To Our Shareholders
Thank you very much for your continued support. We are pleased to present our Annual Report for the133rd period, ended on March 31st, 2018.
As you know, although there was a degree of uncertainty in this period in the Japanese economy
including uncertainty over policy trends in the U.S., the economy has exhibited moderate recovery withimprovements in employment and profitability.
Against such an economic backdrop, as we entered the second year of the second three-year Midterm Management Plan, all members of the Parker Group, under the slogan of aiming to be the leading
global company in the field of surface modifications, maintaining our technical superiority in the market ofsurface modifications for a wide variety of substrates, have worked together on the three priority targets of“enhancing and expanding the business base,” promoting innovation in R&D as a “technology-drivencompany” and “strengthening the structure of the organization”. As a result, our business achievements
for this period were as described in the latter part of this report.
In consideration of the steady results achieved during this term and our dividend policy, the ordinary
year-end dividend will be eleven yen per share, and to express appreciation to our shareholders on the90th anniversary since the company’s establishment, a commemorative dividend of two yen per share will
be added to make the total year-end dividend thirteen yen per share.
While corporate profits have continued to improve in Japan and the economy is expected to continue
to improve, the environment faced by our group is one which remains unpredictable due to geopoliticalrisks and increased uncertainty in overseas economies stemming from trade issues. The Parker Grouppositions this year, which marks the 90th anniversary of our founding, as an important year, and as wehead towards our centenary we will pursue further growth and the creation of new business bases, as wellas improving management efficiency Group-wide, investing in equipment and promoting global quality
initiatives, as we aim for sustainable growth well into the future.
We look forward to the continuing support of our shareholders.
June 2018

Kazuichi SATOMI

Kentaro Sato

Chairman & C.E.O.

President & C.O.O.

Parker Group Outlook(1) Business progress and results
While uncertainties remained including the direction of U.S. policy and geopolitical risks in East Asia,
overall the global economy fared well due to a steady performance by the U.S. economy and acomeback in China and other Asian economies. Furthermore, the Japanese economy exhibited
moderate recovery due to an improved employment environment, a recovery in personal consumption
and improved corporate profits.
The business environment faced by the Parker Group was one in which our key customers in theautomotive industry saw a continued recovery in domestic auto manufacturing as well as steady growthoverseas, resulting in steady growth overall. In the steel industry which is another key business area,
against a backdrop of improvement in the demand and supply environment, demand for steel grew
overseas as well as in Japan where demand was strong for steel for use in the automotive andindustrial machinery industries.
Against such a backdrop, as we entered the second year of the second three-year Mid-termManagement Plan, all members of the Parker Group, under the slogan of aiming to be the leading
global company in the field of surface modifications, maintaining our technical superiority in the market
of surface modifications for a wide variety of substrates, have worked together on the three priority
targets of “enhancing and expanding the business base,” promoting innovation in R&D as a“technology-driven company” and “strengthening the structure of the organization”.
As a result of these efforts, our consolidated business achievements were as follows.
Net sales were 114,840 million yen (up 4.8% on the previous period), and operating income was
17,984 million yen (up 6.2% ditto). Ordinary income was 20,750 million yen (up 10.5% ditto) and net
income attributable to parent company shareholders was 12,721 million yen (up 4.0% ditto).
The overview by each business segment is as follows.
(Chemicals Business)
Net sales were 45,599 million yen (up 5.2% on the previous period), and operating income was 9,465
million yen (up 5.5% ditto). Our chemicals division manufactures and sells chemicals to form conversion
coating on the surface of metals and other substrates to improve their functionality by improving corrosion
resistance, wear resistance, lubricity and other performances, thereby adding value to the substratematerials. In Japan in the latter half of the fiscal year, profitability fell due to rises in the prices of raw
materials, however demand was robust overseas in Thailand, India, China and elsewhere, and overallboth income and profit rose in this segment.
(Equipment Business)
Net sales were 20,292 million yen (down 7.3% on the previous period), and operating income was 856
million yen (down 45.8% ditto). The equipment business segment manufactures and sells pre-treatment
equipment, painting equipment and powder coating equipment, etc. mainly to the transportation machineryindustry. Demand for equipment rose among automotive manufacturers in China however in Japan the fallin income was significant, and the overall result was a fall in income. In addition, due to increased
competition for orders, profits fell in this segment.

(Jobbing Business)
Net sales were 44,536 million yen (up 10.8% on the previous year), and operating income was 8,682
million yen (up 18.4% ditto). This division provides surface modification jobbing services such as heat
treatment, rust prevention coating and plating. In Japan, demand for jobbing services recovered in the autoparts industry and sales were robust particularly for heat treatment services. Overseas, income rosesignificantly in Thailand and China, and in the latter half of the fiscal year full operations started up at thenew factory in Mexico, and as a result, both income and profits rose in this segment.

(Other)Net sales were 4,411 million yen (up 6.0% on the previous period) and operating income was 188 million
yen (down 34.5% ditto). This segment includes our building maintenance business, transportation
business and solar power generation business. The building maintenance business was stagnant,resulting in a fall in profits.

Chemical

120,000

99,793

102,5142,498

Equipment

Jobbing

Others114,840

109,063

109,569

3,968

4,162

38,92340,17844,536

4,411

100,000

3,453

80,00033,79835,83920,66320,80322,43021,87920,292

41,87843,372

43,741

43,34845,59960,00040,00020,000
0

2014

2015

2016

2017

2018

(2) Status of capital expenditure
Equipment Investment in this period totaled 8,668 million yen, with the main investments in eachsegment as follows.
Main facilities completed in this period:
Nihon Parkerizing Co., Ltd.

Construction of new building
Chemicals Business:
Dae Han Parkerizing Co., Ltd.
Construction of new factory for manufacture of chemicals
Parker Surface Technologies (Shanghai) Co., Ltd.
Construction of new factory for manufacture of chemicals
Jobbing Business:
Parker Trutec, Inc.
Expansion of equipment for rust preventive jobbing and heat treatment jobbing factories(3) Status of funds procurement
Not applicable(4) Issues to face
The Parker Group is now entering the second year of its second three year Mid-term Management
Plan, and will be tackling the following important issues in order to ensure the sustained growth of thebusiness. Our aim is to be the leading global company in the field of surface modifications, maintaining ourtechnical 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 andexpanding existing businesses, daring to take up challenges in the global market, developing newmarkets and creating a new business model.
(2) Technology-driven company
Expanding the market for high value-added products and advancing the development ofdifferentiated technology, as well as improving efficiency of the research and development
organization and contributing to a variety of industrial fields with innovations based on our coretechnology.
(3) Strengthening the structure of the organization
Cutting costs by promoting cost reduction throughout the organization, as well as building a global
quality control system, developing human resources and enhancing corporate governance tostrengthen the structure of the organization.

Number of Employees
Consolidated : 4,222 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

3.83

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

4,749

3.81

Yugen 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

3,823

3.07

Japan Trustee Services Bank,Ltd.(Trust account)

3,500

2.81

Sumitomo Mitsui Banking Corporation

3,113

2.50

Financial Highlights (Consolidated)(JPY million)
2011

2012

2013

2014

2015

2016

2017

2018

Net sales

80,48384,75889,91999,793

102,514

109,063

109,569

114,840

Ordinary income
Net income
attributable to parent
company

13,64912,901

15,17918,046

17,453

17,921

18,77920,750

7,454

6,314

8,463

10,142

9,975

10,32012,22812,721

124,925

130,517

146,739

165,914

187,116

189,377

197,260

220,886

Total liabilities andnet assets

Consolidated Balance Sheets
Fiscal year ended March 312018

2017(JPY Million)
AssetsCurrent assets

111,331

97,021

Cash and deposits

55,67345,400

Notes and accounts receivable-trade

39,98035,879

Short-term investment securities

1,632

3,195

Inventories

9,230

8,933

Deferred tax assets

1,409

1,578

Others

3,572

2,189

Allowance for doubtful accounts

△167

△155

Fixed assets

109,554

100,238

Tangible assets

59,89755,792

Buildings and fixtures, net

20,443

17,559Machinery, equipment and vehicles, net

16,621

15,660Land

16,13915,235Construction in progress

4,615

4,210

Others

2,077

2, 176

Intangible assets

1,390

1,186

Others

1,390

1,186

Investments and other assets

48.26543,260Investment in securities

37,39732,376993

995

Others

9,970

9,776

Allowance for doubtful accounts△96△98Deferred tax assets

Total assets

220,886

197,260

Fiscal year ended March 312018

2017

Liabilities
Current liabilities

39,89633,562

Notes and accounts payable-trade

21,201

17,817

Current portion of long-term loans payable

1,271

831

Corporate Income taxes payable

2,474

2,965

Provision for bonuses

2,578

2,564

Others12,180

9,382

Fixed liabilities

17,773

17,196Long-term loans payable

1,601

2,374

Net defined benefit liability

9,491

9,107

Deferred tax liabilities

5,163

3,772

Others

1,476

1,941

Total liabilities

57,63050,758

123,762

113,291

Paid-in capital

4,560

4,560

Capital surplus

4,286

4,070

Retained earnings

122,455

102,207

Treasury stock△7,539△7,546

12,9439,439

33

Foreign currency translation adjustment

1,693

643

Remeasurements of defined benefit plans

△50

△79

Net assets
Shareholders' equity

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

14,58910,006

Non-controlling interests

24,902

23,204

Total net assets

163,255

146,502

Total liabilities and net assets

220,886

197,260

ncomeConsolidated Statements of income
Fiscal year ended March 312018

2017(JPY Million)
Net sales

114,840

109,569

Cost of sales

71,642

68,293Gross profit

43,197

41,275

Selling, general and administrative expenses

25,21324,341

Operating income

17,984

16,934Non-operating profit

3,193

2,905

Interest income

321

306

Dividends income

571

543

Rent income

420

348

Technical support fee

456

379

1,036

819

Others386

507

Non-operating expenses

427

1,060

Interest expenses

6455

Foreign exchange loss

20661

Others341

343

20,75018,779Extraordinary income

279

1,359

Extraordinary loss

289

345

Income before income taxes

20,74019,793

Income taxes-current

5,394

5,498

Income taxes-deferred

172

173

Net income

15,172

14,121

Net income attributable to non-controlling interests

2,451

1,893

Net income attributable to parent company shareholders

12,721

12,228Equity in earnings of affiliates

Ordinary income