as R&D, capital expenditures and M&A, aiming tosecure even greater support and trust from the public,
markets and stakeholders as an Environment and Energy Company group.
In principle, we intend to pay an interim dividend
and a year-end dividend, targeting stable and consistent dividends based on a consolidated payout ratio target of around 30%.
Also, when the Group holds sufficient internal reserves to fund growth strategies, we plan to actively

Production Results
Production results in each segment for the fiscal period under review were as follows:
Industry Segment

Equity(billions of yen)(billions of yen)

700

350

600

300

500

250

400

200

300

150

200

100

100

50

0

0
14.3

15.3

16.3

17.3

18.3

18.12

14.3

76

15.3

16.3

17.3

18.3

18.12

Precision Instruments

58,195Chemicals

5,085

Textiles

31,389Other Businesses

387

Total

347,893

Notes: 1. Amounts are calculated based on manufacturing costs.
2. The real estate business does not engage in manufacturing, and therefore the above table does not include any amounts from this segment.

Capital Expenditures
The Nisshinbo Group channels its capital expenditures into
priority product fields that offer the potential for long-term
growth and into upgrading manufacturing equipment toraise product quality. It also invests in environmental initiatives such as the reduction of greenhouse gases and in
manufacturing facilities to address rising demand in China,
Southeast Asia and other emerging markets. As a result, inthe fiscal period ended December 2018, capital expenditures totaled ¥27,199 million (US$247 million).
In the electronics business, the Group invested ¥2,327
million in Japan Radio Co., Ltd., mainly for backbone IT systems, and ¥3,250 million in New Japan Radio Co., Ltd., primarily in electronic device manufacturing and research anddevelopment facilities. In the automobile brake business,
the Group invested ¥6,189 million, mainly in friction material
manufacturing facilities at TMD Friction Esco GmbH, a TMD
consolidated subsidiary, and ¥1,357 million at Nisshinbo Automotive Manufacturing Inc., primarily in manufacturing

facilities for friction materials that are compatible with regulations on copper content. In the precision instruments business, the Group invested ¥3,836 million in precision parts
processing facilities at Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd. and ¥1,875 million in plastic
molded parts processing facilities at Nanbu Plastics Co., Ltd.

Capital Expenditures(billions of yen)

40
30

Financials

Total Assets

107,764

Management Framework

payables, ¥3,185 million for accrued expenses, ¥5,659 million for long-term debt and ¥8,422 million for deferred tax
liabilities, and increases of ¥19,078 million for short-termbank loans and ¥6,440 million for other current liabilities.
Equity at the end of the fiscal period totaled ¥264,849
million (US$2,408 million), a decline of ¥25,585 million
from the end of the previous fiscal year. That primarily reflected decreases of ¥6,323 million for capital surplus,¥11,641 million for retained earnings, ¥8,972 million for net
unrealized gain on available-for-sale securities and ¥6,440
million for noncontrolling interests, and an increase of¥13,575 million due to decline in treasury stock.
As a result of the above, the shareholders’ equity ratio
declined 1.1 percentage points to 40.1%.

145,073

Automobile Brakes

Management Resources

Total assets at the end of the fiscal period under review
stood at ¥622,381 million (US$5,658 million), a decline of¥29,578 million from the end of the previous fiscal year
(March 2018). That mainly reflected decreases of ¥6,567
million for time deposits, ¥29,119 million for receivablesand ¥14,512 million for investment securities, and increases of ¥5,956 million for cash and cash equivalents,¥13,622 million for inventories and ¥3,404 million for investments in and advances to unconsolidated subsidiaries
and affiliates.
Total liabilities at the end of the fiscal period were¥357,532 million (US$3,250 million), a decline of ¥3,993
million from the end of the previous fiscal year. The mainchanges in liabilities were decreases of ¥10,821 million forElectronics

Business Segments

Financial Position

Amount (millions of yen)

20
10
0
14.3

77

15.3

16.3

17.3

18.3

18.12

Selection of Accounting Standards

Risks Associated with Fluctuations in Exchange Rates

The Nisshinbo Group currently uses Japanese accounting
standards. However, given that the Company’s basic management policy is to develop its business globally, overseas operations are likely to account for a growing share of
consolidated earnings. From that perspective, we areconsidering voluntarily adopting International Financial Reporting Standards (IFRS), a common set of global accounting standards. However, no final decision has been madeon timing and other factors related to voluntary adoption of
IFRS at this stage.

Forward-looking statements in this report are based on information available to the Nisshinbo Group as of December 31, 2018.

Risks Associated with Market Shifts Relating to Product
Sales Prices and Raw Material Procurement

Risks Associated with New Businesses

The Nisshinbo Group is actively developing new businesses
such as carbon catalysts in order to expand sales and profits.
However, uncertainties are inherent in new businesses
and the development of appealing new products and theformation of new markets may not proceed as anticipated.
This could delay or prevent the recovery of prior investments.

Investment securities held by Nisshinbo are marked tomarket in accordance with accounting standards for financial products, and the Company implements impairment
accounting based on even stricter internal standards for a
portion of these securities. Based on current accounting
standards and standards for asset impairment, there is alimited possibility that impairment losses will have an impact
on net income, as the acquisition cost of the investment
securities was low. However, comprehensive income may
fluctuate significantly owing to changes in market value.
Also, the Company plans to limit increases in interest-bearing
liabilities by selling investment securities to procure capitalneeded for mergers and acquisitions, overseas businessdevelopment, and capital investment, but misalignment of
the timing between sale and investment may give rise to
unforeseen circumstances.

Risks Associated with Changes

to Laws and Regulations

Products supplied by the Japan Radio Group are subject toa range of laws and regulations governing areas such as
national security. These laws include export restrictions,
import regulations and environmental and recycling laws.
The Japan Radio Group has established clear internal regulations regarding compliance with these laws. However,
unforeseen revisions to laws and regulations may limit theGroup’s business activities and lead to an increase in costs.

Business Segments

Risk of Fluctuation in the Value of Investment Securities

Risks Associated with Unforeseen Revisions
StrategySome of the Nisshinbo Group’s products can be significantly
affected by fluctuations in market prices owing to market
developments and competition with other companies. Sales
prices for textile products and raw materials procured by theGroup such as cotton, steel and other materials are particularly susceptible to these market trends. Technological innovation related to semiconductors and other devices, pricecompetition and fluctuations in demand at New Japan RadioGroup and Ricoh Electronic Devices Co., Ltd. may have an
impact on the Group’s financial results.

ProfileRisk Information

Fluctuations in foreign exchange rates can have an impact
on the yen value of the Nisshinbo Group’s revenues,
expenses, receivables and payables arising from business
transactions that are denominated in foreign currencies
and on foreign currency translation adjustments in thefinancial statements related to overseas consolidated
subsidiaries, which prepare their statements in foreign
currencies. While the Group takes steps to mitigate the riskof exchange rate fluctuations, not all this risk can be avoided.
Fluctuations in exchange rates may therefore affect theGroup’s financial results, with periods of yen appreciation
putting pressure on profits.

in Customer Business Performance

Risks Associated with Disasters and Accidents

The Group may face difficulties in securing necessary components owing to changes in the economic environment.
For example, rapid developments in specific parts supply
regions and product fields may affect supply capacity atparts companies and lead to delivery delays. This in turn
could impact the Group’s shipment plans or lead to deterioration in margins owing to sharp increases in the price ofcomponents.

The Nisshinbo Group takes steps to manage risk related todisasters and accidents. However, a large earthquake orother major disaster or a sudden accident such as a fire may
cause significant damage to the Group’s manufacturing
facilities, leading to the suspension of production activities
that causes shipment delays. The Group may also incur considerable costs to restore damaged buildings or facilities.
In addition, the outbreak and spread of a new infectious
disease may have an impact on the Group’s operations.

Risks Associated with Financial Covenants Related toCapital Procurement

The Nisshinbo Group has secured funding from multiple
financial institutions. The Company and some consolidated
subsidiaries have entered into commitment line contracts
and term loan contracts. These companies are bound bycertain financial covenants.

Financials

78

Risks Associated with the Supply Chain

The Nisshinbo Group owns many production bases overseas.
Risks inherent to this international presence include unforeseen changes in laws and regulations, unfavorable politicalor economic factors and social turmoil.

Management Framework

The majority of the Nisshinbo Group manufactures products
in accordance with international quality control standards,
but there is no guarantee that quality-related problems will
not occur in the future. The Company has product liability
insurance, but the occurrence of a large liability could havean adverse impact on the Group’s financial results.

Risks Associated with Overseas Business Development

Management Resources

Risks Associated with Product Quality

The customers of the Nisshinbo Group’s automobile brakes
business are automobile manufacturers that conduct business globally. The cancellation of contracts or requests to
sharply reduce prices owing to changes in the businessresults of such client companies are factors outside thecontrol of Nisshinbo, and consequently may have an impact
on the Group’s financial results.
The Japan Radio Group has a relatively high ratio of
business with central and local governments, so sales
tend to be concentrated in March. In addition, trends incentral and local government spending plans and capital
expenditures in the telecommunications sector may affect
the Group’s financial results.

79Consolidated Balance Sheet
December 31, 2018

Millions of Yen

ASSETS

Thousands of U.S.
Dollars (Note)

Dec. 2018

Mar. 2018

Dec. 2018¥42,434¥36,478$385,764

1

6,568

9

Millions of Yen

LIABILITIES AND EQUITY

Thousands of U.S.
Dollars (Note)

Dec. 2018

Mar. 2018

Dec. 2018

Short-term bank loans¥65,391¥46,313$594,464

Commercial paper

30,00030,000272,727

Current portion of long-term debt

8,560

8,245

77,818CURRENT LIABILITIES:CURRENT ASSETS:
Cash and cash equivalents
Time deposits
Receivables:

Payables:
24,043

191,673

Trade notes

24,12922,187219,355

99,673

127,211906,118

Trade accounts

40,14549,748364,955

Unconsolidated subsidiaries and affiliates

1,225

1,010

11,136

Unconsolidated subsidiaries and affiliates

Other

5,364

4,568

48,764

Other

Allowance for doubtful receivables

(417)

(784)

(3,791)

118,991

105,369

1,081,736

Accrued income taxes

3,088

5,777

28,073

9,732

6,633

88,473

Other current liabilities

18,875

12,435

171,590

218,089

208,951

1,982,627

Long-term debt

59,34665,005539,509

Liability for retirement benefits

50,29248,055457,200

Deferred tax liabilities

16,82525,247

152,955

Inventories
Other current assets

Accrued expenses

Total current liabilities
Total current assets

298,087

311,096

273

14

2,482

12,751

16,170115,918

14,87718,062

135,245

2,709,882
LONG-TERM LIABILITIES:

Land

36,89137,812

335,372

Buildings and structures

169,882

170,516

1,544,382

Machinery, equipment and tools

343,945

349,754

3,126,773

Construction in progress
Accumulated depreciation

9,909

12,64990,082560,627

570,731

5,096,609(375,938)(384,713)(3,417,618)

184,689

186,018

1,678,991

14,267118,000

139,443

152,574

1,267,664

Total liabilities

357,532

361,525

3,250,291

EQUITY:
Shareholders’ equity:
Common stock—authorized, 371,755,000 shares; issued,
178,834,769 shares on December 31, 2018 and
178,798,939 shares on March 31, 2018

Net property, plant and equipment

27,588251,000

20,396

26,719185,418

Retained earnings

177,545

189,186

1,614,045(11,035)(24,610)(100,318)

214,516

218,883

1,950,145

33,99242,964

309,018

(98)

(19)

(891)

5,274

10,361

47,946

Treasury stock—at cost, 7,542,144 shares on December 31, 2018 and
16,818,957 shares on March 31, 2018
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gain on available-for-sale securities
Deferred loss on derivatives under hedge accounting

INVESTMENTS AND OTHER ASSETS:
Investment securities

71,35085,862648,636

Foreign currency translation adjustments

Investments in and advances to unconsolidated subsidiaries and affiliates

35,26231,858

320,564

Post-retirement liability adjustments

Deferred tax assets

6,160

9,241

56,000Goodwill

7,131

8,945

64,827

Other

19,702

18,939179,109

Total
Stock acquisition rights

Total investments and other assets
TOTAL

139,605

154,845

1,269,136¥622,381¥651,959$5,658,009

Total equity
TOTAL

Note: The translations of Japanese yen amounts into U.S. dollar ($) amounts are included solely for the convenience of readers outside Japan and have been
made at the rate of ¥110 to $1, the approximate rate of exchange at December 31, 2018.

80

81(3,418)(36,973)

49,888319,100

161

152

1,464

249,778

268,923

2,270,709

15,071

21,511137,009

264,849

290,434

2,407,718¥622,381¥651,959$5,658,009

Financials

Noncontrolling interests(4,067)35,101

Management Framework

27,610Capital surplus

Management Resources

Total

12,980Total long-term liabilities

Business Segments

Other long-term liabilities
PROPERTY, PLANT AND EQUIPMENT:

Strategy

21,084

Trade accounts

ProfileTrade notes

Consolidated Statement of Profit or Loss

Consolidated Statement of Comprehensive Income (Loss)

Nine-Month Period Ended December 31, 2018

Nine-Month Period Ended December 31, 2018

Millions of Yen

Thousands of U.S.
Dollars (Note)

Millions of Yen

Dec. 2018

Mar. 2018

Dec. 2018¥(5,556)¥26,587$(50,509)

Net unrealized (loss) gain on available-for-sale securities(8,968)

5,742(81,527)

Deferred loss on derivatives under hedge accounting

(79)

(22)

(718)

Dec. 2018

Mar. 2018

Dec. 2018

NET SALES¥416,221¥512,048$3,783,827

NET (LOSS) INCOME

COST OF SALES

335,044406,069

3,045,854

OTHER COMPREHENSIVE (LOSS) INCOME:

Gross profit

105,979

737,973

83,68390,893760,755(2,506)15,086(22,782)

Foreign currency translation adjustments
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating (loss) income(4,926)2,802(44,782)

Post-retirement liability adjustments

(582)

1,905

(5,291)Equity in earnings of unconsolidated subsidiaries and affiliates

(910)

428

(8,273)(15,465)

10,855(140,591)¥(21,021)¥37,442$(191,100)¥(21,971)¥36,489$(199,736)

950

953

8,636

Total other comprehensive (loss) income

Profile81,177

Thousands of U.S.
Dollars (Note)

OTHER (EXPENSES) INCOME:
2,515

2,818

22,864

Interest expense

(889)

(862)

(8,082)Gain on sales of property, plant and equipment

COMPREHENSIVE (LOSS) INCOME
TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO:

2,073

4,375

35,845

Owners of Nisshinbo Holdings Inc.

Loss on impairment of long-lived assets(2,407)(4,522)(21,882)

Noncontrolling interests

Gain on sales of securities

1,713

14,39815,573Business structure improvement expenses(2,071)(539)(18,827)

Other—net(4,007)(2,740)(36,427)

Other (expenses) income—net(975)

18,401(8,863)(LOSS) INCOME BEFORE INCOME TAXES(3,481)

33,487(31,645)

Current

4,299

8,053

39,082

Deferred(2,224)(1,153)(20,218)

2,075

6,900

18,864NET (LOSS) INCOME(5,556)

26,587(50,509)

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

1,627

235

14,791¥(7,183)¥26,352$(65,300)

Management Resources

5,473

3,943

Business Segments

228

Equity in earnings of unconsolidated subsidiaries and affiliates

INCOME TAXES:

Total income taxes

U.S. Dollars

Financials

YenManagement Framework

NET (LOSS) INCOME ATTRIBUTABLE TO OWNERS OF
NISSHINBO HOLDINGS INC.

PER SHARE OF COMMON STOCK:Net (loss) income¥(43.26)¥160.59$(0.39)Cash dividends

30.00

30.00

0.27

82

StrategyInterest and dividend income

83Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Nine-Month Period Ended December 31, 2018

Nine-Month Period Ended December 31, 2018
Millions of Yen
Millions of Yen

Accumulated Other Comprehensive Income
Deferred
Net Unrealized(Loss) Gain
(Loss) Gain on
on Derivatives
Available-forunder Hedge
Sale Securities
Accounting

Foreign
Currency
Translation
Adjustments

PostStock
Retirement
Noncontrolling
Acquisition
Liability
Interests
RightsAdjustments

CapitalSurplusRetained
Earnings

Treasury
Stock

Total
Shareholders’Equity¥27,588¥17,587¥167,598¥(23,090)¥189,683¥37,310¥3¥7,715¥(5,276)¥163¥46,155¥275,753

Cash dividends, ¥30.00 per share——(4,764)—(4,764)

—

—

—

—

—

—

(4,764)

Net income attributable to owners of
Nisshinbo Holdings Inc.

——

26,352—

26,352

—

—

—

—

—

—

26,352

Change in scope of consolidation—transactions with noncontrolling interests

—

0

—

—

0

—

—

—

—

—

—

0

Purchase of treasury stock

—

—

—

(20,011)(20,011)

—

—

—

—

—

—

(20,011)

Disposal of treasury stock

—

(18)

—

194

176

—

—

—

—

—

—

176

Changes by share exchanges

—

9,150

—

18,29727,447

—

—

—

—

—

—

27,447

Net change in the year

—

—

—

—

—

5,654

(22)

2,646

1,858

(11)

(24,644)(14,519)¥27,588¥26,719¥189,186¥(24,610)¥218,883¥42,964¥(19) ¥10,361¥(3,418)¥152¥21,511¥290,434

BALANCE, APRIL 1, 2017

BALANCE, MARCH 31, 2018 (APRIL 1, 2018,as previously reported)
Cumulative effects of changes inaccounting policies

—

365

—

365

—

¥26,719¥189,551¥(24,610)¥219,248¥42,964

Cash dividends, ¥30.00 per share——(4,999)—(4,999)——Net loss attributable to owners of
Nisshinbo Holdings Inc.

——

(7,183)—(7,183)—Purchase of treasury stock

—

—

—

(5)

(5)

Disposal of treasury stock

—

(11)

—

40

29

Changes by share exchanges—(6,334)—

13,540

7,206

—

—

—

—

Issuance of new shares

22

22

—

—

44

—

—

—

—

Change of scope of equity method

—

—

176

—

176

—

—

—

—

—

—

—

—

—

365

¥(3,418)¥152¥21,511¥290,799

—

—

—

—

(4,999)

—

—

—

—

—

(7,183)

—

—

—

—

—

—

(5)

—

—

—

—

—

—

29

—

—

7,206

—

—

44

—

176

—

—

—

—

—

(8,972)(79)(5,087)(649)

9(6,440)(21,218)¥27,610¥20,396¥177,545¥(11,035)¥214,516¥33,992¥(98)¥5,274¥(4,067)¥161¥15,071¥264,849

Thousands of U.S. Dollars (Note)
Accumulated Other Comprehensive Income
CommonStock

Cumulative effects of changes
in accounting policies
BALANCE, APRIL 1, 2018 (as restated)

Retained
Earnings$250,800 $242,900 $1,719,873 $(223,727) $1,989,846
—

—

3,318

3,318

—
$390,582—(45,446)——

Purchase of treasury stock——

Disposal of treasury stock—

Changes by share exchanges
Issuance of new shares
Change of scope of equity method
Net change in the nine-month period

Total
Equity$(173) $94,191 $(31,073) $1,382 $195,554 $2,640,309
—

—

—

—

—

3,318

$(173) $94,191 $(31,073) $1,382 $195,554 $2,643,627—(45,446)(65,300)—(65,300)

—

—

—

—

—

(46)

(46)

—

—

—

—

(100)

—

364

264

—

—

—

—

—

—

(57,582)—

123,091

65,509

—

—

—

—

200

200

—

—

400

—

—

—

—

—

—

1,600

—

1,600

—

—

—

—

—

—

—

—

—

(81,564)(718)(46,245)(5,900)$251,000 $185,418 $1,614,045 $(100,318) $1,950,145$309,018$(891) $47,946 $(36,973) $1,464 $137,009 $2,407,718

—

—

—

—

—

(45,446)——(65,300)

—

—

(46)

—

264

—

—

65,509

—

—

400

—

—

1,600

82

(58,545)(192,890)¥(3,481)¥33,487$(31,645)(8,983)
19,816
1,889(4,006)
(665)
2,535
245
266
287
2,407

(3,196)22,183
1,688(4,375)
76
1,312
—
(202)
(5,092)
4,522(81,664)
180,145
17,173(36,418)(6,045)23,046
2,227
2,418
2,609
21,882(1,615)(14,396)(14,682)

562

120

5,109

26,421(15,466)(7,992)
3,275
18,976
15,495(2,651)(2,353)
3,692(2,400)(1,072)32,415

240,191(140,600)(72,655)
29,773
172,509140,864

830

8,110

7,546

2,553
(26,992)

6,009(29,567)

23,209(245,382)

INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates
Purchase of property, plant and equipment
Purchase of investment securities and investments in and advances tounconsolidated subsidiaries and affiliates
Decrease in time deposits—net
Purchase of investments in subsidiaries with changes in consolidation scope
Proceeds from sales of investments in subsidiaries with changes in
consolidation scope
Purchase of investments in capital of subsidiaries
Other—net
Net cash used in investing activities

(35)
6,273
(261)

(414)
1,929
(6,914)(318)
57,027(2,373)

1,544(1,742)(2,893)(20,723)

21,136—(2,087)(1,798)14,036(15,836)(26,300)(188,391)

FINANCING ACTIVITIES:
Proceeds from long-term debt
Repayment of long-term debt
Increase (decrease) in short-term bank loans—net
Cash dividends paid
Purchase of treasury stock
Decrease in other long-term liabilities
Other—net
Net cash provided by (used in) financing activities

3,249(5,998)20,159(4,999)
(5)
(381)
(89)
11,936

1,975(8,327)(2,647)(4,764)(20,011)
(693)
(318)
(34,785)

29,536(54,527)
183,263(45,445)(45)(3,464)(809)
108,509

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIODCASH AND CASH EQUIVALENTS, END OF PERIOD

(752)
5,956
36,478¥42,434

796(3,372)39,850¥36,478(6,836)54,146331,618$385,764

85

Financials

84—

PostStock
Retirement
Noncontrolling
Acquisition
Liability
Interests
RightsAdjustments

Dec. 2018

Management Framework—

Net loss attributable to ownersof Nisshinbo Holdings Inc.

—

$390,582$250,800 $242,900 $1,723,191 $(223,727) $1,993,164

Cash dividends, $0.27 per share

BALANCE, DECEMBER 31, 2018

Treasury
Stock

Foreign
Currency
Translation
Adjustments

Mar. 2018

Management Resources

BALANCE, MARCH 31, 2018 (APRIL 1, 2018,as previously reported)

CapitalSurplusNet Unrealized Deferred Loss
Total
(Loss) Gain on on Derivatives
Shareholders’Available- for- under Hedge
EquitySale Securities
Accounting

Dec. 2018

Business Segments

Net change in the nine-month period
BALANCE, DECEMBER 31, 2018—¥(19) ¥10,361

OPERATING ACTIVITIES:(Loss) income before income taxes
Adjustments to reconcile net income to net cash provided
by operating activities:
Income taxes—paidDepreciation and amortization
Amortization of goodwill
Equity in earnings of unconsolidated subsidiaries and affiliates(Reversal of) provision for doubtful receivables
Interest and dividends income
Provision for contingent loss
Increase (decrease) in liabilities for retirement benefits
Loss (gain) on sale of property, plant and equipment, net
Loss on impairment of long-lived assets
Gain on sale of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates, net
Loss on write-down of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates
Changes in operating assets and liabilities:
Decrease (increase) in receivables
Increase in inventories(Decrease) increase in payables
Other—net
Total adjustments
Net cash provided by operating activities

Strategy—¥27,588

BALANCE, APRIL 1, 2018 (as restated)

Total
EquityProfileCommonStock

Thousands of U.S.
Dollars (Note)Segment Information

History

Nine-Month Period Ended December 31, 2018
Millions of Yen

Dec. 2018
Electronics

Sales:
Sales to externalcustomers
Intersegment sales
or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets

Automobile
BrakesPrecision
Instruments

Chemicals

TextilesReal Estate

Other
Businesses

Eliminations/
Corporate

Consolidated¥144,204¥135,008¥62,219¥8,173¥43,660¥4,237¥18,720¥—¥416,221

16¥144,220¥(4,905)¥229,262

7¥135,015¥(814)¥152,529

142¥62,361¥1,691¥76,605

111¥8,284¥1,665¥9,057

15¥43,675¥1,250¥55,139

1,126¥5,363¥2,681¥49,790

1,643¥20,363¥(32)¥38,149(3,060)¥(3,060)¥(4,042)¥11,850—¥416,221¥(2,506)¥622,381¥4,688¥8,743¥3,712¥163¥1,282

¥929

¥157

¥142

¥19,816¥6,361¥10,768¥8,197¥176¥1,399¥296¥127¥(125)¥27,199

1907

Established Nisshin Cotton Spinning Co., Ltd.

1958

Established Nippon Kohbunshikan Co., Ltd. (name changed to Nippon Kohbunshi Co., Ltd. in 1986)(acquired by Nisshinbo Mechatronics Inc. in 2010)1972

Established Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)

1989

Established Kohbunshi (Thailand) Ltd. (Thailand)(name changed to Nisshinbo Mechatronics (Thailand) Ltd. in 2011)

1993

Established Pudong Kohbunshi (Shanghai) Co., Ltd. (China)(name changed to Nisshinbo Mechatronics (Shanghai) Co., Ltd. in 2010)

1995

Established Nisshinbo Urban Development Co., Ltd.

1996

Established Nisshinbo Somboon Automotive Co., Ltd. (Thailand)

1997

Established Nisshinbo Automotive Manufacturing Inc. (USA)1998

Established P.T. Gistex Nisshinbo Indonesia (Indonesia)(name changed to P.T. Nisshinbo Indonesia in 2010)

1999

Established Saeron Automotive Corporation (South Korea)

2000

Purchased additional shares of P.T. Nikawa Textile Industry (Indonesia)
Established Continental Teves Co., Ltd. through merger with Continental Teves AG & Co. oHG(name changed to Continental Automotive Co., Ltd. in 2007)

Millions of Yen

Mar. 2018
Electronics

Sales:
Sales to externalcustomers
Intersegment sales
or transfers
Total
Segment profit
Segment assets
Other:
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets

Automobile
BrakesPrecision
Instruments

Chemicals

TextilesReal Estate

Other
Businesses

Eliminations/
Corporate

Consolidated

2002

Acquired all shares of Iwao & Co., Ltd.
¥193,621¥154,205¥64,918¥11,285¥54,640¥8,406¥24,973¥—¥512,04812¥193,633¥3,022¥229,69422¥154,227¥6,119¥171,161

333¥65,251¥1,725¥74,964

146¥11,431¥2,112¥9,3694¥54,644¥1,876¥54,509

1,473¥9,879¥5,067¥49,460

1,605¥26,578¥46¥34,188(3,595)¥(3,595)¥(4,881)¥30,882—¥512,048¥15,086¥654,227¥5,298¥10,101¥3,571¥220¥1,340¥1,249¥204¥200¥22,183¥6,185¥15,340¥5,574¥47¥2,152¥1,095¥43¥(333)¥30,103

Thousands of U.S. Dollars (Note)2003

Established Saeron Automotive Beijing Corporation (China)

2004

Established Continental Automotive Corporation (Lian Yun Gang) Co., Ltd. (China)

2005

Acquired additional shares of New Japan Radio Co., Ltd.

2006

Acquired additional shares of Japan Radio Co., Ltd. and Nagano Japan Radio Co., Ltd.

2008

Acquired all shares of Nisshinbo Brake Sales Co., Ltd. (acquired by Nisshinbo Brake Inc. in 2010)2009

Spun off five businesses — Textiles, Automobile Brakes, Papers, Precision Instruments, and Chemicals — andconverted to holding company; corporate name changed to Nisshinbo Holdings Inc.

2010

Established Nisshinbo-Yawei Precision Instruments & Machinery (Jiangsu) Co., Ltd. (China)(formerly Jiangsu Yawei Nisshinbo Precision Instruments & Machinery Co., Ltd.)
Acquired additional shares of Japan Radio Co., Ltd., making it a consolidated subsidiary
Nagano Japan Radio Co., Ltd. also became a consolidated subsidiary as a result

2011Electronics

Other:
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets

Automobile
BrakesPrecision
Instruments

Chemicals

TextilesReal Estate

Other
Businesses

Eliminations/
Corporate

Acquired all shares of TMD Friction Group S.A. (Luxembourg)

Consolidated$1,310,946 $1,227,345$565,627$74,300$396,909$38,518$170,182$— $3,783,827

145
64$1,311,091 $1,227,409$(44,591)$(7,400)$2,084,200 $1,386,627

1,291$566,918$15,373$696,409

1,009$75,309$15,136$82,336136$397,045$11,363$501,264

10,236$48,754$24,373$452,636

14,936$185,118$(291)$346,809(27,817)—$(27,817) $3,783,827$(36,745) $(22,782)$107,728 $5,658,009$42,618$79,482$33,745$1,482$11,655$8,445$1,427$1,291$180,145$57,827$97,891$74,518$1,600$12,718$2,691$1,155$(1,136)$247,264

Established Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (China)
Established Nisshinbo Singapore Pte. Ltd. (Singapore)Dec. 2018

Sales:
Sales to externalcustomers
Intersegment sales
or transfers
Total
Segment profit (loss)
Segment assets

Established Nisshinbo (Shanghai) Co., Ltd. (China)

2012

Established Nisshinbo Business Management (Shanghai) Co., Ltd. (China)

2014

Established Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd. (China)

2015

Acquired all outstanding shares of TOKYO SHIRTS CO., LTD.
Changed Company’s sector classification on stock markets from textile products to electrical equipment
Acquired all outstanding shares of Nanbu Plastics Co., Ltd.

2016

Nagano Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd. became wholly consolidated subsidiaries ofJapan Radio Co., Ltd.

2017

Sold the papers businessJapan Radio Co., Ltd. became a wholly owned consolidated subsidiary2018

Acquired Ricoh Electronic Devices Co., Ltd., making it a consolidated subsidiary
Sold the foundation brakes business
Established JRC Mobility Inc.
New Japan Radio Co., Ltd. became a wholly owned consolidated subsidiary8687

Key Companies in the Nisshinbo Group

Corporate Data
(As of December 31, 2018)

Company

Location

Main Products and Services

Electronics

FoundedComposition of Shareholders

February 5, 1907
Securities firms

Common Stock

Wireless and Communications
Japan Radio Co., Ltd.

Japan

Disaster prevention systems,
mobile communications equipment

Alphatron Marine Beheer B.V.

Navigation equipment,
The Netherlands
wireless communication equipment

New Japan Radio Co., Ltd.

Japan

Electronic devices, microwave products

Ricoh Electronic Devices Co., Ltd.

Japan

Electronic devices

Automobile Brakes
Automobile brake friction materials

Shareholders

Automobile brake friction materials

27,448

Saeron Automotive Corporation

South Korea

Automobile brake friction materials
Automobile brake friction materials
Automobile brake friction materials

Nisshinbo Saeron Changshu Automotive Co., Ltd.

China

Automobile brake friction materials

Other Japaneseinstitutions

Foreign institutions

16.3%

Basic Stock Information

18.2%

Major Shareholders

SectorElectrical equipment

Stock code

3105

(As of December 31, 2018)
Number of shares held
(thousand shares)

Shareholder nameShareholding ratio(%)

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

24,640

14.38

Japan Trustee Services Bank, Ltd.
(Trust Account)

11,613

6.78

Japan

Plastic products, automotive precision parts

Business year

January 1 to December 31

Nanbu Plastics Co., Ltd.

Japan

Plastic products

Shareholder record datefor dividends

Fukoku Mutual Life Insurance Company

9,000

5.25

December 31 (June 30 for interim dividend)

Teijin Ltd.

6,028

3.52

Total shares authorized

371,755,000 shares

The Master Trust Bank of Japan, Ltd.
(Retirement Benefit Account for Teijin)

4,700

2.74

Total shares issued

178,834,769 shares(As of December 31, 2018)

Trust & Custody Services Bank, Ltd.
(Securities Investment Trust)

3,314

1.93

Treasury stock

7,542,144 shares(As of December 31, 2018)

Japan Trustee Services Bank, Ltd.
(Trust Account 9)

3,139

1.83

Transfer agent

Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Nisshinbo Precision Instrument & Machinery Hiroshima Corporation Japan

Automotive precision parts

Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd.

China

Automotive precision parts

Nisshinbo Mechatronics (Thailand) Ltd.

Thailand

Plastic productsContinental Automotive Corporation

Japan

Automotive precision parts

ChemicalsJapan

Nisshinbo Chemical Inc.

Urethane products,
high-performance chemical products

Shikoku Chemicals Corporation

2,600

1.52

Mizuho Bank, Ltd.

2,481

1.45

Trust & Custody Services Bank, Ltd.
(Investment Trust Acceptance Collateral Port)

2,373

1.39

Management Resources

Nisshinbo Mechatronics Inc.

Business Segments

Number of shares per trading unit 100 shares

Precision Instruments

40.7%

Strategy

Japan

USA

18.3%

234
22,61622,8502-31-11, Ningyo-cho, Nihonbashi, Chuo-ku,
Tokyo 103-8650, Japan

EuropeThailandJapanese financial
institutions

Head OfficeNisshinbo Brake Inc.

Nisshinbo Automotive Manufacturing Inc.

Japanese individuals
and others

Employees

TMD Friction Group S.A.

Nisshinbo Somboon Automotive Co., Ltd.

4.2%

Stock Price and Trading Volume

TextilesJapan

Shirt fabric, developed materials

NISSHINTOA IWAO INC.

Japan

Textile productsTOKYO SHIRTS CO., LTD.

Japan

ShirtsNisshinbo Do Brasil Industria Textil Ltda.

BrazilTextile spinning

PT. Nikawa Textile Industry

Indonesia

Textile spinning and weaving

PT. Nisshinbo Indonesia

Indonesia

Textile weaving and dyeing(yen)(million shares)

1,800

60

1,500

1,200

40

900

Real Estate
Real estate operations

Other
Nisshinbo Singapore Pte. Ltd.

Singapore

Group company support

Nisshinbo Business Management (Shanghai) Co., Ltd.

China

Group company support

8830

Trading volume (right)

600

20

300

10

0

0

6/16

9/16

12/16

3/17

6/17

9/17

89

12/17

3/18

6/18

9/18

12/18

3/19

Financials

Japan

Nisshinbo Urban Development Co., Ltd.

50

Stock price (left)

Management Framework

Nisshinbo Textile Inc.

ProfileMicro Devices¥27,610 million (US$251 million)

Parent Company
Subsidiaries
Total

Treasury stock

2.3%