Business
Reportfor the 128th Term2012.4.1−2013.3.31

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 128th financial period, ended on 31st March, 2013.
As you well know, there were fears that the recovery of the Japanese economy during this period
might slow due to a dampening of exports however the monetary easing instigated by the new
government led to yen depreciation and a rallying of the stock market. In addition to a recovery ofcorporate performance, domestic consumption is also expected to rise and there are increased
expectations for an economic recovery despite a degree of uncertainty.
Against such a backdrop, the Parker Group has been actively strengthening our overseas businesses
and engaging in forward-looking research and development activities, as well as continuing to do
our best to promote cost savings to strengthen our corporate performance and improve profitability.
As a result, our business achievements were as described in the later part of this report.
In consideration of the business achievements, the dividend will be fifteen yen per share, which isan increase of five yen per share from the interim dividend.
It is anticipated that our Group will face a fierce economic climate due to the stagnation of theEuropean economy which is dealing with chronic financial problems, and the slowing of economic
growth in Asian economies, however, we will do our utmost to improve our business results andsatisfy the expectations of our shareholders by promoting the development of new technologies andstrengthening our overseas business.
Thank you very much for your unerring support.
June, 2013

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, while there were indications of an upturn in the U.S.
economy, fiscal austerity and other factors led to a low rate of growth, and the European economy
also remained stagnant overall due to the uncertainty remaining due to financial issues. Growth in
the Asian economies was also duller due to decreased exports to the U.S. and was weak overall. On
the other hand, in Japan, anticipation of an economic downturn increased with the weaker exports
and ending of the eco-car subsidy, however, the financial easing instigated by the new government
led to yen depreciation and a rallying of the stock market, and anticipation of the recovery ofcorporate performance and domestic consumption led to increased expectations for an economic
upturn despite a degree of uncertainty.
The business environment faced by the Parker Group is one in which our key customers in theautomotive industry faced a difficult situation with overseas automotive manufacturers gaining anedge and anti-Japanese sentiment in China forcing a reduction in manufacturing output. In the steel
industry also, the environment was tough as Asian steel manufacturers put up fierce competition.
Against such an economic backdrop, the Parker Group did our best to gain new customers andsupply new technology in order to steadily gain a share of the demand in expanding overseas
markets, made significant equipment investment particularly in the Asian region and strengthened
our overseas businesses, as well as promoted research and development to create new technologies
for the future. Furthermore, we strengthened ties within the Group and restructured business, as wellas promoting efficiency in supply of raw materials and other cost cutting measures.
As a result of these efforts, our consolidated business achievements are as follows.
Net sales were 89,919 million yen (up 6.1% on the previous period), and operating income was13,146 million yen (up 15.2% ditto). Ordinary income was 15,179 million yen (up 17.7% ditto), andpure profit for the period was 8,463 million yen (up 34.0% ditto) due to factors including gain onsale of investment securities and a lower corporate tax rate.

-2-The overview by each business segment is as follows.
(Chemicals Business)
Net sales were 37,776 million yen (up 5.5% on the previous period) and operating income
was 9,801 million yen (up 13.2% ditto). Our chemicals division manufactures and sells
chemicals to form conversion coating on the surface of metals and other substrates to improvetheir functionality by improving corrosion resistance, wear resistance, lubricity and otherperformances, thereby adding value to the substrate material. Domestically, income fell due to afall in demand in the latter half of the period however overseas income, particularly in Asia,
rose approximately 25% and overall the result was an increase in income and profit.
(Equipment Business)
Net sales were 17,669 million yen (up 15.9% on the previous period) and operating income
was 1,206 million yen (up 85.5% ditto). The equipment business segment manufactures andsells pre-treatment equipment, painting equipment and powder coating equipment etc. mainly tothe transportation machinery industry. Domestic equipment investment remained stagnant
however orders for pre-treatment equipment increased overseas, and the result was an increase
in income and profit.
(Jobbing Business)
Net sales were 31,302million yen (up 1.4% on the previous period) and operating income
was 6,155 million yen (up 4.5% ditto). This division provides surface modification jobbing
services such as heat treatment, rust prevention coating and plating. Domestic jobbing businessfaces a tough environment due to hollowing out as customers move their manufacturing
overseas and domestic auto manufacturing declines, however overseas income for the jobbing
business increased significantly in the U.S. in line with the recovery in auto production and alsoin Asia the jobbing business was robust in Thailand, Indonesia and elsewhere.
(Other Business)
Net sales were 3,171 million yen (up 12.6% on the previous period) and operating income
was 340 million yen (up 22.4% ditto). This segment includes our building maintenance, realestate leasing, financial lease and transportation business. Income increased in the building
maintenance business and profitability improved slightly in the logistics business, resulting in
an increase in income and profit in this segment.

-3-Sales by Business (Consolidated)

ChemicalEquipment

JobbingOthers(JPY Million)

120,000
90,807100,000
3,720
80,00080,48369,393

3,027
33,544

3,028

60,00030,94389,9193,171

2,817
30,86831,302

25,71916,380
8,505

40,00020,00084,758

9,911

15,25017,66937,162

32,13936,60135,822

37,776

2008

2009

2010

2011

2012

0(Fiscal Year)

Status of Capital Expenditure
Equipment investment in this period totaled 3,431million yen, with the main investments for eachbusiness segment as follows.
Main facilities completed in this period:
Chemicals Division:
Thai Parkerizing Co., Ltd.
Installation of new equipment in chemical manufacturing plant.
Jobbing Business:
Thai Parkerizing Co., Ltd.:Installation of new equipment in rust prevention coating and heat treatment jobbing plant .

-4-Status of financing
Not applicable.

Issues to face
Regarding the economic outlook, it is anticipated that the U.S. and European economies, which arebeset by financial difficulties, will remain sluggish, and that a high level of growth cannot beachieved in the export-oriented economies in Asia. Furthermore, with regards to the economicpolicies of the current government administration, question marks remain with regard to growthstrategies and while the yen depreciation will give a boost to competitiveness of export industries, it
is believed that a genuine recovery will require a considerable amount of time, and it is anticipatedthat conditions will continue to be tough.
Against such a difficult backdrop, the Parker Group, under its motto of “back to the basics”,
will pursue the development of surface modification technologies which cannot be beaten in terms of
its innovation and originality, as well as actively promote equipment investment to strengthen
manufacturing in Japan and overseas. We are urgently working on furbishing our business base in
the Indian market where particularly strong growth is anticipated, as well as actively investing
management resources on expanding business in China, Thailand and Indonesia.

Number of Employees
Consolidated:

3,355 persons-5-Principal Shareholders
Number of Shares
Held

Name of Shareholders(Thousands ofshares)

Shareholding
Ratio
(%)

Nippon Life Insurance Company

3,596

5.67

Meiji Yasuda Life Insurance Company

2,789

4.39

2,664

4.20The Chiba Bank, Ltd.

2,382

3.75

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

2,374

3.74

Yugen Co., Ltd.

2,354

3.71

The SATOMI Scholarship Foundation

2,316

3.65

Asahi Chiyoda Holding Co., Ltd.

2,292

3.61

Japan Trustee Services Bank, Ltd. (Trust account)

2,003

3.15

Sumitomo Mitsui Banking Corporation

1,556

2.45

Trust & Custody Services Bank, Ltd. as trustee for Nippon SteelCorporation Retirement Benefit Trust Account re-entrusted byMizuho Trust and Banking Co., Ltd.

-6-Financial Highlights (Consolidated)(JPY Million)
2005

2006

200720082009

2010

2011

2012

Net sales

84,73997,115 103,489

90,807

69,39380,48384,75889,919Ordinary profit

12,705

14,247

15,464

9,828

9,055

13,64912,901

15,179Net profit

6,816

6,983

8,088

4,439

4,131

7,454

6,314

8,463

Total assets

122,775 131,348 132,595 111,088 119,101 124,925 130,517 146,739

Net sales(JPY Million)

120,000
100,000

97,115

103,489
90,80784,73980,48384,7582010

2011

89,91969,39380,00060,00040,00020,000
0

2005

2006

2007

2008

2009

2012

(Fiscal Year)

Ordinary profit(JPY Million)

15,46416,00014,00015,17914,247

13,64912,70512,000

9,828

9,055

2008

2009

10,00012,901

8,000
6,000
4,000
2,000
0

2005

2006

2007

(Fiscal Year)

-7-

2010

2011

2012

Net profit(JPY Million)

8,463

8,088

9,000
8,000

6,816

7,454

6,983

6,314

7,000
6,000
4,439

4,131

2008

2009

5,000
4,000
3,000
2,000
1,000
0

2005

2006

2007

2010

2011

2012

(Fiscal Year)

Total assets(JPY Million)

146,739

160,000
140,000

122,775

131,348 132,595
111,088

120,000

119,101

124,925 130,517

100,000
80,00060,00040,00020,000
0

2005

2006

2007

2008

2009

(Fiscal Year)-8-2010

2011

2012

Consolidated Balance Sheets
Fiscal year ended March 312013

2012(JPY Million)
AssetsCurrent assets

77,06264,679Cash and deposits

31,98523,632

Notes and accounts receivable-trade28,14827,431

Short-term investment securities

3,419

2,164

Inventories

9,388

7,464

Deferred tax assets

1,529

1,468

Others

2,725

2,655

Allowance for doubtful accounts

△134

△137

Fixed assets

69,677

65,837

Tangible assets

37,21135,311

Buildings and fixtures, net

12,18412,004

Machinery, equipment and vehicles, net

7,702

7,045

Land

15,167

14,554

Construction in progress

1,156747Others, net

999

958

Intangible assets

2,469

1,846

Goodwill

785

199

Others

1,684

1,647

Investments and other assets

29,996

28,679Investment in securities

20,11418,503

43248

Deferred tax assets

1,373

2,121

Others

8,623

7,963

Allowance for doubtful accounts

△157

△158

146,739

130,517Long-term loans receivable

Total assets-9-Fiscal year ended March 312013

2012

Liabilities
Current liabilities

31,45028,042

Notes and accounts payable-trade13,433

12,861

Short-term loans payable

1,697

2,731

Current portion of long-term loans payable

1,833

560

Corporate Income taxes payable

2,659

2,202

Provision for bonuses

2,203

2,281

255

―

Others

9,368

7,406

Fixed liabilities

14,551

15,201Long-term loans payable

2,090

3,223

Provision for retirement benefits

9,864

9,876

Provision for directors' retirement benefits

999

924

Deferred tax liabilities

372

16

Others

1,225

1,161

Total liabilities

46,002

43,243

Shareholders' equity

82,92175,676

Paid-in capital

4,560

4,560

Capital surplus

3,913

3,913

Retained earnings

78,07370,824

Treasury stock△3,625△3,622

Accumulated other comprehensive profit

1,765△2,030

Valuation difference on available-for-sale securities

4,531

3,056

3

△34

Foreign currency translation adjustment△2,769△5,052

Minority interests

16,05013,628

Total net assets

100,737

87,273

Total liabilities and net assets

146,739

130,517

Provision for loss on retirement of noncurrent assets

Net assets

Deferred gains or losses on hedges- 10 -

Consolidated Statements of income
Fiscal year ended March 312013

2012(JPY Million)
Net sales

89,91984,758

Cost of sales

57,11853,937Gross profit

32,80030,821

Selling, general and administrative expenses

19,654

19,409Operating income

13,146

11,411Non-operating profit

2,391

1,998

Interest income

161

133

Dividends income

304

264

Rent income

322

301

Technical support fee

286

318

Equity in earnings of affiliates

624

679

Foreign exchange gains

234-Others

456

301

Non-operating expenses

358

509

Interest expenses

77

102

Foreign exchange losses

-199

280

207

15,17912,901

Extraordinary income

641

140

Extraordinary loss

459

589

Income before income taxes and minority interests

15,361

12,452

Income taxes-current

5,260

4,357

Income taxes-deferred△13587

Income before minority interests

10,115

7,507

Minority interests in income

1,651

1,193

Net profit for the period

8,463

6,314

OthersOrdinary income- 11 -