To Our Shareholders
Thank you very much for your continued support. It is our pleasure to present our annual
report for the 132nd period, ended on March 31st, 2017.
As you well know, the domestic economy during this period maintained a moderate
recovery, despite the effects of economic fluctuations due to deceleration of emerging
economies and uncertainty in overseas affairs.
Against such a backdrop, the Parker Group has been working to provide high value added
technology which will provide high quality at a low cost and increase the satisfaction of ourcustomers, as well as strengthening our overseas businesses by bolstering our production
facilities particularly in the U.S., Mexico, China and Thailand, based on the second Mid-termManagement Plan which was started in this period. In addition, we have been focusing on
research and development initiatives, enhancing our fundamental research in order to create
core technologies that will ensure that we retain our leading positon in the market well into
the future. As a result, our business achievements for this period were as described in thelatter part of this report.
In consideration of the steady results achieved during this term and the valued support ofour shareholders, the year-end dividend will be ten yen per share.
While employment and incomes have continued to improve in Japan and the economy isexpected to continue to pick up, the environment faced by our group is one which remains
unpredictable due to concerns over the slowing of the Chinese economy and policy trends inthe U.S. The Parker Group will soon enter the second year of our second three year Midterm Management Plan. This plan aims for sustainable growth through three basic policies
including enhancing and expanding our business base, promoting innovation in R&D at ourtechnology-driven company and strengthening the structure of the organization.
We look forward to the continuing support of our shareholders.
June 2017

Chairman & C.E.O.

President & C.O.O.

Shun ONO

Kazuichi SATOMIParker Group Outlook
Business progress and results
There was a continued moderate recovery in the global economy during this period,
however in addition to the slowdown in the economies of China and emerging nations in Asia,
many elements of uncertainty remain following the Brexit vote and change of administrationin the U.S. In Japan the economy continued to recover with improvement in employment andincomes, however due to increased uncertainty as to the future of overseas economies, theexchange rates tended to fluctuate sharply in short periods of time and the situation wasrelatively unstable.
The business environment faced by the Parker Group was one in which our key
customers in the automotive industry saw an increase in auto production in Japan coupledwith steady growth in the U.S. and China, resulting in steady growth overall. In the steel
industry, while there were signs of recovery in demand for steel in Japan and overseas, thesituation remained tough due to the effects of excess supply of steel in Asia and increasing
costs of raw materials, particularly coking coal.
Against such a backdrop, the Parker Group has been working to provide high value added
technology which will provide high quality at a low cost and increase the satisfaction of ourcustomers as well as strengthening our overseas businesses by bolstering our production
facilities particularly in the U.S., Mexico, China and Thailand, based on the second Mid-term
management plan which was started in this period. In addition, we have been focusing on
research and development initiatives, enhancing our fundamental research in order to create
core technologies that will ensure that we retain our leading positon in the market well into
the future.
As a result of these efforts, our consolidated business achievements were as follows.
Net sales were 109,569 million yen (up 0.5% on the previous period), and operating
income was 16,934 million yen (up 7.4% ditto). Ordinary income was 18,779 million yen (up4.8% ditto) and net income attributable to parent company shareholders was 12,228 million
yen (up 18.5% ditto).

The overview by each business segment is as follows.
(Chemicals Business)
Net sales were 43,348 million yen (down 0.9% on the previous period), and operating
income was 8,973 million yen (up 5.2% ditto). Our chemicals division manufactures and sells
chemicals to form conversion coating on the surface of metals and other substrates toimprove their functionality by improving corrosion resistance, wear resistance, lubricity andother performances, thereby adding value to the substrate materials. In Japan, businessachievements were steady due to the recovery in auto production and improvement in steel
exports. Overseas, sales increased on a local currency basis, and our achievements wererelatively steady, however income fell due to the effect of exchange rates. In Japan andoverseas, profitability rose due to an increase in demand for high value added products androbust sales of chemicals in new markets, and overall results were a fall in income and a risein profit in this segment.
(Equipment Business)
Net sales were 21,879 million yen (down 2.5% on the previous period), and operating
income was 1,580 million yen (up 12.6% ditto). The equipment business segment
manufactures and sells pre-treatment equipment, painting equipment and powder coating
equipment, etc. mainly to the transportation machinery industry. In Japan income rose
however overseas income fell. Profit rose due to progress in cost cutting, and overall income
fell while profit rose in this segment.
(Jobbing Business)
Net sales were 40,178 million yen (up 3.2% on the previous year), and operating income
was 7,335 million yen (up 5.1% ditto). This division provides service modification jobbing
services such as heat treatment, rust prevention coating and plating. In Japan demand forjobbing of automotive parts increased, and overall there was a rise in both income and profit
in this segment.
(Other)Net sales were 4,162 million yen (up 4.9% on the previous period) and operating income
was 288 million yen (up 6.9% ditto). This segment is mainly focused on domestic business
which is not directly affected by exchange rates, and includes our building maintenancebusiness, transportation business and solar power generation business. The transportation
business was robust, and overall both income and profit rose in this segment.

Sales by Business (Consolidated)

Chemical(JPY Million)

120,000
100,000

89,919Equipment

99,793

102,514

3,453

2,498

3,171
80,000

Jobbing

Others109,063

109,569

3,968

4,162

38,92340,17833,79835,83920,66320,80322,43021,87937,776

41,87843,372

43,741

43,348

2013

2014

2015

2016

2017

31,30260,00017,66940,00020,0000

Status of capital expenditure
Equipment Investment in this period totaled 7,933 million yen, with the main investmentsin each segment as follows.
Main facilities completed in this period:
Jobbing Business:
Hamamatsu Netsushori Kogyo
Construction of building and new equipment for heat treatment jobbing plant.
Jobbing Business:
Parker Trutec Mexicana S.A. de C. V.
Construction of building and new equipment for heat treatment jobbing plant.
Jobbing Business:
Thai Parkerizing Co., Ltd.
New equipment for rust prevention and heat treatment jobbing plants
Main facilities in progress in this period:

Nihon Parkerizing Co., Ltd.
Construction of new building
Jobbing Business:
Parker Trutec Inc.
New equipment for rust prevention and heat treatment jobbing plants
Chemicals Business:
Parker Surface Technologies (Shanghai) Co., Ltd.
Construction of new chemicals manufacturing plant

Issues to face
The Parker Group is now entering the second year of its second three year Mid-termManagement Plan, and will be tackling the following important issues in order to ensure thesustained growth of the business. Our aim is to be the leading global company in the field of
surface modifications, maintaining our technical superiority in the market of surface
modification for a wide array of substrates.
(1) Enhancing and expanding our business baseStrengthening collaboration between Group companies in Japan and overseas,
maintaining and expanding existing businesses, daring to take up challenges in the
global market, developing new markets and creating a new business model.
(2) Technology-driven company
Expanding the market for high value-added products and advancing the development
of differentiated technology, as well as improving efficiency of the research anddevelopment organization and contributing to a variety of industrial fields withinnovations based on our core technology.
(3) Strengthening the structure of the organization
Cutting costs by promoting cost reduction throughout the organization, as well asbuilding a global quality control system, developing human resources and enhancing
corporate governance to strengthen the structure of the organization.

Number of Employees
Consolidated:

4,022 persons

Principal Shareholders
Number of Shares
Name of Shareholders

Held(Thousands ofshares)

Shareholding
Ratio
(%)

Nippon Life Insurance Company

7,015

5.64

Meiji Yasuda Life Insurance Company

5,578

4.48

The Chiba Bank, Ltd.

4,765

3.83Yugen Co., Ltd.

4,708

3.78

The SATOMI Scholarship Foundation

4,633

3.72

Mizuho Bank, Ltd.

4,227

3.39

State Street Bank and Trust Company

3,895

3.13

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

3,882

3.12

Japan Trustee Services Bank,Ltd.(Trust account)

3,376

2.71

Sumitomo Mitsui Banking Corporation

3,113

2.50

Financial Highlights (Consolidated)(JPY million)
2010

2011

2012

2013

2014

2015

2016

2017

Net sales

69,39380,48384,75889,91999,793

102,514

109,063

109,569

Ordinary income
Net income
attributable to parentcompany

9,055

13,64912,901

15,17918,046

17,453

17,921

18,779

4,131

7,454

6,314

8,463

10,142

9,975

10,32012,228

119,101

124,925

130,517

146,739

165,914

187,116

189,377

197,260

Total liabilities andnet assets(JPY Million)(JPY Million)

Net income attributable to parent company
shareholders(JPY Million)

14,00012,22812,00010,142

10,000

10,320

9,975

8,463

7,454
6,314

8,000
6,000

4,131

4,000
2,000
0
2010

2011

2012

2013

2014

2015

2016

2017

Total liabilities and net assets
197,260(JPY Million)

200,000

2015

2016

165,914180,000
146,739

160,000
140,000

187,116

189,377

119,101

124,925

130,5172011

2012120,000
100,000
80,00060,00040,00020,000
02010

2013

2014

(Fiscal Year)

2017

Consolidated Balance Sheets
Fiscal year ended March 31
2017

2016

(JPY Million)
AssetsCurrent assets

97,021

94,053

Cash and deposits

45,40044,937

Notes and accounts receivable-trade35,87932,822

Short-term investment securities

3,195

3,334

Inventories

8,933

9,271

Deferred tax assets

1,578

1,372

Others

2,189

2,475

Allowance for doubtful accounts

△155

△158

Fixed assets

100,238

95,32355,792

54,665

Buildings and fixtures, net

17,55917,491

Machinery, equipment and vehicles, net

16,186

15,411

Land

15,66014,994

Construction in progress

4,210

4,567

Others

2,176

2,199

1,186

1,413

―

202

1,186

1,210

Investments and other assets

43,26039,244

Investment in securities

32,586

26,703995

1,083

Others

9,776

11,555

Allowance for doubtful accounts

△98

△98

197,260

189,377

Tangible assets

Intangible assets
Goodwill
OthersDeferred tax assets

Total assets

Fiscal year ended March 31
2017

2016

Liabilities
Current liabilities

33,562

33,166

17,817

15,369831

752

Corporate Income taxes payable

2,965

2,416

Provision for bonuses

2,564

2,421

Others

9,382

12,206

17,19618,320Long-term loans payable

2,374

2,998

Net defined benefit liability

9,107

9,969

Deferred tax liabilities

3,772

2,523

Others

1,941

1,924

50,75851,487

Shareholders' equity

113,291

107,220

Paid-in capital

4,560

4,560

Capital surplus

4,070

3,912

Retained earnings

102,207102,377

Treasury stock△7,546△3,629

9,439

7,208

32

Foreign currency translation adjustment

643

2,127

Remeasurements of defined benefit plans△79△76

Notes and accounts payable-trade
Current portion of long-term loans payable

Fixed liabilities

Total liabilities
Net assets

Accumulated other comprehensive profit
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

10,006

9,262

Non-controlling interests

23,204

21,406

Total net assets

146,502

137,890

197,260

189,377

Total liabilities and net assets

Consolidated Statements of income
Fiscal year ended March 312017

2016(JPY Million)
Net sales

109,569

109,063

Cost of sales

68,293

68,627Gross profit

41,27540,436

Selling, general and administrative expenses

24,341

24,669Operating income

16,934

15,766

Non-operating profit

2,905

3,025

Interest income

306

308

Dividends income

543

555

Rent income

348

355

Technical support fee

379

389

Equity in earnings of affiliates

819

1,012

Others

507

405

1,060

871

Interest expenses

55

53

Foreign exchange loss

661

566

Others343

251

Ordinary income

18,77917,921

Extraordinary income

1,359

152

345

173

Income before income taxes

19,793

17,900

Income taxes-current

5,498

5,243

Income taxes-deferred

173

381

Net income

14,121

12,275

Net income attributable to non-controlling interests

1,893

1,954

Net income attributable to parent company shareholders

12,228

10,320Non-operating expenses

Extraordinary loss