BusinessReportfor the 130th Term2014.4.1−2015.3.31

To Our Shareholders
First of all, thank you very much for your continued patronage. We are very glad to be able topresent our annual report for the 130th period, ended on 31st March, 2015.
As you well know, in the Japanese economy during this period, continued improvement was madein employment and wages and the effects of the declining crude oil price and various government
policies resulted in anticipation of a continued moderate recovery. In addition, recovery in overseas
economies led by the advanced economies and the resulting improvement in exports led toheightened expectations for an economic recovery in Japan.
Against such a backdrop, the Parker Group has been actively engaged in meeting the requirementsof our customers in the increasingly sluggish domestic metal surface treatment modification market
by supplying high value added technology which will lead to high quality and low cost, as well as
investing in production equipment to steadily take advantage of increased foreign demand. Inaddition, the Parker Group has focused on research and development with the aim of creating newtechnologies to strengthen our corporate performance and improve profitability. As a result, ourbusiness achievements were as described in the latter part of this report.
In consideration of the business achievements, the dividend will be fifteen yen per share, which isthe same as the interim dividend.
It is anticipated that our Group will face an environment in which there is a high degree ofuncertainty both in Japan and abroad due to the risk of a downturn in the economies of China andEurope and the financial problem faced by Greece, as well as the risk of a bubble after a lengthy
period of quantitative easing. In addition to the development of surface modification technologies
unsurpassed in innovation and originality, we will continue to actively promote equipment
investment to increase our production capacity and do our utmost to improve our businessachievements to meet the expectations of our valued shareholders.
Thank you very much for your unerring support.
June, 2015

Chairman & C.E.O .

President & C.O.O.

Shun ONO

Kazuichi SATOMI-1-Parker Group Outlook
Business progress and results
In the global economy during this period, the U.S. dollar remained strong amidst anticipation of anincrease in interest rates and Japanese and European stock prices which got off to a slow start recovered
somewhat with the introduction of quantitative easing. In the domestic economy, corporate profits
improved with the continuing weak yen, and expectations for an economic recovery increased.
The business environment faced by the Parker Group is one in which our key customers in theautomotive industry adjusted inventories due to slower growth in domestic sales, keeping domestic
auto production at a low level. Also in the steel industry, while demand for steel improved, the excess
supply due to increase in blast furnace production at Chinese steel manufacturers fuelled competitionin this industry.
Against such an economic backdrop, while the sense of stagnation in the domestic market forsurface modification grew, the Parker Group worked hard to provide high valued added technology tomeet our customers’ needs for high quality and low cost, as well as bolstering equipment investment
to increase production capacity particularly in North America, Mexico, China and Thailand to ensurethat we steadily take advantage of increased foreign demand. Furthermore, we have been pouring ourefforts into research and development aiming to create new technology to make sure we maintain ourposition as market leader into the future. We have also worked hard to increase corporate value bysuch measures as constructing solar power plants to make effective use of idle land.
As a result of these efforts, our consolidated business achievements were as follows.
Net sales were 102,514 million yen (up 2.7% on the previous period), and operating income was
14,850 million yen (down 3.5% ditto). Ordinary income was 17,453 million yen (down 3.3% ditto)and pure profit for the period was 9,975million yen (down 1.6% ditto).
The overview by each business segment is as follows.

-2-

(Chemicals Business)
Net sales were 43,372 million yen (up 3.6% on the previous period) and operating income was
11,484 million yen (down 1.3% ditto). Our chemicals division manufactures and sells chemicals
to form conversion coating on the surface of metals and other substrates to improve theirfunctionality by improving corrosion resistance, wear resistance, lubricity and otherperformances, thereby adding value to the substrate materials. The domestic chemicals business
was stagnant however an expansion in sales in China, Korea and India led to an increase in incomein this segment however, the increase in materials costs due to the weak yen and a slowdown in
automotive production in Thailand, a key overseas market, resulted in a fall in profit in thissegment.
(Equipment Business)
Net sales were 20,803million yen (up 0.7% on the previous period) and operating income was1,063 million yen (down 19.1% ditto). The equipment business segment manufactures and sells
pre-treatment equipment, painting equipment and powder coating equipment, etc. mainly to thetransportation machinery industry. Overseas income fell however domestically income rose,
exceeding the 20,000 million mark as it did the previous year. However, there was stiffcompetition to gain orders, resulting in the increased income accompanied by a fall in profit in
the segment.
(Jobbing Business)
Net sales were 35,839 million yen (up 6.0% on the previous period) and operating income was6,607 million yen (up 2.8% ditto). This division provides service modification jobbing services
such as heat treatment, rust prevention coating and plating. In the domestic jobbing business, theheat treatment jobbing business faced a tough environment as this was affected by the shifting ofproduction overseas by auto parts manufacturers, however the rust proof jobbing fared relativelywell. Overseas, the key market of Thailand was sluggish, and in Indonesia labor costs rose,leading to a fall in profit in the tough environment. However the jobbing business in China andVietnam was steadfast, resulting in an increase in both income and profit in this segment.
(Other Business)
Net sales were 2,498 million yen (down 27.7% on the previous period) and operating income
was 203 million yen (down 59.6% ditto). This segment includes our building maintenance andtransportation business, etc. Income and profit in this segment fell as one consolidated subsidiary
relevant to this segment became an affiliated company accounted for by the equity method.

-3-Sales by Business (Consolidated)

Chemical(JPY Million)

Equipment

120,000

80,00060,00040,00020,00089,91984,758100,000
80,483
3,027
30,943

Jobbing

Others99,793
3,453

2,498

33,79835,83920,66320,803

3,171

2,817

102,51431,30230,868

9,911

15,25017,66936,60135,822

37,776

41,87843,372

2011

2012

2013

2014

2015

0
(Fiscal Year)

Status of Capital Expenditure
Equipment investment in this period totaled 10,020million yen, with the main investments in eachbusiness segment as follows.
Main facilities completed in this period:
Jobbing Business:
Parker Trutec, Inc.
Construction of building and installation of new equipment for heat treatment jobbing plant .
Jobbing Business:
Foshan Parker Surface Modification Co., Ltd.
Construction of building and installation of new equipment for heat treatment jobbing plant.
Main facilities in progress in this period:
Jobbing Business:
Parker-Trutec Mexicana S.A. de C. V.
Construction of building and installation of new equipment for heat treatment jobbing plant.

-4-

Status of financing
Not applicable.

Issues to face
Regarding the economic outlook, it is anticipated that the economic expansion in advanced
countries will be a driving force in the global economy however overall there is a lack of vigor. Whilethe decline in the crude oil price has helped in expanding the economies of countries reliant on crude
oil imports, it has struck a blow to resource-rich countries. The Japanese economy is seen to be
gradually brightening with an improved employment environment and continued weak yen, however
uncertainty remains both in Japan and abroad due to the risk of a downturn in the economies of China
and Europe and the financial problem faced by Greece, as well as the risk of a bubble after a lengthy
period of quantitative easing.
Against such a difficult backdrop, in order to secure its position as leader in the surface
modifications market, the Parker Group, under its motto of “Back to the Basics”, will pursue thedevelopment of surface modification technologies which cannot be beaten in terms of its innovationand originality. Furthermore, in order to strengthen corporate performance and profitability, the Parker
Group will promote cost reduction activities throughout the whole business, improve efficiency inconsolidated business and actively promote equipment investment to increase production capacity.

Number of Employees
Consolidated:

3,796 persons-5-Principal Shareholders
Number of Shares
Name of Shareholders

Held(Thousands ofshares)

Shareholding
Ratio
(%)

Nippon Life Insurance Company

3,596

5.67

Meiji Yasuda Life Insurance Company

2,789

4.39

2,664

4.20

The Chiba Bank, Ltd.

2,382

3.75

Yugen Co., Ltd.

2,354

3.71

The SATOMI Scholarship Foundation

2,316

3.65

Mizuho Bank, Ltd.

2,113

3.33

Northern Trust Co.(AVFC) Re 15PCT Treaty Account

1,960

3.09

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

1,858

2.93

State Street Bank and Trust Company

1,581

2.49

Trust & Custody Services Bank, Ltd. as trustee for Nippon Steel& Sumitomo Metal Corporation Retirement Benefit Trust
Account re-entrusted by Mizuho Trust and Banking Co., Ltd.

-6-Financial Highlights (Consolidated)(JPY Million)
2008

2009

2010

2011

2012

2013

2014

Net sales

103,489

90,807

69,39380,48384,75889,91999,793 102,514

Ordinary profit

15,464

9,828

9,055

13,64912,901

15,17918,046

17,453

Net profit

8,088

4,439

4,131

7,454

6,314

8,463

10,142

9,975

Total assets

2015

132,595 111,088 119,101 124,925 130,517 146,739 165,914 187,116

Net sales(JPY Million)

120,000

103,489

99,79390,807100,000

80,483 84,758

102,51489,91969,39380,00060,00040,00020,000
0
2008

2009

2010

2011

2012

2013

2014

2015

(Fiscal Year)

Ordinary profit(JPY Million)

20,00018,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0

18,046
15,464

9,828

2008

17,453

15,1792009

13,64912,901

2011

2012

9,055

2010

(Fiscal Year)

-7-

2013

2014

2015

Net profit(JPY Million)

12,00010,00010,142

9,975

8,463

8,088

7,454

8,000

6,314

6,000

4,439

4,1314,000
2,000
02008

2009

2010

2011

2012

2013

2014

2015

(Fiscal Year)

Total assets(JPY Million)

200,000
180,000
160,000
140,000
120,000
100,000
80,00060,00040,00020,0000

187,116
165,914
146,739

132,595
111,088 119,101

2008

2009

2010

124,925 130,517

2011

2012

(Fiscal Year)-8-2013

2014

2015

Consolidated Balance Sheets
Fiscal year ended March 31
2015

2014

(JPY Million)
AssetsCurrent assets

89,81286,015

Cash and deposits

38,83538,005

Notes and accounts receivable-trade32,67530,167

Short-term investment securities

2,090

3,649

Inventories

10,765

10,238Deferred tax assets

1,425

1,456

Others

4,190

2,635

Allowance for doubtful accounts

△169

△137

Fixed assets

97,30379,899Tangible assets

50,91142,772

Buildings and fixtures, net

16,393

13,747

Machinery, equipment and vehicles, net

12,851

10,141

Land

15,235

15,375Construction in progress

4,481

2,450

Others

1,949

1,057

Intangible assets

1,616

2,697

Goodwill

466

689

Others

1,149

2,008

Investments and other assets

44,77534,428Investment in securities

32,37623,916250

118

Deferred tax assets

1,088

1,365

Others11,159

9,159

△99

△131

187,116165,914

Long-term loans receivable

Allowance for doubtful accounts
Total assets-9-Fiscal year ended March 312015

2014

Liabilities
Current liabilities

32,71032,412

Notes and accounts payable-trade

15,535

14,538

Short-term loans payable

144

1,680

Current portion of long-term loans payable

399

360

Corporate Income taxes payable

1,888

2,759

Provision for bonuses

2,345

2,396

Others12,397

10,676

Fixed liabilities

18,282

15,829Long-term loans payable

1,854

2,108

901

856

Provision for retirement benefits

9,711

10,313

Deferred tax liabilities

3,938

1,424

Others

1,875

1,127

Total liabilities

50,992

48,241

Shareholders' equity

98,79391,396

Paid-in capital

4,560

4,560

Capital surplus

3,913

3,913

Retained earnings

93,94986,546

Treasury stock△3,628△3,623

Accumulated other comprehensive profit

15,492

7,247

Valuation difference on available-for-sale securities

10,6156,203△33

Foreign currency translation adjustment

4,910

1,176

Remeasurements of defined benefit plans

△29

△135

Minority interests

21,836

19,028

Total net assets

136,123

117,672Total liabilities and net assets

187,116

165,914

Provision for directors' retirement benefits

Net assets

Deferred gains or losses on hedges- 10 -

Consolidated Statements of income
Fiscal year ended March 312015

2014(JPY Million)
Net sales

102,514

99,793

Cost of sales

64,77963,065Gross profit

37,73536,728Selling, general and administrative expenses

22,884

21,335

Operating income

14,85015,393Non-operating profit

3,048

2,941

Interest income

238

206

Dividends income

431

367

Rent income

381

335

Technical support fee

354290Equity in earnings of affiliates

791

931

Foreign exchange gains

497

470

Others353

339

Non-operating expenses

445

288

Interest expenses

2673

Compensation expenses

164

9

Others254

205

17,45318,046Extraordinary income

419

571

Extraordinary loss

384

202

Income before income taxes and minority interests

17,48818,415

Income taxes-current

5,041

5,727

Income taxes-deferred

661

232

Income before minority interests

11,785

12,456

Minority interests in income

1,809

2,313

Net profit for the period

9,975

10,142

Ordinary income- 11 -