InterimBusinessReportfor the 132nd Term2016.4.1−2016.9.30

To Our Shareholders
First of all, let us express our sincere appreciation to our shareholders for your continued patronageand support. It is our pleasure to present the interim report for the 132nd period, covering the period
from April 1st, 2016 to September 30th, 2016.
During this period in the global economy, while the U.S. economy fared relatively well and theEuropean economies experienced a moderate recovery, momentum slowed in Europe following theBrexit shock and the Asian economies have continued to decelerate. In Japan also, the sense of
uncertainty is high and the stock market has been sluggish as the strong yen has slowed the growth ofcorporate business results, and personal consumption has lacked vigor.
Regarding the business environment for metal surface modifications faced by our Parker Group,
while our key customers in the automotive industry have been increasing automotive output in the U.S.
and China, output has stalled in Japan. Likewise in the steel industry, as well as the continuing fallingof the steel price due to excess production in China flooding the global market, there have beensignificant restructuring moves in Japan and globally, and the situation remains tough.
In the midst of such a difficult economic environment, our Parker Group has been working to meetthe needs of our customers by strengthening the roll-out of environmentally-friendly products and highvalue-added products, as well as bolstering our production facilities particularly in the U.S., Mexico,
China and Thailand to steadily capture the increasing overseas demand. In addition, in order tomaintain our market superiority well into the future, we have been focusing our efforts on researchand development, particularly the development of surface treatment chemicals for new markets, andstrengthening fundamental research.
As a result, our business achievements for this period were as follows.
Net sales were 50,498 million yen (down 2.6% on the corresponding period for the previous year),and operating income was 7,485 million yen (up 2.6% ditto). Ordinary income was 7,734 million yen(down 9.4% ditto) and net income attributable to parent company shareholders was 4,751 million yen(down 6.3% ditto).
The overview by each business segment is as follows.
(Chemicals Business)
Net sales were 21,275 million yen (down 2.8% on the corresponding period for the previous year),and operating income was 4,443 million yen (up 6.4% ditto); with the overall result being an increasein profit despite the decrease in revenue. Profitability improved in Japan due to bolstering of chemicalsales to new markets. Revenue fell overseas, in part due to the effects of exchange rates, however thefall in profits was held in check by cost reductions.
1(Equipment Business)
Net sales were 7,828 million yen (down 17.5% on the corresponding period for the previous year)
and operating income was 260 million yen (down 5.4% ditto). In this interim period, while revenuerose in India, it fell in China, Indonesia and Japan, with the overall result being a fall in both revenue
and profit.
(Jobbing Business)
Net sales were 19,407 million yen (up 2.7% on the corresponding period for the previous year) andoperating income was 3,279 million yen (down 1.0% ditto). In Japan, demand recovered somewhat
despite the effects of the shift overseas of auto parts manufacturing, resulting in an increase in revenue.
Overseas, business results contracted due to the effects of exchange rates, however an increase indemand in China, Thailand and the U.S. led to an overall result of an increase in revenue and a decreasein profit.
(Other Business)
Net sales were 1,986 million yen (up 25.5% on the corresponding period for the previous year) andoperating income was 136 million yen (up 7.8% ditto). In particular the building maintenance businessperformed well, and the overall result was an increase in both revenue and profit.
Regarding the interim dividend for this period, a resolution was passed by the Board of Directors
on 7th November to pay a dividend of ten yen per share to be paid on the 9th of December, 2016.
Regarding the outlook for the second half of the financial year, while the Japanese economy isexhibiting a moderate recovery, at this point in time the difficulties are being compounded by factors
such as the squeezing of corporate profits due to the strong yen. Overseas, the Brexit vote in the U.K.
and the deceleration of the Chinese and other Asian economies are sources for continued concern. Itis anticipated that overseas business results will continue to be eroded due to the exchange rates, andmany uncertainties remain.
Against such an economic backdrop, our Parker Group has formulated a new mid-term management
plan with the aim of sustainable growth through three basic policies including enhancing andexpanding our business base, promoting innovation in R&D at our technology-driven company andstrengthening the structure of the organization.
We look forward to the unerring support of our shareholders.
President & C.O.O.
Kazuichi SATOMI

2Consolidated Balance Sheet
September 30

March 312016

2016(JPY Million)
AssetsCurrent assets

92,207

94,053

Cash and deposits

43,87844,937

Notes and accounts receivable-trade

31,60832,822

Short-term investment securities

2,850

3,334

Inventories

10,331

9,271

Deferred tax assets

1,312

1,372

Other

2,370

2,475

Allowance for doubtful accounts

△143

△158

Fixed assets

92,25995,323

Tangible assets

52,70854,665

Buildings and fixtures, net

16,391

17,491

Machinery, equipment and vehicles, net

14,42015,411

Land

14,68814,994Construction in progress

5,178

4,567

Other

2,029

2,199

Intangible assets

1,158

1,413

88

202

Other

1,070

1,210

Investments and other assets

38,391

39,244

Investment in securities

28,282

26,703

Deferred tax assets

1,071

1,083

Other

9,135

11,555

Allowance for doubtful accounts

△98

△98

184,466

189,377

Goodwill

Total assets

3September 30

March 312016

2016

Current liabilities

31,21033,166

Notes and accounts payable-trade

15,601

15,369708

752

Corporate income taxes payable

1,783

2,416

Provision for bonuses

2,397

2,421

Other

10,72012,206

Fixed liabilities

17,26518,320Long-term loans payable

2,383

2,998

376

904

Net defined benefit liability

10,048

9,969

Deferred tax liabilities

2,297

2,523

Other

2,159

1,924

Total liabilities

48,47551,487

110,861

107,220

Paid-in capital

4,560

4,560

Capital surplus

4,070

3,912

Retained earnings

105,994

102,377

Treasury stock△3,763△3,629

Accumulated other comprehensive profit

4,329

9,262

Valuation difference on available-for-sale securities

6,983

7,208

12

Foreign currency translation adjustment△2,5832,127

Remeasurements of defined benefit plans

△72

△76

Non-controlling interests

20,80021,406

Total net assets

135,991

137,890

Total liabilities and net assets

184,466

189,377

Liabilities

Current portion of long-term loans payable

Provision for directors’ retirement benefits

Net assets
Shareholders' equity

Deferred gains or losses on hedges

4Consolidated Statements of income
Six months ended September 30

2016

2015

(JPY Million)

Net sales

50,49851,852

Cost of sales

31,01932,567Gross profit

19,47819,284

Selling, general and administrative expenses

11,99311,987

Operating income

7,485

7,297

Non-operating profit

1,460

1,474

Interest income

114

131

Dividends income

308

345

Rent income

177

187

Technical support fee

177

199

Equity in earnings of affiliates

436

412

Other

246

197

1,211

238

33

11

1,071

80

106

147

7,734

8,532

Extraordinary income

363

Extraordinary loss

64

102

Income before income taxes

7,672

8,493

Income taxes

2,246

2,474

Net income

5,425

6,019

673

946

4,751

5,073

Non-operating expenses
Interest expenses
Foreign exchange losses
Other
Ordinary income

Net income attributable to non-controlling interests
Net income attributable to parent company shareholders

5