Nisshinbo Holdings Inc.
2-31-11, Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo 103-8650, JAPANTEL +81-3-5695-8833 FAX +81-3-5695-8970
www.nisshinbo.co.jp/english/

Harnessing
Group Power
for a

Low-Carbon
Society

Annual Report 2010
Fiscal Year Ended March 2010

FINANCIAL HIGHLIGHTS

Aiming to Be an
Environment-Friendly
Company That
Contributes to Society(Years ended March 31)

CONSOLIDATED(millions of yen)(thousands of
US dollars)

2006

2007

2008

2009

2010

2010

Net Sales¥ 278,617¥ 312,825¥ 322,412¥286,167¥242,409$2,551,674

Textiles

82,87982,24378,816

67,59356,755597,421

Automobile Brakes

50,40254,81959,812

49,23041,046432,063

Papers28,612

29,90833,54734,214

31,536331,958

Precision Instruments

31,76130,88534,02135,602

24,908262,189

Chemicals

19,546

20,576

19,175

15,791

14,057

147,969“We will contribute to human society through our business activities, achieving corporate

Electronics

45,85876,06876,47560,55051,699544,200

growth in conjunction with society and providing beneﬁts to all stakeholders.” The Nis-

Real Estate

4,781

4,788

5,446

6,433

6,674

70,253shinbo Group continues to evolve based on our corporate principle of serving as a “public

Other Businesses

14,77813,53815,12016,754

15,734

165,621

Operating Income

10,524

11,551

12,034408

3,570

37,579Net Income (loss)

11,183

15,107

12,290(1,286)

1,896

19,958Equity266,434

282,015

245,909

193,698

193,6392,038,305(yen)(dollars)entity.” Since its founding in 1907 as a cotton spinning company, Nisshinbo has expanded
into a broad range of business segments, including textiles, automobile brakes, paper
products, mechatronics, chemicals, and electronics. The concept at the core of these
activities is pursuing value suited to the times in a manner that contributes to lifestyles
and society. Recently we also made new starts in the environmental and energy ﬁelds.
Nisshinbo is now applying its technology and human power accumulated over more

PER SHARENet Income (loss)¥ 53.21¥ 74.19¥ 63.34¥(7.08)¥10.38$0.11

Shareholders’ Equity

1,283.21

1,301.14

1,179.43

985.191,034.04

10.88

10.00

15.00

15.00

15.00

15.00

0.16

Cash Dividends

than a century to the goal of becoming an environmental company that contributes tothe Earth’s future. The Nisshinbo Group is accelerating its evolution toward a new era.

KEY RATIO(%)

Return on Assets (ROA)

2.6

3.1

2.7

(0.3)

0.5

Return on Equity (ROE)

4.6

5.7

5.1

(0.6)

1.0

Note: The United States dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥95 = US$1.

Consolidated Net Sales by Segment(billions of yen)

300

Consolidated Operating Income by Segment(billions of yen)

15

250
10

CONTENTS

200
5

2 Executive Message
3 Interview with
President Uzawa
8 Seeds for Future Growth

12
14
16
18
20
22
24
26

Overview of Business Segments
TextilesAutomobile Brakes
PapersPrecision Instruments
ChemicalsElectronics
Real Estate

27
31
54
55
56

CSR Activities
Financial Section
Board of Directors
History & Corporate Data
Main Group Companies

150
0
100
-5

50

-10

0

2006

2007

2008

2009

2010

2006

2007

2008

2009

2010

■ Textiles ■ Automobile Brakes ■ Papers ■ Precision Instruments ■ Chemicals ■ Electronics ■ Real Estate ■ Other Businesses

Annual Report 2010 • 1

EXECUTIVE MESSAGE

INTERVIEW WITH PRESIDENT UZAWA

New-Look Nisshinbo Group
Accelerates New Growth Strategies
Following Corporate Split

The Nisshinbo Group implemented a corporate split in April 2009 andembarked on a policy of bold “selection and concentration” so that we
can respond to the rapidly changing business environment. In April
2010 we launched the Challenge 2012 Three-Year Management Plan.
We also set long-term goals of achieving a return on equity (ROE) in
excess of 9% and sales in excess of ¥600 billion by ﬁscal year 2017(ending March 2018).
The engine of global economic growth is shifting to Asia. As
this change unfolds, the Nisshinbo Group is working to undertake
production and sales at the optimal locations while implementing global business strategies. We are concentrating management
resources in the environmental and energy sectors and developing new businesses, including photovoltaic modules, fuel cells, andelectric double-layer capacitors, to build the foundations for the
future competitiveness of the Group.
We are now entering the second year since the corporate split,
and the individual group companies are starting to operate at fullspeed. The business environment is changing at an ever-increasing
pace, and businesses can no longer rely on their past or current
courses. The Nisshinbo Group will seek to achieve new growth as anenterprise that responds to change by exhibiting an entrepreneurial
spirit and entering new business ﬁelds without excessive relianceon continuity.

The Nisshinbo Group has embarked on the Challenge 2012 ThreeYear Management Plan. Freelance journalist Masayoshi Fujitainterviewed President Shizuka Uzawa about the present and future.

“Sense of tension
fosters awarenessfor next roundof reforms.”

SUMMARY OF FY
ENDED
MARCH 2010

The Transition to a Holding Company Structure
Clariﬁes the Performance of Each Business

FUJITA: This past ﬁscal year was one of drastic change. The announcement of a

SHIZUKA UZAWA
President
Nisshinbo Holdings Inc.

MASAYOSHI FUJITA
Freelance journalist
Ex-editor-in-chief, Newsweek Japannew medium-term business plan was postponed by one year, and the Nisshinbo
Group was forced to respond to extremely adverse business circumstances.
UZAWA: Both sales [¥242,409 million] and operating income [¥3,570 million] fell below our initialexpectations. In addition, the textiles and electronics businesses performed worse than anticipated. The automobile brakes and paper businesses performed better than we expected, however,
and we enjoyed fortunate miscalculations in the chemicals business.
In April 2009 the Nisshinbo Group changed its business format to a holding company and ﬁvebusiness companies. Each business company is active in a different business sphere, but this leads
to the question of what each one must do to become a leader in its ﬁeld. This was our main focus
in adopting the holding company structure.
As a result of the change, we learned just how poorly the textiles business was doing. Therefore,
last year we made the difﬁcult decision to suspend mass production in Japan and move our production bases abroad. We also solicited employees in the textiles business for voluntary retirement.
The employees were very understanding and supportive of our action.

Annual Report 2010 • 3

INTERVIEW WITH PRESIDENT UZAWA

Sales by Business Segment(billions of yen)

300
250
200

FUJITA: In the past, didn’t you calculate proﬁt and loss for each division?
Has employee awareness changed signiﬁcantly from the time when each business wasa division within the company to now, when they are all separate companies?
UZAWA: Even prior to the corporate split, we calculated proﬁt and loss for each division and prepared trial balance sheets, so we understood the results. But even if employees saw that theirown division was losing money, they thought that the losses would be made up by other divisions
and that everything would be ﬁne if they simply kept on working hard. With the corporate split,
however, a sense of tension has developed, and personnel can see that their companies cannot
maintain their current status. This is fostering the awareness that we will need for the next roundof reforms.

150
100
50
0

2006

2007

2008

2009

2010

■ Textiles ■ Automobile Brakes ■ Papers■ Precision Instruments ■ Chemicals■ Electronics ■ Real Estate ■ Other Businesses

FUJITA: There are high expectations for the mechatronics [precision instruments] business.
How has it performed?
UZAWA: Photovoltaic modules are performing very well now, but sales of photovoltaic module
manufacturing equipment are sluggish. There was a solar power collapse in Spain, and there is anexcess of equipment in leading European markets. As a result, sales were only about half the levelof the previous ﬁscal year. Nonetheless, I am very hopeful about the future. In fact, we expect thatsales this ﬁscal year will reach about ¥8.5 billion.
The precision instruments business is now facing the question of whether continuing to just
manufacture production equipment will be enough in the future. Other possibilities include materials and the solution business. Because of this, we installed photovoltaic modules manufactured
by Nisshinbo Mechatronics Inc. on the roof of the Miai Machinery Plant in Okazaki City, Aichi
Prefecture. These investigations will enhance our understanding of the types of problems thatphotovoltaic module manufacturers are facing and their needs.
FUJITA: You mentioned that the chemicals business experienced “fortunate miscalculations.”
What did you mean by this?
UZAWA: We sell many different products, but carbon products performed better than we expected.
Also, unproﬁtable thermal insulation products contracted considerably, resulting in an improvement in the balance of income and expenditures. For a time, we considered withdrawing fromthis segment, but after closely examining the costs, we decided to continue. In addition, sales ofelastomer products increased in conjunction with the increase in sales of face masks in response to
the ﬂu outbreak. Even without this special demand, the chemicals business still would have been
proﬁtable, but we made miscalculations that ultimately turned out to be beneﬁcial.

CHALLENGE 2012
PLAN AND LONGTERM TARGETS

Consolidated Financial Target for
Fiscal Year 2012 (Ending March 2013)
Operating
Net Sales Income

Fiscal Year 2012

FUJITA: This year you launched the three-year management plan, which was postponed last year.
(billions of yen)

UZAWA: The Challenge 2012 Three-Year Management Plan gives the impression of being slightly

Net
Incomerestrained with targets of sales of ¥285 billion, operating income of ¥18 billion, and net income of¥15 billion for ﬁscal year 2012 [ending March 2013]. Under the plan, we will continue to develop
the environmental and energy sectors. We have set somewhat ambitious long-term ﬁnancial targets, however, of ROE in excess of 9% and sales in excess of ¥600 billion by the ﬁscal year ending
March 2018. The plan is particularly ambitious in terms of sales, since until now sales have been
only a little higher than ¥240 billion. Sales in the real estate business during the plan period will
be about ¥25 billion. I believe the important thing is how we use the proﬁts generated by thisbusiness to expand other businesses.

285.0

18.0

15.0

242.4

3.6

1.9

(Ending March 2013)

Fiscal Year 2009(Ended March 2010)

4 • Nisshinbo Holdings Inc.

Using M&A to Achieve Target of Sales in Excess of¥600 Billion by the Fiscal Year Ending March 2018

“We will continue
to develop theenvironmental andenergy ﬁelds.”

We do not have any speciﬁc proposals at this time, but mergers and acquisitions will likely be
one possible course of action. The environment and energy immediately come to mind as potential
business ﬁelds for M&A. New Japan Radio Co., Ltd., which became a subsidiary in 2005, represents
the initial strategic preparations for such a move. When we think about the growth of the Nisshinbo
Group, electronics is an important area. New Japan Radio has reported large losses for the last
two years, but a synergy effect in the real sense is going to appear from now on. New Japan Radio
returned to proﬁtability on a quarterly basis in January–March of this year [the fourth quarter ofthe ﬁscal year ended in March 2010].
FUJITA: It seems that Japanese corporations are currently facing the question of whether to

conduct business globally or locally. What stance will the Nisshinbo Group adopt for the future?
UZAWA: The textile business has been struggling for some time, and we have come to the conclu-

sion that we must move offshore. In other words, we have drastically changed our policy from“producing in Japan and selling overseas” to “producing overseas and selling overseas.” However,this is not a problem that concerns only textiles. The brake business is no exception. At a time
when domestic automobile production is declining, we must think hard about whether domestic
investment is most appropriate. We can no longer assume that even research and development
must be performed in Japan; it may be possible to move research and development overseas.
The fact that the Japanese economy will contract as the population declines is unavoidable.
Under these circumstances, companies like Nisshinbo must carefully examine how we can continue
doing business. The aggregate growth of companies leads to the growth of the country, and it is
the job of corporate managers to search for new businesses that will not only enable the company
to survive but also beneﬁt the country as a whole.
FUJITA: Against this backdrop, what is your approach concerning growth strategies for Nisshinbo?
UZAWA: Textiles is not a declining industry on a worldwide basis, but expanding production in acountry like Japan is no longer possible. With respect to automobile production too, China is rapidly
emerging to overtake the United States as the world’s largest market. In these circumstances, weneed to establish new businesses based on research and development. Such businesses include
photovoltaic module manufacturing equipment, bipolar plates for fuel cells, Carbodilite, which
is a high-performance chemical product, and electric double-layer capacitors.
FUJITA: In response to discontinuous social change, companies must act discontinuously

as well. You often say that new businesses need not be extensions of existing businesses.
UZAWA: Today, the Nisshinbo Group appears to be active in a variety of ﬁelds, but there are

Annual Report 2010 • 5

INTERVIEW WITH PRESIDENT UZAWA

nology to create high-quality products, they were respected and people would follow them. In
the past, senior management and ﬁnancial positions in overseas subsidiaries were ﬁlled withpeople from Japan. It was only when personnel from Japan were not able to manage things that
local personnel were put in charge. But even though that system still works in some cases, it is nolonger suitable for the times.
Nowadays it is necessary to entrust local management to people who understand the local
region best. The president of our subsidiary in Korea does not speak Japanese, so we communicate in English, and it works very well. Although we still have a long way to go, the trend is toward
using local personnel rather than sending Japanese employees overseas. I believe that when thishappens, development will also begin shifting overseas.

“Everything starts
by taking on new
challenges.”

FUJITA: As the company globalizes, do more issues of corporate governance arise?
UZAWA: I believe that fundamentally corporate governance will function adequately if there areassociations with technologies or products. Without a lineup of products with various lifecycles,
it is difﬁcult for companies to remain in business. In this sense, we are looking to develop businesses that are not simply extensions of existing business lines. We will develop businesses evenin remote ﬁelds if they are promising.
Also, speaking of discontinuity, in the past we hired and nurtured engineers who were recent
graduates. Now, however, we are hiring highly skilled engineers from outside the company even
if it causes a certain amount of friction. We can no longer stick blindly to an independent management model.
Over the next several years, real estate income should generate sufﬁcient capital to invest
approximately ¥10 billion every year. I hope to invest these funds in the environment, energy, andother ﬁelds and in new businesses not only in Japan but overseas as well. We will not attempt todo everything by ourselves but will look for opportunities to collaborate with others and to makestrategic investments. What is essential for doing this is developing the human resources that canmanage such a broad range of business. I look forward to taking on young personnel with theambition to tackle the challenges of new businesses. Everything starts by taking on new challenges.

REJUVENATINGMANAGEMENT

Seeking Young Managers Who Think
and Act Independently

FUJITA: Did seeking this type of reform of internal awareness lead tothe recent appointment of young ofﬁcers?
UZAWA: It did. We appointed some young personnel, who around 10 years ago would have been
just about reaching the position of senior manager now, to the post of ofﬁcers. We want managers
who are not only interested in short-term ﬁgures but also able to make clear what they are thinking. This personnel shift is a major reform that we have not seen at Nisshinbo for 40 or 50 years.
FUJITA: Human resources also hold tremendous signiﬁcance for your global strategies.
What is your thinking on overseas business development and personnel assignments?
UZAWA: I believe that Japanese manufacturers have been successful overseas because of theirtechnological capabilities. Even if they couldn’t speak the local language, if Japanese used tech-

6 • Nisshinbo Holdings Inc.

structures in place that enable personnel to point out problems when management starts to dosomething improper. The key element of governance, even more important than the design ofthe systems, is the state of awareness of the persons who make up the organization. I think theidea that all companies should adopt US-style governance is inappropriate. In fact, in Europe ideas
vary from country to country. Nisshinbo has foreign investors, and we have made the preparations
necessary to avoid having our foreign investors see us as a strange company.
There are no absolute right answers when it comes to corporate governance theory. Each company can develop the best possible governance tailored to its speciﬁc corporate culture. I do
believe, however, that a mandatory retirement age for senior management is necessary. This is
another area in which we have made speciﬁc arrangements.

PUBLICLY
TRADEDSUBSIDIARIES

Publicly Traded Subsidiaries Have Dual Governance

FUJITA: What are your thoughts concerning publicly traded subsidiaries?
UZAWA: There is a theory that publicly traded parent and subsidiary companies are disadvanta-

geous for minority shareholders, but I have some reservations about this. First, if a subsidiary is
publicly traded, corporate governance will also be effective with respect to that company. Somesay this is disadvantageous for minority shareholders, but in the case of a publicly traded company,
shareholders have the right to buy and sell shares freely. It is true that in the past there have beencases where the market value of a publicly traded subsidiary surpassed that of the parent, but thissimply means that the subsidiary became stronger as a result of the public listing. I believe that thisis the case with respect to procuring capital as well as attracting outstanding human resources.
If the parent company supports the subsidiary with all of its capabilities, governance will bemuch more effective than that of an uncontrolled publicly traded company. We were criticizedfor our handling of New Japan Radio after it reported substantial losses in two consecutive ﬁscal
years, but we appointed a managing ofﬁcer from Nisshinbo Holdings to the chairman’s position tostrengthen governance. Also, we appointed a Japan Radio director as an executive managing ofﬁcerof Nisshinbo Holdings. The existence of governance from the parent company and governance asa publicly traded company is not a bad thing for minority shareholders.
We are not considering publicly listing the subsidiaries that became separate companies in thecorporate split in the future. If this were to happen, spinning them off rather than keeping themas subsidiaries would be one option that we would consider. At that time, our thinking on whether
public listing is a good thing or a bad thing including the legal considerations may be different.

Annual Report 2010 • 7

Seeds for
FutureGrowthAs a manufacturer of photovoltaic module manufacturing equipment, Nisshinbo Mechatronics is conducting
research on how to improve the economics of photovoltaics. The ﬁrst solution that we have obtained is lowering
the manufacturing costs of the modules. Another method
is to extend the lifespan of photovoltaic modules. In bothcases, the key is new materials.

● SEEKING ECONOMIC EFFICIENCY FOR PHOTOVOLTAICS

New Materials Business Shines Light on
Path to 100-Year Photovoltaic Modules

HIROSHI NAK ANO
President
Nisshinbo Mechatronics Inc.

The widespread adoption of photovoltaics is being held backby their low economic efﬁciency. Currently, electricity generated
by photovoltaics costs about twice as much as electricity
from other means. Nisshinbo Mechatronics Inc. is approaching
the problem of improving the economics of photovoltaics
from the direction of materials. Nisshinbo Mechatronics President
Hiroshi Nakano discusses the new direction of the PV businessthat will be made possible by new materials.

Photo: A solar simulator, a type ofphotovoltaic module testing device

8 • Nisshinbo Holdings Inc.

Two Approaches to Improving
the Economics of Photovoltaics
The global PV market is said to be in a second expansionary phase. Total global production of photovoltaic modules is projected to reach 9,000 units in the ﬁscal year
ending March 2013 compared to 4,500 units in the ﬁscal
year ended March 2009. It is also calculated that total
power generation will increase to 12 gigawatts worldwide by the ﬁscal year ending March 2013. The PV market
continues to expand, but there are still a number of outstanding issues concerning the widespread adoption ofphotovoltaics. Looking at fees for household electricity,
power generated by oil or wind costs ¥23 per kWh, but
photovoltaic power costs ¥48 per kWh. For photovoltaics to replace other means of generation, their economic
efﬁciency will have to be improved by at least two times.

New Materials to Lower Consumable Costs
We want to be a manufacturer that makes the greatest
possible contribution to our customers through the provision of photovoltaic module manufacturing equipment.
As one aspect of this idea, we collected a wide range of
information concerning problems with manufacturing
equipment and with photovoltaic modules themselves.
One thing we discovered was an issue with the manufacturing equipment consumables. The O-rings used inmodule laminators to maintain a vacuum during the
production process and the diaphragms that apply pressure are expensive, but if deteriorated parts are used,problems with the equipment as a whole can occur. We
thought that by enhancing the performance and lowering the costs of the materials used in these consumables,
we could reduce photovoltaic module production costs.
To implement this solution, Nisshinbo Mechatronics
extended invitations to outside materials experts andbegan development of higher added-value consumablematerials. The result was the development of original
O-rings and diaphragms that are less expensive thanearlier products but three times more durable. The
Nisshinbo speciﬁcation O-rings and diaphragms wereshown publicly for the ﬁrst time at an exhibition held in
Shanghai in May 2010, and they generated a tremendous
response. We received inquiries concerning mass production from leading photovoltaic module manufacturers,
and we plan to collaborate with materials makers andbegin full-scale production. We expect these low-cost,high-performance O-rings and diaphragms to capture
80% of the global market and generate sales of ¥2.5 billion in the ﬁscal year ending March 2013.
New Seal Material Greatly Extends
Photovoltaic Module LifespanThe development of new consumable materials is no
more than the starting line to the creation of total solutions for improving the economics of photovoltaics. Nisshinbo Mechatronics is currently conducting research anddevelopment on new seal materials that will enhance theeconomic efﬁciency of photovoltaics by greatly expanding the lifespan of photovoltaic modules.

The silicon crystals in the generating unit of a photovoltaic module path have indeﬁnite lifespan. Generally, however, the warranty period of the module is only
about 10 years. This is because the module lifespan isdetermined by the seal material that serves the purposeof attaching the cells to the glass or back sheet and protecting the silicon crystals from humidity. Our research
into problems with photovoltaic modules revealed thatprocessing defects and poor functioning of the seal material lead to panel failures and reduce module lifespan.
Based on this research, Nisshinbo Mechatronics isdeveloping a new high-performance seal material withmany times the durability of existing materials. As partof the veriﬁcation testing, we installed 1,400 photovoltaic
modules that we manufactured on the roof of the Miai
Machinery Plant in Okazaki and are collecting data onchanges in the seal material cross-linking (the strengthof the polymer structures) in conjunction with various
changes in the environment, including weather and temperature. The seal material currently under development
will be marketed as a revolutionary material that canincrease the life of a module by several times. We estimate that the global seal material market is in the rangeof ¥700 billion to ¥1 trillion, and this business may very
well become a driving force behind Nisshinbo Mechatronics’ growth in the future.
Our Ultimate Goal Is to Create 100-Year
Photovoltaic Modules
Improving the economic efficiency of photovoltaics
requires not only addressing materials-related issues but
also visualizing the entire photovoltaic module manufacturing process. Developing optimal consumable materials, establishing molding formulas, and applying themto equipment designs will improve the economic efﬁciency of photovoltaics and increase their lifespan. Nisshinbo Mechatronics is considering using its accumulated
technological expertise to provide photovoltaic module
manufacturing system consulting services and supporting the visualization of manufacturing processes.
Nisshinbo Mechatronics will use its comprehensive
photovoltaic module manufacturing capabilities in new
business ﬁelds, including consumable products that
reduce manufacturing costs, new seals that extend thelifespan of photovoltaic modules, and consulting services
regarding manufacturing system equipment installationand optimal processing conditions, to achieve growth in
the global market as a provider of total solutions that
pursue the high economic efﬁciency of photovoltaics.
Ultimately, we will create photovoltaic modules with a
100-year lifespan.

Expected Sales of O-Rings
and Diaphragms (billions of yen)
3

80%
World share

2

1

0

2011

2012

2013

■ Nisshinbo sales ■ Global market

Positioning of New Products

O-ringHigher performance

New
Product
Current
Product
Lower cost

Higher cost

Lower performance

Diaphragm
Higher performance

New
Product
Higher cost

Lower cost

Improved
Product
Current
Product
Lower performance

Annual Report 2010 • 9Seeds for
FutureGrowthThe Nisshinbo Group’s Initiatives to Support Fuel-Cell Use

Electronic Control UnitAIR
HYDROGEN

Battery

Hydrogen
CylinderFuel Cells

CURRENT

Motor
WATER

H2 H2 H2
H2 H2 H2 H2
H2 H2 H2

Hydrogen-Storing
Carbon5nm

Carbon Alloy Catalyst

Bipolar Plate

Electric Double-Layer
Capacitor

Hydrogen is stored and thepressure is reduced
Improved safety, lower costs● RESEARCH AND DEVELOPMENT

Innovative Breakthroughs Accelerate
Widespread Use of Fuel Cells
Fuel cells generate electric power through the reaction ofhydrogen and oxygen without creating carbon dioxide. Fuel-cell
technology will be essential for creating a low-carbon society. The
Nisshinbo Holdings’ Business Development Division is conducting
diverse research and development that will contribute to thewidespread use of fuel cells, and breakthroughs achieved throughthe application of accumulated technological capabilities will
open the path to a low-carbon society. Below, we report on thefrontlines of research and development in the Nisshinbo Group.

Photo: The Nisshinbo Group Central Laboratory, a center of
research and development served by many young employees

10 • Nisshinbo Holdings Inc.

Overcoming the Signiﬁcant Hurdles
Preventing Widespread Fuel-Cell Use
Fuel cells will likely be used in a wide range of applications, and expectations are rising that they will spread
rapidly in three areas in particular: automotive fuel-celluse, residential fuel-cell use, and micro fuel-cell use.
Of these, the leader is residential fuel cells, and various
energy companies began marketing residential fuel cells
under the ENE-FARM uniﬁed brand in May 2009.
The spread of fuel cells, however, has yet to pick up
speed. There are still signiﬁcant hurdles to the widespread use of fuel cells, including high cost as a result of
the use of platinum catalyst to encourage the reaction
between hydrogen and oxygen, concerns about stablesupply, and the safety and cost issues regarding hydrogen tanks. Nisshinbo is currently conducting research anddevelopment on carbon alloy catalysts and hydrogenstoring carbon to solve these problems.
Development of a Carbon Alloy Catalyst
That Can Dramatically Reduce Costs
The platinum catalysts currently used in fuel cells present
the two issues of cost and stable supply. With respect tocost, in the case of a fuel-cell vehicle, several score gramsof platinum are used in each vehicle, and the cost can be
as much as several hundred thousand yen. In addition,
a little less than 80% of platinum supply sources are concentrated in South Africa, and this is a signiﬁcant factor
affecting stable supplies.
To address these issues, in 2006 Nisshinbo launched aplan to develop an alternative catalyst that can take theplace of platinum, and a new catalyst that uses carbon
was successfully developed. The carbon alloy catalyst
boasts catalyst performance (open-circuit voltage andoutput density) that is at least as high as platinum, but
the cost is only about one-sixth that of a platinum catalyst. As a result, when used in a fuel-cell vehicle, the cost
can be dramatically reduced. Various companies are currently conducting research on a variety of alloy-replacement catalysts, but we have conﬁrmed that our carbon
alloy catalysts perform at the world’s highest levels. In
addition, the catalyst uses carbon, an extremely common
material with much more stable supply.
The Nisshinbo Group is conducting research toenhance the performance of carbon alloy catalysts evenfurther and move to mass production; sample shipments
will begin in the ﬁscal year ending March 2011. We areabout to move into the ﬁnal phase of the practical appli-

cation of the carbon alloy catalyst in preparation for thewidespread adoption of fuel-cell vehicles in 2015.

Positioning of
the Carbon Alloy Catalyst
Catalyst performance

Hydrogen-Storing Carbon Solves
the Problems of Safety and Cost
Fuel-cell vehicle hydrogen tanks are at war with highpressure. Because of the ﬁlled volume of hydrogen andthe storage capacity of tanks that can be used with vehicles, the pressure of a full tank can reach 70 Mpa,* andmanufacturing safe tanks that can withstand these highpressures can cost as much as several million yen.
Nisshinbo is developing hydrogen-storing carbon
to create safe and low-cost hydrogen tanks. By storinghydrogen in hydrogen-storing carbon, the pressure inside
the tank can be lowered, which enhances the safety andcan substantially reduce the cost.
Hydrogen-storing carbon achieves storage and release
performance at the world’s highest levels, and Nisshinbo
plans to start joint research concerning the use of suchtanks on fuel-cell vehicles.
* 0.1 Mpa is equal to approximately 1 atmosphere. Consequently, 70

Carbon Alloy
Catalyst
Platinum
Catalyst
Lower cost with the sameor higher performance
Cost

Mpa is equal to 700 atmospheres (700 times the pressure at ground level,
equivalent to water pressure at a depth of 7,000 meters).

Annual Report 2010 • 11

OVERVIEW OF BUSINESS SEGMENTS

Segments

TextilesAutomobile Brakes

PapersPrecision Instruments

ChemicalsElectronics

Real Estate

Nisshinbo’s Founding Business
Goes Global

Global Supplier ofBrake Friction Materials

All-Round Paper Company
Supplying High Added Value

Supporting Growth ThroughEffective Use of Idle Assets

Nisshinbo has become a global supplier with world-class development
capabilities in the field of friction
materials, which are key components
of automobile brake systems. With
“customer ﬁrst” and “continuous improvement” as our main quality policies, Nisshinbo meets the procurement needs of the world’s automakers
through technological advancement
and global business development. We
are strengthening stable supply systems tailored to the characteristics
of local markets while establishingdevelopment systems in response to
future technological developments,
including electronic brake control
and environment-friendly next-generation automobiles.

Nisshinbo supplies high added-value
paper products that meet market
needs. Based on the concept of environment- and people-friendly manufacturing, in the household products
segment we developed Cotton Feel,a tissue paper that contains cotton,
and the world’s ﬁrst highly absorbent
bathroom tissue paper designed foruse with bidets; in the specialty paper
segment we developed top-quality
printing paper; and in the processed
paper products segment we sell telegram paper, high-end packaging, andother products. We are also working
to expand the use of products certiﬁed by the Forest Stewardship Council(FSC) to contribute to the preservationof forests.

Developing High ValueAdded and EnvironmentOriented BusinessEntering Global Markets with
Outstanding Technologies

Since its founding in 1907, Nisshinbo
has led the Japanese textile industry
with its state-of-the-art technologies
and high quality. Nisshinbo expanded
its business into the spinning, weaving, processing, and sewing ﬁelds andpossesses the world’s most advanced
technologies in areas ranging fromdevelopment to production. Nisshinbo is focusing on the development of
new technologies and products basedon the concepts of environmental sustainability, health, and comfort. It is
expanding overseas bases in Indonesia, India, China, and elsewhere andshifting domestic production abroadwhile reconstructing domestic business to specialize in new product andtechnology development.

Total Solutions for
Photovoltaic Module
Manufacturing Equipment
Utilizing the know-how it has accumulated over more than half a century
as a machine tool maker supporting
various manufacturing industries,
Nisshinbo is putting much effort into
the photovoltaic module manufacturing equipment business, which
is attracting expectations as a clean
energy. We are developing a global
business centered mainly in Asia andfrom now on will offer total consulting services concerning equipment,materials, and processing conditions
with the aim of expanding businessand raising added value even more.

Utilizing its know-how in the chemicals ﬁeld, Nisshinbo is developing
technologies and products with theaim of contributing to the realizationof a low-carbon society. Our products, such as bipolar plates for fuelcells, Carbodilite, which is a highperformance resin material withunique characteristics (such as its
ability to increase the durability ofplant-derived plastics), and electric
double-layer capacitors, will play anessential role in the diffusion of environment-related products. Viewing
these as promising growth areas, weare investing management resourcesin them in a priority manner.

New Japan Radio Co., Ltd. and Ueda
Japan Radio Co., Ltd. enjoy strong superiority in the semiconductor ﬁeld
with respect to analog technologies,
in the telecommunications ﬁeld withrespect to microwave technologies,
and in medical ultrasound technology. Furthermore, we are developing
new products with a focus on consumer audiovisual equipment, industrial and medical equipment, and information and telecommunications.
In 2010 technological development
will be further reinforced throughcollaboration with UMC Japan*. Generating synergy effects between theelectronics business and energy ﬁelds
is a key issue for the Nisshinbo Group.

Nisshinbo’s real estate business is
active in the redevelopment of business property that has become idle asa result of business changes by groupcompanies, as well as the leasing ofofﬁce and commercial facilities andthe sale of residential land with theaim of creating pleasant urban environments. Many of the idle properties and facilities located throughout
Japan have high asset values and canbe used for a wide range of purposes,
including shopping centers, leisure facilities, ofﬁces, housing, and nursing
homes. The income obtained fromthe effective use of idle assets will be
used as capital to launch new businesses and develop globally.

● Shirts:● Friction materials:● Household paper products:* The Japanese subsidiary of UMC,
a leading foundry in Taiwan.

Main Business Areas
Dress shirts, school uniform shirts,
casual shirts, and fabric● Textiles:

Uniform fabrics, home furnishing
fabrics (bedding), casual fabrics● Denim: Jeans and denim fabric● Knits: Knit products and fabrics● Oikos: Nonwoven material● Assembly products:

Drum brake products● Specialty paper:

Fine paper, synthetic paper
Telegram paper, high-end packaging,advertising-related products,
card products, photo mounts, andother products

Polyurethane elastomer ﬁber

Net Sales / Operating
Income (Loss)

manufacturing equipment:
Photovoltaic module laminators,
solar simulators, EL cell inspection
equipment, edge isolation systems● Customized machinery:● Processed paper products:● Mobilon:●● Photovoltaic module

Tissues, bathroom tissue paper(made with virgin and recycled pulp),
and kitchen-related products

Brake linings, disc pads

● Bipolar plates for fuel cells● Semiconductor products● Leasing● Carbodilite high-performance● Information and communications● Sales:chemical productdevices and equipment● Rigid urethane foam

● Power supply units and● Mobilon urethane elastomer

Customized machinery for aircraft
and automobiles, special presses

Unused sites at the former
Hamamatsu Plant and the former
Harisaki Plant

electronic components● Microwave products● Carbon products● Electronic medical devices and● Precision parts processing

instruments● Plastic molding and processing

Yarn: Fiber material

Net Sales

Operating Income (Loss)(billions of yen)

60

0

60

8

30

1.5

30

1.4

15

-0.5

60

0

6

6.5

40

-1

40

6

20

1.0

20

0.7

10

-1.0

40

-1.6

4

5.0

20

-2

20

4

10

0.5

10

0

5

-1.5

20

-3.2

2

3.5

-3

0

0

0

0

0

-0.7

0

-2.0

0

-4.8

0

0

2008
■ Net Sales

12 • Nisshinbo Holdings Inc.

■

2009

2010

Operating Income (Loss)

2008■ Net Sales

■

2009

2010

Operating Income

2008■ Net Sales

■

2009

2010

Operating Income

2008■ Net Sales

2009
■

2010

Operating Income (Loss)

2008■ Net Sales

■

2009

2010

Operating Income (Loss)

2008■ Net Sales

■

2009

2010

Operating Income (Loss)

2.0

2008
■ Net Sales

2009

■

2010

Operating Income

Annual Report 2010 • 13

Nisshinbo Textile Inc.

OVERVIEW

TextilesBuilding Foundations for Rapid Return to Proﬁtability
Through Global Business and Competitive Products
Summary of Financial Results for the Fiscal Year
Ended March 2010
Operating Losses Improve Despite
Adverse Business Environment
In the ﬁscal year ended March 2010, the textile industry experienced extreme changes in the business environment, including sluggish domestic consumption of
apparel, a tendency for consumers to seek low-priced
items, falling prices, and a contraction of the domestic
textile industry as a result of rapid globalization. It wasunder these circumstances that Nisshinbo reinforced
product development and introduced APOLLOCOT 100%
cotton non-iron shirts in August 2009. Also, measures tobuild global production structures proceeded, including
the expansion of processing facilities in Indonesia and thestart-up of a sewing joint venture in India.
As a result, the textile business as a whole reported net
sales of ¥56,755 million (down 16.0% from the previousyear) and an operating loss of ¥2,131 million (an improvement of ¥612 million from the previous year).

Business Strategies and Outlook for the Fiscal
Year Ending March 2011
Rapid Establishment of Revenue Basesfor a Return to Proﬁtability
Some time will be required for consumer demand to
improve, so the business environment is going to remain
difﬁcult. Under these circumstances, we will reconstruct
domestic business in accordance with the fundamental
policies set forth in the Challenge 2012 Three-Year Management Plan and accelerate the globalization of business to rapidly establish revenue bases for a return to
proﬁtability.

green
story
Our Environmentally
Friendly Products

APOLLOCOT 100% Cotton Non-Iron Shirts
Sales of APOLLOCOT non-iron shirts, which are highly resistant to wrinkling even though they are made from 100% cotton, have reached 100
million units. Since no ironing is needed after washing, electricity consumption is reduced, leading to lower carbon dioxide emissions.

Expanding Sales in the Global Markets
of a Core BusinessIn the shirt business, the highest priority has been placedon reinforcing the revenue bases of CHOYA CORP., a subsidiary. It will be difﬁcult to increase sales because ofsluggish performance in the department store market,
a major sales channel of CHOYA, but proﬁtability will be
improved by reducing costs through such measures as
withdrawing from unproﬁtable stores. Next, Nisshinbo
continues to enjoy an overwhelming share of the domestic dress shirt market and to expand business in the dyed

yarn segment, where it accounts for 65% of materials.
Domestic sales of APOLLOCOT brand shirts began inAugust 2009 and generated a greater response than
anticipated. As a result, the sales plan for the ﬁrst year
was revised upward from 150,000 units to 250,000 units.
In the ﬁscal year ending March 2011, we will continue
to develop the domestic market and increase sales by
expanding product variations and will begin internalsales in China and presales in Europe and America.
In the denim business, the premium denim market(high-priced jeans) has long been a priority area for Nisshinbo, but the market has contracted rapidly as consumer interest in low-priced goods increases. Therefore,
Nisshin Denim Inc., a domestic subsidiary, will specialize in the production of high added-value products andquick response (QR) products. Also, a joint venture company established in Indonesia will target the domestic
and foreign volume markets (medium-priced jeans) andbegin sales of products of “Nisshinbo quality.”
Shifting Production Overseas While Retaining
Technology Development in Japan
Under the Challenge 2012 Three-Year Management Plan,
the overseas shift of production that has been conductedto date will be accelerated. Most production functions
will be transferred overseas, and domestic business sites
will specialize and focus on the development of highly
competitive new products and technologies.
Production capacity is being expanded overseas by theconstruction of a new plant by a subsidiary in Indonesia, the establishment of a shirt material ﬁnishing andprocessing plant in China, and the start of shirt sewing
by a joint venture in India. Meanwhile, domestic sites
will focus on the development of highly competitive
new products and technologies and the handing downof expertise and will build the structures necessary forthe transfer of the world’s highest-level processing technologies to overseas bases and the provision of support.
By accelerating the shift of production overseas while
maintaining quality at the highest levels, we will drastically reduce costs in order to gain shares of global markets and increase sales volumes.

Net Sales(billions of yen)

60

40

20

0

2010

2011

Operating
Income (Loss)

2012

2013

(billions of yen)

1

0

1

-2

-3

2010

2011

2012

2013

• Projections for the ﬁscal
year ending March 2011and later are from the timeof announcement of the
Challenge 2012 Three-YearManagement Plan.

In the ﬁscal year ending March 2011, our workforce willunite to achieve proﬁtability and establish revenue bases
by executing the company’s business reconstruction plan.

Annual Report 2010 • 15

Nisshinbo Brake Inc.

OVERVIEW

Automobile Brakes

Increasing Market Shares with Distinctive Products
Especially in Developing Countries
Summary of Financial Results for the Fiscal Year
Ended March 2010

recovery is expected overall, and China is likely to experience an upturn.

Increasing Operating Income by
Reducing Fixed Costs Globally
The business environment in the fiscal year ended
March 2010 remained difﬁcult with sluggish personal
consumption and a decline in capital investment intentions. Domestic automobile sales recovered to the levelof the previous year for the entire ﬁscal year thanks to
tax incentives and subsidies for eco-cars, but exports
remained low. As a result, domestic automobile production volume fell to 8.87 million vehicles, down 11% fromthe previous year.
In this business environment, Nisshinbo Brake’s
domestic business experienced a decline in revenues due
to decreased orders for new car parts, and the overseas
business reported lower revenues with the exception of
our subsidiary in China, where the market has recovered
rapidly. With respect to income, proﬁtability improved
thanks to efforts to reduce ﬁxed costs in Japan and overseas, including optimal placement of personnel andreorganization of our American subsidiary, and operating
income increased.As a result, the brake product businessas a whole reported consolidated sales of ¥41,046 million, down 16.6% from the previous year, and operating
income of ¥3,880 million, up 11.9%.

Cultivating Emerging Markets Basedon Fundamental Strategies
Enhancing our presence in developing countries, particularly in the Chinese and Indian markets, will be essential
for achieving future growth in the brake business. In
China, we decided to establish a subsidiary in Jiangsu
Province in addition to Beijing-based Saeron Automotive
Beijing Corporation (SABC). We are expanding facilities
and taking other actions to target not only Korean automakers, which are increasing their presence in China, butalso Japanese automakers. In the Indian market, we aretargeting Japanese automakers by providing technicalsupport to Rane Brake Lining Limited, an afﬁliate subject
to the equity method.
Based on the fundamental strategies of technological advancement and global business development,
we are implementing global business strategies withan eye to localization and addressing such major issues
as the development of distinctive products with strong
price competitiveness. To further develop business inthe future, we merged with Nisshinbo Brake Sales Co.,
Ltd., a group company, in April 2010. Also, we are only
halfway done with reorganizing business structuresin such a manner that a proﬁt can be generated evenwith orders at 70% of their level prior to the collapse of
Lehman Brothers.

Business Strategies and Outlook for the Fiscal
Year Ending March 2011

green
story
Our Environmentally
Friendly Products

Green Pad Environment-Friendly Brake Products
Green Pad products are brake friction materials that do not contain any
hazardous substances in compliance with the European End-of-Life Vehicle Directive. Nisshinbo Brake conducts material and process designs
with a constant awareness of the need to reduce environmental impact.

Market Developments Remain Unpredictable
In the ﬁrst half of the ﬁscal year ending March 2011,
automobile production volumes in Japan were generally brisk, supported by extensions of tax incentives andsubsidies for eco-cars. It is believed, however, that thecurrent strong sales are eating into demand in the second
half, when the subsidies will expire, so the outlook for theentire year is not optimistic.
In contrast, the automobile markets of various othercountries are undergoing moderate recoveries. Automobile sales in the United States (excluding large trucks
and buses) were at the same pace as the previous year,
automobile production in Thailand is up 10% over theprevious year, automobile production in South Korea is
up 6%, and automobile sales in China are at the samelevel as the previous year. Consequently, a moderate

Responding to Next-Generation Vehicles
Responding to next-generation vehicles, such as electricvehicles, is a key issue for Nisshinbo Brake. We believethat the brake systems required by future automobiles
will be determined by developments concerning the useof electronics in vehicles. Automakers are currently in the
research and testing phases, however, so it is difﬁcult to
identify likely outcomes. We are working to establish true
technological capabilities by delving even deeper into thefriction material-related technologies that we possess.

Net Sales(billions of yen)

40

30

20

10

0

2010

2011

Operating
Income2012

2013(billions of yen)

5

4

3

2

1

0

2010

2011

2012

2013

• See note to the graph on p15.

In the ﬁscal year ending March 2011, the 66-year-old
Nisshinbo brake business and the 60-year-old Nisshinbo
Brake Sales Co., Ltd. have merged. All Nisshinbo Brake
employees will make concerted efforts toward greatly
improved performance in the future.

Annual Report 2010 • 17

Nisshinbo Paper Products Inc.

OVERVIEW

PapersNew Products Introduced and Sales of Distinctive
Products Promoted in Various Fields
Summary of Financial Results for the Fiscal Year
Ended March 2010
Income Increased Substantially Through Cost
Reductions in Household Papers Segment
In the ﬁscal year ended March 2010, sales prices in thepaper products business declined and revenues fell
because of the impact of the economic downturn on
household paper products and consumer preference forlow-priced products. Thanks to signiﬁcant cost reductions achieved through lower materials and fuel expenses
and lower depreciation expenses, however, income
increased sharply. In the specialty papers segment, salesof ﬁne papers and label-related products handled by a
subsidiary were sluggish because of the slow economic
recovery. Although sales of telegram-related products
were brisk, both revenue and income were down fromthe previous year. As a result, the paper products business as a whole reported net sales of ¥31,536 million(down 7.8% from the previous year) and operating incomeof ¥1,706 million (up 118.7%).

Business Strategies and Outlook for the Fiscal
Year Ending March 2011
Higher costs for raw materials and fuel in conjunction
with the rising prices of pulp and crude oil will result incontinued hardship in the paper products business. Nisshinbo Paper Products will strengthen collaboration withgroup companies and concentrate management assets
in growth ﬁelds so as to increase revenue and income
despite the difﬁcult business environment.

green
story
Our Environmentally
Friendly Products

Bath Tissue Paper with Twice the Absorbency
The convex portions of two sheets of paper that underwent Super W
embossing are lined up to create bath tissue designed speciﬁcally forbidets with twice the absorbency of earlier Nisshinbo bath tissue. Since
the amount used can be reduced, less paper is consumed.

Household Paper Products: Raise Sales Prices
and Expand Sales of Distinctive Products
Although the household paper products industry is supported by steady consumption of essential daily items,
manufacturers are experiencing contracting revenues
due to higher costs for raw materials and lower productprices. Sales channels are undergoing drastic changes
as a result of reorganization and mergers in both thewholesale and retail industries, and the introduction ofimported products, although market shares are still low,
makes it difﬁcult to raise prices.
In these circumstances, we will distinguish ourselvesfrom other companies with high added-value products,
such as bath tissue designed speciﬁcally for use withbidets. In this product segment, even if competition
intensiﬁes as a result of market entry by other companies,
the market will continue to grow, so we can expand sales
by maintaining and improving our superiority in quality.
We are also strengthening alliances with overseas
companies in such areas as base paper procurement andexpanded collaboration to include technical guidance
and product stocking.
Specialty Papers: Expand Business in Related
Fields and Strengthen Eco-Products
Demand for high-quality and distinctive ﬁne papers
remains strong in the packaging and paper productareas. In the specialty paper segment, we are introducing new ﬁne paper products and expanding sales of highadded-value products, and we are expanding business inthe packaging area to related ﬁelds by generating synergy
effects with Daiwa Shiko Co. As for environment-friendly
products, we have established a lineup of products that
include natural materials, and we have positioned products certiﬁed by the Forest Stewardship Council (FSC)* as
priority products. Overseas, we export high-quality printing paper, mainly to South Korea, and we plan to actively
develop this business by expanding sales to other Southeast Asian countries and starting overseas production.
Processed Paper Products: Expand the Scopeof Business and Develop Overseas Business
The market for telegram-related products has been invigorated as a result of the growth of Internet telegrams andgift products with messages. In ﬁelds that are incidental
to the high-end paper carton market, we are gaining newcustomers by offering solutions that include assemblyand logistics. In the processed paper product business wewill work to increase sales in the telegram-related product and advertising-related product ﬁelds, as well as toexpand our scope of business through collaboration withgroup companies. Overseas, we are working to increase
sales of printers and other products handled by Nisshinbo
Postal Chemical Co., Ltd. and begin selling high-quality
paper cartons for use in China. We will also increase production, particularly by our subsidiaries in China.

Nisshinbo Paper Products will continue to contribute tosociety by providing high added-value products that satisfy customers.

Net Sales(billions of yen)

30

20

10

0

2010

2011

Operating
Income2012

2013(billions of yen)

1.5

1

0.5

0

2010

2011

2012

2013

• See note to the graph on p15.

* FSC certiﬁed products use
forestry materials harvested
from properly managed,
sustainable forests.

Annual Report 2010 • 19

Nisshinbo Mechatronics Inc.

OVERVIEW

Precision Instruments

Developing PV Business Globallyfrom Customer’s Perspective
Summary of Financial Results for the Fiscal Year
Ended March 2010
Revenues and Proﬁts Decline Due to Less
Investment by Photovoltaic Module Manufacturers
In the ﬁscal year ended March 2010, Nisshinbo Mechatronics’ key business developments included the completion of a new plant for photovoltaic module manufacturing equipment at the site of the Miai Machinery Plant
in Okazaki City, Aichi Prefecture, the establishment oflocal subsidiaries in Taiwan and North America, and thedevelopment of new materials relating to photovoltaic
module manufacturing. Sales of photovoltaic module
manufacturing equipment, our main product line, havefallen substantially below the planned ﬁgure due to acontraction of large-scale capital investment by photovoltaic module manufacturers following the ﬁnancial
crisis in the autumn of 2008. Also, sales of specializedmachine tools have been sluggish with the exception ofcertain products, such as battery processing equipment
for hybrid vehicles.
As a result, the mechatronics business as a whole
reported lower revenues and proﬁts, with net sales of¥24,908 million (down 30.0% from the previous year)
and an operating loss of ¥535 million (a deterioration of¥2,383 million compared to the previous year).
On March 1, 2010, Nisshinbo Mechatronics mergedwith and absorbed Nippon Kohbunshi Co., Ltd., a wholly
owned subsidiary. We will use the merger as an opportunity to raise production efﬁciency and quality and to
generate synergy effects in business and income throughthe utilization of overseas bases.

Business Strategies and Outlook for the Fiscal
Year Ending March 2011

green
story
Our Environmentally
Friendly Products

Solar Simulators
Nisshinbo Mechatronics boasts more than 90% of the domestic market
for in-line solar simulators, which are devices for measuring the output
characteristics of photovoltaic modules. We thus support the manufacture of high-quality photovoltaic modules.

Seeking Lower Total Costs and High Added Value
The present issue in photovoltaics is reduction of thecost of power generation. Nisshinbo Mechatronics isfocusing on developing technologies that can extend
the lifespan of modules so as to reduce total costs andprovide higher added value from the customer’s perspective. We are also considering using the expertise
accumulated through the production and installationof photovoltaic modules at the Miai Machinery Plant toprovide consulting services concerning optimal module
processing conditions and materials as well as module

installation to customers that manufacture modules.
In global business, we are establishing overseas sales
and service bases, particularly in Taiwan, Europe, andNorth America. Going forward, we anticipate high growthin East Asia, and we will implement a strategy of exercising leadership in Asian markets by using and expanding
our local production bases there.
As part of this strategy, this summer we turned ourexisting company in China into a subsidiary, renamed
it Nisshinbo-Yawei Precision Instruments & Machinery(Jiangsu) Co., Ltd., and commenced the manufactureand sale there of photovoltaic module manufacturing
devices.
PV Business Showing Signs of Recovery
Demand in the PV business plunged as a result of the
ﬁnancial crisis, and markets have been stagnant sincethen. Nisshinbo Mechatronics experienced a substantial decline in sales in the ﬁscal year ended March 2010,
but business is now turning upward. As a result of rising awareness concerning environmental preservation
and an accelerating shift to renewable energy sources,
photovoltaics is being installed at a brisk pace in many
countries. It is projected that globally more than twice
as much photovoltaic capacity will be installed by 2012
than in 2008. In these circumstances, we expect net sales
in the photovoltaic module manufacturing equipment
segment to more than double to ¥8.5 billion.

Net Sales(billions of yen)

30

20

10

0

2010

2011

Operating
Income (Loss)

2012

2013

(billions of yen)

1.5

1

0.5

0

Other Business Segments
Nisshinbo Mechatronics is active in a number of ﬁelds
other than photovoltaic module manufacturing equipment, including specialized machine tools for automobile
and aircraft manufacturing, precision processed components for automotive antilock brake systems and electronic stability control, and the manufacture and sale ofmolded plastic components, such as air conditioner fans.
Our initial targets for the precision instruments businessas a whole in the ﬁscal year ending March 2011 are net
sales of ¥28 billion and operating income of ¥800 million.

Nisshinbo Mechatronics will continue to implementbusiness strategies centered on contributing to preservation of the global environment and pursue higher
corporate value.

-0.5

-1

2010

2011

2012

2013

• See note to the graph on p15.

Also see the article Seeds for
Future Growth on page 8.

Annual Report 2010 • 21

Nisshinbo Chemical Inc. and Nisshinbo Holdings Inc.

OVERVIEW

Chemicals

Accelerating Business Development with
Focus on Environmental Products
Summary of Financial Results for the Fiscal Year
Ended March 2010
Comprehensively Reconstructing Business toGenerate Proﬁts Despite Declining Revenues
In the ﬁscal year ended March 2010, Nisshinbo Chemicalreorganized its business by streamlining existing product lines, including thermal insulation products, carbon
products, and elastomer products, and was able to securestable income. In the environmental and energy ﬁelds,
two areas of high-priority development, we started construction of a bipolar plates manufacturing plant in Chiba
City, Chiba Prefecture, and established structures thatwill be able to respond to the widespread introduction offuel cells. As a result, the chemicals business reported net
sales of ¥14,057 million (down 11.0% from the previousyear) and an operating loss of ¥376 million (an improvement of ¥1,525 million over the previous year).

Business Strategies and Outlook for the Fiscal
Year Ending March 2011
Pursuing “Selection and Concentration” asEnvironmental Businesses Take Off Worldwide
In order to contribute to the realization of a low-carbon
society, Nisshinbo Chemical is actively investing resourcesin environmental- and energy-related businesses, suchas carbon bipolar plates and Carbodilite, a high-performance resin material.
Regarding electric double-layer capacitors, which we
aim to develop into a full-ﬂedged business from now on,
at present Nisshinbo Holdings is conducting development activities and endeavoring to improve our productstrength with a view to expanding application to automobiles and hybrid construction equipment.

green
story
Our Environmentally
Friendly Products

Bipolar Plates for Fuel Cells
A key component of the fuel cell, which generates electricity from thechemical reaction between hydrogen and oxygen, is the bipolar plates.
Nisshinbo Chemical has developed carbon bipolar plates with outstanding corrosion resistance properties.

Bipolar Plates for Fuel Cells
In April 2010 we began operations at a new high-productivity plant (the Chiba Plant) to reduce costs and respondto expansion of the market for residential fuel cells andgrowing demand for bipolar plates resulting from trial
production of automotive fuel cells. In the Three-YearManagement Plan through the ﬁscal year ending March
2013, we project that demand for automotive fuel cells
will continue to grow based on the spread of residential
fuel cells. In the ﬁscal year ending March 2011, we willcontinue comprehensive efforts to develop technologies
that can reduce the cost of bipolar plates and support
mass production.
Net Sales

Carbodilite
Carbodilite enhances durability and heat resistance when
added to polylactic acid resin and has received highest
praise around the world. Applications of Carbodilite are
not limited to bio-plastics; it is also used globally as asafe crosslinking agent for water-based paints and inks.
Carbodilite can make substantial contributions to thedevelopment of smaller and lighter digital devices whenused as a halogen-free and lead-free electronic component adhesive, and it is becoming an essential material
for the development and manufacture of environmentfriendly products. Sales are expected to be slightly above¥1 billion in the ﬁscal year ending March 2011, and weare aiming for sales of ¥2 billion in the ﬁnal year of theThree-Year Management Plan.
Electric Double-Layer Capacitors
Electric double-layer capacitors are a type of capacitor
that excels at rapid charging and discharging of high current. These products have an established track record
with transport equipment, and in the ﬁscal year ending March 2011 we will launch capacitor modules that
include a hard case cell and digital control circuit thatare currently under development with the aim of expanding the use of the capacitors from the current industrial
equipment applications to construction equipment andautomotive applications. We expect that widespread useof these capacitors in automotive applications will begin
around 2015.
Improving the Proﬁtability of Existing ProductLines Through Business Reconstruction
Insulating materials are one of our main product lines,
and we are working to enhance performance by increasing the share of high added-value products that employ
chloroﬂuorocarbon-free technologies and by developing
business in Asia, where demand is growing rapidly.

(billions of yen)

15

10

5

0

2010

2011

Operating
Income (Loss)

2012

2013

(billions of yen)

0.6

0.4

0.2

0

-0.2

-0.4

2010

2011

2012

2013

• See note to the graph on p15.

Nisshinbo Chemical is conducting development and establishing businesses in the environmental and energy ﬁelds
that are essential for the creation of a low-carbon society.

Annual Report 2010 • 23

New Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd.

OVERVIEWElectronics

Actively Developing High Added-Value Products toCreate Unique Markets amid Intense Competition
Summary of Financial Results for the Fiscal Year
Ended March 2010
Second Consecutive Operating Loss
Reported amid Sluggish Global Demand
In the ﬁscal year ended March 2010, the electronics products business performed poorly as a result of sluggish
global demand. In the semiconductor segment, a principal business line for New Japan Radio Co., Ltd., sales ofcertain products, such as microwave devices for use incommunications equipment in China, were up, but salesof other products dropped substantially. Measures weretaken to control costs, including personnel expenses, but
the effects from the decline in revenues were substantial,
and the company reported an operating loss.
Because of a rapid decline in the automobile andelectrical segments, Ueda Japan Radio Co., Ltd. reported
lower sales of electronics manufacturing services (EMS)
related products despite substantial efforts. Thanks to
reductions in production costs and sales, general, andadministrative expenses, however, a proﬁt was achieved,
albeit lower than the previous year. As a result, the electronics products business as a whole reported net salesof ¥51,699 million (down 14.6% from the previous year)
and an operating loss of ¥2,654 million (an improvementof ¥1,264 million over the previous year).

Business Strategies and Outlook for the Fiscal
Year Ending March 2011

green
story
Our Environmentally
Friendly Products

Outdoor Transmitters for Satellite Communications System
This product, a type of transmitter with very small aperture terminals(VSAT), has been made lighter and smaller, electricity consumption has
been cut, and consideration has been made of the chemical substancesused so as to ensure compliance with environmental laws.

Electronics Industry Anticipates Positive
Growth in Fiscal Year Ending March 2011
Japan’s electronics industry expects positive growth forthe ﬁrst time in four years as a result of higher replacement demand for ﬂat-screen televisions in conjunction
with the full transition to terrestrial digital broadcastingscheduled for July 2011 and higher production of electronic components and devices in response to a recoveryof global electronics device markets. While continuing to
cut costs, the electronics products business will work toachieve a recovery in ﬁnancial performance by developing new products and cultivating new customers.
New Japan RadioIn the ﬁscal year ending March 2011, New Japan Radio
will collaborate with UMC Japan to develop new products, such as power devices that use a BCD (bipolar-CMOS-

DMOS) process, while developing and applying new silicon IC products, such as digital power supply control ICs,
digital video decoders, and extremely low-power radiotransceiver ICs.
Our initial projections for the ﬁscal year ending March2011 are for substantially higher revenues and proﬁts,
with net sales of ¥45 billion (up 12.0% over the previousyear) and operating income of ¥1.5 billion (an increaseof ¥4.2 billion over the previous year).
The main factors behind the increase in revenues area substantial recovery of demand in the microwave tube
and peripheral equipment segment and the microwave
application product segment as well as expected resultsfrom new products and new customers. In the semiconductor product segment, our main business, we will reinforce global collaboration and expand sales to domestic
customers. We expect to generate higher revenues fromnew products and new devices in the ﬂat-screen television, digital still camera, PC-related, Blu-ray disc recorder,
mobile phone, and automotive markets.
Ueda Japan Radio
Ueda Japan Radio is working to expand business in the
low-power radio ﬁeld, an area in which it has specialized
technologies, and for original products using ultrasonicand power supply control technologies. We will also create new technologies to achieve stable development of
the EMS business for contract manufacturing of electronic devices. In the area of ultrasonic technologies,
we are accelerating the development and expansion of
new technologies for use with medical and industrial
inspection devices, such as portable ultrasonic diagnostic
equipment. With respect to radio technologies, we will
expand low-power radio and RFID applications, such as
patient guidance systems for hospitals and electric power
control and monitoring systems that use radio control.
Our initial projections for the ﬁscal year ending March2011 are for net sales of ¥12.5 billion (up 9.0% over theprevious year) and operating income of ¥100 million (thesame as the previous year).

Net Sales(billions of yen)

60

40

20

0

2010

2011

Operating
Income (Loss)

2012

2013

(billions of yen)

1

0

-1

-2

-3

2010

2011

2012

2013

• See note to the graph on p15.
The above project values
take into account risks whenincorporating consolidated
performance.

The electronics products business will continue its unceasing management efforts to achieve a rapid recovery ofﬁnancial performance and return to the path of growth.

Annual Report 2010 • 25

CSR ACTIVITIESOVERVIEW

Real Estate

Securing Income to Accelerate Group Growth byRenting and Selling Idle Assets
Summary of Financial Results for the Fiscal Year
Ended March 2010

Business Strategies and Outlook for the Fiscal
Year Ending March 2011

Higher Income in the Building Lot Sales
and Stable Rental Businesses
In the ﬁscal year ended March 2010, the real estate business began redeveloping the site of the former Hamamatsu Plant by subdividing the property and selling
residential building lots, and we reported higher rental
income as a result of an expansion of large-scale commercial facilities by lessees. In addition, we started leasing
land and buildings to subsidiaries in conjunction withthe corporate split.
As a result, the real estate business as a whole reported
higher sales and income, with net sales of ¥6,674 million(up 3.7% over the previous year) and operating income of¥6,136 million (up 83.7%).

Business Plan for the Fiscal Year Ending March2011 Projects Higher Sales and Income
There are signs indicating a weakening of demand fromtenant businesses in conjunction with the economic
downturn, but the large-scale commercial facilities that
we own are outstanding properties with sales and income
at the top levels of their class among tenant businesses,
and the asset values are extremely high. As a result, we
anticipate stable sales and income in the future.
In the ﬁscal year ending March 2011, we plan to subdivide and sell building lots at the site of the former Hamamatsu Plant and the site of the former Harisaki Plant,
and we anticipate substantial increases in both sales andincome.
Undertaking High-Quality
Community Development Throughthe Effective Use of Idle Assets
We will actively develop the residential building lots subdivision and sales business through the effective use ofidle assets and the redevelopment of former businesssites over the next ﬁve to seven years. Speciﬁcally, we will
act as the lead developer for site preparation work andcollaborate with housing builders and others to subdivideand sell residential building lots.
The properties that we own are located in urban areas
close to train stations and have high asset values. By acting as the lead developer, we can conduct integrated
planning and development of entire areas, making it
possible to create high-quality communities that take
into consideration the environment and security.

We Aim to Contribute to Society Through Our Business Activities
with a Deep Awareness of Corporations as Public Entities
Net Sales(billions of yen)

12

9

6

3

0

2010

2011

Operating
Income2012

2013(billions of yen)

10

Since its founding in 1907, the Nisshinbo Group has advocated the principles of “the corporation as a public entity”
and “consistent integrity.” This way of thinking is in accordance with our approach to corporate social responsibility
today. We will continue to contribute broadly to society
by engaging in business activities that uphold the spiritof our corporate principles and corporate philosophy by
improving the foundations for a comfortable life for people
around the world, working in harmony with society andthe global environment, and promoting good faith andfairness in business activities.

Principles

Corporate Philosophy

Charter

Medium-Term
Management Plan

Business Activities

8

6

Corporate Principles of the Nisshinbo Group

4• Public Entity: We shall contribute to human society
through our business activities.

2• Consistent Integrity: We shall respond to stakeholders
with honesty and integrity.

0

2010

2011

2012

2013

• Innovation: We shall create the future throughcontinuous innovation.

• See note to the graph on p15.

The real estate business will engage in urban building that
contributes to the development of local communities andincrease the pace of business to achieve proﬁtability at theearliest possible time.

Corporate Philosophy of the Nisshinbo Group• As an eco-company, we shall contribute broadly towardenhancing the comfortable lifestyles and cultures ofpeople around the world.
• We shall aim to conduct business activities with honesty
and integrity as our social responsibility based on the belief
that companies are public entities.

Subdivided residential lots

Details regarding other speciﬁc environmental and social activities at theGroup can be found in Nisshinbo’s CSR report.

http://www.nisshinbo.co.jp/english/csr/download.html

26 • Nisshinbo Holdings Inc.

Structure of Our CSR Vision• We shall constantly aim to raise corporate value andbecome a corporate group with a strong presence.

Annual Report 2010 • 27

CSR ACTIVITIESCorporate Governance
Basic StanceBased on our belief that corporations are public entities,
the Nisshinbo Group adheres to its fundamental stance ofalways acting with integrity and in good faith toward our
stakeholders. To maintain a system of corporate governance appropriate to this, we regard it important to work
to ensure the transparency of management, reinforce
accountability, and act ethically in all matters.

Corporate Governance Structures

Reinforcing Audit Functions

Maintaining Internal Control Systems

The auditors monitor the directors’ execution of their
responsibilities as well as operations and ﬁnancial conditions at the Company and its subsidiaries. The two outside auditors attended every (16) Board of Directors andevery (12) Board of Auditors meeting held in the ﬁscal
year ended March 2010 and were active in presenting
their opinions.
The Company also receives advice on pertinent laws
from corporate attorneys, and ﬁnancial auditors perform
rigorous and impartial accounting audits.
Furthermore, the Internal Audit Department works
with the corporate and ﬁnancial auditors to improve theeffectiveness of business and accounting audits.

Companies have been obligated since the ﬁscal year
ended March 2009 to submit reports on internal controls
in order to ensure the reliability of ﬁnancial statements.
The Nisshinbo Group established group regulations andthe like in response to this development and developed
a group-wide system of internal controls.
During the system’s second year of operation, the ﬁscal year ended March 2010, the Internal Audit Department assessed the operational status of the internal
control systems in each group company to conﬁrm theireffectiveness.

Improve Transparency of Management
The Board of Directors has 12 members, three of whom
are outside directors (as of June 29, 2010). Nisshinbo also
has four statutory corporate auditors, including two outside auditors.
Two of the outside directors and the two outside auditors are registered as independent ofﬁcers as required
under the regulations of the relevant Japanese securities
exchanges for being listed thereupon.
The terms of ofﬁce for directors are set at one year
in order to clarify management responsibilities in eachﬁscal year. Nisshinbo also introduced a managing ofﬁcer
system with the intention of separating management
decision-making and execution.

Timely Information Disclosure
The Company holds brieﬁngs for all of its stockholders
and investors on a regular basis. It also publishes notices
in a timely fashion on its website regarding the convening of and resolutions from regular general stockholders
meetings, ﬁnancial results, business reports, and annual
securities reports.

Corporate Governance Structures

General Shareholders Meeting

Board of Directors

Corporate Attorneys

12 Directors(including threeoutside directors)

Financial Auditors

Board of Auditors
Four Statutory Auditors(including two
outside auditors)

AdviceRepresentative Directors

Internal Audit Department

Executive Officers ConferenceManaging Officers, Business Divisions, Group Companies

28 • Nisshinbo Holdings Inc.

Risk Management
Basic Stance
The Nisshinbo Group engages in risk management activities in order to minimize various risks. We believe that inrisk management it is important to develop measuresfor preventing risk and measures to respond in a timely
manner should a problem occur.
Quick response measures include our having adopted
Crisis Management Regulations to respond to a crisis
such as a major earthquake. In order to (1) minimize
damage, (2) ensure the continuity of business throughrapid recovery, and (3) contribute to the rapid recoveryof the community when a crisis occurs, we will strive to(i) put a premium on human life, (ii) act in ways beﬁtting
a responsible corporation, (iii) collaborate with governmental bodies and business partners, and (iv) give fullest
consideration to our community and neighbors.

Crisis Management Systems
The Company has created a system for times of crisis
under which response task forces will be created at Nisshinbo Holdings, the core companies, and subsidiary companies. The authority to direct each task force is placed in
the hands of the president of Nisshinbo Holdings. Regulardrills and inspections take place to ensure that the crisis
management system can perform as expected.

Nisshinbo Holdings and its core subsidiaries haveorganized ﬁreﬁghting teams at each business site. They
perform regular inspections of ﬁreﬁghting equipment,
conduct ﬁre hydrant drills, and hold annual accident prevention inspections. Emergency contact exercises are also
conducted annually to ensure that the whereabouts andsafety of employees can be conﬁrmed should a major
earthquake or other disaster occur.

Novel Inﬂuenza Countermeasures
The novel inﬂuenza A (H1N1) virus ran rampant throughout the world during 2009. The World Health Organization (WHO) raised its pandemic alert level in June tophase 6 (signaling infections are increasing and persisting among humans). The Nisshinbo Group establisheda novel flu virus response team in September 2008.
The team oversees information management—entailing mainly the distribution of information about travel
restrictions and such and collecting data on people whohave become ill—as well as the implementation of infection prevention measures. Also, thanks to infection prevention measures having been implemented thoroughly
at each group company, such as the distribution of highperformance ﬁltration masks for infection prevention to
all group employees, including those overseas, we wereable to prevent any workplace infections that could haveinterfered with business operations.

Information Security Measures
The Nisshinbo Group is constantly improving information
security measures to prevent leaks of important personal
information about customers and of trade secrets. We are
addressing information security through both measures
on information systems and human controls.
On our information systems, we are reinforcing monitoring of the network shared throughout the Group. We
are also tightening oversight of the data that employees
take out of company ofﬁces.
To protect personal information and manage trade
secrets, in addition to the aforementioned measures
we conduct annual internal audits and are continually
improving our control systems. In addition to measuresfor handling leaks of conﬁdential group information,measures have also been devised to prevent conﬁdential
information from being brought in, and we are endeavoring to prevent the intellectual property of third parties
from being infringed.

Annual Report 2010 • 29

CSR ACTIVITIES

Compliance
Basic Stance
The Nisshinbo Group believes it is important for all
employees to maintain the highest ethical standards and,in keeping with the principle of “consistent integrity,” toact with fairness and integrity toward our stakeholders inorder to obtain society’s trust and sympathy for our business management. For that reason, we ask all employees
to comply to the utmost with the Nisshinbo Group’s Corporate Code of Conduct.

Corporate Ethics Committee and Corporate
Ethics Reporting System
Nisshinbo established its Corporate Ethics Committee tooversee group-wide compliance activities.
The Corporate Ethics Reporting System was created
for the early discovery and prevention of suspected andactual legal violations. Both Group employees and a wide
range of stakeholders can report to the system, which

Corporate Ethics Reporting System

Nisshinbo Holdings Inc.
Board of Directors

can be used to communicate directly with the Corporate
Ethics Committee or an outside corporate attorney. The
conﬁdentiality of persons making reports is strictly guaranteed and every effort is made to prevent any prejudicial treatment toward them. Reports are dealt with by the
Corporate Ethics Committee.

Legal Risk Management
The Nisshinbo Group conducts legal risk management as
part of its compliance-related efforts. Checklists are used
to conduct inspections concerning responses to major
laws closely related to the Company’s business and we
make efforts to avoid imperfect compliance.
We conducted inspections as a part of that effort during the ﬁscal year ended March 2010 concerning the safekeeping of dangerous substances and chemical reagentsheld at group companies and reporting thereof to governmental bodies to conﬁrm that they were being properly
performed.

Financial Section

Compliance Education
The Nisshinbo Group prepared its Corporate Vision of
the Nisshinbo Group in both Japanese and English as an
educational tool concerning compliance-related topics.
We are making every effort to get the information to all
employees, including local executive staff, in non-English
speaking countries as well.

President
Corporate Ethics Committee
Corporate Ethics
Committee members
to receive reports

Corporate attorneys
to receive reports

Consultations,
reportingStakeholders

30 • Nisshinbo Holdings Inc.

CONTENTS
32 Management Discussion
and Analysis

37 Six-Year Summary

38 Consolidated
Financial Statements
43 Notes to Consolidated
Financial Statements

Annual Report 2010 • 31

FINANCIAL SECTION

MANAGEMENT DISCUSSION AND ANALYSISHIGHLIGHTSCURRENT BUSINESS STRATEGIES AND FUTURE PROSPECTS• Sales fell due to reduced capital investments by photovoltaic module manufacturers in the precision instruments business. Nonetheless, operating income rose due to improved proﬁts ratio in the paper productand brake businesses.
• A new management structure was launched on April 1, 2009, with the holding company Nisshinbo Holdings Inc. grouping together six business corporations. The objective is to improve the competitiveness ofeach business corporation and maximize group corporate value.
• A new three-year management plan called “Challenge 2012” that will be in effect through the ﬁscal year
ending March 2013 (ﬁscal 2012) was formulated. The plan’s goal is to strengthen and nurture new businesses in the environmental and energy ﬁelds as well as restructure businesses globally focused on Asia.

OPERATING RESULTS
Overview
During the ﬁscal year under review (the ﬁscal year ended March 2010),
the Japanese economy rallied thanks to increased exports and the effects of emergency economic measures. However, with the severity inemployment conditions and so forth persisting this did not lead to aself-sustaining recovery. It was under these circumstances that on April
1, 2009, Nisshinbo spun off its textiles, automobiles brakes, papers,
mechatronics, and chemicals businesses into separate subsidiaries.
The Group adopted a holding company structure as Nisshinbo Holdings
Inc., grouping together the aforementioned ﬁve business corporations
with a sixth handling electronics.
During the ﬁscal year under review, the business corporations madeindependent by the company split-up worked to improve their competitiveness in their respective areas of business and improve the corporate value of the Group as a whole. They also made progress toward
expanding operations in the environmental and energy ﬁelds andbolstering earning power. Furthermore, the Group sought to improve
managerial efﬁciency and strengthen management by moving actively
forward with organizational restructuring, pulling together its U.S.
production bases in the brake products business, and conducting M&A
with fellow group companies in the precision instruments business.

been planned at the start of the year.
In addition, Nisshinbo reported ¥3,887 million in investment income
from the equity method for the year, though there was also a ¥2,354
million loss on impairment of idle properties and the like.
As a result, Nisshinbo posted a net proﬁt of ¥1,896 million (US$20
million), an increase of ¥3,182 million from the previous year. Net
proﬁt per share stood at ¥10.38 (US$0.11), compared to a net loss of¥7.08 per share in the previous year.
Net Sales(billions of yen)

300

250

200

150

Our Group formulated a new three-year management plan called“Challenge 2012” that will be in effect through the ﬁscal year ending
March 2013 (ﬁscal 2012).
Under the plan, we will construct a competitive infrastructure for the
future by intensively investing management resources in the environmental- and energy-related businesses, and by nurturing and strengthening new businesses such as photovoltaic modules, fuel cells, electric

double-layer capacitors, Carbodilite, and carbon catalysts. We will also
hasten the globalization of our businesses focused on Asia and, in allareas of business, execute business strategies that are aimed at ﬁnding
optimal locations for production and sales.
Our Group is seeking fresh achievements as an enterprise responsive
to changes with a view to branching out into new areas of businesswithout dwelling on their continuity with current operations.

Net Sales (millions of yen)

Operating Income (Loss) (millions of yen)

Textiles

56,755down 16.0% from the previous year

(2,131)

an improvement of ¥612 million from the previous year

Automobile Brakes

41,046

down 16.6% from the previous year

3,880

up 11.9% from the previous year

Papers

31,536

down 7.8% from the previous year

1,706

up 118.6% from the previous year

Precision Instruments

24,908down 30.0% from the previous year(535)

a deterioration of ¥2,383 million from the previous year

Chemicals

14,057

down 11.0% from the previous year(376)

an improvement of ¥1,525 million from the previous year

Electronics

51,699down 14.6% from the previous year

(2,654)

an improvement of ¥1,264 million from the previous year

Real Estate

6,674

up 3.7% from the previous year

6,136

up 83.7% from the previous year

Other Businesses

15,734down 6.1% from the previous year194

up 24.1% from the previous year

Refer to pages 14 to 26 for details on performance in individual segments.

DIVIDENDS
The basic policy of Nisshinbo Holdings Inc. is to pay dividends twice ayear, at midterm and at yearend. The total annual dividend payment
including the midterm dividend shall be ¥15.0 per share.
Nisshinbo will continue its policy of paying ¥15.0 per share after
the ﬁscal year ended March 2010 while working to distribute proﬁts toshareholders by ﬂexibly increasing dividends in response to changes
in business conditions.

Cash Dividends

(yen)

15

10

100
5
50

0

Results of Operations in the Current Termand Comparison with the Previous Term
Net sales were ¥242,409 million (US$2,552 million), down 15.3%
from the previous year. The cost of goods sold was ¥201,625 million(US$2,122 million), a 17.3% drop year on year. Selling, general, andadministrative expenses stood at ¥37,214 million (US$392 million), off
11.2% from the previous year. As a result, operating income rose ¥3,162
million from the previous year to ¥3,570 million (US$38 million). Although the precision instruments business posted lower income, an
improved proﬁts ratio in the papers and automobile brakes businesses
resulted in increased income. The operating loss was also improved
thanks to the effects of streamlining those items in the textiles andelectronics businesses whose performance was well below what had

32 • Nisshinbo Holdings Inc.

2005

2006

2007

2008

Operating Income

2009

2010

0

2005

2006

2007

2008

2009

2010

(billions of yen)

12

9

6

3

0

2005

2006

2007

2008

2009

2010

Annual Report 2010 • 33

FINANCIAL SECTION

MANAGEMENT DISCUSSION AND ANALYSISFINANCIAL POSITION
Total assets at the end of the ﬁscal year under review stood at ¥358,110
million (US$3,770 million), a decrease of ¥8,748 million from the end of
the previous ﬁscal year. The main factors behind the decline includeda ¥19,259 million decrease in current assets due to an ¥11,435 million
decrease in cash and cash equivalents and a ¥6,924 million decrease
in inventories; a ¥3,453 million decrease in property, plant and equipment; and a ¥13,964 million increase in investments and other assets
due to an increase in gains on devaluation of marketable securities.
Total liabilities at the end of the ﬁscal year were ¥164,471 million(US$1,731 million), a decrease of ¥8,689 million from the end of theprevious ﬁscal year. The main factors behind the decline included a¥35,730 million decrease in short-term bank loans, a ¥4,000 million
increase in commercial paper, a ¥9,722 million increase in long-term
debt (including current portion of long-term debt), and an ¥11,209
million increase in long-term and short-term deferred tax liabilities.
Net assets at the end of the fiscal year were ¥193,639 million(US$2,038 million), a decrease of ¥59 million from the end of the previous ﬁscal year. The major factors behind the decline were a decreaseof ¥5,035 million as a result of the acquisition of treasury shares, anincrease of ¥6,537 million from higher net unrealized gain on available-for-sale securities as a result of higher securities prices, and adecrease of ¥3,263 million from lower minority interests.
Net assets per share were ¥1,034.04 (US$10.88), up ¥48.85 from theend of the previous ﬁscal year.

PRODUCTION RESULTS
Total Assets(billions of yen)

Industry Segment

400

Textiles
300

200

100

2005

2006

2007

2008

Equity35,462–20.9

Papers25,918–13.5

Precision Instruments

24,601–25.8

Chemicals

6,021

–27.1

Electronics

48,930–15.2

180,421

–18.0

2009

2010

Notes: 1. Amounts are calculated based on manufacturing costs.
2. The real estate and other businesses do not engage in manufacturing, and therefore the above amounts do not include any amounts from this segment.
3. The above amounts do not include consumption taxes.

(billions of yen)

CAPITAL EXPENDITURES
250

200

150

100

2005

2006

2007

2008

2009

2010

CASH FLOWS

34 • Nisshinbo Holdings Inc.

Year-on-Year Change (%)–14.4

Automobile Brakes

Total

0

Cash Flows from Investing Activities
Cash ﬂows used in investing activities were ¥9,949 million (US$105 million), an improvement of ¥4,444 million from the end of the previous
ﬁscal year. The main factor was a decrease in payment for purchase ofproperty, plant and equipment.

Amount (millions of yen)
39,489050

Cash Flows from Operating Activities
Cash ﬂows from operating activities stood at ¥27,538 million (US$290
million), an increase of ¥15,599 million from the end of the previous
ﬁscal year. The main factors were increases in income before income
taxes and minority interests, as well as increases in payable.

Production results in each segment for the ﬁscal year under review were as follows:

Cash Flows from Financing Activities
Cash ﬂows used in ﬁnancing activities were ¥30,347 million (US$319
million), a decrease of ¥42,287 million from the previous ﬁscal year.
The main factor was a decrease in short-term bank loans.
As a result of the above, cash and cash equivalents at the end of theﬁscal year were ¥17,768 million (US$187 million), a decrease of ¥11,435
million from the end of the previous ﬁscal year.

Capital expenditures amounted to ¥13,027 million (US$137 million)
during the ﬁscal year under review. These included investments of¥1,496 million for the construction of photovoltaic module manufacturing facilities for photovoltaic module manufacturing equipment at
the Miai Machinery Plant in the precision instruments business and¥945 million for the construction of a special plant for bipolar plates
for fuel cells at the Chiba Business Ofﬁce in the chemicals business. In
addition, ¥1,032 million was used in the automobile brakes business on
system and IT investments for Nisshinbo Brake Inc., a consolidated subsidiary, to build a global data management system and so forth, and¥1,141 million was used in the textiles business for P.T. Gistex Nisshinbo
Indonesia, a consolidated subsidiary, to invest in textile-processing
facilities and so forth.

Capital Expenditures(billions of yen)

20

15

10

5

0

2005

2006

2007

2008

2009

2010

GEOGRAPHICAL SEGMENT INFORMATION
Sales in Japan were ¥203,747 million (US$2,145 million), a 13.3% decrease from the previous year. However, operating income rose to¥5,014 million (US$53 million), climbing ¥8,020 million from the previous year thanks to a decrease in depreciation expenses.
In Asia, sales fell 23.8% from the previous year to ¥27,442 million(US$289 million), while operating income fell 69.6% to ¥895 million(US$9 million). The declines were due to the transfer of the sinteringbusiness at Saeron Automotive Corporation in Korea and reduced production due to customer inventory adjustments at Kohbunshi (Thailand) Ltd.
In other regions, sales fell 26.2% from the previous year to ¥11,220
million (US$118 million) and operating income dropped 37.5% to ¥602
million (US$6 million), due mainly to decreased sales and income at
Nisshinbo do Brasil Industria Textil Ltda. in South America.

Net Sales by Geographical Segment

Other
Regions Asia
4.6% 11.3%

Domestic
84.1%

Overseas
15.9%

Annual Report 2010 • 35

FINANCIAL SECTION

MANAGEMENT DISCUSSION AND ANALYSISFINANCIAL SECTION

SIX-YEAR SUMMARY(millions of yen)

RISK INFORMATIONNew Business Risks
The Nisshinbo Group is actively developing new businesses, but it ispossible that the development of appealing new products and theformation of new markets may not proceed as anticipated. This could
result in delays or the inability to recover prior investments.
Risk of Fluctuation in the Value of Investment Securities
Investment securities held by Nisshinbo are marked to market in accordance with accounting standards for ﬁnancial products, and theCompany implements impairment accounting based on even stricter
internal standards for a portion of these securities. If accounting standards are changed in the future, however, periodic income or losses
may vary widely. Also, the Company plans to limit increases in interestbearing liabilities by selling investment securities to procure capitalneeded for mergers and acquisitions, overseas business development,
and capital investment, but misalignment of the timing between saleand investment may give rise to unforeseen circumstances.
In addition, Nisshinbo made a trust contribution of ¥14.7 billion in
response to losses resulting from a change in accounting standards
regarding employee retirement plans made in 2000. The Company
amortizes retirement beneﬁts evenly over an average 15-year employment term, and therefore retirement beneﬁt expenses affected by
ﬂuctuations in stock prices could have an impact on income for theﬁscal year.
Risks Associated with the Utilization of Idle Land
To reform its business structures, Nisshinbo is taking active measures
to close certain business sites and subsequently use the idle land. Such
redevelopment may result in cleanup expenses, and revisions to laws
could impede redevelopment.
Product Quality Risks
The vast majority of the Nisshinbo Group manufactures its products inaccordance with international quality control standards, but there is no
guarantee that quality-related problems will not occur in the future.
The Company has product liability insurance, but the occurrence of alarge liability could have an adverse impact on the Company’s business results.

Risks Associated with Market Shifts Relating to
Product Sale Prices and Raw Material Procurement
Some of the Nisshinbo Group’s products are signiﬁcantly affected by
ﬂuctuations in market prices in conjunction with market developments
and competition with other companies. Changes in currency exchange
rates when procuring imported raw materials that cannot be shiftedto selling prices may also curtail income.
Risks Associated with Changes in Customers’ Business Performance
The customers of the Nisshinbo Group’s automobile brakes businessare automobile manufacturers that conduct business globally. Changes
in the business results of such client companies are a factor that theGroup cannot control, and consequently they may have an impact on
our ﬁnancial results.
Risks Associated with the Electronics Product Business
Semiconductors account for more than 80% of the consolidated salesof New Japan Radio Co., Ltd., which is a consolidated subsidiary, andchanges in demand in semiconductor markets may have an impact on
business results. Also, overseas sales account for approximately half of
New Japan Radio’s sales, and changes in exchange rates may have an
impact on business results.

Net Sales2006
278,617

2007
312,8252008
322,412

2009
286,1672010
242,409

9,651

10,524

11,551

12,034408

3,570

Operating Income
Net Income(loss)

8,199

11,183

15,107

12,290(1,286)

1,896

Equity222,771

266,434

282,015

245,909

193,698

193,639

Total Assets

370,168

491,230

472,670

424,706

366,858

358,110

Shareholders’ Equity Ratio (%)

60.2

54.2

55.3

53.0

49.0

51.1

Return on Assets (%)

2.2

2.6

3.1

2.7

(0.3)

0.5

Return on Equity (%)

3.8

4.6

5.7

5.1

(0.6)

1.0

Payout Ratio (%)*

28.1

32.2

35.6

—

—

167.7

Capital Expenditures

12,504

16,54818,30624,28016,872

13,027

Depreciation and Amortization

11,046

13,835

14,984

16,89018,025

12,960208,198,939

208,198,939

201,698,939

198,698,939

184,098,939

184,098,939

39.03

53.21

74.19

63.34

(7.08)

10.38

Common Shares Issued
Per Share (in yen):
Net Income(loss)
Shareholders’ Equity

1,072.54

1,283.21

1,301.14

1,179.43

985.191,034.04

Cash Dividends

10.00

10.00

15.00

15.00

15.00

15.00

Number of Employees

9,505

12,602

12,744

13,253

12,726

12,488*Payout Ratio is on a non-consolidated basis.

Risks Associated with Developing Overseas Businesses
The Nisshinbo Group owns many production bases overseas. Risks inherent to that include unanticipated changes in laws and regulations,unfavorable political or economic factors, and social turmoil.
Net Sales

Risks Associated with Financial Covenants
Related to Capital Procurement
The Company and its consolidated subsidiary New Japan Radio haveentered into commitment contracts with multiple ﬁnancial institutions. Since certain ﬁnancial covenants and time-limited acceleration
conditions are attached to these contracts, it is possible that the terms
for borrowing may change due to future ﬂuctuations in performance.

(billions of yen)

Net Income (loss)(billions of yen)

Net Income (loss) per Share

(yen)

90
300

15

250

12

200

9

150

6

100

3

50

0

0

-3

80
70
60
50
40
30
20
10
0

2005

36 • Nisshinbo Holdings Inc.

2005
243,421

2006

2007

2008

2009

2010

-10

2005

2006

2007

2008

2009

2010

2005

2006

2007

2008

2009

2010

Annual Report 2010 • 37

FINANCIAL SECTIONCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS(March 31, 2010 and 2009)(thousands of US
dollars) (Note 1)(millions of yen)

ASSETS2010

Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables
Notes receivable, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, trade (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unconsolidated subsidiaries and afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories (Notes 3 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property, plant and equipment (Note 5):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery, equipment and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investments and other assets:
Investment securities (Notes 4 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and advances to unconsolidated subsidiaries and afﬁliates . . . . . . . . . .
Deferred tax assets (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

2010

¥17,768
2,413
2¥ 29,203
3,202
1,637

$187,032
25,40021

7,449
48,9915,819
1,264
63,523(300)
63,223
41,293
3,982
1,925
130,606

9,415
45,0676,649
2,182
63,313(320)
62,993
48,217
1,665
2,948
149,865

78,410515,695
61,253
13,305
668,663(3,158)665,505
434,663
41,916
20,263
1,374,800(thousands of US
dollars) (Note 1)(millions of yen)

LIABILITIES AND EQUITYCurrent liabilities:
Short-term bank loans (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PayablesNotes and accounts payable, trade (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unconsolidated subsidiaries and afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees’ savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities:
Long-term debt (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance beneﬁts (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

2010

¥24,340
22,0002,331¥60,070
18,0002,432$256,211
231,579
24,537

24,835760
7,822
33,417
179
5,740
3,137
44
3,179
94,367

21,826547
6,530
28,903
185
6,307
929
1
3,348
120,175

261,4218,000
82,337351,758
1,884
60,421
33,021
463
33,463
993,337

14,42420,87015,91418,896
70,104

4,601
25,634
4,748
18,002
52,985

151,832
219,684
167,516
198,905
737,937

27,58820,401
156
129,584
17,092(82)(5,538)27,58820,401
107
130,521
10,555(42)(8,168)290,400
214,747
1,642
1,364,042
179,916(863)(58,295)(6,053)—
183,148
10,491
193,639¥358,110—(1,018)
179,944
13,754
193,698¥366,858(63,716)—
1,927,873
110,432
2,038,305$3,769,579

Commitments and contingencies (Note 11)27,643
127,477
234,003
1,550
390,673(275,947)
114,726

28,063
127,373
232,833
2,542
390,811(272,632)
118,179

290,979
1,341,863
2,463,189
16,3164,112,347(2,904,705)
1,207,642

60,471
39,618
4,596
616
7,477
112,778¥358,110

51,56535,640
4,000
329
7,280
98,814¥366,858

636,537
417,032
48,3796,484
78,705
1,187,137$3,769,579

Equity (Note 12) :Common stock:
Authorized— 371,755,000 shares
Issued―184,098,939 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock acquisition rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred loss on derivatives under hedge accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less shares in treasury
2010—7,137,858 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009—1,567,705 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See Notes to Consolidated Financial Statements.

38 • Nisshinbo Holdings Inc.

Annual Report 2010 • 39

FINANCIAL SECTIONCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Years ended March 31, 2010 and 2009)(Years ended March 31, 2010 and 2009)(thousands of US
dollars) (Note 1)(millions of yen)

Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before income taxes and minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes (Note 7):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Per share:

2010

2009

2010

¥242,409¥286,167$2,551,674

201,625
37,214
238,839

243,858
41,901
285,759

2,122,368
391,727
2,514,095

3,570

408

37,579

2,144
(816)
3,887
(3,449)
1,766

3,466
(1,140)4,436(9,738)(2,976)

22,568(8,590)40,916(36,305)
18,5895,336(2,568)56,168

3,238
4,042
7,280

2,120
(3,257)(1,137)34,08442,547
76,631(1,944)
3,840¥1,896(1,431)145¥(1,286)(20,463)
40,421$19,958(yen)

Net income (loss)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See Notes to Consolidated Financial Statements.

¥10.3815.00(thousands of US
dollars) (Note 1)(millions of yen)

2010

2009

2010

¥27,588¥27,588$290,400¥27,588¥27,588$290,400

Capital surplus:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥20,401¥20,401¥20,401¥20,401$214,747$214,747

Stock acquisition rights:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥107
49
¥156

¥59
48
¥107

$1,126516$1,642Retained earnings:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment due to increase in consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥130,521
1,896(2,755)
(68)
(1)
(9)
¥129,584¥153,746(1,286)(2,812)
132(19,211)(48)¥130,521$1,373,905
19,958(29,000)
(716)
(10)
(95)
$1,364,042

Net unrealized gain on available-for-sale securities:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥10,555
6,537¥17,092¥30,145(19,590)¥10,555$111,105
68,811$179,916

Deferred loss on derivatives under hedge accounting:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(42)
(40)
¥(82)

¥(112)
70¥(42)$(442)(421)$(863)

Foreign currency translation adjustments:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(8,168)
2,630¥(5,538)¥4,322(12,490)¥(8,168)$(85,979)
27,684$(58,295)

Treasury stock at cost:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: increase in the afﬁliate accounted for by the equity method . . . . . . . . . . . . . . . . . .
Deduct: sold and retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(1,018)(5,037)(5)
7¥(6,053)¥(10,904)(11,074)—
20,960¥(1,018)$(10,716)(53,021)(53)
74$(63,716)

Minority interests:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥13,754(3,263)¥10,491¥20,664(6,910)¥13,754$144,779(34,347)$110,432

Common stock:
Balance at beginning of year
(2010—184,098,939 shares; 2009 — 198,698,939 shares) . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year
(2010 and 2009—184,098,939 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(US dollars)¥ (7.08)
15.00

$0.11
0.16

See Notes to Consolidated Financial Statements.

40 • Nisshinbo Holdings Inc.

Annual Report 2010 • 41

FINANCIAL SECTIONCONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Years ended March 31, 2010 and 2009)(thousands of US
dollars) (Note 1)(millions of yen)

2010

2009

2010

¥5,336¥(2,568)$56,168(30)
12,960(242)(3,887)(175)
3,439(2,738)623
2,354(4,914)18,025
1,280(4,436)(1,076)3,564(6,147)
1,818
111

(316)
136,421(2,547)(40,916)(1,842)
36,200(28,821)
6,558
24,779(543)(3,948)(5,716)

557
435
(127)

3,120
2,004
737

5,863
4,579
(1,337)

229
7,334
4,050
(2,037)
27,538

14,5401,602(9,974)(1,799)11,9392,411
77,20042,632(21,442)
289,874

290

770

3,053

3,339
(13,250)

7,644(17,669)

35,147(139,473)(1,149)904(83)(9,949)(2,095)(1,317)(1,726)(14,393)(12,095)
9,516
(874)
(104,726)

Cash ﬂows from ﬁnancing activities:
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in short-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . . . .

12,666(3,065)(35,883)
4,000(2,755)(5,037)(569)
296(30,347)

3,570(2,420)19,1968,000(2,812)(11,074)(402)(2,118)
11,940133,326(32,263)(377,716)
42,105(29,000)(53,021)(5,989)3,116(319,442)

Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents of newly consolidated subsidiaries at beginning of year . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,299(11,459)
24
29,203¥17,768(3,947)
5,539
403
23,261¥29,203

13,673(120,621)
253
307,400$187,032

Cash ﬂows from operating activities:
Income (loss) before income taxes and minority interests . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Income taxes-paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for accrued pension and severance beneﬁts . . . . . . . . . . . . . . . . . . . . . . . .
Payment of accrued pension and severance beneﬁts . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of investment securities and investments in and advances tounconsolidated subsidiaries and afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on write-down of investments in and advances to unconsolidated
subsidiaries and afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on plant closures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash ﬂows from investing activities:
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of investment securities and investments in and advances tounconsolidated subsidiaries and afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for purchase of investment securities and investments in and advances tounconsolidated subsidiaries and afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

See Notes to Consolidated Financial Statements.

42 • Nisshinbo Holdings Inc.

1

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated ﬁnancial statements have been
prepared in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and its related accounting regulations,and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial
Reporting Standards.
In addition, the accompanying footnotes include information which2

is not required under generally accepted accounting principles andpractices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely
for convenience and are stated, as a matter of arithmetical computation only, at the rate of ¥95 = $1, the approximate exchange rate at
March 31, 2010. The translations should not be construed as representations that the Japanese yen amounts have been, could have been, or
could in the future be, converted into United States dollars.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Consolidation
The consolidated ﬁnancial statements include the accounts of Nisshinbo Holdings, Inc. (hereinafter the “Company”) and its signiﬁcant
subsidiaries (together, the “Group”).
Under the control or inﬂuence concept, those companies in which
the Parent, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group
has the ability to exercise signiﬁcant inﬂuence are accounted for by
the equity method.
Investments in unconsolidated subsidiaries and associated companies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting
had been applied to the investments in these companies, the effecton the accompanying consolidated ﬁnancial statements would not
be material.
All signiﬁcant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized proﬁt included
in assets resulting from transactions within the Group is eliminated.
(b) Foreign currency transactions
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at
the exchange rates at the balance sheet date. The foreign exchange gains
and losses from translation are recognized in the income statement to
the extent that they are not hedged by forward exchange contracts.
Investments in and advances to unconsolidated subsidiaries and afﬁliates in foreign currencies are translated at the historical rates effectiveat the dates of transaction from which such accounts were originated.
(c) Foreign currency ﬁnancial statements
The balance sheet accounts of the consolidated foreign subsidiaries
are translated into Japanese yen at the current exchange rate. Revenue
and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.

(d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits placed withbanks on demand and highly liquid investments with insigniﬁcantrisk of changes in value which have maturities of six months or lesswhen purchased.
(e) Inventories
Inventories are measured principally at the lower of cost and net realisable value, cost being substantially determined by the average cost
method.
(f) Marketable securities and other investments
The Group classiﬁes all of its marketable securities as available-forsale which are reported at fair value, with unrealized gains and losses
included in equity as net unrealized gain on available-for-sale securities. Other investments without quoted market prices are stated atcost. Realized gains or losses on the sale of securities are based on the
average cost of a particular security held at the time of sale.
Marketable securities and other investment securities are regularly
reviewed for other-than-temporary declines in carrying amount basedon criteria that include the length of time and the extent to which themarket value has been less than cost, the ﬁnancial condition and nearterm prospects of the issuer and the Company’s intent and ability toretain marketable securities and investment securities for a period oftime sufﬁcient to allow for any anticipated recovery in market value.
When such a decline exists, the Company recognizes an impairment
loss to the extent of such decline.
(g) Property, plant and equipment
Effective April 1, 2009, the Group adopted the straight-line methodof depreciation, which had been previously depreciated principallyby the declining balance method. This change was made to provide amore accurate allocation of depreciation. The effects of this change
were to decrease depreciation by ¥3,789 million ($39,884 thousand)and to increase income before income taxes and minority interests by¥3,518 million ($37,032 thousand) for the year ended March 31, 2010.
Annual Report 2010 • 43

FINANCIAL SECTIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3(h) Goodwill
The difference between the cost and underlying fair value of the net
equity of investments in subsidiaries at acquisition is included in goodwill or other long-term liabilities and amortized on a straight-line basis
over ﬁve years.
(i) Impairment of long-lived assets
Long-lived assets are evaluated for impairment using an estimate ofundiscounted cash ﬂows whenever events or changes in circumstancesindicate that the carrying amount of such asset may not be recoverable. If the estimate of undiscounted cash ﬂow is less than the carrying amount of the asset, an impairment loss is recorded based on thefair value of the asset. Fair value is determined primarily by using the
anticipated cash ﬂows discounted at a rate commensurate with therisk involved. For assets held for sale, an impairment loss is further
increased by costs to sell. Long-lived assets to be disposed of other thanby sale are considered held and used until disposed of.
(j) Retirement and pension plans
The Group has deﬁned beneﬁt plans and deﬁned contribution plansthat cover substantially all employees. Under the deﬁned beneﬁt plans
for the Group, the annual provision for retirement beneﬁts is calculated
to state the liability for retirement beneﬁts based on the projected
beneﬁt obligations and plan assets at the balance sheet date.
Retirement beneﬁts to directors and corporate auditors are provided
at the amount that would be required if all directors and corporate
auditors retired at the balance sheet date.

(l) Research and development costs
Research and development costs are changed to income as incurred.
(m) Income taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statements of income. The asset
and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets andliabilities. Deferred taxes are measured by applying currently enacted
tax laws to the temporary differences.
(n) Derivative ﬁnancial instruments
The Group uses a variety of derivative ﬁnancial instruments, including
foreign currency forward contracts, currency swaps, coupon swaps,
currency options and interest rate swaps, as a means of hedging exposure to foreign currency and interest rate risks. The Group does notenter into derivatives for trading or speculative purposes.
The foreign currency forward contracts, coupon swaps and currency
options are utilized to hedge foreign currency exposures in sales ofﬁnished products to overseas customers and procurement of raw materials from overseas suppliers. Trade receivables and payables denominated in foreign currencies are translated at the contracted rates if thecontracts qualify for hedge accounting.
Interest rate swaps are utilized to hedge the interest rate exposuresof long-term debt.

INVENTORIESInventories at March 31, 2010 and 2009 were as follows:(millions of yen)Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4(thousands of US dollars)

2010

2009

2010

¥18,100
14,275
8,918¥41,293¥22,204
15,90910,104¥48,217$190,526
150,263
93,874$434,663

MARKETABLE AND INVESTMENT SECURITIESThe carrying amounts and aggregate fair values of securities available-for-sale included inmarketable and investment securities at March 31, 2010 and 2009 were as follows:(millions of yen)

Cost
Unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥27,683
31,236(790)¥58,129¥28,084
22,267(2,119)¥48,232$291,400
328,800(8,316)$611,884

Aggregate cost of non-marketable securities accounted for under the cost method totaled¥2,344 million ($24,674 thousand) and ¥4,970 million at March 31, 2010 and 2009, respectively.

5

SHORT-TERM BANK LOANS AND LONG-TERM DEBT

The annual interest rates applicable to the short-term bank loans at March 31, 2010 and 2009were 0.7% to 6.8%. Long-term debt at March 31, 2010 and 2009 consisted of the following:(millions of yen)(k) Stock options
The accounting standard for stock options requires companies to recognize compensation expense for employee stock options based on thefair value at the date of grant and over the vesting period as consideration for receiving goods or services. The standard also requires companies to account for stock options granted to non-employees basedon the fair value of either the stock option or the goods or services
received. In the balance sheet, the stock option is presented as a stockacquisition right as a separate component of equity until exercised.
The standard covers equity-settled, share-based payment transactions,but does not cover cash-settled, share-based payment transactions. In
addition, the standard allows unlisted companies to measure options
at their intrinsic value if they cannot reliably estimate fair value.

44 • Nisshinbo Holdings Inc.

Long-term debt with collateral:
Loans from banks maturing serially to 2024, ranging from 0.9% to 2.2% . . . . . . . . . . . . .
Long-term debt without collateral:
Loans from banks maturing serially to 2016, ranging from 0.9% to 4.9% . . . . . . . . . . . . .
Capital lease obligations, due through 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥13,183¥3,225$138,769

3,306
266
16,755(2,331)¥14,424

1,570
2,238
7,033
(2,432)¥4,60134,8002,800
176,369(24,537)$151,832

Annual Report 2010 • 45

FINANCIAL SECTIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6

Under most circumstances, employees terminating their employment
are entitled to retirement beneﬁts determined based on the rate of pay
at termination, years of service and certain other factors.
The Group provides deﬁned beneﬁt plans and deﬁned contribution plans. In addition, the Company has established an employee

Annual maturities of long-term debt were as follows:Year ending March 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(millions of yen)(thousands of US dollars)¥2,331
2,408
9,450
724
1,842
¥16,755$24,537
25,347
99,474
7,621
19,390$176,369

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

retirement beneﬁt trust.
The liability for retirement beneﬁts for directors and corporate auditors at March 31, 2010 and 2009 were ¥153 million ($1,610 thousand)and ¥478 million. The retirement beneﬁts for directors and corporate
auditors are paid subject to the approval of the shareholders.

The liability for employees’ retirement beneﬁts at March 31, 2010 and 2009 consisted of the following:(millions of yen)

At March 31, 2010 and 2009, net book value of assets pledged as collateral for short-term bank loans and long-term debt were as follows:(millions of yen)

RETIREMENT AND PENSION PLANS(thousands of US dollars)

2010

2009

2010

¥10,137
10,056
4,494
2,712¥27,399—¥9,272——¥9,272$106,705
105,853
47,30528,547$288,410

Projected beneﬁt obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized transitional obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥45,359(19,662)
25,697
2,009(9,102)(39)
18,565
2,152¥20,717¥50,401(17,758)
32,643
2,252(12,482)(87)
22,3262,830¥25,156$477,463(206,968)
270,495
21,147(95,811)(410)
195,421
22,653$218,074

The components of net periodic retirement beneﬁt costs for the years ended March 31, 2010 and 2009 were as follows:
At March 31, 2010 and 2009, in addition, pledged assets as collateral for liabilities other than the above were as follows:(millions of yen)(millions of yen)

2010
Assets pledged:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥8,292441
209¥8,942(thousands of US dollars)

2009¥8,692402
209¥9,303(millions of yen)

Liabilities with collateral:
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and accounts payable, trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010$87,284
4,642
2,200$94,126(thousands of US dollars)

2010

2009

2010

¥9,396264
179¥9,839¥9,396313
185¥9,894$98,905
2,779
1,884$103,568

Deﬁned beneﬁts plans:Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of transitional obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic beneﬁt costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deﬁned contribution plan:Deﬁned contribution pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥2,098
883
(456)
(243)
1,083
48
3,413

¥2,447
1,095
(508)
(240)
698
56
3,548

$22,084
9,295(4,800)(2,558)
11,400505
35,926429¥3,84294¥3,642

4,516$40,442Retirement beneﬁts paid due to restructuring of business operations for the years ended
March 31, 2010 and 2009 were ¥797 million ($8,389 thousand) and ¥3,844 million, respectively.

Assumptions used for the years ended March 31, 2010 and 2009 were set forth as follows:
2010
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization period of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition period of actuarial gain / loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization period of transitional obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46 • Nisshinbo Holdings Inc.

2.0%
2.0% –2.8%
10–15 years
10–15 years
10 years

2009
2.0%
1.9% –3.3%
10–15 years
10–15 years
10 years

Annual Report 2010 • 47

FINANCIAL SECTION

7NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8

INCOME TAXESThe tax effects of signiﬁcant temporary differences and loss carryforwards which resulted indeferred tax assets and liabilities at March 31, 2010 and 2009 were as follows:(millions of yen)

Deferred tax assets:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employees’ bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued severance beneﬁts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets and depreciation in excess of tax limitation . . . . . . . . .
Accrued deﬁned contribution costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:
Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred gains on sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land revaluation surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥511
17,569
166
1,151
7,777
1,050
1,032
2,672
(17,826)¥14,102¥563
12,715174
1,295
10,004216—
1,582(9,745)¥16,804$5,379184,937
1,747
12,116
81,863
11,053
10,86328,126(187,642)$148,442¥(12,377)(4,396)(2,550)(2,159)¥(21,482)¥(8,181)(4,406)(2,535)(766)¥(15,888)$(130,284)(46,274)(26,842)(22,726)$(226,126)¥(7,380)¥916$(77,684)

LEASESThe Group leases certain machinery, computer equipment and otherassets.
Total rental expenses for the years ended March 31, 2010 and 2009were ¥423 million ($4,453 thousand) and ¥514 million, respectively,
including ¥256 million ($2,695 thousand) and ¥365 million of lease
payments under ﬁnance leases.
On March 30, 2007 the ASBJ issued ASBJ Statement No.13, “Accounting Standard for Lease Transactions” which revised the existingaccounting standard for lease transactions issued on June 17, 1993.

Under the existing accounting standard, ﬁnance leases that deem totransfer ownership of the leased property to the lessee are to be capitalized, however, other ﬁnance leases are permitted to be accounted
for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s ﬁnancial statements.
The revised accounting standard requires that all ﬁnance leasetransactions should be capitalized. The revised accounting standard
for lease transactions is effective from the ﬁscal year beginning on
April 1, 2008.

Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under ﬁnance lease,depreciation expense of ﬁnance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2010 and 2009 was as follows:(millions of yen)

Acquisition cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net leased property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥1,185(906)¥279¥1,988(1,290)¥698$12,474(9,537)$2,937(millions of yen)

Obligations under ﬁnance leases:
Due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(thousands of US dollars)

2010

2009

2010

¥151
128
¥279

¥238
460
¥698

$1,5901,347$2,937(millions of yen)

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2010 and 2009 andthe actual effective tax rates reﬂected in the accompanying consolidated statement of income was as follows:

Normal effective statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of afﬁliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Devaluation of investment in subsidiary allowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends and other permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lower income tax rates applicable to income in certain foreign countries . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation expense under ﬁnance leases:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

2009

40.7 %
175.0(29.7)(61.7)
22.8(19.2)
(4.6)
(0.1)
13.3
136.5 %

40.7 %(39.9)
70.3—(18.6)(4.2)
24.3(24.6)(3.7)
44.3 %

2009

2010

¥256

¥365

$2,695

Depreciation expense, which is not reﬂected in the accompanying statements of income, is computed by the straight-line method.

9

DERIVATIVESThe Group enters into foreign currency forward contracts and currency
swap contracts to hedge exchange risk associated with certain assets
and liabilities denominated in foreign currencies. Foreign currency
forward contracts which qualify for hedge accounting for the years
ended March 31, 2010 and 2009 and such amounts which are assigned
to the associated assets and liabilities are recorded on the balance

sheets at March 31, 2010 and 2009, are excluded from disclosure ofmarket value information.
The Group also enters into interest rate swap contracts to manage its
interest rate exposures on certain liabilities. Such contracts outstanding at March 31, 2010 and 2009 were as follows:(millions of yen)

Not hedged:
2010
Interest rate swaps:
Fixed rate payments, ﬂoating rate receipt . .
Foreign currency forward contracts
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency swap
Receive EUR · Pay JP¥ . . . . . . . . . . . . . . . . . .
Receive EUR · Pay US$ . . . . . . . . . . . . . . . . .
48 • Nisshinbo Holdings Inc.

(thousands of US dollars)

2010(thousands of US dollars)

2010

2009

Contract
amountFair value

Unrealized
gain (loss)

Contract
amountFair value

Unrealized
loss

Contract
amountFair value

Unrealized
gain (loss)

¥184

¥(9)

¥(9)

¥7,684¥(692)¥(692)$1,937

$(95)

$(95)

¥1,735
¥390

¥(65)
¥21

¥(65)
¥21

¥1,139
¥689

¥(39)
¥(44)

¥(39) $18,263¥(44) $4,105$(684)$221$(684)$221¥3,405¥1,044

¥431
¥(28)

¥431
¥(28)

¥—
¥—

¥—
¥—

¥— $35,842¥— $10,989$4,537$(295)$4,537$(295)

Annual Report 2010 • 49

FINANCIAL SECTION10NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13

OTHER INCOME (EXPENSES) – OTHER, NET

Other income (expenses) — Other, net consisted of the following:(millions of yen)

Loss on sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on inventory disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on plant closures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement beneﬁts paid due to restructuring of business operations . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11(thousands of US dollars)

2010

2009

2010

¥(623)(2,354)
543
(557)
—
(435)
(797)
569
205
¥(3,449)¥(1,818)
(111)
3,948
(3,120)(709)(2,004)(3,844)(1,280)(800)¥(9,738)$(6,558)(24,779)
5,716(5,863)—(4,579)(8,389)5,989
2,158$(36,305)

COMMITMENTS AND CONTINGENCIES

Commitments for capital expenditures outstanding at March 31, 2010 and 2009 were in the approximate amounts of¥2,505 million ($26,368 thousand) and ¥3,856 million, respectively.

SEGMENT INFORMATIONa) Industry segments
Information about industry segments of the Company and its consolidated subsidiaries
for the years ended March 31, 2010 and 2009 were as follows:(millions of yen)

2010
TextilesAutomobile
BrakesPapersPrecision
Instruments

ChemicalsElectronics

Real Estate

Other
Businesses

Eliminations/ Consolidated
Corporate¥41,046
305
41,35137,471¥3,880¥31,536
134
31,67029,964¥1,706¥24,908790
25,69826,233¥(535)¥14,057
512
14,56914,945¥(376)¥51,699
10
51,70954,363¥(2,654)¥6,674
4,098
10,772
4,636¥6,136¥15,734830
16,564
16,370¥194¥—(6,717)(6,717)(4,067)¥(2,650)¥242,409—
242,409
238,839¥3,570I. Sales and Operating Income (loss)
Sales to customers . . . . . . .
Intersegment sales . . . . . .
Total sales . . . . . . . . . . . . .
Operating expenses . . . . .
Operating income (loss)¥56,755
38
56,79358,924¥(2,131)

II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets . . . . . . . . . . . . . .
Depreciation andamortization . . . . . . . . . . .
Impairment oflong-lived assets . . . . . . .
Capital expenditures . . . .

¥48,422¥39,498¥20,567¥30,810¥11,074¥82,087¥52,951¥8,067¥64,634¥358,110¥2,096¥2,331¥951¥1,125¥608¥3,724¥1,901¥13¥211¥12,960¥1,756

¥—

¥—

¥56

¥—

¥—

¥—

¥—

¥542

¥2,354¥1,980¥2,638¥1,263¥1,850¥955¥842¥3,516¥8¥(25)¥13,027(millions of yen)

12

2009

SUBSEQUENT EVENTS(a) Year-end cash dividends
On May 12, 2010, the Board of Directors of Nisshinbo Holdings Inc.
declared year-end cash dividends (¥7.5 per share) in the amounts of¥1,335 million ($14,053 thousand).
(b) Cancellation of treasury stock
On March 26, 2010, the Board of Directors of Nisshinbo Holdings Inc.
approved the Company to cancel treasury stock of the Company’s common stock.
On April 22, 2010, the Company canceled 5,300 thousand shares oftreasury stock of the Company’s common stock.

Textiles(c) Stock option
At the general shareholders meeting held on June 29, 2010, the Company’s shareholders approved a stock option plan to grant stock purchase rights up to 200 thousand shares of the Company’s common
stock to directors and key employees in the period from August 1,
2012 to July 31, 2017.

Automobile
BrakesPapersPrecision
Instruments

ChemicalsElectronics

Real Estate

Other
Businesses

Eliminations/ Consolidated
Corporate¥49,230
377
49,607
46,139¥3,468¥34,21448
34,262
33,482¥780¥35,602628
36,23034,382¥1,848¥15,791
488
16,27918,180¥(1,901)¥60,550—
60,55064,468¥(3,918)¥6,433
464
6,897
3,557
¥3,340¥16,754
1,365
18,11917,963¥156¥—(3,372)(3,372)(2,750)¥(622)¥286,167—
286,167
285,759¥408

I. Sales and Operating Income (loss)
Sales to customers . . . . . . .
Intersegment sales . . . . . .
Total sales . . . . . . . . . . . . .
Operating expenses . . . . .
Operating income (loss)¥67,5932
67,59570,338¥(2,743)

II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets . . . . . . . . . . . . . .
Depreciation andamortization . . . . . . . . . . .
Impairment oflong-lived assets . . . . . . .
Capital expenditures . . . .

¥54,955¥41,706¥25,487¥35,076¥10,924¥62,817¥22,142¥8,113¥105,638¥366,858¥2,898¥3,607¥1,869¥1,949¥1,431¥4,754¥1,476¥41¥—¥18,025

¥85

¥—

¥—

¥—

¥26

¥—

¥—

¥—

¥—

¥111

¥2,959¥2,791¥2,965¥1,485¥1,735¥2,843¥411¥52¥1,631¥16,872(thousands of US dollars)

2010
TextilesAutomobile
BrakesPapersPrecision
Instruments

ChemicalsElectronics

Real Estate

Other
Businesses

Eliminations/ Consolidated
Corporate$432,063
3,211
435,274
394,432$40,842$331,958
1,411
333,369
315,411$17,958$262,189
8,316
270,505
276,137$(5,632)$147,969
5,389
153,358
157,316$(3,958)$544,200
105
544,305
572,242$(27,937)$70,253
43,136113,389
48,800$64,589$165,621
8,737
174,358
172,316$2,042$ — $2,551,674(70,705)—(70,705) 2,551,674(42,811) 2,514,095$(27,894)$37,579

I. Sales and Operating Income (loss)
Sales to customers . . . . . . .
Intersegment sales . . . . . .
Total sales . . . . . . . . . . . . .
Operating expenses . . . . .
Operating income (loss)$597,421
400
597,821620,252$(22,431)

II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets . . . . . . . . . . . . . .
Depreciation andamortization . . . . . . . . . . .
Impairment oflong-lived assets . . . . . . .
Capital expenditures . . . .

50 • Nisshinbo Holdings Inc.

$509,705$415,768$216,495$324,316$116,568$864,074$557,379$84,916$680,358$3,769,579$22,063$24,537$10,011$11,842$6,400$39,200$20,010$137$2,221$136,421$18,484

$—

$—

$589

$—

$—

$—

$—

$5,706$24,779$20,842$27,768$13,295$19,474$10,053$8,863$37,011$84$(264)$137,126

Annual Report 2010 • 51

FINANCIAL SECTIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL SECTIONb) Geographical segments
The geographical segments of the Company and its consolidated subsidiaries
for the years ended March 31, 2010 and 2009 were as follows:

To the Board of Directors of Nisshinbo Holdings Inc.
We have audited the consolidated balance sheets of Nisshinbo Holdings Inc. and consolidated(millions of yen)subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of income,

2010
Japan
Sales to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INDEPENDENT AUDITORS’ REPORT

Asia

Other Regions

Consolidated¥242,409

changes in equity, and cash ﬂows for the year then ended, all expressed in Japanese yen. These¥203,747¥27,442Interarea transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,301

10,076805(20,182)—

consolidated ﬁnancial statements are the responsibility of the Company’s management. Our re-

Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

213,048

37,51812,025(20,182)

242,409

sponsibility is to express an opinion on these consolidated ﬁnancial statements based on our. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

208,034¥5,01436,623¥895

11,423¥602(17,241)¥(2,941)

238,839¥3,570audits.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥252,714¥32,390¥12,232¥60,774¥358,110

Operating expenses
Operating income (loss)¥11,220

Eliminations/
Corporate¥—

We conducted our audits in accordance with auditing standards generally accepted and appliedin Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated ﬁnancial statements are free of material misstatement.

(millions of yen)2009

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in¥15,204

Eliminations/
Corporate¥—

11,001

349(20,755)—

used and signiﬁcant estimates made by management, as well as evaluating the overall consoli-

47,014

15,553(20,755)

286,167

dated ﬁnancial statement presentation. We believe that our audits provide a reasonable basis

247,361

44,067

14,590(20,259)285,759. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥(3,006)¥2,947¥963¥(496)¥408

for our opinion.

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥224,937¥29,546¥12,955¥99,420¥366,858

Japan
Sales to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asia¥234,950¥36,013Interarea transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,405

Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

244,355

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)

Other Regions

Consolidated¥286,167

the consolidated ﬁnancial statements. An audit also includes assessing the accounting principles

In our opinion, the consolidated ﬁnancial statements referred to above present fairly, in allmaterial respects, the ﬁnancial position of Nisshinbo Holdings Inc. and consolidated subsidiaries
as of March 31, 2010 and 2009, and the results of their operations and their cash ﬂows for the year

(thousands of US dollars)

then ended, in conformity with accounting principles and practices generally accepted in Japan.

2010
Japan

Asia

Sales to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,144,706$288,863$118,105

Eliminations/
Corporate$—

Interarea transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97,905106,0638,474(212,442)—. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,242,611

394,926

126,579(212,442)

2,551,674

consolidated ﬁnancial statements expressed in Japanese yen have been translated into US dollars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,189,832

385,505

120,242(181,484)

2,514,095

on the basis described in Note 1.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$52,779$9,421$6,337$(30,958)$37,579

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,660,147$340,947$128,758$639,727$3,769,579

Total sales

Operating expenses

Operating income (loss)c) Sales to foreign customers
Sales to foreign customers for the years ended March 31, 2010 and 2009 amounted to¥63,133 million ($664,558 thousand) and ¥80,528 million, respectively.

52 • Nisshinbo Holdings Inc.

Other Regions

Consolidated$2,551,674

The United States dollar amounts shown in the consolidated ﬁnancial statements have beentranslated solely for convenience. We have reviewed this translation and, in our opinion, the

VERITAS & Co.
June 29, 2010
Tokyo, Japan

Annual Report 2010 • 53

HISTORY

BOARD OF DIRECTORS (As of June 29, 2010)

Director, Chairman

Takashi Iwashita

Director *1,
President

Director, Senior Executive
Managing Ofﬁcer

Director *1, Senior Executive
Managing Ofﬁcer

Shizuka Uzawa

Shinji Takeuchi

Yoshihito Onda

1907

Established Nisshin Cotton Spinning Co., Ltd.

1937

Acquired Kawagoe Cotton Spinning Co., Ltd.

1938

Merged with Nisshin Rayon Co., Ltd. (now the Miai Business Ofﬁce)

1940

Established Toa Jitsugyo Co., Ltd. (name changed to Nisshin Toa Inc. in 1990)

1945

Acquired Meiji Plant, Nanshin Seiki Co., Ltd. (now the Fuji Business Ofﬁce)

1949

Established Nihon Postal Franker Co., Ltd. (name changed to Nisshinbo Postal Chemical Co., Ltd. in 2006)

1958

Established Nippon Kohbunshikan Co., Ltd. (name changed to Nippon Kohbunshi Co., Ltd. in 1986)(acquired by Nisshinbo Mechatronics Inc. in 2010)

1962

English name of company changed to Nisshin Spinning Co., Ltd.

1972

Established Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)

1978

Acquired Tokai Seishi Kougyou Co., Ltd.

1985

Acquired Nisshin Denim Inc.

1989

Established Kohbunshi (Thailand) Ltd. (Thailand)

1993

Established Pudong Kohbunshi (Shanghai) Co., Ltd. (China)(name changed to Nisshinbo Mechatronics (Shanghai) Co., Ltd. in 2010)

1995

Established Nisshinbo Automotive Corporation (U.S.A.)
Established Nisshinbo Urban Development Co., Ltd.

1996

Director,
Executive Managing Ofﬁcer

Director,
Executive Managing Ofﬁcer

Director,
Managing Ofﬁcer

Director,
Managing Ofﬁcer

Masaaki Isobe

Masaya Kawata

Masahiro Murakami

Hiroshi Nakano

Established Nisshinbo Somboon Automotive Co., Ltd. (Thailand)

1997

Established Nisshinbo Automotive Manufacturing Inc. (U.S.A.)

1998

Established P.T. Gistex Nisshinbo Indonesia (Indonesia)

1999

Established Saeron Automotive Corporation (South Korea)

2000

Purchased additional shares of P.T. Nikawa Textile Industry (Indonesia)
Established Continental Teves Co., Ltd. through merger with Continental Teves AG & Co. oHG(name changed to Continental Automotive Co., Ltd. in 2007)

2002

Acquired all shares of Iwao & Co., Ltd.
Established Nisshinbo (Shanghai) Co., Ltd. (China)

2003

Established Saeron Automotive Beijing Corporation (China)

2004

Established Continental Teves Corporation (Lian Yun Gang) (China)

2005

Acquired additional shares of ALOKA Co., Ltd.
Made tender offer for additional shares of New Japan Radio Co., Ltd.

Director,
Managing Ofﬁcer

Nobuyuki Hagiwara

Director *2

Director *2

Director *2

Tomofumi Akiyama

Toshiya Hanawa

Koji Kato

2006

Acquired additional shares of Japan Radio Co., Ltd. and Nagano Japan Radio Co., Ltd.

2007

Acquired all shares of Daiwa Shiko Co., Ltd.

2008

Acquired all shares of CHOYA CORP.

2009

Spun off ﬁve businesses — Textiles, Automobile Brakes, Papers, Mechatronics, and Chemicals — andconverted to holding company; corporate name changed to Nisshinbo Holdings Inc.

Acquired all shares of Nisshinbo Brake Sales Co., Ltd. (acquired by Nisshinbo Brake Inc. in 2010)*1 Representative director*2 Outside director

CORPORATE DATA (As of March 31, 2010)
MANAGING OFFICERS AND AUDITORS (As of June 29, 2010)
President

Executive Managing Ofﬁcer

Managing Ofﬁcer

Standing Statutory Auditor

Shizuka Uzawa *1

Masaaki Isobe *1
Masaya Kawata *1

Masahiro Murakami *1
Hiroshi Nakano *1
Nobuyuki Hagiwara *1
Toshihiro Kijima
Kazunori Baba

Yoshio Ide
Masao Satsuka

Senior Executive
Managing Ofﬁcer

Shinji Takeuchi *1
Yoshihito Onda *1*1 Board member as well
*2 Outside auditor

54 • Nisshinbo Holdings Inc.

FoundedFeb. 5, 1907

Employees

Head Ofﬁce

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku,
Tokyo 103-8650, Japan
Tel: +81-3-5695-8833 Fax: +81-3-5695-8970

Parent Company 230
Subsidiaries 12,258
Total 12,488

Common Stock

Osaka Branch

2-4-2, Kitakyuhouji-machi, Chuo-ku,
Osaka 541-0057, Japan
Tel: +81-6-6267-5501 Fax: +81-6-6267-5529

Authorized 371,755,000 shares
Issued 184,098,939 shares¥27,588 million— US$290 million

Shareholders

13,781

Statutory Auditor

Yo Kawakami *2
Toshihiko Tomita *2

Nagoya Branch

5-2-38, Sakae, Nakaku,
Nagoya 460-0008, Japan
Tel: +81-52-261-6151 Fax: +81-52-263-9480

Listings

Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo

Transfer Agent

Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Annual Report 2010 • 55

MAIN GROUP COMPANIES (As of August 1, 2010)

Nisshinbo Textile Inc.
TextilesDevelopment, manufacture, processing, trading, and import/
export of thread, woven fabric, nonwoven fabric, apparel,industrial textile materials, and other ﬁber products.

Nisshinbo Holdings Inc.
Nisshinbo Brake Inc.

General Stockholders Meeting
Board of Directors
ChairmanPresident
Board of Management
Board of Statutory Auditors
Statutory Auditor•CHOYA CORP.
•Nisshin Denim Inc.
•Naigai Shirts Co., Ltd.
•P.T. Nikawa Textile Industry•P.T. Gistex Nisshinbo Indonesia•Nisshinbo Do Brasil Industria Textil LTDA.
•Nisshinbo (Shanghai) Co., Ltd.

Corporate Strategy Center
Business Support Center

Automobile Brakes
Development, manufacture, processing, sales, and import/
export of friction materials, brake equipment, and brake partsfor motor vehicles, transport machinery, and other machinery.

•Nisshinbo Somboon Automotive Co., Ltd.
•Saeron Automotive Corporation•Nisshinbo Automotive Manufacturing Inc.
•Saeron Automotive Beijing Corporation

Business Development Division
Property Management Department

Nisshinbo Paper Products Inc.
PapersDevelopment, manufacture, processing, trading, and import/
export of paper and processed paper products and processingof industrial waste.

•Tokai Seishi Kougyou Co., Ltd.
•Nisshinbo Postal Chemical Co., Ltd.
•Daiwa Shiko Co., Ltd.
•Shanghai Sun-Rich Arts & Crafts Co., Ltd.

Nisshinbo Mechatronics Inc.
Precision Instruments
Development, manufacture, processing, trading, and import/
export of special-purpose industrial machinery, general industrial
machinery, other equipment, and parts for these products.

•Nisshinbo Precision Instrument & Machinery
Hiroshima Corporation•Nisshinbo Alps Tech Co., Ltd.
•Nisshinbo Mechatronics (Shanghai) Co., Ltd.
•Kohbunshi (Thailand) Ltd.
•Taiwan Nisshinbo Photovoltaic Co., Ltd.
•Nisshinbo-Yawei Precision Instruments &Machinery (Jiangsu) Co., Ltd.

Nisshinbo Chemical Inc.
Chemicals•Nisshin Environmental Planning Inc.

Development, manufacture, processing, trading, and import/
export of inorganic chemical industrial products, organic
chemical industrial products, medical products, and otherindustrial chemical products as well as construction and civilengineering design, implementation, and management.

New Japan Radio Co., Ltd.
Electronics•Ueda Japan Radio Co., Ltd.

Development, manufacture, processing, trading, and import/
export of electron tubes, semiconductor elements, integrated
circuits, and other electronic components and electricalmachinery using these products.

Other Group Companies
Real Estate
Other Businesses

56 • Nisshinbo Holdings Inc.

•Nisshinbo Urban Development Co., Ltd.
•Nisshinbo Europe B.V.
•Nisshin Toa Inc.
•Iwao & Co., Ltd.