Integrated Report 2017
Fiscal Year Ended March 2017

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/

Pursuing Innovation in Four Areas
Wireless Communications and Electronics
Leveraging information and communications technology and microelectronics, theNisshinbo Group is contributing to the building of a safer and securer society and theProfileThe Company
Everyone Needs

realization of a comfortable living environment in the field of wireless communicationequipment.
Related Business: Electronics

Environment and Energy Company group
Nisshinbo Holdings Inc. is targeting long-term goals of net sales of ¥1 trillion and ROE of
12% in the fiscal year ending March 2026.
We have identified four strategic business fields: Wireless Communications andElectronics, Automotive Parts and Devices, Lifestyle and Materials, and New Energy andAutomotive Parts and Devices

Strategy

As an Environment and Energy Company group working to create a sustainable society,

The Nisshinbo Group supplies various automotive products, including brake friction
materials, precision parts and electronic components. As a global supplier, we are
striving to make major technological themes a reality, such as improvements in thesafety, comfort, reliability and environmental friendliness of automobiles.

Smart Society. Focusing on those fields, we aim to continue growing as a company that
Related Businesses: Electronics Automobile Brakes Precision Instruments Chemicals

Value Creationdelivers solutions for today’s global society.

Lifestyle and Materials
Through our textile and chemical product businesses, the Nisshinbo Group endeavors
Management Framework

to develop products that can both add color to our lives and contribute toenvironmental preservation.
Related Businesses: Textiles Chemicals

New Energy and Smart Society
Financials

The Nisshinbo Group is contributing to the development of clean energy through the
supply of products such as bipolar plates for fuel cells. We are also doing our part tocreate a smart society.
Related Businesses: Electronics Precision Instruments Chemicals

1Nisshinbo Group Corporate Philosophy
Contents
The Nisshinbo Group believes strongly that its companies are public entities. While pursuing profit on the basis ofProfileValue Creation

P.1-8

P.18-48

1 Pursuing Innovation in Four Areas

18 The Nisshinbo Group’s Business Model

3 Nisshinbo Group Corporate Philosophy

20 The Nisshinbo Group’s Management Capital

4 The Nisshinbo Group’s Corporate History

22 Feature: 01 Increasing Value in the Automobile Brakes Business

6 A New Era as an Environment and26 Feature: 02 ADAS—A Promising New Field for the Nisshinbo Group

Energy Company Groupfair competition, we consider it our mission to contribute to society at large through our corporate activities.
To achieve further growth in global society by utilizing the organizational culture we have cultivated, we haveformulated our Corporate Philosophy and Business Conduct Guidelines to reflect the values and standards of
behavior that all of our employees throughout the world share and respect.

28 Feature: 03 The Nisshinbo Group’s Human Resources Strategy

8 Highlights

Nisshinbo Group Corporate Philosophy

22

26

Feature: 01

Profile30 Feature: 04 Implementing Environmental Management
Feature: 02

Strategy

Business Conduct Guidelines of the Nisshinbo GroupP.9-179 To Our Shareholders
9

To Our Shareholders

28

Compliance

Environment

Human Rights

Workplace

Product Safety

Procurement

Feature: 03

Strategy

32 At a Glance
34 Overview ofBusiness Segments

36

34 Electronics
Financial Strategy

14

The Nisshinbo Group’s
Financial Strategy

16 The Nisshinbo Group’s

Our corporate philosophy expresses the values we share as members of the Nisshinbo Group.

36 ESG information:
Advanced Technology
Center

PUBLIC ENTITY

38 Automobile Brakes

Shareholder Value

Value Creation

14 The Nisshinbo Group’s

Nisshinbo Group Corporate Philosophy

Japan Radio’s Advanced
Technology Center

40 ESG information:

40

Nisshinbo Brake’s Tatebayashi Plant

CONSISTENT INTEGRITYINNOVATION

Believing that our companies are public

Respecting the diverse cultures and cus-

Maintaining our spirit of response toentities, we shall aim to realize a sustain-

toms of the world, as well as biodiversity,change and unceasing challenge, we shallable society*1 by proposing solutions to

we shall conduct fair and sincere businesscreate an affluent future together with ourglobal environmental problems.

activities with pride as a corporate citizen.

stakeholders*2.

We remember at all times and in all our activities

We fulfill our social responsibilities as a corporate

We work toward the creation of an affluentthat the ultimate goal of our Group is to contrib-

citizen by acting in good faith and with fairness

society by constantly creating new and original

ute to society.

at all times.

value.

We offer products and services that help solve

We respect the diverse cultures and customs of

We satisfy stakeholder expectations by sensitively

global environmental issues, with an eye tocountries and regions throughout the world andanticipating changes in the times and the envi-

developing a society where all people can enjoy

uphold the laws and regulations of each.

ronment and boldly taking on new challenges.

89 History

We conduct our business activities with full

We build ties of trust with stakeholders and work

90 Key Companies in the Nisshinbo Group

recognition that the global environment depends

together with them in our business activities.

91 Corporate Dataon the maintenance of a delicate harmony

Tatebayashi Plant

42 Precision Instruments
44 Chemicals
46 Textiles

Management Framework

Financials

P.49-62

P.63-88

50 Interview with
Outside Director

53 Corporate Governance
58 Board of Directors, Audit& Supervisory Board Members
and Managing Officers

50Interview with
Outside Director

Management Framework

48 Real Estate

comfortable lifestyles long into the future.

61 Compliance

Editing Policy*1 A sustainable society is a society where environmental
preservation and effective resource use are balancedwith economic rationality and where, as a result,all people can enjoy comfortable lifestyles long into
the future.

among all living things and that we are part ofthat diverse harmony.

Financials

60 Risk Management*2 A stakeholder is any person or organization
involved in or affected by our corporate activities,
including customers, shareholders, employees,
business partners, community residents, andgovernmental organizations.

In addition to the usual financial data and information about business strategies, Nisshinbo’s Integrated Report 2017 includes an in-depth section about the Group’s environmental,social and governance (ESG) activities to provide readers with a more detailed picture of the Group’s business activities. This information highlights how the Nisshinbo Group is
striving to increase corporate value in areas such as personnel training and the environment, complementing efforts to increase value through earnings growth.

23The Nisshinbo Group’s Corporate History
From 1945 onwards, amid Japan’s post-war recovery and rapid economic growth, the Nisshinbo Group shifted its focus fromits core, founding business of textiles to automobile brakes, chemicals and other non-textile businesses. In the 1960s, theautomobile brakes business expanded, spurred by the growing popularity of cars in Japan. Nisshinbo also actively developed its
precision instruments and chemicals businesses, building new plants and adding capacity.
The yen appreciated following the Plaza Accord in 1985, forcing the Company to restructure its operations. Textile andProfileNisshinbo Holdings Inc. traces its roots back to Nisshin Cotton Spinning Co., Ltd.,
which was founded in 1907 to mass produce high-grade cotton yarn. After the war,
the Company actively started to develop its operations by moving into non-textile
businesses. Led by one of the key principles in its Corporate Philosophy – Public
Entity – Nisshinbo’s mission is to contribute to society through its business activities.

non-textile businesses also stepped up moves into overseas markets. In 1990, non-textile businesses generated more than halfof the Group’s sales for the first time.

Nishi Arai Plant begins operations as

Began production of rigid

Established Nisshinbo Automotive

Established Continental Teves Co., Ltd. (joint venture)a chemicals production facility

urethane foam in the chemical

Manufacturing Inc. (U.S.A.)(Now Continental Automotive Co., Ltd.)Friction materials division starts

products field

production of brake linings, plastics
Strategy

division begins production ofphenol-based plastics

1946

Established Nisshin
Cotton Spinning Co., Ltd.

1960
1958

1981

2000
1999

2005
Value Creation

1907

1997
Completed construction of the1944

Established Nihon Kohbunshikan Co., Ltd.,

Tatebayashi Chemicals Plant

Established Saeron Automotive

Acquired additional shares in

begins production of plastic bobbins(now the Tatebayashi Plant)

Corporation (South Korea)

New Japan Radio Co., Ltd.

Began production of friction materials

Consistent Integrity

A strong business basebuilt over time

The Five Key Functions of Business Management

Integrity. This was rigorously enforced by the Company’s second president,

Respecting the diverse cultures and

The Company’s fourth president, Takeshi Sakurada, set—L ook after capital entrusted to the company by its

Seijiro Miyajima, who began efforts to create a sincere and strong corporate

customs of the world, as well as

out Five Key Functions of Business Management, which

culture that remains part of the Group’s corporate DNA to this day.

biodiversity, we shall conduct fair andhe linked to the first principle in Nisshinbo’s Corporate

sincere business activities with pride as

Philosophy—Public Entity.

Another key principle in Nisshinbo’s Corporate Philosophy is Consistent

After his appointment as executive director in 1914, Miyajima took a

Sakurada made the decision to lead Nisshinbo into

loss to profits in the space of just six months. He also expanded the Group by

non-textile business fields, showing his foresight andactively acquiring other firms in the sector and by building new plants.

skills as a business leader.

owners—B ring together skilled people and technologies inan organization—C ombine those skills and technologies with capital
Financials

rigorous, rational approach to business management, taking the Company froma corporate citizen.

Management Framework

Committed to Consistent Integrity

to create value—G enerate profits from goods and services at the
distribution stage— R edistribute profits

45

A New Era
as an Environment and Energy Company Group

Next 2015

for the fiscal year ending March 2026

Three-year Management Plan

The Nisshinbo Group is targeting net sales of ¥1

Fiscal year ended March 2014
to fiscal year ended March 2016

trillion and ROE of 12% in the fiscal year ending

Plan objectives

the Group will expand existing businesses, create

March 2026. To achieve those long-term goals,

Regenerate and expand the electronics business

new businesses and actively conduct M&A.

Strengthen the automobile brakes business

Guided by our corporate slogan, Challenging

Improve profitability and enhance global competitiveness in each businesstowards a New Era of Technological Innovation &Expand the environmental businessSuper Smart Society, we will work to raise theGenerate synergies

presence of the Nisshinbo Group in innovation,technology, marketing and business systems.

May 2015

TOKYO SHIRTS CO., LTD. becomes a wholly owned
consolidated subsidiary

Electronics

October 2015

Three-Year Management Plan

Nanbu Plastics Co., Ltd. becomes a wholly owned
consolidated subsidiary

Fiscal year ended March 2011
to fiscal year ended March 2013

(billions of yen)
600

12

%

Value Creation

Establish unique technologies and new businesses in theenvironment and energy fields

April 2017

500

400

December 2010

November 2011

Japan Radio Co., Ltd. andNagano Japan Radio Co.,
Ltd. become consolidated
subsidiaries

TMD Friction Group S.A.
becomes a wholly owned
consolidated subsidiary

Papers business sold
October 2017

Japan Radio Co., Ltd. becomes a wholly
owned consolidated subsidiary

Management Framework300¥1trillion

Nagano Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd.
become wholly owned consolidated subsidiaries ofJapan Radio Co., Ltd.

Generate sustained growth in the environmental business

OthersNet
sales:

ROE

March 2016

Plan objectives

Automobile Brakes

Long-term
goals

Strategy

Challenge 2012
Net Sales of Nisshinbo Group

ProfileAfter adopting a holding company structure in 2009, Nisshinbo Holdings Inc. embarked
on a new era as an Environment and Energy Company group. The Company set out totransform the Group’s earnings structure by combining technologies from across theGroup to create new businesses and by actively acquiring companies through M&A
deals. Focusing on four strategic business fields – wireless communications andelectronics, automotive parts and devices, lifestyle and materials, and new energy andsmart society – Nisshinbo will continue working to create a sustainable society.

Long-term goals

April 2009

Adopted a holding
company structure

200

Financials

100

0

2010
6

2011

2012

2013

2014

2015

2016

2017

(Years ended March 31)

7

To Our Shareholders

Highlights(For the years ended March 31)(millions of yen)

2013

2014

2015

2016

(thousands of
US dollars)

2017

2017

Operating Results$4,793,400

Electronics

175,308

187,743

209,116

205,368

190,852

1,735,018

Automobile Brakes

118,849

148,699

161,887

165,037

146,062

1,327,836

Precision Instruments

24,52028,65528,60829,52560,687551,700

Chemicals

8,150

8,810

8,138

8,285

9,483

86,209Textiles

54,73654,63051,07360,12755,842507,655

Papers30,524

31,686

31,28032,58532,648296,800

Real Estate

15,367

10,567

9,246

8,358

8,084

73,491Other Businesses

23,23923,56024,41024,704

23,616214,691

Operating Income

13,394

13,175

13,744

12,6174,890

44,455Net Income Attributable to Nisshinbo Holdings Inc.

6,418

9,012

13,694

10,776

3,575

32,500Total Assets¥551,933 ¥611,311 ¥678,486 ¥651,793¥646,288$5,875,345

Equity242,623

276,865

306,938

284,472

275,753

2,506,845

Net Cash Provided by Operating Activities¥34,095¥26,075¥37,120¥39,566¥26,768$243,345

Net Cash Used in Investing Activities(10,973)(19,862)(21,271)(22,793)(31,429)(285,718)

Net Cash Provided by (Used in) Financing Activities(24,073)(2,321)(6,238)(9,044)

3,595

32,682(yen)(dollars)Financial Position

Cash Flows

Transforming
Strengths
into New Value
Targeting continued growth as a solutions provider for

Value Creation¥527,274

Strategy¥450,693 ¥494,350 ¥523,758 ¥533,989

ProfileNet Sales

today’s global society in line with our new slogan:
Challenging towards a New Era of Technological Innovation& Super Smart Society.*

Per Share
Net Income Attributable to Nisshinbo Holdings Inc.

Cash Dividends¥51.60¥80.33¥67.93¥22.52$0.20

1,198.67

1,369.78

1,634.07

1,472.26

1,444.94

13.14

15.00

15.00

15.00

30.00

30.00

0.27

Management Framework

Shareholders’ Equity¥36.74(%)

Key Ratios
Return on Assets (ROA)

1.2

1.5

2.1

1.6

0.6

Return on Equity (ROE)

3.2

4.0

5.5

4.4

1.5

Number of Employees

22,08322,052

21,387

23,05523,256

Number of Patents Approved

2,293

2,448

2,424

2,441

2,402

Greenhouse Gas Emissions per Unit of Sales (t-CO2 /million yen)

1.62

1.48

1.43

1.37

1.51

ESG Indicators
Financials* A super smart society is defined as “a society where the various needs of society are finely differentiated and met by providing
the necessary products and services in the required amounts to the people who need them when they need them, and in which all
people can receive high-quality services and live a comfortable and active life that makes allowances for their various differencessuch as age, gender, region, or language.” (Science and Technology Basic Plan, January 22, 2016).

Notes: 1.The U.S. dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥110 = US$1.
2.In the fiscal year ended March 2017, Iwao & Co., Ltd. was merged with Nisshin Toa Inc., both of which are consolidated subsidiaries. The apparel textile operationsof Iwao & Co., Ltd. included in the other businesses segment were reclassified under the textiles business segment as a result. Figures for the previous fiscal years havebeen adjusted to reflect this change.

89

strong yen, there was a steady recovery in profitability in the auto-

In the fiscal year ended March 31, 2017, net sales declined 1.3%

Performance in other business segments was largely firm.

year on year to ¥527,274 million, operating income fell 61.2% toIn the marine systems business, Japan Radio, led by subsidiarymobile brakes business, which reported operating income before

Alphatron Marine Beheer B.V., plans to actively convert global

goodwill amortization related to TMD Friction Group of ¥5,914

representative offices to full local subsidiaries and boost sales by

million, up ¥224 million year on year.

expanding its lineup of products for small and mid-size vessels such

* Effective from the fiscal year ending March 2018, the marine equipment business was
renamed the marine systems business.

as fishing boats and pleasure craft. Capturing overseas demand,

Challenging towards a new era oftechnological innovation & supersmart society

particularly in Asia, also holds the key to growth in the marine

Challenging towards a New Era of Technological Innovation & Super
Smart Society is the Nisshinbo Group’s corporate slogan for 2017.

supplier of marine systems by providing data and service solutions

Advances in technology are accelerating. Companies will fail to growreasons for the lower sales and profits.

to complement our existing operations developing and sellingand develop if they do not consistently respond to new developments

Japan Radio’s restructuring program

marine equipment. Our services will give users the ability to centrally

in the operating environment, such as smart societies and supercontrol all types of shipping data, enabling the rapid gathering andsmart societies. Our response is to think more carefully about what

resulting in a segment loss of ¥3,240 million. Earnings deteriorated

Over the last few years, Japan Radio has been implementing asharing of information on ship-to-ship and ship-to-shore positions,end-users really need from our products so that we can improve

sharply at Japan Radio Co., Ltd., the segment’s core company, due

major restructuring program that included some radical reforms,

leading to safer and more efficient shipping movements.

outcomes and the services we provide to customers. That will leadto a poor performance in the marine equipment business* amid asuch as the relocation of operations from Mitaka in Tokyo toto greater satisfaction and more rewarding experiences for ourweak shipbuilding market and a slump in the marine transportation

Nagano and the conversion of Nagano Japan Radio Co., Ltd. andcustomers, increasing the Nisshinbo Group’s competitiveness.

market. Japan Radio’s solutions and specialized equipment businessUeda Japan Radio Co., Ltd. to wholly owned subsidiaries. However,

was also affected by a cyclical decline in large disaster prevention

one reason for the deterioration in earnings this fiscal year was thesystem projects.

company’s continued high exposure to domestic public-sector

The first reason was a weak performance by our electronics
business. Segment profit in electronics declined ¥11,558 million,

The second reason was the strong yen. Shipments at New
Japan Radio Co., Ltd. increased year on year, but profits declined,

demand and to the market for large merchant vessels, reflecting
a lack of speed in executing its business strategy.

Harnessing the Group’s strengths
to develop ADAS
For the medium and long term, our main focus is on advanced

in our electronics business. Similarly, forex factors led to lower sales

domestic public-sector projects in the solutions business by actively

autonomous driving. Autonomous driving comprises three key areas

As shown by the launch of our ADAS business, which harnesses

in the automobile brakes business. Excluding the impact of thereinforcing its sales network overseas. Aiming to grow sales ofof functionality — recognition, decision-making and control. At

synergies in our electronics, automobile brakes and precisiondisaster prevention systems and other products, Japan Radio

Nisshinbo, we are focusing on devices and systems related to recog-

instruments businesses, the Nisshinbo Group’s greatest strength,

established a new joint-venture company in Indonesia in January

nition. Our goal is to develop and expand our ADAS business by

and its greatest potential, lies in its ability to bring together diverse

2017 with local partner the Warga Djaja Group, a major businessdrawing on the strengths of Japan Radio and New Japan Radio in

businesses and technologies to create new businesses. That means

conglomerate and a long-term business partner in our textiles

radar, laser, sensor and semiconductor technologies. As part of thatan optimal Groupwide approach is vital, which is dependent on

business. The joint venture has already started sales and aftermarket

approach, we will convert Japan Radio into a wholly owned consoli-internal cooperation.

service operations. We also plan to set up local subsidiaries in thedated subsidiary of Nisshinbo Holdings Inc. in October, leading toPhilippines and Vietnam.

faster and more effective decision-making and helping to accelerateof regions and business fields, synergies will not materialize if

growth in ADAS-related operations.

employees communicate only with people in their narrow businessIn a Group as diverse as Nisshinbo operating in a wide range

in various countries across Asia as they improve port infrastructure

The Nisshinbo Group has supplied high-quality parts to auto-

fields. By venturing out of their respective areas and interacting

and upgrade weather radar and disaster prevention systems. The

makers and Tier 1 parts suppliers in Japan and overseas for manywith employees in other fields, our employees will help to create

Japanese government is also stepping up its support in this area,

years through its automobile brakes and precision instruments

new businesses and increase the Group’s corporate value.

including the creation of a new project team by the Ministry ofbusinesses. We aim to create a new growth business by combining

Internal Affairs and Communications to promote public-private

the trust we have built up through those business relationships withreinforcing manufacturing technology and upgrading IT infrastruc-

sector partnerships. Our disaster prevention systems, which havethe technological expertise in our electronics business.

ture. We are also creating more opportunities for interaction

captured a large share of the domestic market, are already widely

It may take several years before we can launch products thatManagement Framework

Japan Radio is now working to end its dependence on

Value Creation

Strengthening cooperation acrossthe Group

mainly due to forex factors, which had a large impact on earnings

Amid continued economic growth, we forecast rising demand

driving assistance systems (ADAS) and other areas related toStrategysystems business. We aim to become the world’s leading integrated

Inc. declined 66.8% to ¥3,575 million. There were two main

¥4,890 million and net income attributable to Nisshinbo Holdings

ProfileFinancial results for the fiscal year
ended March 2017

Specific examples include efforts to optimize the Group, such as

between different R&D teams, enhancing our ability to identify

contribute to earnings, but we are confident our ADAS andpromising business themes, and encouraging young employees toGoing forward, we plan to accelerate growth in this field by focusing

autonomous driving-related business can become a key part ofmeet with counterparts across the Group to learn from each otheron direct sales and the provision of maintenance services.

the Group in the future.

and stimulate exchanges of ideas. We are rolling out a range ofFinancials

used in Asia, where they have won strong support from users.

other initiatives as well: developing the ADAS and automotive
business, adopting a shared services model for Group businesses,

1011

promoting information sharing between Group companies that arein the same country but in different business fields, and improving
the efficiency of back office operations. All these initiatives areis in line with that strategy, and we intend to continue implementing our growth strategy backed up by similar decisions to optimize
the Group based on a long-term perspective. We will work toboost profitability by improving asset efficiency, while taking into

fiscal year ending March 2026, although we are putting moreaccount the strength of the Group’s finances and maintaining thegenerating synergies with companies that have been acquired by orimportance on profit margins than sales. We envision sales growthshareholders’ equity ratio at 30–40%.

merged with the Nisshinbo Group. Nanbu Plastics Co., Ltd., whichof ¥250 billion from M&A deals and another ¥250 billion fromWe also plan to pay a stable and continuous dividend tojoined the Group in the previous fiscal year, has a strong position in

growth in existing businesses and the creation of new businesses

shareholders. When the Group has sufficient internal reserves tomolded plastic parts for medical equipment, as well as automotive

driven by successes in R&D. Again, cooperation across the Groupfund investment in growth, such as R&D, increased capital investment

parts. We plan to identify more business opportunities by combin-

will be key to generating synergies that support sales growth. In theand M&A deals, we will endeavor to return profits to shareholders

ing the company’s expertise in plastics with our manufacturing

period through to March 2026, we intend to invest around ¥400

through dividend hikes and share buybacks after considering factors

technologies in microwave products and medical ultrasoundbillion in our business to drive growth. By stepping up cash flowsuch as financial stability.

devices in the electronics business.

management, we aim to exceed our current estimate for annual

After our acquisition of TMD, we booked annual goodwill

operating cash flow of ¥40–50 billion, providing more funds toamortization costs of nearly ¥6 billion for five years. The fiscal year

invest in growth.

ended March 2017 was the final year of that amortization schedule.

Groupwide cooperation also has a crucial to role to play in

Our aim is to use M&A deals, existing businesses and R&D togenerate new synergies and increase the number of new businesses

Strategy

Our long-term goals are sales of ¥1 trillion and ROE of 12% in theProfilegrounded in the Group’s corporate DNA.

Our goals for the fiscal year
ending March 2026

to drive Nisshinbo’s exponential growth. To support that, we will

Our policy is to channel management resources into automotive

During that period, TMD implemented a restructuring program that

accelerate efforts to create a corporate culture that fosters diverseand super smart society-related businesses, which offer good pros-

saw it consolidate, transfer and expand certain manufacturing sites,

thinking and creates groundbreaking new business fields.

pects for growth. The disposal of our papers business in April 2017leading to an improvement in profitability. TMD is also generating

nance reforms as part of our efforts to become an even bettersynergies with Nisshinbo Brake Inc. in areas such as joint raw mate-global company. The Nomination Committee and Remuneration

rial procurement and workplace safety. With our global Groupwide

Committee, which were established voluntarily and largely comprisestrategy taking shape, the fiscal year ending March 2018 is set tooutside directors, started their activities during the fiscal year ended

be a major step forward for the Nisshinbo Group.

March 2017. Also, in June 2017, we put even greater emphasis

Value Creation

Increasing the Group’s Corporate Value

Meanwhile, we are continuing to implement corporate gover-on transparency by abolishing an internal system that allowed

as an Environment and Energy Company group

CSR

AI

Corporate GovernanceTechnology & Marketing

Drive Productivity and Performance,
Inspire Creativity and Innovation

Diversity

Environmental Management

Communication

Cash Flow Management

Big Data

IoT

Society 5.0

previous Presidents and Chairmen to stay on at the Company in

Our vision for the Nisshinbo Groupan advisory role.

Our vision is to transform Nisshinbo into an Environment andincreasingly uncertain. Against that backdrop, we will strive to make

Energy Company group that provides solutions for today’s global

an even greater contribution to global society in line with our visionsociety. To enhance the Group’s presence, we need to provide new

for the Group — in the short term, medium term and long term.

Geopolitical risk is rising worldwide and the business outlook isManagement Framework

Improve the quality of the Group’s
organizational culture

New Era ofTechnological Innovation& Super Smart Society

outcomes and services that society needs, supported by ourstrengths in manufacturing. We have identified seven key areas

June 2017

where we believe Nisshinbo can create new value: security, safety,
disaster prevention, health, comfort, convenience and smart society.
By reinforcing cooperation across the Group, every one of our

Global Business Management

employees can help create a deep-thinking corporate culture
backed up by a connected, optimized organization.

Corporate Philosophy

Business Conduct Guidelines
Compliance
Environment
Human Rights

12

Workplace
Product Safety
Procurement

Long-term Goals
M&A

Business Portfolio

ROE, ROA

Shareholder Returns

Fiscal year ending March 31, 2026

Net sales:
ROE:

Improve earnings, grow business volume¥1trillion

12%

The Group’s business fields and classifications may change overthe next ten years. Autonomous driving could develop into smart
mobility or smart transportation covering ships, aircraft and all areasof land, sea and air transport. As changes emerge, we will employ

Masaya Kawata

flexible approaches and channel business resources into promising

President

Financials

Public Entity,
Consistent Integrity,
Innovation

strategic areas to help realize a super smart society.

13

The Nisshinbo Group’s Financial Strategy

Our subsidiary in Shanghai carries out the same operations for localof ¥1 trillion and ROE of more than 12% in thesubsidiaries in China, while our subsidiary in Singapore is responsible

Executive Managing Officer
Chief of Business Support Center

fiscal year ending March 2026. To achieve thosefor cash pooling for subsidiaries in the ASEAN region. In other

Procuring funds to achieve ourlong-term goals

regions, the Business Support Center at Nisshinbo Head Officegoals, we will use capital investment to growcarefully monitors the situation, using inter-company loans to balance

To achieve our long-term goals, we envision sales growth of ¥250

existing businesses, invest in R&D to create new

cash surpluses and deficits.

billion from M&A deals and another ¥250 billion from growth inexisting businesses and the creation of new businesses built on

businesses and advance strategic M&A deals.
We are implementing the following financial strategy to secure funds in support of those efforts.

successes in R&D. During the period covered by our long-term

Optimizing the business portfolio

goals, we plan to invest a total of roughly ¥400 billion to drive

Increasing return on sales (ROS) is the most important factor inof approximately ¥250 billion. Over the whole period, capital

improving return on equity (ROE).

investment should be fully offset by depreciation costs.

growth, including M&A deals, which are likely to require funding

We intend to use cash generated by existing businesses tocover about 80% of the ¥250 billion in planned M&A spending.

channeling management resources into promising growth areas,

The Group’s real estate business is set to play a key role here by
redeveloping former business sites, leasing large commercial facili-

Promoting cash flow management

Going forward, we will continue to implement our growth strategy

ties and selling housing lots in partnership with major real estate

The Nisshinbo Group is targeting a consolidated dividend payout

The Nisshinbo Group is using cash flow management to maximize

while also boosting capital efficiency, in line with our goal ofdevelopers to generate stable cash flow. We plan to procure theratio of roughly 30% through stable and consistent dividends. For

funds from business earnings. Specifically, we have set working

optimizing the Group’s business portfolio.

remaining 20% of required funds through borrowings, while ensur-

the fiscal year ended March 2017, we paid an annual dividend of

capital targets for each business and subsidiary, covering areas such

The Nisshinbo Group closely monitors profitability at individual¥30 per share, the same as the previous fiscal year. Going forward,

as balance sheet inventories and receivables. Those targets are usedbusinesses in each business segment. When a business posts three

we are committed to paying a base-level dividend of ¥30 per share.

to monitor operating results based on a PDCA cycle.

successive fiscal years of losses, the management team begins

In line with the Group’s Corporate Governance Policy, we regularly

ing a stable and robust financial position for the Group.
The Nisshinbo Group has a number of strategic shareholdings.
assess the purpose and economic rationale for holding those shares.

Domestic subsidiaries channel their funds to Nisshinbo Holdings Inc.,

new investment projects are analyzed by relevant business divisions

The results of the assessments are reported to the Board of Directors,

deals, we will endeavor to return profits to shareholders throughwhich minimizes the amount of idle excess funds in the Group by

and the Corporate Strategy Center, as well as by the Business

which decides whether to retain or dispose the shares. Through this

dividend hikes and share buybacks after taking into account thetransferring surplus cash to businesses with funding requirements.

Support Center, which develops feasibility studies examining

process, we have been steadily selling cross shareholdings andthe appropriate level of investment returns based on fundstrategic shareholdings.

Group’s financial stability.

procurement strategy.
The Nisshinbo Group is currently considering whether to adopt

Dividends, Share Buybacks and Total Shareholder Return Ratio(billions of yen)
25

Share Buybacks (left)(%)

Dividends (left)

500

Total Shareholder Return Ratio (right)
400
20

300

Management Framework

discussions on whether to continue with the business. Potential

in growth, such as R&D, increased capital investment and M&A

We have also introduced a cash management system (CMS).

Value Creation

Shareholder return policy

Strategy

In the fiscal year ended March 2017, we sold the Nisshinbo
Group’s papers business. This move was in line with our policy ofsuch as automotive and super smart society-related businesses.

When the Group has sufficient internal reserves to fund investment

ProfileThe Nisshinbo Group’s long-term goals are sales
Takayoshi Okugawa

The shareholders’ equity ratio was 35.5% as of March 31,2017 and the balance of interest-bearing debt stood at aroundDecember as a unified fiscal year-end for the whole Group, which¥110 billion as of May 31, 2017. To achieve our ROE target of at

would make it easier to monitor and compare the performance ofleast 12% in the fiscal year ending March 2026, we do not envis-

businesses across the Group.

age increasing the Company’s financial leverage to an excessive
level. We plan to maintain the shareholders’ equity ratio at around30-40% while continuing to take into account the Group’s financial
stability. We may issue corporate bonds as needed, in line with that

200

15

100

is also an important factor in reducing funding costs when bonds
are issued.

Financials

010

policy. We recognize that improving the Group’s earnings capabilities

5

0

07.3

14

08.3

09.3

10.3

11.3

12.3

13.3

14.3

15.3

16.3

Note: Total shareholder return ratio not shown for the fiscal year ended March 2009 due to losses in that year.

17.3

15

The Nisshinbo Group’s Shareholder Value
Dividend per Share / Dividend Yield
Dividend per share (left)

ROE and Shareholders’ Equity

Dividend yield (right)

Shareholders’ equity (left)

(yen)

(%)

30

30

30

2.6

25

3.0

30

177.4

2.5

1.6
15

1.4

10

10

1.1

1.1

1.6

1.6

15

15

15
1.0

1.5

15

150

189.6

5.5
5.0

4.4

4.0
3.2

1.5

15

2.5

100

1.5

15
1.0

10

7

(%)
7.5

190.8

6.1

1.7

15

186.3

5.1

5.1

2.0

1.9

15

171.5

2.5

188.4

184.6

178.6

194.7

Profile15

1.9

ROE (right)

190.8

2.7

2.3
20

(billions of yen)
200

1.0

50

5

0.5

0

0

0

–0.6

05.3

06.3

07.3

08.3

09.3

10.3

11.3

12.3

13.3

14.3

15.3

16.3

17.3

08.3

18.3

(As of March 31)

2014

2013

P/E

250

P/B

18.0 x
0.6 x

12.3

13.3

14.3

15.3

16.3

17.3

Share
price

¥882

P/E

17.1 x
0.6 x

P/B

2015
Share
price

¥1,153

P/E

14.4 x
0.7 x

P/B

2016

2017

Share
price

¥1,195

P/E

17.6 x
0.8 x

P/B

Share
price

¥1,113

P/E

49.4 x
0.8 x

P/B

Stock Basic Information
Stock market
listings

Number of shares held
(thousand shares)

Shareholding ratio(%)

The Master Trust Bank of Japan, Ltd.

24,225

13.55

Japan Trustee Services Bank, Ltd.

19,451

10.88

Shareholder nameElectrical equipment

Fukoku Mutual Life Insurance Company

12,000

6.71

Stock code

3105

Trust & Custody Services Bank, Ltd.

7,302

4.08

Number of shares
per trading unit

100 shares

Teijin Ltd.

6,028

3.37

Business year

April 1 to March 31

Shikoku Chemicals Corporation

2,600

1.45

Shareholder record
date for dividends

March 31 (September 30 for
interim dividend)

Mizuho Bank, Ltd.

2,300

1.29

The Japan Wool Textile Co., Ltd.

2,282

1.28

THE BANK OF NEW YORK MELLON 140044

2,188

1.22

Goldman Sachs Japan Co., Ltd.

2,000

1.12

Total shares issued

178,798,939 shares(As of March 31, 2017)

Treasury stock

20,013,820 shares(As of March 31, 2017)Management Framework

150

Tokyo Stock Exchange, First Section;
Nagoya Stock Exchange, First Section;
Fukuoka Stock Exchange;
Sapporo Stock Exchange(As of March 31, 2017)

Sector200

Total Shareholder Return (TSR)

Major Shareholders

Value Creation

(%)

11.3

Stock and Shareholder Information

Share Price, P/E, P/B and TSR

¥660

10.3

(Forecast)

Note: Dividend yield = annual dividend ÷ share price at previous fiscal year-end

Share
price

09.3

Strategy

04.3

–2.5

0

Number and Composition of Shareholders(people)25,000(%)
50

100
20,00040

38.6
15,00030

13,894

50

TOPIX

20

Financials

17.6

10,000Nisshinbo

16.2
13.0

5,000

10

11.2
0

12.3 12.6 12.9 12.12 13.3 13.6 13.9 13.12 14.3 14.6 14.9 14.12 15.3 15.6 15.9 15.12 16.3
Notes: 1. P/E = year-end share price ÷ net income per share (actual)
2. Total shareholder return = share price appreciation + dividends paid

16

3.4

0

16.6

16.9 16.12 17.3

08.3

09.3

10.3

11.3

12.3

13.3

No. of shareholders (left)
Treasury stock (right)
Financial institutions (right)
Individuals and others (right)
Securities firms (right)

14.3

15.3

Foreign companies (right)

16.3

0

17.3

Other Japanese corporations (right)

17

The Nisshinbo Group’s Business Model

Creating new value by mixing andmatching technologies and businesses
Since the earliest days of the Company, the Nisshinbo Group has grown and developed by constantly mixing andmatching technologies and businesses. Our business model is based on a process of creating new businesses in tune
with the times by leveraging our existing portfolio of diverse businesses and targeting resources on strategic fields.

Wireless
communications

Semiconductors

Brake pads

ProfileADAS
Components

Electronics
Strategy

ABS/EBS
Continental
Automotive** Equity-method
affiliate

Value Creation

Precision parts
processing

Automotiveparts

Machinery andprocessing
technologies

Management Framework

Textile spinning technologies

Smart Society

Fuel cellcomponents

Plastic molding

Chemical fibers

18

Chemicals

Financials

Smart Textiles
APOLLOCOT

19

The Nisshinbo Group’s Management Capital

The Nisshinbo Group aims to create corporate value by

Human CapitalIntellectual Capital

Natural Capital

appropriately investing various management capital inbusiness processes such as research and development,

Number of employeesmaterial procurement, manufacturing and sales

 verage for Japanese manufacturing industryANisshinbo Group (Japan)
Nisshinbo Group (overseas)

activities, rather than simply increasing financial capital(people)(%)

25,000

1.2

Number of patents
approvedJapan

Research anddevelopment
expenses

Greenhouse gas
emissions per unitof salesWater usage per unitof salesEnergy consumption
per unit of sales(billions of yen)(t-CO2/million yen)(m3/million yen)

(GJ/million yen)Overseas

2,500

25

2,000

20

25

60

1.6

Profilethrough its operations.

Frequency of injuries
with lost work*

Underpinning this approach is the Corporate
Philosophy of the Nisshinbo Group (see page 3 for more

20,000details). Based on this philosophy, the Business Conduct
Guidelines of the Nisshinbo Group define standards of

40
1,500

compliance, fair trade, information security,15
0.8

10,000

1,000

10

10
20

0.3

0.4

5,000

500

0

environmental preservation, human rights, safety and

5

0

0

15.3 16.3 17.3

Strategy

Procurement Basic Policy, which covers seven areas:

15

0.6

workplace safety, product safety and procurement. We
have also formulated the Nisshinbo Group CSR

1.2

15,000

behavior expected of its executives and employees in six
areas: compliance, the environment, human rights,

20

0.9

15.3 16.3 17.3

50

15.3 16.3 17.3

0

0

0

15.3 16.3 17.3

15.3 16.3 17.3

15.3 16.3 17.3

15.3 16.3 17.3

* Frequency of Injuries with lost work
= (number of employees injured
with lost work ÷ aggregate numberof working hours x 1 million)

health, and quality and safety. Based on this policy, we

Value Creation

work with suppliers to implement concrete CSR
initiatives across the entire supply chain.

MANUFACTURING

DISTRIBUTION

SALESWe have formulated the Nisshinbo Group CSR Procurement Basic Policy,

In workplace safety the Nisshinbo Group’s conduct guidelines place top

The Nisshinbo Group is restructuring its logistics systems and improving

The Nisshinbo Group is working to enhance product safety and quality towhich sets out our basic stance on CSR initiatives across the entire

priority on safety in its business activities. Based on those guidelines, we

distribution efficiency. TOKYO SHIRTS CO., LTD. has outsourced all its

increase customer satisfaction. Japan Radio Co., Ltd. gathers information

supply chain.

strive to ensure a safe and agreeable workplace environment for all our

logistics operations to a major distribution company under a 3PL*

on any product failures and adds it to a product database. The

In the fiscal year ending March 2018, we also formulated CSR

employees. In the fiscal year ended March 2017, Nisshinbo Brake Inc.

contract. The company’s logistics systems have been integrated into theinformation is used widely by the company to improve new and existing

Procurement Guidelines for Group companies to support steady progressconducted safety training at its overseas business sites using hands-on

distribution firm’s infrastructure, leading to faster receiving, shipping anddesigns. To ensure the knowledge and lessons learned are passed on to

in CSR procurement, which has now been added to the list of KPIs fortraining equipment. The aim of the program, which was also

inventory management.

future generations of product designers, Japan Radio has set out rules

Group companies. Going forward, we plan to work closely with our

implemented at the company’s domestic sites in the fiscal year ended

suppliers to implement CSR procurement.

March 2016, is to raise awareness of safety issues by giving eachManagement Framework

MATERIAL PROCUREMENT

Financials

employee simulated first-hand experiences of dangers in the workplace.

* Third-party logistics: A service provided by third-party distribution companies that offer
cargo owners comprehensive and innovative outsourced logistics solutions covering
product ordering, inventory management and IT systems.

about registering information in the database and when to use it during
the design stage. The chemicals business introduced a new sales support
system in November 2016. The system allows us to rapidly gather productquality data and customer feedback and share it with all divisions,
ultimately leading to improvements in customer satisfaction.

20

21

Feature:

01

Increasing Valuein the Automobile Brakes Business— Discussion with Senior Management

ProfileThe first NISTMD Kaizen Activities Conference was held at the Tatebayashi Plant in April 2017.

John Hudson

ChairmanNisshinbo Brake Inc.

President and Group CEOTMD Friction GroupTo what extent have TMD and NISB integrated
their businesses?
Koji Nishihara: Even before we completed the acquisition of TMD

business planning. We combined the best parts from both compa-

in November 2011, we were talking to their management teamnies to create a new NISB-TMD long-range planning process, in theabout our corporate mission, values and vision. We knew it wassame way that we shared understanding and knowledge in thevital to create a common set of principles in order to bring together

joint development of next-generation, copper-free materials.

two companies with completely different backgrounds. Of course,
it wasn’t all plain sailing. It took time to work out how to combine

Koji Nishihara: After the merger, our first step was to create an

our Japanese approach with TMD’s Western business culture.

Opportunity Team. TMD and NISB each selected several experts to

The main principles of the Nisshinbo Group’s Corporatejoin the team. Together they embarked on a global tour of TMD andKoji Nishihara: In the fiscal year ended March 2013, the first year

Philosophy are Public Entity, Consistent Integrity and Innovation.

NISB business sites to help them kick-start the process of integration.

shareholder, TMD had around 12 years in the private equity investor

after TMD became part of the Nisshinbo Group, the automobile

To help TMD employees understand our philosophy, we introduced

In R&D, we developed a common set of green guidelines,

community, which tends to be focused more on the next one tobrakes business reported an operating loss of ¥4.3 billion after

PASSION, a catchword from a book written by Kazuo Inamori,including environmental standards on the type of base materials we

two years. It was very good coming back under the ownership ofgoodwill amortization costs. In the most recent fiscal year, profits

founder of Kyocera Corporation.

should and shouldn’t use in our future friction materials.

a strategic investor. With the Nisshinbo Group, we now have thewere almost back to breakeven. That ¥4.3 billion improvement insupport of a large organization, and together with our Nisshinbo

operating income over the last three years was driven by profits ofJohn Hudson: PASSION stands for Profit, Ambition, Sincerity,

progress, we established a joint team to find ongoing cost savings

Brake (NISB) colleagues, we’re able to look at a much longer time-¥3.0 billion from TMD and profits of ¥2.5 billion from NISB, partly

Strength, Innovation, Optimism and Never giving up. We havein procurement.

frame of five to seven years, and sometimes 10 years or longer,

offset by an increase of ¥1.2 billion in goodwill due to a drop in thecreated a related pamphlet and distributed it to all TMD employees

when developing strategies for growing the business.

value of the yen. That illustrates just how important TMD has been

to encourage them to think about the Nisshinbo Group’s corporate

in turning round the segment’s earnings in recent years.

principles.

Management Framework

John Hudson: Before Nisshinbo Holdings became our principal

The benefits of that approach are numerous. The employees

Value Creation

It’s now been five years since TMD joined the Nisshinbo Group.
What have your companies gained from the relationship so far?

Strategy

Koji Nishihara

In procurement, probably the easiest area to make shared

We have taken several steps to integrate logistics operations,
including relocating TMD Japan to NISB’s Tatebayashi Plant.
We also created the Global Management Team (GMT),

feel part of a much larger family, and that’s important when we

NISB made its first move into overseas markets in the lateexplain our long-term vision to them. We’ve been able to discuss

1990s. After building several plants overseas, NISB appeared to beover the last five years is that both sides have identified processes

Saeron Automotive Corporation (SAC) in Korea, and other key

openly with our NISB colleagues about common product develop-

transforming itself into a more global company. But once we started

and approaches they would like to adopt from each other. That

individuals. The GMT is a forum to share common challenges andment projects and share ideas and approaches on how to develop

working with TMD, it became clear that our overseas operations

sharing has highlighted different skills and different strengths that

discuss and decide the strategic direction of the business.

next-generation manufacturing technology.

were merely an extension of our domestic business, retaining aboth parties can benefit from. To give an example, TMD and NISB

strong Japanese business culture. With its different customers,

took different approaches to strategic planning and long-term

One of the really positive aspects of the discussions we’ve hadcomprising myself, John Hudson, Seo In-Seok, who is President of

Financials

origins and business approaches, TMD gave us a valuable insight
into how to make NISB a truly global company.

22

23

Koji Nishihara: One German employee from TMD and a Korean

We’re installing next-generation manufacturing technology atin technology for both Brazil and Germany, in line with our agreed

employee from SAC currently work with us at NISB head office.

both our new sites in Brazil and Germany. That should generate

We are also about to launch a joint CSR training program for TMD

significant benefits, as the new technology will help us reduce

roadmap for next-generation manufacturing.

and NISB personnel, and every year we hold global meetings forheadcount in manufacturing processes. We’re bringing in the NISB

turing in terms of both unit cost and quality. Our employees will

each function in our operations, such as R&D, quality assurance

philosophy on raw materials storage, raw materials handling, andalso have the opportunity to learn new skills. More computer andand manufacturing technology.

raw materials mixing as part of efforts to further improve the quality

IT technology will be needed to automate the equipment but alsoof our products. We’re making big investments and taking big steps

to carry out online quality control checks.

So, there are big improvements in the pipeline for manufac-

John Hudson: And we do this also for HR and IT, so nearly all of
the functions have regular meetings. Inside TMD, we hold a number
conference and so on, and we invite NISB colleagues to attend.
NISB itself has similar conferences, and we send people from TMD

What steps will you take to deepen cooperation
between TMD and NISB?

Profileof international conferences. We have an HR conference, an R&D

to participate. It’s all part of a learning process to understand eachJohn Hudson: I think one of the most important aspects of theother better, but it also helps us develop the next generation of

Koji Nishihara: The most important thing is to maintain momen-

Koji Nishihara: The emergence of regenerative brake systems* andproducts and manufacturing technology.

tum in existing areas of cooperation. After studying numerous

automatic brake systems could lead to significant changes in our

M&A deals, I’m convinced that basic business mergers are not thebusiness. In the face of change, the most important thing we need

GMT is that it allows us to sit in the same room together and talk
Koji Nishihara: In 2016, we launched a new project called Mission

best way to ensure the Japanese approach to manufacturing takes

to remember is that we have to leverage our technologies andlong-term working relationship inside the NISB-TMD organization.

Zero, Step by Step to drive improvements across all business sites

root across a global organization. In my view, the easiest way toproblem-solving capabilities to keep our customers happy. We will

Without that forum, I think we’d lose a lot of opportunities.

operated by TMD, NISB and SAC.

integrate two business entities is to retain the best parts of eachenhance those strengths while also adding capacity and building

company and gradually increase the scope of cooperation. However,networks to ensure our global customers worldwide are satisfied.

We also run cultural awareness training sessions. Our organization is global, spanning Japan, Korea, Europe, China, Brazil, andJohn Hudson: The goal is to reduce the accident rate to zero andmanagement structures will, eventually, need to be combined.

Mexico, all home to different cultures. We have a lot of interna-quality issues to zero. At every business site in the NISB-TMD world,

We plan to do this but the timeframe has not been finalized yet.

tional business people in senior management roles at TMD, which

we’ve been running Kaizen improvement projects. Some of them are

has helped us support the Nisshinbo Group in its desire to become

focused on safety, some on quality assurance, and others on effi-

John Hudson: I think there are some areas where we’ve alreadya more international business. But we still need to keep reminding

ciency in the factory. Drawing on the best of those Kaizen projects,

made good progress. For example, in the independent aftermarket,

our people that there are different cultures, as it’s easy for them to

we invite about 20 people from Kaizen teams across TMD to attend a

we’ve agreed that the TMD independent aftermarket team will growautomatically revert to what they understand and remember. So,

joint event – this year it was in Tatebayashi. We then select the best

the business for NISB-TMD. So that’s already under way. In sourcing,

we have to keep talking. We have to keep meeting. And by doing

Kaizen project in the whole NISB-TMD organization. But the greatest

we have set up a project team to use the skills and processes within

that, we steadily build a unified team approach.

reward from bringing the teams together is that they start to under-

the TMD world and spread them across the whole organization.

Strategy

face to face about common topics. It’s part of how we build theJohn Hudson: I think if we can keep communicating, keep thelearning process going, and keep exchanging personnel, then we
have a very strong future together.

Value Creation* Hybrid and electrical vehicles are fitted with regenerative brake systems. Energy generated
during braking is recovered as electrical energy, which is used to power the vehicle.
Friction materials used in hybrid systems that use a combination of regenerative andconventional hydraulic brake systems are likely to last longer.

stand what colleagues in Tatebayashi have been doing comparedwith their colleagues in Queretaro in Mexico, or colleagues in Romania, helping to share best practice around the group.

Management Framework

What progress have you made in realigning manufacturingin Germany and Brazil?
In Germany, we have two factories less than 75 kilometers

Brazil, we have a factory that is 50 years old. It’s in the middle of aaway from each other supplying original equipment (OE) parts forvery desirable residential area with narrow streets, which makes it

passenger car automakers. For a number of reasons, we decided tohard to bring in raw materials and ship finished goods. Local people

merge them into a single site. One site, like our existing Brazilian

also don’t want to have a factory next door. So, with support fromfactory, is close to a residential area, but the main reason is to

Nisshinbo Holdings, we set up a project to relocate the factory to

reduce costs, as running two factories is more expensive than one

a dedicated industrial area around 20 kilometers away. We plan tofactory with a larger output. We’ve started building new facilities

complete the move by the end of 2017. The existing site willat our site in Essen and we plan to complete the project by the end

undergo remediation before being sold.

of 2018.

Financials

24

John Hudson: Both projects are on time and progressing well. In

25

Feature:

02

ADAS—A Promising New Field for the Nisshinbo Group
Based on our passion for innovation — an integral part of the Nisshinbo Group’s Corporate Philosophy —New Japan Radio making clear
progress in the automotive fieldparts in new application fields, such as system control, powertrain
and power supplies for onboard cameras. The company’s sales ofautomotive electronic parts have doubled over the last few years,

New Japan Radio has been focusing on the promising field of

reaching around ¥10 billion in the fiscal year ended March 2017.

automotive electronics for some time. Previous growth categories

New Japan Radio also established a new business site inleads to a safer and more secure society for everyone. We are now harnessing innovation in the automotive

included power ICs for car navigation and car audio systems. As

Frankfurt and secured VDA 6.3 certification, a Germany quality

part of a joint Nisshinbo Group development team, the company

management system standard, in the fiscal year ended March 2017.

has built closer links with automakers and Tier 1 parts suppliers.

The company is now ready to start expanding its automotive parts

Those efforts are now translating into higher sales of automotive

business in Europe.

field to develop new products for advanced driving assistance systems (ADAS).

of New Japan Radio Co., Ltd., the Nisshinbo Group is well-positioned

Profilewe are committed to contributing to society through our business activities, aiming to provide value that

JRC Group’s Business Expansion Roadmap

JRC product launches

to address those needs. To maximize the value offered by both companies, we are leveraging the relationships built up by the automorapidly stepping up research and development activities, aiming tobecome a supplier of key components in the coming ADAS era.

and radars to detect obstacles. Japan Radio’s radar technology istechnology for automotive applications.

Using in-house technology to help
solve social issues

next-generation transport support systems, such as 11th generation

and radar-based traffic counters (poor weather and glare affects thechallenges faced by society by channeling management resources

accuracy of current camera-based systems). Japan’s network of

into fields where it can make society safer and more secure. The

expressways already has various infrastructure in place to support

automotive field is one area where we are already making a differ-those systems. Consequently, compared with other countries, Japanence by supplying copper-free brake friction materials and parts

is well-placed to lead the global push towards autonomous driving

for fuel cell vehicles (carbon bipolar plates). We are now moving

on expressways.
The global market for ADAS is projected to reach ¥1 trillion in
the 2020s. Based on that outlook, we see the potential for sales

Autonomous escaperoute guidancefor disasters

Area monitoring radar
Ultra-sound proximity
sensors< Semi-autonomous
driving >Roadside ETC 2.0 devices made byother companies

Information
provision system

2015
2015

Multi-mode
communication
systemArea monitoring radar
Ultra-sound proximity
sensors

2020
Automatic brake systems

2030
Semi-autonomous

Japan Radio, along with a Tier 1 Japanese automotive parts supplier,ing performance during testing.

helped to develop the world’s first GPS device for car navigation sys-

In ADAS, vehicles need to recognize their surroundings, and radar

tems. Under its JRC brand, the company also has a large share of theis better-suited than cameras to that role because of excellent distance

ETC market for motorbikes and the top share in the ETC market forperception and an ability to operate in poor weather and detect obsta-

imported cars.

cles. Japan Radio will leverage its technologies and the Nisshinbo

Japan Radio’s 11th generation GPS receiver unit, due for release inGroup’s close links with automakers and Tier 1 suppliers to develop its

worth tens of billions of yen for each of the Group’s ADAS-related

2018, achieves a step-change in positioning accuracy by reducing theThat trend is also spreading to the automotive field, where companies

products from the late 2020s onward. Electronics companies are

margin of error from meters down to centimeters. The improved device

are pushing ahead with the development of the connected car andcompeting aggressively to develop ADAS products, but we believe

is likely to play a key role in autonomous control for construction

the field of autonomous

autonomous driving systems that can automatically perceive their

the Nisshinbo Group can be one of the leaders in the field bymachinery, agricultural machinery and a wide range of other modes ofdriving has only just begun.

harnessing its technologies and existing user base.

transport, as well as passenger cars.

precise than ever before.
Using the wireless communication and sensing technologies ofJapan Radio Co., Ltd. and the electronic device fabrication technology

Meanwhile, Japan Radio’s radar technology for ships, weather
observation and aircraft was developed from a completely different
perspective to the approach used by conventional automotive parts
suppliers. Our prototype automotive radar device is highly regarded by
our Tier 1 supplier partner, which was surprised by the radar’s outstand-

ADAS business going forward.
Nisshinbo’s work in

Financials

require large numbers of sensors and radars, which have to be more

Fully autonomous

Development of autonomous driving

The internet of things (IoT) is an emerging trend in society.

surroundings, make decisions and control the vehicle. Those systems

Onboard devices

Management Framework

Group is working to help solve environmental issues and other< Fully autonomous
driving >2020

receivers only achieve meter-level accuracy), ultrasound sensors,radars to detect cars travelling in the wrong direction on expressways,

communication technology and electronic parts fabrication.

First step tomarket entry

GPS receivers with centimeter-level positioning accuracy (current

As an Environment and Energy Company group, the Nisshinbo

into the field of ADAS by combining our strengths in wireless

26

Japan Radio is also working on other development projects forTransport
infrastructure
platform

Value Creation

Tier 1 automotive parts suppliers in Europe to adapt and launch ourIntegrated withdisaster prevention
systems

Transport infrastructure
platform
2030

Localized
information provisionhighly regarded in the industry and we have teamed up with one< Linked to disasterprevention systems >Strategy

Most ADAS currently rely on a combination of high-precision cameras

Roadside devices

Expressways

Japan Radio’s radar and sensing
technologies hold the key to ADAS

General roads

Senior Executive Managing Officer
Chief of Corporate Strategy Centerbile brakes business with automakers and Tier 1 parts suppliers andDevelopment of autonomous transport infrastructure

Masahiro Murakami

Kinji Kato
Executive Officer
Communications Products
Division
Japan Radio Co., Ltd.

27

Feature:

03

The Nisshinbo Group’s Human Resources Strategy
Based on the idea that people are vital to the success of companies, the Nisshinbo Group is training andenhancing its human resources to support its business operations. We are currently implementing our long-termgoals, targeting net sales of ¥1 trillion and ROE of more than 12% in the fiscal year ending March 2026. To

As a growing company planning to launch many new businesses

our domestic operations, and overseas subsidiaries are giving locallyin the near future as part of its business strategy, we believe it ishired employees greater responsibility, including senior management

vital to ensure we have people who can develop and expand thosepositions. To drive Nisshinbo’s development as a global company,

new businesses. One of the key roles of Nisshinbo Holdings Inc. is

we need to step up cooperation between management teams at all

to put in place mechanisms that support the systematic development

our companies to improve the Group’s ability to expand overseas.

of the Group’s human resources.

achieve those targets, we need to systematically support the development of human resources, particularly
the people who manage our business. The key elements of our strategy are: (1) cultivate the next generation

In April 2014, Keidanren, the Japan Business Federation, unveiled

services model for the Group.

Systematically cultivating the next
generation of business leaders

Improving communication
between businesses

an Action Plan on Women’s Active Participation in the Workforce.

We believe a dynamic organization is vital to drive the Company’s

In line with the goals of this plan, we announced our own voluntary

growth. Before we adopted the holding company system in 2009,

action plan in December 2014 to promote women to leadershipcommunication between different departments and divisions was

positions. Under our plan, which has an end-date of 2020, we aim

healthy. However, the holding company system led to the creation

to (1) promote women to director positions, (2) triple the number ofof separate operating companies, reducing opportunities for thefemale managers compared with the present level, and (3) increaseexchange of ideas between employees at mid-Level manager andthe recruitment ratio for new female graduates to 40% for clericallower levels. To address that issue, the Business Development Divi-Managing Officer
Human Resources andAdministration Service Department
Diversity Development
Department

General training programs are separated into streams that canpositions and to 20% for technical positions. In line with this plan,sion and the Human Resources and Administration Service Depart-

eventually lead to promotion to mid-Level manager, section headGroup companies have also developed general business action

ment started running workshops in December 2016 to encourageand division head positions. In the fiscal year ended March 2015,

plans based on the Act on Promotion of Women’s Participation andyounger employees at Group companies, aged up to around 30,

we introduced a new specialist program for personnel who are ear-

Advancement in the Workplace. Under their plans, Group companies

to develop future business ideas. Group company employees whomarked to become senior managers. Participants in the program arehave set concrete targets for the number of female managers andare selected to take part in the workshops conduct interviews withselected based on recommendations from Group companies andnew recruits as part of efforts to actively support women in thesenior managers and have detailed discussions with other partici-

must pass a vetting process carried out by the Board of Manage-

workplace. We have already made progress towards our goals. In

pants, helping them to develop proposals for the Group’s future

ment. They then undergo 18 months of external training and prac-

2015, we appointed a woman to the Board of Directors and in

business portfolio, which they then present to Nisshinbo’s leaders.

tical workshops to give them the mindset and presence they need2017 we achieved our female recruitment ratio targets for clerical

We believe this approach has the potential to play a significant roleto fill their roles as business leaders. Every year we select around 10

positions. We will continue to implement initiatives, such as tailoredin driving the Group’s growth going forward.

employees to undergo this leadership training program.

training programs for female employees and their line managers, toValue Creation

Personnel training starts as soon as new employees join the Company.

Strategy

Makoto Sugiyama

Profileof business leaders, (2) promote diversity, (3) radically overhaul personnel systems, and (4) create a shared

Promoting diversity

achieve all our final-year targets before the 2020 end-date.
Amid Japan’s declining birthrate and aging population, older

Define role
Evaluate
performance

Systematic process for cultivating the next generationof business leaders — training framework< Regular review >Define role and evaluate performance for key positions

it easier for them to continue working for us so that they pass ontheir wealth of skills and expertise.

The Nisshinbo Group continues to move away from its legacy

gender, age or other characteristics, continue to work for us as long as

business of textiles, transforming itself into an Environment andpossible, helping to contribute to the Group’s ongoing development.

Energy Company group that contributes to society by harnessing
technologies in the electronics and automotive fields. Based on thatstrategic direction, we need to build a Groupwide framework for

18 months

Development program(4) Management mindset follow-up training

Overhauling personnel systems andintroducing shared services

Our goal is to ensure that our best employees, regardless of

Next-generation business leader program(3) – 1 Selective external training(3) – 2 Practical workshops(2) Training to attain management mindset

Led byNisshinbo
Holdings

Workshops for younger employees
Training exchange programs with other sectors

Define role
Evaluate
performance

Selective

Identify future business leader candidates< Regular review >Define role and evaluate performance for key positions

Led by Group
companies

Training programs at individual companies orfor specific roles
OJT

Training our employees to be
global business people
The Nisshinbo Group started expanding into overseas markets inpersonnel systems and performance evaluation in order to drive
growth by energizing communication between employees andgenerating synergies between different businesses. Specifically, we
are adjusting seniority-based pay systems and progressively moving
to compensation based on job type and ability.

the 1970s. Today, the Group has 131 business sites in 24 countries

Also, as the Group becomes bigger, business operations are

and regions. Due to the international nature of our operations, we

becoming more complex and cumbersome, leading to inefficiencies

are training our employees to give them global business skills. In

in some areas. To address that issue, we are now rationalizing backJapan, we encourage employees aged below 35 to gain experience

office departments such as human resources, accounting, legal

overseas and improve their language skills. We also hire overseas

and general affairs, and intellectual property, and shifting to a

students who have studied in Japan to fill administrative positions inshared services model to increase management efficiency.

Financials

Selection

Stream-based training for future managers(1) Recognize own abilities

Recommend participants for program

28

workers are increasingly important for the Group. We need to makeManagement Framework

Systematic process for cultivating the next generationof business leaders — overview

29Feature:

04

Implementing Environmental Management

(GWh)
6,000

Solar power generationin the Nisshinbo GroupAs an Environment and Energy Company group providing solutions to help tackle humanity’s greatest
challenge – global environmental issues – the Nisshinbo Group is creating a framework to support theimplementation of environmental management. We have set medium- and long-term environmental targets
that dovetail with our business plans. By achieving those targets, we aim to help create a sustainable society.

5,000

We are actively installing solar power generation systems at

4,000

business sites that require large amounts of energy, such as
facilities that use thermal processing. In the fiscal year

3,000

ended March 2017, installation work was mainly carriedout at domestic sites, helping to lift the Group’s total solar

2,000

power generation to 5,118GWh.
Breakdown of business sites and subsidiaries with solar power systems:

Medium-term Environmental Targets: Key Themes and Results

Shimada

Chiba

Tatebayashi

1,000ProfileMiai Machinery

Tokushima

Nisshinbo Precision Instrument & Machinery Hiroshimaother sites

0

13.3

(Fiscal year ended March 2016 to fiscal year ending March 2019)

15.3

17.3

Reduce energy
consumption per unitof salesTargets forthe fiscal year
ending March
2019

Implement at one chosenbusiness site in each corecompany

Ratio of total sales:

40% or more

Ratio of total sales:

40% or more

Reduction of% ormore compared with fiscal
year ended March 2015

Reduction of% ormore compared with fiscal
year ended March 2015

Reduction of% ormore compared with fiscal
year ended March 2015

90% or more

Initiatives

Protect rare species and implement

LCAs involve quantifying the

Products and services that contribute to

We are installing solar power

Most greenhouse gases originate

PRTR substances are chemical

We are working to reduce raw

initiatives to preserve forest andenvironmental burden andthe realization of a sustainable society are

generation systems and switchingfrom energy sources, so lowering

compounds that are harmful tomaterial and packaging material

river environments.

potential environmental impact on

defined in accordance with the OECD

to LNG and other gas-based

greenhouse gas emissions andpeople and ecosystems.

volumes and effectively reuse

the planet and ecosystems of allclassification for environmental

energy supplies for key fossil fuelreducing energy usage are

inputs during a product’s lifecycle,

businesses. Products and services that doenergy sources. The Group also

closely linked.

from materials sourcing through to

not come under that definition are

selects highly efficient energy

disposal. LCAs provide a usefulassessed using rigorous internal

systems when upgrading facilities.

CFCs, which have a high global

substances in manufacturing

benchmark for designing

standards. To contribute to humanity

warming potential. CFCs are used

processes.

environmentally friendly products.

through our business activities, we arein semiconductor fabrication

working to grow sales based on a holistic

processes. We are installing systems

approach to production and sales.

that break down those CFCs,

5

Another key measure is reducing

Improvethe recycling rate10

We have minimized emissions

waste. We are focusing on raisingof PRTR substances by switching torecycling rates at overseas sites.

Value Creation

Increase the sales ratio for
products that contribute to asustainable society

Strategy

Promote Life Cycle
Assessments (LCAs)

5

Reduce the volume of
PRTR substanceemissions per unitof sales16.3

Step up efforts tomaintain biodiversity

Key themes

Reduce greenhousegas emissions per unitof sales14.3

alternative low-toxic chemical

Fiscal year
ended March2017

Implemented measures toprotect the environment
through nine specific projects

Ratio of total

Ratio of total

sales:

sales:

Progress andfactors

Steady progress

Steady progress

23%

Emissions of greenhouse gases up

Emissions of PRTR substances up

year ended March 2015

year ended March 2015

5.3% compared with fiscal

4.5% compared with fiscal

84.7%

Target for the fiscal year ending

Increase in usage reflected lower

Increase in usage reflected lower

Increase in emissions was due toEffectively reusing waste materials

March 2019 already achieved; now

sales and higher energy usage in thesales and higher emissions in thethe addition of Nanbu Plastics Co.,in manufacturing processes is an

expanding number of products.

electronics business.

electronics business.

Ltd. to the Group.

issue at overseas sites.

Long-term Environmental Targets (fiscal year ending March 2026)

Financials

For more details, please visit the Nisshinbo Group’s CSR website.

45%

5.1

Energy usage up%
compared with fiscal year
ended March 2015

Management Framework

leading to lower emissions.

https://www.nisshinbo.co.jp/english/csr/
1. Increase the ratio of products that
contribute to a sustainable society to

65% or more of total sales

2. Reduce greenhouse gas emissions perunit of sales by

15% or more

3. Improve the recycling ratio to

95% or morecompared with fiscal year ended
March 201530

31

At a Glance
The Nisshinbo Group comprises six businesses: electronics, automobile brakes, precision instruments,
chemicals, textiles and real estate. Leveraging the manufacturing technologies and assets of our original
spinning business, we have diversified into other business fields, where we supply high value-added
products to satisfy a range of customer needs.
Note: The papers business is no longer part of the Nisshinbo Group following its disposal in April 2017. Sales in the papers business totaled ¥32.6 billion
in the fiscal year ended March 2017.

Precision
Instruments

Chemicals

TextilesProfileAutomobile
BrakesElectronics

Real Estate

Main business areas

Main business areas

Main business areas

Main business areas

Main business areas

Involved in wireless communications

The Nisshinbo Group is the world’s leading

Manufactures plastic products for home

Manufactures a range of highly promising

Mainstay business is products made from

Procures funds to support the Nisshinbo

equipment and electronic parts; inmaker of brake friction materials by market

appliance and automotive applications andproducts in the environmental and energy

natural cotton; supplies high-quality “MadeGroup’s growth strategy by effectively

wireless communications equipment,

share; acquired TMD Friction Group S.A.,

supplies processed precision automotive

fields, such as Carbodilite, a modifier forby Nisshinbo” dress shirts, denim, uniforms

utilizing idle plant sites and other real estate

supplies solutions such as disaster

Europe’s largest manufacturer of brakeparts and customized production equipment

biodegradable plastics and waterborne

and other products to markets worldwide.

assets arising from business restructuring.

prevention systems, as well as marine

friction materials, in 2011; now expandingfor customers worldwide, primarily in Asia.

resins, and bipolar plates for fuel cells.

systems and communications equipment;

presence as a true global supplier, within electronic parts, aims to grow the

manufacturing bases in North America,

electronic devices business with a focus

South Korea, Southeast Asia, China, Europe,on microelectronics technologies.

South America, and South Africa.

Solutions and specialized equipment:

Friction materials:

Plastic products

Sales:— Disc pads and brake linings

Carbodilite high-performancechemical additive

Shirts:— Disaster prevention systems— Dress shirts, casual shirts and fabric— Housing lots

Communications equipment:

Assembly products:

Bipolar plates for fuel cells

Textiles:Leasing:— GPS receivers— Drum brake products

Rigid urethane foam

— Uniform fabric and casual fabric— ARIO Nishi Arai and other properties

Fine carbon products

Denim:

Customized production equipment— Marine radar and communications
equipment

Value Creation

Marine systems:

Precision parts processing including
parts for electronic brake systems(EBS)

Strategy

Main business areas— Jeans and denim fabric

OthersElectronic devices:— Semiconductor devices and SAW filters

Net Sales

36.2%

27.7%

11.5%

1.8%

10.6%

Management Framework

Segment
Share

1.5%

205.3

190.8

165.0

146.0

29.5

60.6

8.2

9.4

60.1

55.8

8.3

8.0

16.3

17.3

16.3

17.3

16.3

17.3

16.3

17.3

16.3

17.3

16.3

17.3

(billions of yen)

Financials

32

33

Overview of Business Segments

Electronics
Japan Radio Co., Ltd. / New Japan Radio Co., Ltd.
Electronics is the largest segment in the Nisshinbo Group. Japan Radio Co., Ltd. is focused on wireless communications equipment and supplies disaster prevention systems and other public infrastructure-related products andProfilemobile communications products for marine and automotive applications. New Japan Radio Co., Ltd. is focusedon electronic components, supplying analog semiconductors, SAW filters* and other electronic devices andmicrowave products.
* Surface acoustic wave filters: used in smartphones and other communication devices

16,000(millions of yen)
12,000

8,000

4,000

Business strategies for the fiscal year
ending March 2018

In the fiscal year ended March 2017, the electronics businessIn the electronics business, the priority issue is a recovery in earnings

New Japan Radio is targeting automotive & industrial equip-

reported net sales of ¥190,852 million, down 7.1% year on year,

at Japan Radio. Domestic public-sector demand and equipment for

ment, communication and microwave devices as three promisingand a segment loss of ¥3,240 million, a deterioration of ¥11,558

large merchant vessels generate a high proportion of sales at Japanapplication markets. The company has overhauled its organization,

million compared with the previous fiscal year.

Radio, which is one reason for the slump in earnings in the fiscal

creating a structure based on three businesses targeting thoseyear ended March 2017. To address that issue, we plan to strengthenmarkets.

In the marine systems field, Japan Radio Co., Ltd. reported
0-4,000

15.3

16.3

17.3

Japan Radio

7,713

3,183

(5,486)

New Japan Radio

2,918

3,127

1,792

integrated business management through faster and more effective
decision-making.

lower sales of equipment for new merchant vessels and retrofit

the disaster prevention business in Indonesia and other emerging

projects amid weak conditions in the shipbuilding and marine

markets in Asia, expand operations in the automotive field andJapan Radio’s devices is expanding, supported by growth in thefreight markets. Sales also fell sharply in the solutions and specialized

other private-sector markets and work together with subsidiary

number of sensors required for each vehicle. ADAS typically use aequipment field, mainly due to a cyclical decline in major projects inAlphatron Marine Beheer B.V. to enhance our lineup of products

combination of cameras and radars. To address growth in the ADAS

the disaster prevention system business.

and services for small vessels.

market, New Japan Radio is working to rapidly develop power

In the fiscal year ended March 2017, Japan Radio completed its

Also, amid improvements in internet connectivity in the marine

In the ADAS electronics parts business, the market for New

management ICs (PMICs) for those ADAS systems.

new business site in Kawagoe. The company now has a research

environment, we have launched an information service called

In Europe, we established a sales office in 2013 and started

and development center and a fully integrated aftermarket servicing

J-Marine Cloud to support safe and smart ship operations. The

actively promoting our products. Those efforts have resulted in close

217

586

—

facility in the Tokyo area that can serve the entire Kanto region.

service gives users access to a wide range of content, including

business relationships with leading Tier 1 automotive parts suppliers

Ueda Japan Radio

974

743

—

Japan Radio also established PT. JRC SPECTRA INDONESIA, aweather information and optimal route planning tools. Taking thatin the region. Our parts have been certified to Germany quality

454

joint-venture with a local partner in Indonesia. Amid continued

approach even further, we are looking into developing new

standards and we are now targeting sustained growth in sales withgrowth in the Indonesian economy, the new company will target

value-added services that provide integrated vessel support.

the establishment of a new subsidiary in Germany.

rising demand for improved coastal and port infrastructure and forSpecifically, we plan to harness big data such as information about

upgraded disaster prevention systems.

the operational status of wireless and radar equipment supplied by

Total

881
12,704679
8,318(3,240)Earnings at New Japan Radio Co., Ltd. were affected by thenegative impact of the strong yen on sales of mainstay electronic
devices, but demand was firm for automotive devices, particularly

Japan Radio and build systems that link various onboard equipment
and systems to each other and the internet (marine IoT).
In the automotive field, we will continue to work towards thefrom domestic customers, resulting in higher overall sales year on

early launch of next-generation GPS receivers and cutting-edge

year. However, the company was unable to offset the impact of theradars for advanced driving assistance systems (ADAS). Automatedstrong yen, leading to a sharp fall in profits compared with thecontrol is likely to spread from passenger cars to construction

previous fiscal year.

machinery, agricultural machinery, small aircraft and other areas.

Targeting further business growth, New Japan Radio converted

Financials

X band compact
weather radar

Management Framework

Nagano Japan Radio

Eliminations

Value Creation

Segment Profit
Breakdown(millions of yen)

Summary of financial results for the
fiscal year ended March 2017

Strategy

Segment Profit

To accelerate the execution of our growth strategy, we plan toits sales office in Frankfurt, Germany into a company called NJR

make Japan Radio a wholly owned subsidiary of Nisshinbo Holdings

Europe GmbH, which will work to increase sales of automotive

Inc. on October 2, 2017. We expect this move to enhancedevices to car parts suppliers in Europe.

34

35

E SG information
Interview with the CTO

Takeshi Koarai

Q1.

Director and Executive Officer
CTO
Japan Radio Co., Ltd.

It’s now been two years since Japan Radio moved from Mitaka
in Tokyo to Nagano. What is your take on the last two years?

Q2.

What role does the Advanced Technology Center play in
the Nisshinbo Group?

The Nisshinbo Group’s growth was driven by its original focus on textiles, but

creative power of our engineers, guided by our vision for the facility — a

it is now aiming to become an Environment and Energy Company group.

center of excellence in Nagano creating new products and services for theJapan Radio and the electronics business as a whole have been given a key

A Center of Excellence with a Global Outlook

world. We also launched World Café, an event held with Nagano Japan Radiorole in driving that transformation.

— Japan Radio’s Advanced Technology Center in Nagano

and Ueda Japan Radio once or twice each month to energize communication

Research and development related to artificial intelligence (AI) and theacross the Japan Radio Group. The aim is to promote new ideas and creativeinternet of things (IoT), or the internetworking of physical devices, is vital tothinking by encouraging topic-based discussion among small, fluid groups of

support the continued growth of the Japanese economy. Developments infour to five people in a relaxed setting.

those fields will make sensors that handle information and connected devices

created a stronger sense of cooperation between engineers across different

The Nisshinbo Group has positioned wireless communications and electronics as a strategic business field.
Japan Radio Co., Ltd., which is the core Group company in that field, transferred its operations from Mitaka inincreasingly important, presenting a major opportunity for the IT sector.

Strategy

Compared with our approach at Mitaka, these and other initiatives have

ProfileWe designed the Advanced Technology Center as a place to harness theAgainst that backdrop, Japan Radio is also targeting the field of mobility,

teams. Efforts by the architects to embed the Advanced Technology Center inincluding the highly promising growth market of autonomous driving, where

the surrounding natural environment have also reinvigorated our employees,

we are working to adapt our existing radar technology to automotive

spurring an even stronger desire to innovate.

applications. By maximizing the role of the Advanced Technology Center, we
aim to foster close cooperation between technology and business divisions

Tokyo to a new technology development center in Nagano two years ago. Since its creation in 1915, Japan Radioin order to grow automotive electronics into a major business for the
Nisshinbo Group.

has played a pioneering role in communication and IT devices in Japan. The company is now aiming to step up
how Japan Radio’s Advanced Technology Center is leading the company’s technological development efforts.
After more than a century in business, Japan Radio worked withpower of every engineer, helping them to create new products andgroup companies Nagano Japan Radio Co., Ltd. and Ueda Japan

services that can compete in today’s tough market environment.

Radio Co., Ltd. to restructure its business to support growth foranother hundred years. The Advanced Technology Center, which

Insights from Engineers at the Advanced Technology Center
MakotoShigeta

Radar Design Group
Product Design Department
Japan Radio Co., Ltd.

HitoshiIto

Component Group
Technical Development Department
Japan Radio Co., Ltd.

Leveraging our marine technologies

products from the standpoint of customers

to move into new business fields

I develop marine radar systems for small vessels, such as fishing boats,

I develop satellite tracking antenna for ships. Ship antenna always need tomerchant ships and working boats. As the eyes of the boat, radar systems are

be facing the satellite to ensure unbroken communication. Marine antennaengineers. The aim is to create an environment that maximizes

vital to protecting the lives of the crew. Developing products with that kind of

therefore need control systems to compensate for the ship’s motions on theinnovation in manufacturing by harnessing the unlimited power of

crucial role gives me a great deal of job satisfaction.

water. As more satellites are positioned in orbit, control systems are

the latest equipment and facilities and given the remit to acceleratetechnology development as a center of excellence.
The building itself is designed to promote teamwork among

imagination to create a steady stream of new ideas that benefit
society. The center’s spiral atrium is used as a meeting space andpresentation area, while also allowing people from different departments and teams to meet and exchange ideas easily. The roof andbalconies on each floor have been designed as field testing areas
place to conduct environmental testing. The Advanced Technology
Center’s key mission is to cultivate the senses and imaginative

easier to arrange and hold meetings with other teams. The move from Mitaka
to the new center has helped energize communication between engineers,which is also driving forward our research projects.
At the moment, my focus is on ensuring we develop new marine radar

becoming more advanced to prevent interference with other satellite
communication links.
One of the strengths of the Advanced Technology Center is the way it
encourages greater cooperation between engineers. When I was asked todevelop new devices for automotive applications, it was easy for me tosystems that are reliable and satisfy customers. Going forward, I hope toorganize meetings with the automotive team, helping to foster good

create new products that give Nisshinbo a foothold in new markets, while

communication.

always being mindful of customer needs.

Financials

and a well-equipped facility next to the center gives engineers a

The Advanced Technology Center has an open-plan design, making it

Management Framework

Committed to developing new

was a key element of the restructuring program, was equipped with

Value Creation

its game as a manufacturer of cutting-edge electronic devices for the global market. In this section, we look at

We have a high degree of confidence in the technologies we accumulated through the development of marine systems. We now plan to transfer
that expertise to cars and other modes of land transport, contributing to thecreation of a new business for the Nisshinbo Group.

36

37

Overview of Business Segments

Automobile Brakes
Nisshinbo Brake Inc. / TMD Friction Group S.A.
Nisshinbo is a global supplier with world-class development capabilities in the field of friction materials, which are
key components in automobile brake systems. The automobile brakes business also includes Luxembourg-based
ProfileTMD Friction Group S.A., making Nisshinbo one of the world’s leading manufacturers of friction materials. As a
global leader in the friction materials industry, we are working to address global automaker needs for optimumparts procurement.

1,500(millions of yen)0

-1,500(millions of yen)

-3,000

15.3

16.3

17.3

NISB* —Domestic

1,950

1,142

1,486

NISB —Overseas

5,267

5,722

5,045

TMD

1,725

2,068

TMD acquisition costs, etc. (10,298)(9,475)(8,606)

Total* Nisshinbo Brake Inc.

(2,069)

(887)

(7)

fuel cell vehicles are projected to gain ground in the car market. As

In the fiscal year ended March 2017, the automobile brakes businessIn the fiscal year ending March 2018, we forecast domestic new car

the world’s leading maker of brake friction materials, the Nisshinbo

reported net sales of ¥146,062 million, down 11.5% year on year,

sales in line with the previous fiscal year. In the US, new car sales

Group will rapidly develop new products to address changes in theand operating income before goodwill amortization of ¥5,914

have been trending at a high level, but we forecast sluggish sales

market in order to further expand market share.

million, up 3.9% year on year. The automobile brakes businessvolume as replacement demand tails off. We expect new car sales

booked goodwill amortization costs of ¥5,921 million related to theto remain on an upward trend in China, but growth is likely to beacquisition of TMD, resulting in a segment loss of ¥7 million, an

modest. In Thailand, we anticipate a recovery in the new car

improvement of ¥879 million from the previous fiscal year. The

market, supported by growth in the economy and replacement

amortization schedule for goodwill related to the acquisition ofdemand. In Europe, the UK’s decision to leave the EU is a potential

TMD was completed in the fiscal year ended March 2017.

downside risk for new car sales, but we forecast continued modest

In domestic operations, sales declined due to the impact ofgrowth as sales in Central Europe are firm and sales in Easternlower sales volumes for light vehicles, but an improvement in theEurope are currently in a medium- and long-term recovery phase.

product mix and other factors lifted profits year on year. Overseas,

up efforts to expand and realign its production framework, withcurrency basis, but the impact of the strong yen resulted in lower

TMD planning to complete the move to a new plant in Brazil during

sales and profits after foreign currency translation. In South Korea,

2017 and finish integrating two manufacturing sites in Germany

domestic auto sales were healthy, but overall sales and profits

during 2018. In 2016, the automobile brakes business started

declined amid weak auto exports.

selling Nisshinbo-branded aftermarket products in the Middle East

market products and the impact of the strong yen on sales after
foreign currency translation. However, the operating loss narrowed
due to cost reduction measures.

*1 US environmental regulations, effective from 2021, prohibit the sale of new friction
materials or vehicles fitted with friction materials that have a copper content of morethan 5%. From 2025, the limit on copper content will be reduced to less than 0.5%.
*2 Non-Asbestos Organic

Against this backdrop, the automobile brakes business will step

sales and profits rose in the US, China and Thailand on a local

Sales contracted at TMD, reflecting weaker demand for after-

Next-generation vehicles such as electric, plug-in hybrid andManagement Framework

1,013

Business strategies for the fiscal year
ending March 2018

Value Creation

Segment Loss
Breakdown

Summary of financial results for the
fiscal year ended March 2017

Strategy

Segment Lossmarket and we are planning to build a global production, sales andsupply framework with TMD.
TMD has already started volume production of low-steel
friction materials that are compatible with new regulations on
copper content*1. We forecast further growth in production ofthese materials after TMD completes the integration of its manufacturing sites in Germany. Nisshinbo Brake Inc. has started volume

Financials

production of NAO*2 materials and the pace of output is scheduled
to rise from summer 2018.

Disc pads

38

39

E SG information

Yasuki Hattori
Managing Officer
Research & Development
Nisshinbo Brake Inc.

2017. Under the program, we implemented a number of priority— Nisshinbo Brake’s Tatebayashi Plant

Yasuji Ishii
President
Nisshinbo Brake Inc.

Number of Workplace Accidents

safety initiatives that limited workplace accidents to just one during
the entire fiscal year. The sole accident involved no loss of work

12

days and the employee recovered fully in less than seven days.

10

The Tatebayashi Plant is the main domestic manufacturing site of Nisshinbo Brake Inc. The plant produces

Accidents with no lost work days (full recovery less than 7 days)

Accidents with lost work days

seas plants in the automobile brakes business. Initiatives include
6

running Safety Dojo* training sessions overseas. In July 2016, we

4

in the Nisshinbo Group’s automobile brakes business, Tatebayashi has developed manufacturing approaches

invited representatives from Nisshinbo Brake’s Chinese plant, Saeron

2

that achieve high levels of operational safety, product quality and efficiency. These approaches are transferred

Automotive’s Korean and Chinese plants, and TMD’s three Chineseplants to take part in a health and safety seminar to raise awareness

0

2011

and exchange ideas.

such as copper-free brake friction materials.

2012

2013

2014

2015

2016
2017
(Years ended March 31)

Value Creationworldwide to other plants in the Nisshinbo Group. Tatebayashi is also responsible for developing new products

Accidents with no lost work days (full recovery 7 days or more)

8

assessing the quality of health and safety management systems andbrake pads and brake linings for the automotive sector in Japan and for export markets. As the mother plant

Strategy

We are transferring these health and safety activities to over-* A mobile training facility used to teach employees about the importance of workplacesafety through 13 hands-on training tools that simulate being caught in machinery andother accidents.

Overview of the Tatebayashi Plant

Safety-first manufacturing

The Tatebayashi Plant is located in Ora-machi on the outskirts ofNisshinbo Brake puts the highest priority on workplace health andTatebayashi City in Gunma Prefecture. The vast site of more thansafety at the Tatebayashi Plant. After many years of workplace

Continuous Kaizen activities

2

ProfileA Mother Plant Supplying the World

Toshiyuki Takazawa
General Manager
Friction Material Manufacturing Department
Nisshinbo Brake Inc.

safety initiatives, only a handful of incidents occur at the plant each

The Tatebayashi Plant began Kaizen activities in 1998 after learning

countries worldwide were invited to the first NISTMD Kaizen

year, down sharply from levels in the past. Our analysis of incidents

about the Toyota Kaizen approach from Toyota Motor Corporation.

Activities Conference, which was held at the Tatebayashi Plant ina testing center. The plant’s onsite facilities and prime location makein recent years shows that almost no accidents are caused by physi-

Nisshinbo Brake subsequently developed its own Kaizen program,

April 2017.

it an ideal place to develop and manufacture brake products.

cal factors that create unsafe conditions inside the plant. Many

which has been progressively rolled out to plants overseas during
the last five years.

Disc pad production started in 1981, followed by brake lining

accidents are in fact caused by unsafe practices by experienced

production in 1989. The friction materials division at the Tokyo Plant

employees as a result of over familiarity with processes or inatten-

The Kaizen program was extended to TMD in 2016 under thewas transferred to the Tatebayashi Plant in 2000, resulting in today’stion. Based on that analysis, we launched a program to eliminate

Mission ZERO Step by Step banner. We are using Kaizen activities tointegrated automobile brake product facility. The plant had a

accidents with lost work days and accidents with no lost work days

improve the Group’s entire operating structure by building stronger

workforce of 670 as of March 31, 2017.

(full recovery seven days or more) in the fiscal year ended March 31,

links between our employees, regardless of division and country, toManagement Framework

120,000m houses two disc pad production plants and one brakelining production plant. Tatebayashi also has a research center andpromote sharing of best practices, invigorate teams and further
improve cost competitiveness. An emphasis on profits based on KPIs

2. Establish forklift safety instruction

Priority Safety
Activities

3. Establish safety instructions for dangerous area
(which could have serious accidents)and human resources training are two key elements of the activities.
Financials

1. Conduct risk assessment

Each business site also runs presentations about Kaizen activities at their facilities. In the fiscal year ended March 31, 2017, 108
people who took part in those presentations at business sites in ten

4. Ensure compliance with internal safety regulations
5. Ensure standard procedures regarding accidents

4041Overview of Business Segments

Precision Instruments
Nisshinbo Mechatronics Inc.
Utilizing various areas of expertise accumulated over more than 70 years, this segment focuses on plastic products,
mainly for the home appliance and automotive sectors, and precision parts processing, primarily metal processing
Profilefor the automotive sector. The segment also makes customized production equipment to meet the specific needs ofcustomers. We are developing these businesses globally, centered on Asia.

1,200(millions of yen)

800

400

(millions of yen)

Business strategies for the fiscal year
ending March 2018synergies by sharing business resources. By leveraging thoseIn the fiscal year ended March 2017, the precision instruments

In the precision instruments business segment, we are focusing on

appliance and automotive fields.

business reported net sales of ¥60,687 million, up 105.5% year

plastic products as our core business, targeting expansion in theon year, and segment profit of ¥1,049 million, up 229.4%, mainly

home appliance and automotive fields. We forecast sales growth

Machining (Yangzhou) Co., Ltd. is bringing forward its capitalreflecting the consolidation of Nanbu Plastics Co., Ltd. in October

for plastic parts in the automotive field, which is a growing

investment plans to address rising demand from customers. It is also

2016.

market, and also in the home appliance field, where Japanese air

accelerating efforts to add extra production capacity.

15.3

16.3

17.3

In customized production equipment, we plan to strengthen

year, mainly due to the full-scale start of volume production parts

Plastics Co., Ltd. became a consolidated subsidiary 18 months

our presence in automotive components, the aerospace and energy

for electronic steering systems at Nisshinbo-Continental Precisionago. We are exchanging personnel with the company, sharing

fields, and OEM products. We also aim to increase margins by

Machining (Yangzhou) Co., Ltd., a joint venture with Continental

information between departments and exploring ways to realize

(509)

(88)

808

improving design efficiency and productivity.

Plastic products

853

448

1,204

Eliminations

(81)

(42)

(964)

Total

264

318

1,049

Automotive Holding Co., Ltd.
In plastic products, sales and profits both increased year on
year, supported by the consolidation of Nanbu Plastics Co., Ltd.,rising orders for air conditioner fans and an improvement inproductivity. In automotive parts, Nanbu Plastics Co., Ltd. is working
to increase orders for high value-added lamp components such as

Management Framework

Mechatronics

In precision parts processing, Nisshinbo-Continental Precisionconditioner makers are stepping up global expansion. Nanbu

In precision parts processing, sales and profits both rose year on
0

synergies, we aim to expand our presence in both the home

Value Creation

Segment Profit
Breakdown

Summary of financial results for the
fiscal year ended March 2017

Strategy

Segment Profit

E SG information

thick-walled lenses. To generate business synergies, Nisshinbo
Mechatronics Inc. and Nanbu Plastics Co., Ltd. are exploring waysof sharing their domestic and overseas business sites and thecustomer network of Nanbu Plastics Co., Ltd. in order to further
increase orders for automotive parts.
In customized production equipment, sales declined due to aTraining activities at Nanbu Plastics
Nanbu Plastics Co., Ltd., which joined the Nisshinbo Group in October 2015, has createda pamphlet summarizing the Nisshinbo Group’s Corporate Philosophy and BusinessConduct Guidelines in a single document. The company distributed the compact andcontraction in photovoltaic module manufacturing operations, but

easy-to-carry pamphlet to its employees and those of its subsidiaries and held a training

cost savings helped to narrow losses.

course as part of a management policy briefing in January 2017. Nanbu Plastics uses the
Financials

pamphlet to share the Corporate Philosophy and Business Conduct Guidelines with new
employees and mid-career recruits during training when they join the company.
Nanbu Plastics also conducted human rights awareness training for some 70
Automotive EBS
valve block42

management-level employees to instill the Nisshinbo Group’s stance on human rights,
part of the Business Conduct Guidelines.

Pamphlet containing Corporate Philosophy
and Business Conduct Guidelines43

Overview of Business Segments

Chemicals
Nisshinbo Chemical Inc.
This segment is pushing ahead with the development of environment-related products on a global basis, drawing
on a broad base of expertise and intellectual property in the chemical field. Our environment- and energy-related
Profileproducts include bipolar plates for fuel cells and Carbodilite, a high-performance plastic material that increases the
durability of biodegradable plastics and waterborne resins, which have minimal environmental impact at thedisposal stage. We are investing management resources in these promising growth areas as a matter of priority.

1,500(millions of yen)

1,000

500

(millions of yen)0

Business strategies for the fiscal year
ending March 2018

demand in the public-sector sewage treatment field, as well as

In the fiscal year ended March 2017, the chemicals business

The chemicals business will continue to step up development andmarket. We plan to run field tests for sewage treatment

reported net sales of ¥9,483 million, up 14.5% year on year, andmarketing efforts for Carbodilite, fuel cell-related products, bio-

applications in the near future as part of efforts to promote oursegment profit of ¥1,309 million, up 73.9%.

carriers for wastewater treatment and carbon products.

bio-carriers for use in major projects. We have also started targeting

continued growth in the private-sector wastewater treatment

demand for sewage control in agricultural communities.

In thermal insulation products, orders increased for insulation

We will work to expand sales of Carbodilite as a cross-linkingbase solution for civil engineering and spray-on applications, and foragent for waterborne resins and as a biodegradable plastic modifier.

rigid urethane insulation blocks and refrigeration panels for LNG

Over the medium and long term, we also see prospects for growthproperties, demand is growing for semiconductor applications suchcarriers, leading to higher sales and profits compared with thein Carbodilite demand for automotive coating applications.

as processors and memory devices, and we forecast rising demandprevious fiscal year. In bio-carriers for wastewater treatment, private-

Meanwhile, more countries, particularly in Europe, are introducing

for plate-type products. We also anticipate increased demand for

sector companies in China started adopting our products to address

restrictions on the use of non-biodegradable plastics.

glass-like carbon for molding tools, which are used to make curved

15.3

16.3

17.3

Environmental &Energy Business

457

636

1,098

Others

(102)

18

137

Subsidiaries

41

97

74

Eliminations

0

1

0

exceeded our forecasts due to strong demand for Carbodilite. We

1,309

are receiving a high level of inquiries about Carbodilite, particularly

tighter environmental regulations. We are working to expand salesof bio-carriers for wastewater treatment in the private sector, while
also stepping up sales promotion activities to encourage public-

In fuel cell bipolar plates, growth in the residential fuel cellmarket is slowing.

In glass-like carbon, which has excellent heat-resistance
Value Creation

Segment Profit
Breakdown

Summary of financial results for the
fiscal year ended March 2017

Strategy

Segment Profit

glass screens for smartphones and other devices and neodymium
magnets for a wide range of industrial products.

In bio-carriers for wastewater treatment, we forecast rising
Management Framework

sector sewage treatment facilities to adopt our products.
In functional chemicals, sales and operating income both

Total

396

753

for use as a safe, environmentally friendly waterborne cross-linking
agent that strengthens molecular bonds and as a biodegradable

E SG information
Protecting the Golden Orchid (cephalanthera falcata)

modifier that improves the durability of plastic.
Sales of fuel cell bipolar plates declined, mainly due to weaker
shipments of residential fuel cells.
In carbon products, orders increased amid strong demand forsemiconductors and OLED panels, with sales and operating income

Inc. have become members of the Chiba Business Network for Biodiversity, establishedby Chiba Prefecture. Both facilities are working to protect the Golden Orchid(cephalanthera falcata), which grows within the Toke Midorinomori Industrial Park. The
Golden Orchid, a perennial plant belonging to the Orchidaceae class, relies on carbon
Financials

both reaching our forecasts.

The R&D Center of Nisshinbo Holdings Inc. and the Toke Plant of Nisshinbo Chemical

produced from organic matter in the soil broken down by mycorrhizal fungi, in
addition to carbon they produce themselves through photosynthesis. Artificial
cultivation of the Golden Orchid is therefore difficult.

Bipolar plates for fuel cells

44

Golden Orchids at a Nisshinbo business site45

Overview of Business Segments

TextilesNisshinbo Textile Inc.
Since its founding in 1907, Nisshinbo has led the Japanese textile industry with its state-of-the-art technologies andhigh quality. Nisshinbo subsequently expanded its business globally in the fields of spinning, weaving, processing
Profileand sewing and today possesses some of the world’s most advanced technologies in product development andproduction. Nisshinbo is currently working to increase global sales of the APOLLOCOT brand by mobilizing its
sophisticated textile processing technologies.

2,000(millions of yen)
1,500

1,000

500

(millions of yen)joint initiative in smart textiles with the electronics business,

In the fiscal year ended March 2017, the textiles business reported

and reviewing quality assurance systems, aiming to realize small-lot,primarily Japan Radio Co., Ltd. Specifically, we are assessing thenet sales of ¥55,842 million, down 7.1% year on year, and segment

high-quality, low-cost operations, boost international

potential for harnessing the Group’s ability to provide integrated

profit of ¥1,777 million, down 0.1%.

competitiveness and expand sales of overseas-made products insolutions, with the electronics business drawing on its data

Japan and in third countries.

collection and management skills and system construction expertise,increased, supported by rising awareness of wrinkle-free shirts in

-500

16.3

17.3

Domestic

(968)

1,672

1,790

Overseas

606

423

351

5

(317)

(364)

(357)

1,779

1,777

* ‌Consolidated subsidiaries Iwao & Co., Ltd. and Nisshin Toa Inc. merged in October
2016. As a result of the merger, the apparel textile operations of Iwao & Co., Ltd.,previously included in the other businesses segment, were reclassified under the
textiles business segment. Figures for the previous fiscal year have been adjusted
to reflect this change.

In the materials development business, we are targeting higher

the retail market. Sales also rose in the materials development

sales of products such as stretchable non-woven fabric and thermalbusiness, which covers non-woven fabric, spandex and elastomers,

adhesive fiber.

In the textiles business, we have started looking into a possible

and Nisshinbo Textile Inc. developing a new type of textile withembedded sensors that can read vital signs.

driven by higher sales of unique products. However, overall sales
and profits declined year on year and fell short of our projections,due to weaker sales of shirt fabric for export, work uniform fabricand summer shirts sold by TOKYO SHIRTS CO., LTD.
Overseas, sales of products made in Indonesia for the Japanesemarket were firm, but amid rising competition from overseas
companies, sales to third countries and regions, including the local

E SG information

Management Framework

15.3

Total

global quality.” We also plan to continue upgrading our facilities

In the domestic market, sales of APOLLOCOT shirt fabric0

Eliminations

called T-KAIZEN, in line with our slogan, “Realize global costs andValue Creation

Segment Profit
Breakdown

Summary of financial results for the
fiscal year ended March 2017

Strategy

Segment Profit*

Indonesian market, the US and Europe, were weak. In Brazil, salesrose year on year, reflecting lower imports of imported fibers due tothe weak Brazilian real, and a decline in inventories in domestic
retail channels.

Business strategies for the fiscal year
ending March 2018
The textiles business has positioned shirts and materials
development as its core operations, aiming to boost sales of highIn the shirt business, we are targeting an increase in market
share for our wrinkle-free shirt fabric and secondary products.
In Indonesia, our main production region, we are implementing
the Nisshinbo Textile group’s proprietary improvement program

Nisshinbo Textile Inc. received the Frontier Award 2016 from the Japan Research Association
for Textile End-Uses for its wrinkle-free shirt fabric APOLLOCOT. Newly established in fiscal
2016, the award is presented to researchers and developers of unique textile products thatmake a positive contribution to everyday life and play a role in creating new value.
APOLLOCOT is the first 100% cotton shirt fabric to achieve level 4 wash-and-wear
characteristics*.
In addition to being free of wrinkles after washing, the material provides wrinkle
resistance when the shirt is worn. APOLLOCOT received the award for this contribution

Financials

value-added products and increase earnings.

APOLLOCOT Wins Frontier Award 2016

Frontier Award ceremony

to consumer lifestyles.
* Wash and wear characteristics: An index of the degree of wrinkling after washing. A level 5 rating means that the material is completely free of wrinkles, as if freshly ironed. A rating of 4 orhigher means that wrinkles are reduced by 90% or more.

Non-woven cotton fabric Oikos

46

47

Overview of Business Segments

Real Estate
Nisshinbo Holdings Inc.
Nisshinbo’s real estate business redevelops properties that have become vacant as a result of business changes at
Group companies. Income from those activities is used to fund the Group’s growth strategy, such as launching newProfilebusinesses and expanding global operations. Income is generated from two main sources — property leasing andthe sale of housing lots. Nisshinbo has actively developed the housing lot sales business since 2009, when the Group
moved to a holding and operating company structure. The Group’s domestic real estate portfolio includes many
land and property sites with excellent locations, generating strong earnings for the real estate business.

Management Framework
8,000(millions of yen)

The real estate business will continue to fulfill its role as a source of50

Interview with Outside Director

53

Corporate Governance

58

Board of Directors, Audit & Supervisory Board Members
and Managing Officers

60

Risk Management

61

Compliancefunds to help Nisshinbo attain its management targets by effectively
utilizing the real estate assets of the whole Group.

4,000

In the property leasing business, we forecast continued stable
operations, supported by the large number of highly competitive

Strategy

Segment Profit

Business strategies for the fiscal year
ending March 2018

Value Creation

premium stores operated by tenants in large-scale commercial
properties owned by the Group.

0

15.3

16.3

17.3

In the housing lot sales business, we will continue to sell lots atformer plant sites in Kawagoe (256 total lots) and Okazaki (6 totallots). We will also begin sales of lots in the north section of theformer Japan Radio Co., Ltd. site in Mitaka, Tokyo. The site has atotal potential development area of around 29,000m2. At theformer Nisshinbo Textile Inc. Miai Plant site (Aichi), which has a total

In the fiscal year ended March 2017, the real estate businessaround 350 detached homes and land for commercial, medical andreported net sales of ¥8,084 million, down 3.3% year on year, andwelfare facilities.

Management Framework

Summary of financial results for the
fiscal year ended March 2017

potential development area of roughly 140,000m2, we plan to sellsegment profit of ¥5,811 million, up 0.3%.
In the property leasing business, leasing operations were firm
for office buildings, commercial facilities and other properties. Efforts
to reduce costs also contributed to higher profits. During the fiscal
year under review, the business began leasing out a site in Mitaka,
Tokyo, which was vacated by Musashino Electronics Co., Ltd.*In the housing lot sales business, lots were sold at former plantsites in Kawagoe (Saitama), Nagoya (Aichi) and Okazaki (Aichi), but

Financials

net sales declined year on year due to the end of housing lot sales
at the former Harisaki Plant site (Aichi) in the previous fiscal year.
The sale of lots at the former Nagoya Plant site was completed in
the fiscal year under review.
* A former subsidiary of Japan Radio Co., Ltd., liquidated in August 201548

49

Interview with Outside Director:

What is the Ideal
Board of Directors?

out of place in today’s corporate governance environment, but theEurope, business leaders typically gain wider public recognitionend of the system raises a new issue: is it good for major companies

based on their track record, but it is hard for executives in Japan toto lose top personnel who have valuable experience at the highest

exert influence and leverage their skills after leaving their companies.

level of their organization? Given the knowledge those individuals

I believe we can build an even stronger corporate governancehave and their status in the business community, the answer probably

system by putting the right systems in place to resolve these issues

lies in creating a separate external framework that continues toover time.

advise, support and communicate with the company. In the US and

Tomofumi Akiyama
Outside Director
Chairman,
Fukoku Mutual Life Insurance Company

What role do you think directors should play in business management?

Fiduciary duty is the primary responsibility of directors. We have a

From that standpoint, one of the roles of directors is to pro-duty to shareholders to protect the value of assets entrusted to themote risk taking, while at the same time closely monitoring that

Company through their investments.

risk. They have to envisage the outcome of decisions from two main

Senior managers have to take certain risks to increase corporate

successive improvements to its corporate governance system in recent years. However, the Japanese govern-

and what would happen if it did not. In a worst-case scenario,

stable approach, but before long, companies that follow that

directors have to be ready to fulfill their responsibility to shareholders

approach lose competitiveness and fall by the wayside. Companies

by making decisions that protect shareholder value.

have to take a hard look at their business portfolio and identify

In those situations, directors have a vital role to play in advising

ment is calling on the business community to do even more. At Nisshinbo, the need for stronger corporate

what makes them different to their peers, then take risks based on

the management team. Nisshinbo Holdings’ outside directors are all

governance is growing as the Group’s operations become increasingly global. For this year’s integrated

those strengths. That sits at the heart of corporate leadership. The

involved in highly specialist fields. Ideally, the management team should

Nisshinbo Group’s management team deserves high marks for

actively take on board their advice and use it to develop the Group’s

taking that approach.

next business strategy. At Nisshinbo, everybody is free to speak theirreport, we discussed the role of the Board of Directors with Tomofumi Akiyama, who has been an outside

Q1.

However, the phrase “corporate growth” should be used with

The Nisshinbo Group has been accelerating the pace of corporate governance reforms.
The number of directors has been cut and more outside directors have been appointed. A Remuneration Committee and a Nomination Committee have also been established — a discretionary measure. Most recently, Nisshinbo abolished its internal system of advisors and consultants, posts thatwere filled by previous Company presidents and chairmen. What is your view on these changes?

mind during Board of Directors meetings, with outside directors

care. The bigger a company becomes, the greater the risks. Companies

taking an active part in those discussions. I believe it is important formust not put priority on growth to the detriment of shareholder

the Company to try new ideas, from both a business perspective

value. Management should shun markets with high volatility andand an organizational perspective. If the first attempt does not

avoid targeting growth for growth’s sake and excessive risk taking.

work out, we need to analyze what went wrong and try again.

Nisshinbo sold its papers business in April 2017 and Japan Radio Co., Ltd. is set to become awholly owned subsidiary in October 2017. What is your take on those decisions?

Nisshinbo has a serious-minded corporate culture, so it tends tothey also need to have the right information to make informed

fully commit to reform when something needs to be changed.

decisions. As a company, we need to ask ourselves how to achieve

Improving corporate governance is a topic that all Japanese companies

that. With outside directors taking a greater role in management inBoth moves have been a major topic of discussion at the seniorneed to address, but the speed and effectiveness with which Nisshinbo

Japan, this is an important question for all Japanese companies, notmanagement level for several years amid the Group’s wider efforts

reinforce the company, such as implementing a restructuring program

has tackled the issue has impressed me.

just Nisshinbo.

to concentrate management resources on strategic areas. We haveto boost profitability and generating synergies by enhancing its

had careful in-depth discussions about the best route to follow on

automotive communications equipment business. However, theboth issues.

next challenge will be to integrate Japan Radio into the Nisshinbo

Nisshinbo has put the necessary systems and structures in place,

Under the committee-based corporate governance system,

In the case of Japan Radio, we have taken a number of steps tobut our work to improve corporate governance has only really justoutside directors who sit on committees approve or reject proposals

begun. The effectiveness of those systems will now be tested.

made by senior management. When making their decisions, outside

The papers business has been sold at the best time, in my

Nisshinbo needs to continuously enhance its corporate governancedirectors need to be more informed about the proposal in order toview. We have worked hard to increase the value of the business

wholly owned subsidiary now because the time is right to accelerate

systems by identifying any issues and making improvements.

avoid simple Yes or No responses. External consultants can have a role

while taking into account the interests of all stakeholders. The

that cultural integration process.

in that process, but either way, outside directors have to be given

decision now to exit the business follows careful consideration

inside and outside directors. As the number of outside directors

room to discuss the thrust of management proposals more thoroughly.

about our future strategy. I believe the deal offers significant merits

Nanbu Plastics Co., Ltd., the Nisshinbo management team has a

increases, there is a risk that the Board of Directors could become

I agree with the decision to abolish the internal advisor andfor all three parties — the papers business, the Nisshinbo Group

good track record of making the right steps at the right time withtoo distant from the Group’s frontline operations. Outside directors

consultant system, which allowed previous presidents and chairmen

and the buyer.

M&A deals. That is set to be a key strength for us going forward as

tend to take a more objective standpoint in decision-making, but

to stay on at the Company in an advisory role. That system is now

Group’s corporate culture. We decided to make Japan Radio a

Financials

One area we need to look at is ensuring the right balance ofManagement Framework

Q3.

Value Creation

director at Nisshinbo Holdings for 11 years.

50

angles — what would happen if the company chose a certain route,value. Sticking to the same business for many years may look like a

Strategy

Corporate governance in Japan continues to develop. The Nisshinbo Group is part of that trend, implementing

ProfileQ2.

As seen with the acquisitions of TMD Friction Group S.A. and

M&A activity increases.

51

Corporate GovernanceNisshinbo believes it needs to increase corporate value over the medium and long term as an Environment andEnergy Company group based on global business management and cash flow management. To achieve this, we arepromoting the Group’s Corporate Philosophy and improving the quality of corporate governance and other aspectsof our organizational culture. In parallel, we are striving to deliver quantitative growth in earnings and shareholder
value, focusing on ROE to improve profitability and placing importance on the share price in management decisions.
By making rapid and bold decisions based on risk-taking in line with our management principles, we areworking to enhance management efficiency while ensuring transparency, improve accountability, act ethically andProfilebuild a stronger corporate governance structure founded on the core principles of our Corporate Philosophy –Public Entity, Consistent Integrity and Innovation.

The goals are in line with Nisshinbo’s vision of becoming an

In contrast to recent years, the Group faces a great deal of
uncertainty in the global operating environment caused by

Nisshinbo to overemphasize the importance of those goals at the

non-economic factors. However, the management team must not

expense of its corporate vision or philosophy. Sustainable growth

make knee-jerk reactions to unexpected events. In these uncertain

should be the focus.

times, I believe the Nisshinbo Group is on the right track. As a

Also, without a more detailed business plan, investors andother stakeholders will lack confidence in the goals. That is one

We have formulated the Nisshinbo Corporate Governance Policy,

Nisshinbo has separated decision-making and oversight from busi-

which clearly states our basic thinking on corporate governanceness execution and adopted a managing officer system to reinforce

and related initiatives. By steadily implementing the principles of

those functions. By transferring responsibility for business execution

the policy and revising and improving its content as needed, we

to managing officers and strengthening oversight by the Board of

aim to improve the effectiveness of governance and create a

Directors, we are improving management efficiency and transpar-

framework for rapid and bold decision-making that contributes toency and creating an effective governance structure that will sup-sustained growth and increased corporate value over the medium

port the Group’s sustained growth and enhance corporate value

and long term.

over the medium and long term.
Nisshinbo has established an Audit & Supervisory Board. The
members of the Audit & Supervisory Board monitor the executionof duties by directors in accordance with audit policy and plans
determined by the board.

Group, we are looking forward to the future and making steadyprogress on a daily basis.

issue we are currently discussing with senior management. The

Corporate Governance Structure

outside directors will obviously be involved in developing that

General Shareholders’ Meetingbusiness plan.

Audit & Supervisory Board

Financial Auditors

Four Audit & Supervisory Board Members(including two outside audit & supervisory board members)

What is an effective Board of Directors?
Nomination Committee
Remuneration Committee

An effective Board of Directors should be made up of people with athe rights of investors and shareholders are asserted, companies willstrong sense of fiduciary duty. Through free and open discussion at

become overly defensive. That’s why it is important to build a dialog

board meetings that is clearly reflected in the day-to-day manage-

based on a common approach that is beneficial for both investors

ment of the Company, the Board of Directors should contribute toand companies.

sustained growth in corporate value and build win-win relationships
with shareholders and all other stakeholders.

Board of Management
Discusses business execution matters

Managing Officers, Business Divisions, Group Companies

That thinking applies to other stakeholder groups as well.
To achieve that, we need to make management more transparent
and communicate closely with all stakeholders. The role of outside

the life insurance sector, I believe “coexistence” is the basis for the

directors is to moderate the interests of the Company and its

ideal relationship between a company and its investors. When only

stakeholders, leading to a highly effective Board of Directors.

Internal Audit Officer
Corporate Strategy Center

Representative Directors

Representative Directors

Directors

Managing Officers

Representative directors are appointed by resolutions of

As of June 29, 2017, the Company had 10 directors,

Nisshinbo has adopted a managing officer system tothe Board of Directors. As of June 29, 2017, the presi-

including four outside directors. The Board of Directors is

speed up decision-making for business execution anddent and a senior executive managing officer were theresponsible for making decisions on important manage-

clarify operational responsibilities. As of June 29, 2017,

Company’s two representative directors.

ment matters and for monitoring the execution of duties

the Company had 15 managing officers, including fiveby directors. Directors are appointed for one-year terms inwith dual roles as directors. Managing officers are alsoorder to clarify management responsibility each fiscal year.

appointed for one-year terms.

Financials

After many years working at the senior management level in

52

Management Framework

Board of Directors
10 Directors (including four outside directors)

Q5.

Value Creation

Environment and Energy Company group. However, I do not want

Corporate governance structure

Strategy

Q4.

Nisshinbo is working towards its long-term goals of net sales of ¥1 trillion and ROE of at least
12% in the fiscal year ending March 2026. What is your view on these targets?

Corporate Governance Policy

53Ensuring appropriate information
disclosure and transparency

decides on important management matters at board meetings, such

The Company carries out active corporate communication by appro-

the business portfolio group structure, and the implementation of

In 2015, the Company abolished anti-takeover measures thatpriately combining statutory disclosures with voluntary information.

M&As. These management matters are determined based on thetions are conducted in an appropriate manner. Under this structure,

were introduced in 2006. If an outside party attempts to purchase a

When disclosing information, the Company takes into account thecriteria for agenda items stipulated under the Companies Act ofoutside directors draw on their depth of experience and expertise tolarge number of the Company’s shares or puts forward a takeover

convenience and accessibility of the information for the user, includ-Japan, other statutory and regulatory requirements, and various

monitor business management from an objective and independent

proposal, the Company is required by law to provide shareholders

ing high value-added non-financial information. In addition, theinternal rules that govern the Board of Directors and the delegation

standpoint, while outside members and internally appointed stand-with sufficient information, including the opinions of the Board ofCompany shall disseminate information in English such as by pre-of authority. Further, in its deliberations and decisions, the board

ing members of the Audit & Supervisory Board work closely with

Directors, to allow them to make informed decisions about theparing English-language annual integrated reports.

keeps the following matters in mind.

the Internal Audit Office.

merits of the deal. The Company is also required to take othercross-shareholdings shall be performed after deciding in each indi-

Nisshinbo has appointed several outside directors and outside
audit & supervisory members. These outside appointments also sit

vidual case the purpose of the holdings from the standpoint ofon the Company’s voluntarily established Nomination Committee

raising the corporate value of the Company and the relevant business partner.

and Remuneration Committee.
We have adopted this structure as we believe it ensures opera-

To increase the transparency and objectivity of the nomination

appropriate steps, such as providing shareholders with the neces-

and appointment process for directors, Audit & Supervisory Boardsary time to consider their decision.

members and managing officers, the Company has appointed
independent outside directors to the Remuneration Committee andthe Nomination Committee, which are positioned as advisory

fully protect shareholder rights. The Company will implement

As values shared by all officers and employees that serve as the

Responsibilities of the board

various measures related to communication with shareholders andbasis for corporate governance initiatives, the Company has estab-investors and ensure the appropriate operation of the Generallished the Nisshinbo Group Corporate Philosophy. The Company has

Shareholders’ Meeting.

also established the Business Conduct Guidelines of the Nisshinbo

holder rights is not impeded and will take appropriate measures toWith respect to cross-shareholdings, the Company may holdbodies of the Board of Directors.

Group to define standards of behavior expected of our executives
and employees in six areas: compliance, the environment, humanstrengthening the business or alliance relationship, to the extent

rights, workplace safety, product safety and procurement. Directors

deemed necessary from the standpoint of raising corporate value.

and managing officers take the initiative to provide this guidance by

These cross-shareholdings are regularly assessed to determine thethemselves and constantly educate employees on compliance withnecessity of the holdings and the presence or absence of economic

these guidelines and widely disseminate them.

rationality. The results of the assessments are reported to the Boardof Directors, which discusses the merits of continuing to hold the• Compliance with laws and regulations and corporate
ethics• Increasing medium- to long-term corporate value• Securing the trust of various stakeholders including
shareholders, customers, employees, business partners, and local communities

fiduciary duty to shareholders and thus strive to appropriately reflect
shareholders’ intentions within the board. By overseeing the prepa-

To promote the globalization of each Nisshinbo company along

ration and management of internal control and risk management

the lines of environment and energy, the Board of Directors selects

systems, directors and the board help to monitor business execution

personnel who possess extensive management and professionaland decision-making. At the same time, the Company fearlessly

experience and high-level expertise and who can enrich and ensure

confronts risk and works to achieve governance that is focused on

the diversity of the board. The current Board of Directors is com-quick and bold decision-making. In this manner, the Company aims

posed of 10 directors, of which four are independent outside direc-

to achieve greater accountability to stakeholders, increased profit-

tors (including one woman). The maximum number of directors isability, and higher returns for shareholders.

set at 14 in the Company’s Articles of Incorporation.

Value Creation

shares of business partners with the goal of maintaining andDirectors and the Board of Directors recognize that they have a• Alignment with corporate philosophy and management policy

Strategy

Appropriate cooperation withstakeholders other than shareholders

The Company shall ensure that the exercise of minority share-as the formulation of management strategies and plans, changes toProfileSecuring the rights and equal
treatment of shareholders

In light of the above, the Board of Directors deliberates andshares or selling them. The exercise of voting rights related toClassification

Total remuneration(Millions of yen)

176

Audit and Supervisory Board members(Excluding outside audit and supervisory board members)

32

Outside directors and outside Audit andSupervisory Board members

52

Independent Outside Directors at Nisshinbo Holdings Inc.

Remuneration breakdown (Millions of yen)Basicremuneration

Stock options

Bonus

Retirement
benefit

137

9

28

—

Total numberof payees

Name

Reasons for appointment

Tomofumi Akiyama

Mr. Akiyama has extensive experience in corporate management through his previous role as President of Fukoku Mutual Life Insurance Company.
Drawing on his extensive management experience and judgment, Mr. Akiyama provides oversight of management activities at the Nisshinbo Group.

10
Noboru Matsuda

32

—

—

—

track record and judgment, Mr. Matsuda provides oversight of management activities at the Nisshinbo Group.

2
Yoshinori Shimizu

52

—

—

—

Shinobu Fujino

54

Mr. Shimizu has specialist knowledge, mainly in the fields of finance and monetary affairs, in his role as a university professor. Drawing on his highly
specialist expertise, long track record and judgment, Mr. Shimizu provides oversight of management activities at the Nisshinbo Group.

6

Notes: 1. Total maximum compensation
		 Directors: ¥400 million per year		 (Employee salaries of individuals simultaneously appointed as employee and director are not included in payments to directors. Directors are also eligible to receive subscription
rights to new shares as stock options, up to a maximum value of ¥40 million per year).
		 Audit & Supervisory Board members: ¥70 million per year
2. The Company had 10 directors and four Audit & Supervisory Board members as of March 31, 2017.

Mr. Matsuda has experience as a public prosecutor and lawyer and has specialist legal knowledge. Drawing on his highly specialist expertise, long

Financials

Directors(Excluding outside directors)

Management Framework

Remuneration for Directors and Auditors (Fiscal year ended March 2017)

Ms. Fujino has specialist knowledge and experience, mainly in the field of personnel development, in her role as a career counselor. Drawing on her
extensive expertise and experience and her perspective as a woman, Ms. Fujino provides oversight of management activities at the Nisshinbo Groupand contributes to the promotion of diversity management.

55

With respect to independent outside directors, the Board of
Directors shall obtain the consent of the person in question andappoint them after carefully determining their eligibility as an independent director, taking into consideration the external requirements set forth in the Companies Act and the independence
tors and outside Audit & Supervisory Board members are able toproperly fulfill their roles and responsibilities, when nominating acandidate, the Company shall understand the status of officers who
concurrently serve in other listed companies or companies andorganizations that correspond to such, and verify that it will notinterfere in their attendance of the Company’s Board of Directors
meetings, Audit & Supervisory Board meetings, or their work.

The IR Director, who oversees policies and measures related to

Measures to improve the effectivenessof the Board of Directors

communication with shareholders and investors, accurately andAs part of efforts to improve the effectiveness of the Board of

fairly disseminates information outside the Company and proac-

Directors, the Company is taking a number of steps to ensure out-

tively conducts IR activities. The IR Director also strives to enhanceside directors participate appropriately in board meeting discussions

the General Shareholders’ Meeting, where senior management canby putting forward their opinions.

interact directly with shareholders, and the results briefings andAt the start of board meetings, the chairperson provides anbriefings to overseas investors. In addition, the Company plans andoverview of the Company’s operating environment and current

conducts individual meetings with domestic and overseas investors

strategic direction, giving board members the necessary backgroundthroughout the year.

to discuss the subsequent agenda points. In the case of highly

If deemed necessary, the IR Director and other directors andspecialist topics, outside directors are briefed beforehand to deepen
their understanding. Key statements made during meetings are

views from shareholders and investors.

recorded in the minutes, allowing for appropriate feedback.

Strategy

managing officers take part in responding to applications for interThe status of IR activities including measures and policies about

Profilestandards set by securities exchanges. To ensure that outside direc-

Dialogue with shareholders

When necessary, board members are also given the opportunity

communication with shareholders and investors is routinely

to visit business sites and attend business briefings. In addition toreported to the Board of Directors where it is reviewed.

board meetings, regular meetings are held between outside directors, Audit & Supervisory Board members and the president. Board
members are also required to attend twice-yearly Management
Policy Meetings with business managers and candidates for man-

2006

	Introduced outside director system and managing officer system, reduced term of

agement posts, in order to deepen their understanding of theoffice for directors from two years to one

Group’s business activities.

2015

Increased number of outside directors from three to four2016	Reduced number of board members from 13 to 10 (including four outside directors)
Established Remuneration Committee and Nomination Committee (both discretionary
bodies), started evaluating effectiveness of Board of Directors

2017

Abolished internal advisor and consultant system

In addition to reducing the size of the Board ofmembers about the effectiveness of the Board of Direc-

Directors, Nisshinbo has made changes such as review-tors. Responses to this year’s survey were again collated

ing criteria for matters to be discussed by the board andand reported to the board. The survey was used to

improving the quality of documents and briefings. This

assess the effectiveness of the Board of Directors and tohas led to more dynamic discussions by the 10 direc-

discuss improvements by helping the board understandtors, including the four outside directors. The results ofthe current situation, identify and analyze any issues

the survey indicate that the board is appropriately fulfill-

and compare responses with those in the previous

ing its decision-making role for key management mat-year’s survey. The following areas were assessed:

ters and its oversight role for business execution. The

1. Operation of the Board of Directors
2. Discussions by the Board of Directors
3. Composition of the Board of Directors
4. P rovision of information and training opportuni0

5
Number of inside directors

56

In April each year, the Company surveys all the board

Number of outside directors (10

15 (people)

ties to the Board of Directors

survey also confirmed the need to enhance the qualityand depth of discussion by increasing the amount oftime allocated to debating management strategy and
Financials(year)
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Survey of Directors and Audit & Supervisory Board Members

Management Framework

Composition of the Board of Directors

Value Creation

Corporate Governance
Reforms

medium- to long-term business policy, in order to further improve the board’s effectiveness.

of which are women)

57

Board of Directors, Audit & Supervisory Board Members
and Managing Officers
Audit & Supervisory Board Members(As of June 29, 2017)

Board of Directors

Takumi Ohmoto

Yo Kawakami*

Shiro Manabe*

ProfileYoichi Fujiwara

Director and Managing
Executive Officer,
Shikoku Chemicals Corporation

Director,*1

Director,*1

Director,

President

Senior Executive Managing Officer

Senior Executive Managing Officer

Masaya Kawata

Masahiro Murakami

Kenji Ara

Chief of Corporate Strategy Center

President, Japan Radio Co., Ltd.

Managing Officers* Outside Audit & Supervisory Board member

President

Masaya Kawata*

Responsible for Property Management
Department

Strategy

Senior Executive
Managing Officers

Masahiro Murakami*
Kenji Ara*
Executive Managing

Executive Managing Officer

Executive Managing Officer

Officers

Toshihiro Kijima

Kazunori Baba

General Manager,
Business Development Division

President, Nisshinbo Textile Inc.

Managing Officer

Managing Officer

Managing Officer

Managing Officer

Masahiro Kawamura

Hajime Sasaki

Yasuji Ishii

Kazuhiro Iwata

President,
Nisshinbo Mechatronics Inc.

President, Nisshinbo Chemical Inc.

President, Nisshinbo Brake Inc.

President, Nisshinbo
Automotive Manufacturing Inc.

Koji Nishihara*
Ryo Ogura*

Value Creation

Takayoshi Okugawa** Concurrent board member

Director,

Director,

Director,

Executive Managing Officer

Executive Managing Officer

Executive Managing Officer

Koji Nishihara

Ryo Ogura

Takayoshi Okugawa

Responsible for Brake BusinessPresident, New Japan Radio Co., Ltd.

Chief of Business Support Center

Chairman, Nisshinbo Brake Inc.

Director*2

Director*2

Tomofumi Akiyama

Noboru Matsuda

Yoshinori Shimizu

Shinobu Fujino

Managing Officer

Managing Officer

Managing Officer

Chairman,
Fukoku Mutual Life Insurance Company

LawyerProfessor Emeritus at Hitotsubashi
University

Career Counselor

Akihiro Ishizaka

Makoto Sugiyama

Toshihiro Masuda

Senior Manager of Corporate
Strategy Department, Corporate
Governance Department andAutomotive Business Strategy
Department

Senior Manager of CSR Department,
Diversity Development Department,
Human Resources and Administration
Service Department and Overseas
Administration Service Department

Executive Managing Officer,
Nisshinbo Mechatronics Inc.

*1 Representative director

58*2 Outside director

Financials

Director*2

Management Framework

Director*2

59

Risk Management
In order to fulfill its corporate social responsibility by contributing to society through ongoing business activities,
the Nisshinbo Group has established systems to ensure stable operations by mitigating a range of risks that could
have a serious impact on the smooth operation of its business.

This year, TOKYO SHIRTS CO., LTD. and Nanbu Plastics Co., Ltd.

Initiatives to ensure information security

took part in the training for the first time and a drill involving

The Nisshinbo Group is constantly reinforcing information security

roughly 13,000 Nisshinbo Group personnel in Japan was carried out

measures to prevent leaks of personal information about customers

to test the safety confirmation and emergency contact system.

and other sensitive information.
Nisshinbo widely uses anti-virus software and installs security

Initiatives to protect personal information

update programs to ensure its IT devices and systems are fully

The Nisshinbo Group recognizes that one of its key corporate social

protected against attack from computer viruses. We also use an
information security management system to monitor access tobusiness continuity management (BCM) drills in the fiscal year

responsibilities is to ensure important information related to

Firefighting teams at each Group business site have access to

ended March 2016. The drills cover the period from immediately

customers, suppliers, employees and other individuals is protected

critical data and prevent unauthorized IT devices from accessing ourcompact water pumps, chemical protection suits, life-saving

after a disaster until the point when the response team has to makeand managed appropriately. In order to fulfill this responsibility, thenetwork. Using these tools, we are working to prevent and control

equipment, chemical fire trucks and other equipment suited to thea judgment on activating the BCP. In the fiscal year ended MarchCompany handles personal information in accordance with its

internal data leaks and block external attacks on our systems.

2016, we also conducted safety confirmation and emergency

internal privacy policy. In addition, internal audits are conducted inemergency response capabilities, business sites also conduct regularcontact system drills, emergency reporting drills and training toline with Company regulations to ensure systems are working

guidelines. To ensure continuous improvement in information

rapid response drills to increase readiness for early-stage fires,

improve coordination with head office.

properly, and steps are taken to prevent data leaks and realize

security, we conduct regular internal IT audits of domestic

ongoing improvements.

subsidiaries to confirm the guidelines are being followed. We arefacilities and location of each site. As part of efforts to improvelife-saving situations and other potential emergencies such as gas or

In the fiscal year ended March 2017, concerns that a major
earthquake could affect any area of Japan increased after thechemical leaks.

To ensure each one of our employees understands the importanceGroup companies are required to follow information security

working to raise awareness of information security among users of

Kumamoto earthquakes. Against that backdrop, on September 1,of protecting personal information, we provide basic training to newly

IT systems across the Group through regular training programs

drills, which are reviewed by managing officers, to ensure

2016, we conducted a BCM drill based on the scenario of

recruited personnel and run training programs at individual businessusing learning materials that clearly set out rules to be followed.

disaster prevention management activities remain at a high state

widespread damage caused by a Nankai Trough earthquake. A

sites in line with annual plans. From the fiscal year ended March 2014,

similar drill was conducted in the previous fiscal year. Group Crisis

we introduced learning modules about protecting personalfrom an internal location to an external data center to ensure

Response Team drills were a key focus of disaster training in theinformation into the curriculum used to train managers when they arebusiness continuity in the event of a major natural disaster.

Initiatives to ensure business continuity

fiscal year ended Marchpromoted. Also, with the start of Japan’s new national identity system

The Nisshinbo Group has conducted disaster drills as part of disaster2017. During the drills, a

in January 2016, we formulated new regulations governing thereadiness inspections for some time, helping to adjust and improve

Nisshinbo Holdings

handling of personally identifiable information and ensured related

disaster and fire prevention plans. In the past, disaster drills focused

Emergency Headquarters

personnel were familiar with the new rules.

on first-response training at individual business sites, but the Group

with group management

now recognizes that a coordinated and joint response by damaged

functions was set up in

facilities, business segments, head office divisions and Nisshinbo

the access plaza

Holdings is an essential part of responding to a major earthquake or(multipurpose space) on

other disaster that causes widespread damage. After the initial

the second floor of the

response phase, when human and physical damage is ascertained

head office building,following the disaster (usually completed within 72 hours), thewhich was used to conduct role-playing drills involving the president

management team decides whether to activate the Group’s

and other senior executives. Participants were divided into fourbusiness continuity plan (BCP).

teams with specific roles – information gathering, analysis, reporting

formulated the Nisshinbo Group Business Conduct Guidelines in order to win trust from the public through fair andand disclosure.

honest business activities.

Major business sites also conduct comprehensive disasterIn addition, we are migrating the Company’s business servers

Strategyof readiness.

ProfileCrisis management system and disaster rapid
response system

To prepare for that kind of scenario, we started running

Value Creation

ComplianceRole-playing drills

Based on two principles in its Corporate Philosophy – Public Entity and Consistent Integrity – the Nisshinbo Group’s
mission is to act with fairness and integrity in order to contribute to society through its business activities. We haveManagement Framework

Assumptions for BCM drills
Nagano,Ueda

Tatebayashi
KawagoeHead office,Yokoyama-cho,NakanoAsahi
Toke

The Nisshinbo Group has established a Corporate Ethics Reporting

all compliance matters across the Group. The committee answers

System to rapidly identify and prevent any reoccurrence of potential

directly to the president and is led by a director with a dual role as aor actual legal violations. Group employees and external parties canmanaging officer.

submit reports to the system. Group employees can use the system

FujiedaMiai
Hamakita

Tokushima,
Yoshinogawa

7
6 Upper
6 Lower
5 Upper
5 Lower43

to communicate directly with the Corporate Ethics Committee or an(1) implementing corporate ethics systems and regulations,outside corporate attorney. Every effort is made to protect those(2) deciding the content and methods of corporate ethics training

who have used the system from unfair treatment.

for employees, and (3) formulating and implementing

Financials

Hiroshima

Corporate Ethics Reporting System

Nisshinbo has established a Corporate Ethics Committee to handle

The Corporate Ethics Committee is responsible for

NagoyaOsaka

Corporate Ethics Committee

If the Corporate Ethics Committee receives a report via theinvestigations, responses, procedures and remedial measures related

system, it launches an investigation and takes appropriate action

to consultations and reports received through the Company’s

where necessary. If the outside corporate attorney receives a report,

Corporate Ethics Reporting System.

appropriate action is taken based on close cooperation with the
Corporate Ethics Committee. Serious matters are promptly reported

60

Earthquake (Magnitude 8.0)

61

to the president. In the case of reports received from individuals

guidelines, and the UK Bribery Act. An updated guidebook

who have provided their name and contact details, the Corporate

containing the latest information was distributed to all the Group’s

Ethics Committee provides information to them, such as updates on

subsidiaries in the fiscal year ended March 2017.

the investigation and a summary of its conclusions. Regular reports
are also submitted to the Board of Directors and the Audit &Ensuring business confidentiality

Supervisory Board to ensure any information and concerns reported

Nisshinbo signs non-disclosure agreements with suppliers to preventto the committee are dealt with in an objective manner. In addition,

any leak of confidential information such as intellectual property,

the Corporate Ethics Committee works to prevent any futuretechnologies and expertise disclosed to them during the productviolations of laws or corporate ethics by providing information to all

design and development stage.
We also conduct annual internal audits to check whether thethe results of the investigation.

Group’s trade secrets are being managed appropriately.

Compliance education

CSR procurement basic policy

In order to ensure fair and honest business practices, theAs part of its corporate social responsibility (CSR) initiatives, theNisshinbo Group conducts compliance training for different

Nisshinbo Group has set out its policy on procurement in theemployee levels and work sites and provides training to

Nisshinbo Group Business Conduct Guidelines. The Group has also

employees prior to overseas assignments.

formulated the Nisshinbo Group CSR Procurement Basic Policy,

Compliance managers at subsidiaries also receive

clarifying its stance on seven specific areas: legal compliance, fairtrade, information security, environmental protection, human rights,

protect subcontractors.

health and safety, and quality assurance.

Initiatives to prevent corruption

1. To strictly observe all legal obligations and social norms

In recent years, countries worldwide have been reinforcing

2. To always pursue business in a sound and fair manner

Financials
64

Eleven-Year Summary

66

Management’s Discussion and Analysis

72

Consolidated Balance Sheets

74

Consolidated Statements of Income

3. To properly manage all information

75

Consolidated Statements of Comprehensive Income (Loss)bribery and corruption. Nisshinbo is working to prevent any such

4. To give due consideration to protection of the environment

illegal activity, in line with rules in the Nisshinbo Group Business5. To respect all basic human rights

76

Consolidated Statements of Changes in Equity

Conduct Guidelines. In the fiscal year ended March 2016, we

6. To strive for a secure and healthy living and working environment

77

Consolidated Statements of Cash Flows

published a Corruption Prevention Guidebook with information

7. To aim to ensure the quality and safety of all products and services

78

Notes to Consolidated Financial Statements

We are working to extend our CSR initiatives across the entire

88

Independent Auditor’s Reportabout related laws and regulations overseas, as well as in Japan.
The guidebook is provided to all Group companies, including
subsidiaries overseas. In addition to information about Article 18 of

supply chain by asking suppliers to adhere to our principles in thoseJapan’s Unfair Competition Prevention Act (prohibition of provision

seven areas.

Value Creation

regulatory systems and stepping up efforts to prevent and expose

Strategypractical training about antimonopoly legislation and laws toProfilecompanies in the Group about its response to the issue based on

To support further progress in CSR procurement, weof illicit profit, etc. to foreign public officials, etc.), the guidebook

formulated CSR Procurement Guidelines for Group companies into prevent corruption, such as the United Nations Convention

the fiscal year ending March 2018. Also, Group companies are

Against Corruption (UNCAC), OECD treaties on preventing

now required to carry out CSR surveys of their suppliers as a new

corruption of overseas public officials in international transactions,

KPI. Going forward, we will work closely with our suppliers to

the US Foreign Corrupt Practices Act (FCPA) and its related

implement CSR procurement.

Management Frameworkprovides information about international treaties and laws designed

Corporate Ethics Reporting System
Nisshinbo Holdings Inc.

Board of Directors

Nisshinbo Group

ReportPresident
Instruct

Division subject to investigation
ReportFinancials

Investigate

Corporate Ethics Committee
Internal Contact Point(Corporate Ethics Committee)

External Contact Point
Coordinate(Corporate Attorney)Group companies
Promote Groupwide
understanding

Response(Disclosed whistleblower)

Report, consult(Disclosed / undisclosed whistleblower)

Stakeholders

6263

Eleven-Year Summary(For the years ended March 31)(millions of yen)

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Net Sales

312,825

322,412286,167

242,409

325,555

379,340

450,693494,350

523,758

533,989

527,274

Operating Income

11,551

12,034408

3,570

19,843

4,170

13,394

13,175

13,744

12,6174,890

Net Income (Loss) Attributable to Nisshinbo Holdings Inc.

15,107

12,290(1,286)

1,896

11,185

9,416

6,418

9,012

13,694

10,7763,575

Equity282,015

245,909

193,698

193,639

211,557

213,751

242,623

276,865

306,938

284,472

275,753

Total Assets

472,670

424,706

366,858

358,110479,852

534,584

551,933

611,311

678,486

651,793646,288

Shareholders’ Equity Ratio (%)

55.3

53.0

49.0

51.1

38.0

34.7

37.9

39.1

38.2

35.9

35.5

Return on Assets (%)

3.1

2.7

(0.3)

0.5

2.7

1.9

1.2

1.5

2.1

1.6

0.6

Return on Equity (%)

5.7

5.1

(0.6)

1.0

6.1

5.1

3.2

4.0

5.5

4.4

1.5

Payout Ratio (%)

20.0

23.6

—

144.5

23.7

27.9

40.8

29.1

18.7

44.2

133.2

Capital Expenditures

18,30624,28016,872

13,027

12,80015,705

20,12319,89636,90922,86230,505

Depreciation and Amortization

14,984

16,89018,025

12,96013,15814,55018,96921,48623,111

22,571

22,264

201,698,939

198,698,939

184,098,939

184,098,939

178,798,939

178,798,939

178,798,939

178,798,939

178,798,939

178,798,939

178,798,939

Common Shares Issued

Profile2007

Strategy

Per Share (in yen):
74.19

63.34

(7.08)

10.38

63.32

53.83

36.74

51.60

80.33

67.93

22.52

1,301.14

1,179.43

985.191,034.04

1,036.80

1,063.19

1,198.67

1,369.78

1,634.07

1,472.26

1,444.94

Cash Dividends

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

30.00

30.00

Number of Employees

12,744

13,253

12,726

12,48818,292

22,30422,08322,052

21,387

23,05523,256Net Income (Loss) Attributable to Nisshinbo Holdings Inc.
Shareholders’ Equity

Shareholders’ Equity Ratio

Capital Expenditures(billions of yen)(%)(billions of yen)

Value Creation

Net Sales

Net Income Attributable
to Nisshinbo Holdings Inc. per Share
(yen)

600
500
400

40

40

30

30

20

20

10

10

100
80
Management Framework

60

300

40

200
100
0

0

12.3

13.3

14.3

15.3

16.3

17.3

Net Income Attributable
to Nisshinbo Holdings Inc.

20

0

12.3

13.3

14.3

15.3

16.3

17.3

0

12.3

13.3

14.3

15.3

16.3

17.3

12.3

13.3

14.3

Return on Equity

Depreciation and Amortization

Number of Employees(%)(billions of yen)(people)25

25,00020

20,00015

15,00010

10,000

5

5,000

15.3

16.3

17.3

15.3

16.3

17.3

(billions of yen)

6

10

4

5

2

0

0

12.3
64

13.3

14.3

15.3

16.3

17.3

0

12.3

13.3

14.3

15.3

16.3

17.3

Financials

15

0

12.3

13.3

14.3

15.3

16.3

17.3

12.3

13.3

14.3

65

Management’s Discussion and Analysis
Current Business Strategies and Future Prospects

Highlights• Group sales and profits declined year on year, reflecting a sharp drop in profits at Japan Radio Co., Ltd.
amid a deteriorating operating environment. The automobile brakes business, New Japan Radio Co., Ltd.
and other operations were also affected by negative forex factors.
• Sales and profits rose sharply in the precision instruments business due to a full-year earnings contribution
from Nanbu Plastics Co., Ltd., which became a consolidated subsidiary in the previous fiscal year.

Operating Results
Economic Environment

Comparison with the Previous Term

Net Sales

Operating Income(billions of yen)(billions of yen)600

Net Sales (millions of yen)

15

500
400

10

200

5

100
0

0
12.3

66

13.3

14.3

15.3

16.3

17.3

12.3

13.3

14.3

15.3

16.3

17.3

Segment Profit (Loss) (millions of yen)

Electronics

190,852 down 7.1%

(3,240) deterioration of ¥11,558 million

Automobile Brakes

146,062 down 11.5%(7) improvement of ¥880 million

Precision Instruments

60,687 up 105.5%

1,049 up 229.4%

Chemicals

9,483 up 14.5%

1,309 up 73.9%

Textiles

55,842 down 7.1%

1,777 down 0.1%

Papers32,648 up 0.2%

2,603 up 250.7%

Real Estate

8,084 down 3.3%

5,811 up 0.3%

Other Businesses

23,616 down 4.4%

Financials

300

Management Framework

The Nisshinbo Group reported net sales of ¥527,274 million(US$4,793 million), down 1.3% year on year. Although theprecision instruments business achieved sales growth, mainlyreflecting the consolidation of Nanbu Plastics Co., Ltd., sales
declined in the electronics business due to weakness in shipbuilding and marine transport markets and a drop off inValue Creation

Results of Operations in the Current Term andNisshinbo Holdings Inc. declined 66.8% year on year to¥3,575 million (US$33 million), mainly due to the drop in
operating income.
On October 1, 2016, two consolidated subsidiaries,
Nisshin Toa Inc. and Iwao & Co., Ltd., merged to form a
new company called Nisshintoa Iwao Inc. As a result of themerger, the apparel textile operations of Iwao & Co., Ltd.,
which were previously included in the other businesses
segment, were reclassified under the textiles business segment, effective from the fiscal year ended March 2017.

Strategy

During the fiscal year ended March 2017, corporate earnings
and the employment environment in Japan continued to improve at a moderate pace. Overseas, the US economy continued to expand gradually, supported by firm consumer
spending and an upturn in the employment environment.
The European economy remained on a moderate recovery
path and the Chinese economy improved overall, mainly due
to public-sector investment from the second half of the fiscal
year. However, the outlook became increasingly uncertain
due to slowing growth in emerging economies and the risk ofan economic impact from geopolitical issues such as instability in the Middle East and on the Korean peninsula and theUK’s decision to leave the EU.

major public-sector project deliveries at Japan Radio Co., Ltd.
Sales also contracted year on year in the automobile brakes
business, which was mainly caused by the impact of thestronger yen in foreign currency translation adjustments.
Operating income declined 61.2% year on year to¥4,890 million (US$44 million), mainly reflecting lower profits in the electronics business due to operating losses at
Japan Radio Co., Ltd. and the impact of the stronger yen on
New Japan Radio Co., Ltd. Operating income before goodwill amortization fell 37.9% year on year to ¥12,300 million(US$112 million).
Despite an increase in equity in earnings of a nonconsolidated subsidiary and affiliates, net income attributable todevelopment through our strengthened alliance with Canadian company Ballard Power Systems Inc., a global pioneerin fuel cells.
In the electronics field, we are preparing to move into
advanced driving assistance systems (ADAS) by leveraging
the Group's strengths in wireless communication technology
and electronic component manufacturing technology.
We will continue to focus on existing public infrastructurebusinesses such as disaster prevention systems and wirelesscommunication systems for marine applications, but with Industry 4.0, the internet of things (IoT) and artificial intelligence (AI) gaining momentum, we plan to bring together oursensing and communication technologies to help create
super smart societies. We will draw on our technologies andexpertise in electronics, mechatronics and chemicals and seek
M&A targets that fit well with our approach, aiming to build
a cohesive Group from our diverse workforce and deliver results as an Environmental and Energy Company group.
In the fiscal year ending March 2018, we will implement
our growth strategy by continuing to channel management
resources into businesses in the automotive field and the supper smart society field. In the electronics business, we willcontinue to push ahead with efforts to generate new growthby restructuring operations, aiming to create a solid operating base. In the automobile brakes business, we will step up
the production of friction materials that are compatible withnew regulations on copper content, demand for which is projected to expand worldwide. We will also reinforce the earnings structure at TMD. In the precision instruments business,
we aim to expand our business by integrating operations
with Nanbu Plastics Co., Ltd.
Our estimates are based on average exchange rates forthe fiscal year of ¥110/US$ and ¥120/€.

Profile• The Company sold its papers business to Daio Paper Corporation in April 2017.

As an Environmental and Energy Company group that contributes to global society, the Nisshinbo Group aims to provide solutions that address some of the biggest issues facedby society today, such as environmental destruction andglobal warming, in order to realize its goal of making life
safer and more secure. Based on that approach, the Group is
working towards its long-term goals of net sales of ¥1 trillion
and ROE of 12% in the fiscal year ending March 2026.
To achieve those targets, the Group is focusing on four
strategic business areas: wireless communications and electronics, automotive parts and devices, lifestyle and materials,
and new energy and smart society. Specifically, we are pursuing tireless innovation to reinforce existing businesses, leveraging the results of R&D projects and actively seeking M&A
opportunities.
Going forward, we will implement our growth strategy by
first channeling management resources into businesses in theautomotive field and the super smart society field.
In the automobile brakes field, we have started production of friction materials that are compatible with new regulations on copper content, demand for which is projected to
expand worldwide. In the US, new regulations are scheduled
to come into effect from 2021 that will limit the use of copper in brake friction materials to prevent water pollution. The
Nisshinbo Group has moved quickly to develop friction materials with less or no copper and is one of the first in the industry
to start mass production of materials that are compatible
with the new regulations. We plan to steadily expand our
lineup of those materials, aiming to grow our business byhelping to protect the environment.
In the chemicals field, we are working towards the commercialization of parts for fuel cell vehicles (carbon bipolar
plates and catalysts to replace platinum) by accelerating(91) improvement of ¥32 million

Note: Changes in net sales and segment profit (loss) are year-on-year figures; please refer to pages 34 to 48 for details on performance in individual segments,
except for the papers business.
67

Dividend
Nisshinbo intends to retire treasury stock, but this stock may
be used in share swaps as part of M&A deals aimed at significantly increasing shareholder value.

Cash Dividends
(yen)

30

Cash Flows from Financing Activities

Cash provided by operating activities totaled ¥26,768 million (US$243 million), mainly reflecting cash provided of¥6,717 million from income before income taxes, ¥22,264
million from depreciation and amortization and ¥8,264 million from amortization of goodwill, against cash used of¥9,630 million for income taxes–paid and ¥6,997 million forincrease in receivables.

Cash provided by financing activities totaled ¥3,595 million(US$33 million), mainly reflecting cash provided of ¥30,415
million from proceeds from issuance of long-term debt,
against cash used of ¥14,809 million for repayment of longterm debt, ¥5,978 million for decrease in short-term bankloans and ¥4,762 million for cash dividends paid.

Cash Flows from Investing Activities

20

10

0
13.3

14.3

15.3

16.3

17.3

Total Assets

Equity(billions of yen)(billions of yen)

700

350

600

300

500

250

400

200

300

150

200

100

100

50

0

Value Creation

0
12.3

13.3

14.3

15.3

16.3

17.3

12.3

13.3

14.3

15.3

16.3

17.3

Production Results

Management Framework

million in deferred tax liabilities (long-term liabilities), versus
an increase of ¥20,330 million in long-term debt.
Equity at the end of the fiscal year totaled ¥275,753 million (US$2,507 million), a decrease of ¥8,719 million fromthe end of the previous fiscal year. This primarily reflected adecline of ¥1,227 million in retained earnings, an increase of¥1,091 million in net unrealized gain on available-for-salesecurities, a decrease of ¥4,172 million in foreign currencytranslation adjustments and a decrease of ¥4,458 million innoncontrolling interests. As a result of the above, the shareholders’ equity ratio declined 0.4 of a percentage point year
on year to 35.5%.

Cash used in investing activities totaled ¥31,429 million(US$286 million), primarily reflecting cash provided of ¥4,568
million from sale of investment securities, against cash usedof ¥29,219 million for purchase of property, plant and equipment, ¥4,372 million for increase in time deposits and ¥3,443
million for purchase of shares of subsidiaries.

As a result of the above, cash and cash equivalents at
the end of year totaled ¥39,850 million (US$362 million),a decrease of ¥2,422 million from the end of the previous
fiscal year.

Strategy

12.3

Financial Position
Total assets at the end of the fiscal year stood at ¥646,288
million (US$5,875 million), a decrease of ¥5,505 million
from the end of the previous fiscal year. This mainly reflected
increases of ¥4,191 million in time deposits, ¥4,901 million
in receivables and ¥2,969 million in inventories, versus decreases of ¥6,283 million in property, plant and equipment,¥6,529 million in goodwill and ¥3,633 million in deferred
tax assets.
Total liabilities at the end of the fiscal year were ¥370,535
million (US$3,369 million), an increase of ¥3,214 million fromthe end of the previous fiscal year. This was mainly due todecreases of ¥6,421 million in short-term bank loans, ¥7,354
million in the current portion of long-term debt and ¥3,534

Cash Flows from Operating Activities

ProfileThe full-year dividend for the fiscal year ended March 2017 is¥30 (US$0.27) per share, the same amount as for the previous fiscal year.
By focusing on ROE, Nisshinbo is aiming to deliver sustained increases in shareholder value through the distributionof profits and other means. We also intend to accelerate investment in areas that drive growth, such as R&D, capital
expenditures and M&A, aiming to secure even greater support and trust from the public, markets and stakeholders as
an Environmental and Energy Company group.
In principle, we intend to pay an interim dividend and a
year-end dividend, targeting stable and consistent dividends
based on a consolidated payout ratio target of around 30%.
Also, when the Group holds sufficient internal reserves tofund growth strategies, we plan to actively return profits toshareholders through share buybacks and other means after
considering factors such as financial stability. In principle,

Cash Flows

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

Year-on-Year Change (%)

190,266-12.6

Automobile Brakes

114,761-13.2

Precision Instruments

55,317+95.3

Chemicals

6,555

+13.2

Textiles

35,073-8.5

Papers25,727

-9.3

542

-0.1

428,241-5.1

Other Businesses
Total

Financials

Amount (millions of yen)

Electronics

Notes: 1. Amounts are calculated based on manufacturing costs.
2. The real estate business does not engage in manufacturing, and therefore the above table does not include any amounts from this segment.

68

69Capital Expenditures
manufacturing facilities at TMD consolidated subsidiary TMD
Friction GmbH. In the other businesses segment, Nisshinbo
Singapore Pte. Ltd. used ¥2,931 million to acquire rental realestate to secure a stable source of income.

Capital Expenditures(billions of yen)

40
30
20
10
0
13.3

14.3

15.3

16.3

17.3

Risk Information
Forward-looking statements in this report are based on information available to the Nisshinbo Group as of March 31, 2017.

The Nisshinbo Group is actively developing new businesses
such as carbon catalysts in order to expand sales and profits.
However, uncertainties are inherent in new businesses andthe development of appealing new products and the formation of new markets may not proceed as anticipated. This
could delay or prevent the recovery of prior investments.

70

Sales Prices and Raw Material Procurement

Some of the Nisshinbo Group’s products can be significantly
affected by fluctuations in market prices owing to market developments and competition with other companies. Sales
prices for textile products and raw materials procured by theGroup such as cotton, steel and other materials are particularly susceptible to these market trends. The New Japan RadioGroup (New Japan Radio Co., Ltd. and its consolidated subsidiaries) generates more than 80% of its consolidated sales
from semiconductor devices. Significant fluctuations in demand in the semiconductor market may therefore have alarge impact on the Nisshinbo Group’s financial results.

Risks Associated with the Supply Chain

The Group may face difficulties in securing necessary components owing to changes in the economic environment. For
example, rapid developments in specific parts supply regions
and product fields may affect supply capacity at parts companies and lead to delivery delays. This in turn could impact theGroup’s shipment plans or lead to deterioration in margins
owing to sharp increases in the price of components.

Risks Associated with Overseas Business Development

The Nisshinbo Group owns many production bases overseas.
Risks inherent to this international presence include unforeseen changes in laws and regulations, unfavorable political or
economic factors and social turmoil.
Risks Associated with Financial Covenants Related toCapital Procurement

The Nisshinbo Group has secured funding from multiple
financial institutions. The Company and some consolidated
subsidiaries have entered into commitment line contracts andterm loan contracts. These companies are bound by certain
financial covenants.

Risks Associated with Fluctuations in Exchange Rates

Fluctuations in foreign exchange rates can have an impact on
the yen value of the Nisshinbo Group’s revenues, expenses,
receivables and payables arising from business transactions
that are denominated in foreign currencies and on foreign
currency translation adjustments in the financial statements
related to overseas consolidated subsidiaries, which prepare
their statements in foreign currencies. While the Group takes
steps to mitigate the risk of exchange rate fluctuations, not
all this risk can be avoided. Fluctuations in exchange rates
may therefore affect the Group’s financial results, with periods of yen appreciation putting pressure on profits.

Risks Associated with Disasters and Accidents

The Nisshinbo Group takes steps to manage risk related todisasters and accidents. However, a large earthquake or othermajor disaster or a sudden accident such as a fire may causesignificant damage to the Group’s manufacturing facilities,
leading to the suspension of production activities that causes
shipment delays. The Group may also incur considerable
costs to restore damaged buildings or facilities.
In addition, the outbreak and spread of a new infectious
disease may have an impact on the Group’s operations.

Financials

Investment securities held by Nisshinbo are marked to market
in accordance with accounting standards for financial products, and the Company implements impairment accounting
based on even stricter internal standards for a portion ofthese securities. Based on current accounting standards andstandards for asset impairment, there is a limited possibility
that impairment losses will have an impact on net income, as
the acquisition cost of the investment securities was low.
However, comprehensive income may fluctuate significantly
owing to changes in market value. Also, the Company plans
to limit increases in interest-bearing liabilities by selling investment securities to procure capital needed for mergers
and acquisitions, overseas business development, and capital
investment, but misalignment of the timing between saleand investment may give rise to unforeseen circumstances.

Risks Associated with Market Shifts Relating to ProductProducts supplied by the Japan Radio Group (Japan Radio
Co., Ltd. and its consolidated subsidiaries) are subject to arange of laws and regulations governing areas such as national security. These laws include export restrictions, importregulations and environmental and recycling laws. The Japan
Radio Group has established clear internal regulations regarding compliance with these laws. However, unforeseen
revisions to laws and regulations may limit the Group’s business activities and lead to an increase in costs.

Management Framework

Risk of Fluctuation in the Value of Investment Securities

The majority of the Nisshinbo Group manufactures products
in accordance 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 a large liability could havean adverse impact on the Group’s financial results.

Regulations

The customers of the Nisshinbo Group’s automobile brakes
business are automobile manufacturers that conduct business globally. The cancellation of contracts or requests to
sharply reduce prices owing to changes in the business resultsof such client companies are factors outside the control ofNisshinbo, and consequently may have an impact on theGroup’s financial results.
The Japan Radio Group has a relatively high ratio of business with central and local governments, so sales tend to beconcentrated toward the end of the fiscal year. In addition,
trends in central and local government spending plans andcapital expenditures in the telecommunications sector may
affect the Group’s financial results.

Value Creation

Risks Associated with New Businesses

Risks Associated with Product Quality

Risks Associated with Unforeseen Revisions to Laws andPerformance

Strategy

12.3

Risks Associated with Changes in Customer BusinessProfileThe Nisshinbo Group channels capital expenditures into priority product fields that offer the potential for long-term
growth and into upgrading manufacturing equipment toraise product quality. It also invests in environmental measures such as the reduction of greenhouse gases and in manufacturing facilities in China and Southeast Asia in response
to rising demand driven by market expansion.
As a result, in the fiscal year ended March 2017, capital
expenditures totaled ¥30,505 million (US$277 million). In theelectronics business, Japan Radio Co., Ltd. invested ¥5,828
million in the construction of new facilities, including systemengineering and research and development sites, and New
Japan Radio Co., Ltd. invested ¥2,768 million, mainly in electronic device manufacturing and research and development
facilities. In the automobile brakes business, the Group invested ¥7,335 million, mainly to expand friction material

71Consolidated Balance Sheets(March 31, 2017 and 2016)(millions of yen)

ASSETS(thousands of
US dollars) (Note 1)

2017

2016

2017

¥39,850¥42,272$362,273

Time deposits (Note 5)
Marketable securities (Note 4)

7,841

3,650

71,282—

1—

LIABILITIES AND EQUITY(thousands of
US dollars) (Note 1)

2017

2016

2017

Short-term bank loans (Note 5)¥48,977¥55,398$445,246

Commercial paper (Note 5)

30,00030,000272,727

Current portion of long-term debt (Note 5)

8,661

16,01578,736

Notes and accounts payable, trade (Note 5)

72,422

72,177658,382

Nonconsolidated subsidiaries and affiliates

11

36

100

10,57812,671

96,164

83,011

84,884754,646

Accrued expenses

16,837

16,660153,064

Accrued income taxes

3,030

5,350

27,545Current liabilities:

Current assets:
Cash and cash equivalents(millions of yen)

PayablesReceivables
Accounts receivable, trade (Note 5)

7,011

7,992

63,736141,288138,227

1,284,436

Nonconsolidated subsidiaries and affiliates

1,034

1,050

9,400

Other

5,388

2,803

48,982150,072

1,406,554

(579)

(831)

(5,264)

154,142

149,241

1,401,290

Inventories (Notes 3 and 5)

99,77096,801

907,000

Deferred tax assets (Note 7)

6,001

7,216

54,555Less allowance for doubtful receivables

Other current assets
Total current assets

7,196

5,215

65,418314,800

304,396

2,861,818

190

0

1,727

Other current liabilities

15,468

11,463

140,618

Total current liabilities

206,174

219,770

1,874,309

Long-term debt (Note 5)

70,47650,146640,691

Liabilities for retirement benefits (Note 6)

49,282

47,181

448,018

Deferred tax liabilities (Note 7)

30,741

34,275

279,464

Other long-term liabilities (Note 5)

13,862

15,949126,018

164,361

147,551

1,494,191

370,535

367,3213,368,500

27,58827,588250,800

Deferred tax liabilities (Note 7)

Strategy

154,721

Other

ProfileNotes receivable, tradeLong-term liabilities:

Total long-term liabilities
Total liabilities

Equity:Property, plant and equipment (Note 5):39,21547,679356,500

Buildings and structures

176,205

175,956

1,601,863

Machinery, equipment and tools

321,119

323,6882,919,264

9,130

7,346

83,000545,669

554,669

4,960,627(360,184)(362,901)(3,274,400)

185,485

191,768

1,686,227

Less accumulated depreciation
Property, plant and equipment, net

Shareholders’ equity:
Common stock:
Authorized—371,755,000 shares
Issued 2017 and 2016—178,798,939 shares
Capital surplus

17,587

17,599159,882

Retained earnings

167,598

168,825

1,523,618

Management Framework

Land

Construction in progress

Value Creation

Contingent liabilities and commitments (Note 10)

Less treasury stock at cost
2017—20,013,820 shares(23,090)—(209,909)

2016—20,071,007 shares—(23,156)—

Total shareholders’ equity

189,683

190,856

1,724,391

37,31036,219339,182

3

(56)

27

7,715

11,887

70,136

Accumulated other comprehensive income:Net unrealized gain on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Investments and other assets:

Foreign currency translation adjustments
80,51480,232

731,946

Investments in and advances to nonconsolidated subsidiaries and affiliates

27,71326,017

251,936

Deferred tax assets (Note 7)

9,744

12,162

88,582

Goodwill

8,078

14,60773,436

Other

19,954

22,611

181,400

Noncontrolling interests

46,15550,613

419,591

146,003

155,629

1,327,300

Total equity

275,753

284,472

2,506,845¥646,288¥651,793$5,875,345

Total liabilities and equity¥646,288¥651,793$5,875,345

Total investments and other assets
Total assets

Post-retirement liability adjustments
Total accumulated other comprehensive income
Stock acquisition rights (Note 11)(5,276)(5,216)(47,964)

39,752

42,834361,381

163

169

1,482

229,598

233,859

2,087,254

Financials

Investment securities (Notes 4 and 5)

See Notes to Consolidated Financial Statements.
72

73

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income (Loss)(Years ended March 31, 2017 and 2016)(Years ended March 31, 2017 and 2016)(millions of yen)

Net sales(thousands of
US dollars) (Note 1)

2017

2016

2017

¥527,274¥533,989$4,793,400(millions of yen)(thousands of
US dollars) (Note 1)

2017

2016

2017

¥1,833¥14,341$16,664

1,281(15,061)

11,645

59

(119)

536

(4,559)(11,076)(41,445)

Post-retirement liability adjustments(51)(5,179)(464)

Equity in earnings of a nonconsolidated subsidiary and affiliates

(559)

(544)

(5,081)

Net income
Other comprehensive income (loss):

Costs and expenses:

Net unrealized gain (loss) on available-for-sale securities

Cost of sales

420,610

419,4023,823,727

Selling, general and administrative expenses

101,774

101,970925,218

522,384

521,3724,748,945

4,890

12,617

Foreign currency translation adjustments

44,455Comprehensive income (loss)(3,829)(31,979)(34,809)¥(1,996)¥(17,638)$(18,145)

ProfileOperating income

Deferred gain (loss) on derivatives under hedge accounting

Other income (expenses):
3,124Interest expenses(969)(1,007)(8,809)Nisshinbo Holdings Inc.

¥493¥(18,999)$4,482Equity in earnings of a nonconsolidated subsidiary and affiliates

4,406

2,874

40,055

Noncontrolling interests(2,489)1,361(22,627)

Other, net (Note 9)(4,340)

4,572(39,455)

1,827

9,563

16,6096,717

22,18061,064

4,982

8,016

45,291

See Notes to Consolidated Financial Statements.

Strategy

Income before income taxes

24,818Comprehensive income (loss) attributable to:

2,730Interest and dividend income

Income taxes (Note 7):
Current
Deferred

(177)

(891)

7,839

44,4001,833

14,341

16,664

Net income (loss) attributable to noncontrolling interests(1,742)

3,565(15,836)

Net income attributable to Nisshinbo Holdings Inc.

¥3,575¥10,776$32,500(yen)(US dollars)

Net income¥22.52¥67.93$0.20

Cash dividends

30.00

30.00

0.27

Management Framework

Per share:

Value Creation

Net income

(98)
4,884

See Notes to Consolidated Financial Statements.

Financials

7475

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows(Years ended March 31, 2017 and 2016)(Years ended March 31, 2017 and 2016)(millions of yen)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock
at costTotal
shareholders’equityNet
Deferred
unrealized gain (loss)
Foreign
Postgain (loss)onStockcurrency retirement
on derivatives
acquisitiontranslation
liability
availableunderrightsadjustments adjustments
for-salehedge
securities accounting

10

348
(174)

¥(1,127)

Total
equity¥222 ¥47,805 ¥306,938(3,568)
10,776(2,489)

(323)
(26)

358

358

(174)
(120) (10,787)(4,089)(53)

Balance at March 31, 2016
¥27,588 ¥17,599 ¥168,825 ¥(23,156) ¥190,856 ¥36,219
Cash dividends, ¥30.00
per share(4,762)(4,762)
Net income attributable to
Nisshinbo Holdings Inc.
3,575
3,575
Change in scope of
consolidation—transactions
with noncontrolling interests(6)(6)
Purchase of treasury stock(2)(2)¥(56) ¥11,887¥(5,216)¥169 ¥50,613 ¥284,472

(6)

68
(39)
(1)

(4,762)
3,575
(6)
(2)

62

62

(39)
(1)

(39)
(1)
(6) (4,458)(7,546)¥163 ¥46,155 ¥275,753

1,091¥27,588 ¥17,587 ¥167,598 ¥(23,090) ¥189,683 ¥37,310

59¥3(4,172)(60)¥7,715 ¥(5,276)(thousands of US dollars) (Note 1)

CapitalsurplusRetainedearnings

Treasurystock
at costTotal
shareholders’equityBalance at April 1, 2016
$250,800 $159,991 $1,534,773 $(210,509) $1,735,055 $329,264
Cash dividends, $0.27(43,291)(43,291)
per share
Net income attributable to32,50032,500Nisshinbo Holdings Inc.
Change in scope of
consolidation—transactions
(55)
(55)
with noncontrolling interests
Purchase of treasury stock
(18)
(18)
(54)
(355)
(9)

$(509) $108,063 $(47,418) $1,536 $460,118 $2,586,109(43,291)
32,500
(55)
(18)

564

564

(355)
(9)

(355)
(9)
9,918

536

(37,927)$250,800 $159,882 $1,523,618 $(209,909) $1,724,391 $339,182$27$70,136 $(47,964) $1,482 $419,591 $2,506,845

Net change in the year
Balance at March 31, 2017

618

Total
equitySee Notes to Consolidated Financial Statements.

(546)(54) (40,527)(68,600)¥6,717¥22,180$61,064(9,630)22,2648,264(4,406)
(133)
2,046
5,929
(3,907)662
4,093(7,797)
22,571
7,189(2,874)(1,073)575
5,385(4,420)(972)
414(87,545)
202,400
75,127(40,055)(1,209)18,60053,900(35,518)
6,018
37,209(2,358)(6,252)(21,436)

76
2,022

249
1,915

691
18,381(6,997)
1,235(1,259)2,150
26,76813,531(969)(6,297)(3,789)39,566(63,609)
11,227(11,445)
19,545
243,345

955

2,312

8,682

4,568
(29,219)

8,775(24,727)

41,527(265,627)(135)(4,372)(2,549)4,658(1,227)(39,745)—(3,443)
217(31,429)(10,188)—(1,074)(22,793)—(31,300)
1,972(285,718)

Cash flows from financing activities:
Proceeds from issuance of long-term debt
Repayment of long-term debt
Decrease in short-term bank loans
Cash dividends paid
Purchase of treasury stock
Proceeds from treasury stock sold of consolidated subsidiaries
Decrease in other long-term liabilities
Purchase of additional shares of consolidated subsidiaries
Other, net
Net cash provided by (used in) financing activities

30,415(14,809)(5,978)(4,762)
(2)
49
(605)
(80)
(633)
3,595

27,214(10,304)(20,485)(3,568)
(26)
284
(634)
(919)
(606)
(9,044)

276,500(134,627)(54,345)(43,291)(18)
445(5,500)(727)(5,755)32,682

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

(1,388)(2,454)32
42,272¥39,850(2,245)5,484
82
36,706¥42,272(12,618)(22,309)291
384,291$362,273

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile net income to net cash provided by operating activities:
Income taxes—paidDepreciation and amortization
Amortization of goodwill
Equity in earnings of a nonconsolidated subsidiary and affiliates
Provision for (reversal of) doubtful receivables
Provision for contingent loss
Provision for accrued pension and retirement benefits
Payment of accrued pension and retirement benefits(Gain) loss on sale of property, plant and equipment, net
Impairment of long-lived assets
Gain on sale of investment securities and investments in and advances
to nonconsolidated subsidiaries and affiliates, net
Loss on write-down of investment securities and investments in andadvances to nonconsolidated subsidiaries and affiliates
Other
Changes in operating assets and liabilities:
Receivables
Inventories
PayablesOther, net
Net cash provided by operating activities
Cash flows from investing activities:
Sale of property, plant and equipment
Sale of investment securities and investments in and advances
to nonconsolidated subsidiaries and affiliates
Purchase of property, plant and equipment
Purchase of investment securities and investments in and advances tononconsolidated subsidiaries and affiliates
Decrease (increase) in time deposits
Cash paid for newly consolidated subsidiaries, net of payment for purchaseof companies
Purchase of shares of subsidiaries
Other, net
Net cash used in investing activities

Financials

Disposal of treasury stock
Adjustment due to increasein consolidated subsidiaries
Other

Noncontrollinginterests

2017

Management Framework

Commonstock

Net
Deferred
unrealized gain (loss)
Foreign
Postgain (loss)onStockcurrency retirement
on derivatives
acquisitiontranslation
liability
availableunderrightsadjustments adjustments
for-salehedge
securities accounting

2016

Value Creation

Disposal of treasury stock
Adjustment due to increasein consolidated subsidiaries
Other
Net change in the year
Balance at March 31, 2017

2,808

(174)
(27,020)(14,779)

2017

Strategy

Disposal of treasury stock
Adjustment due to increasein consolidated subsidiaries
Net change in the year

¥64 ¥22,674

Noncontrollinginterests(thousands of
US dollars) (Note 1)

ProfileBalance at April 1, 2015
¥27,588 ¥20,401 ¥161,791 ¥(23,478) ¥186,302 ¥50,998
Cash dividends, ¥22.50
per share(3,568)(3,568)Net income attributable to
Nisshinbo Holdings Inc.
10,776
10,776
Change due to stock
exchange transactions withand within subsidiaries(2,489)(2,489)Change in scope of
consolidation—transactions
with noncontrolling interests
(323)
(323)
Purchase of treasury stock
(26)
(26)

(millions of yen)

See Notes to Consolidated Financial Statements.
76

77

Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
principles and practices 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 ofarithmetical computation only, at the rate of ¥110 =$1, theapproximate exchange rate at March 31, 2017. The translations should not be construed as representations that theJapanese yen amounts have been, could have been, or couldin the future be, converted into United States dollars.

2. Summary of Significant Accounting Policies(5) Inventories
Inventories are measured principally at the lower of cost or
net realizable value, cost being substantially determined by
the actual cost method or the average cost method.
(6) Marketable and investment securities
The Group classifies all of its marketable and investment securities as available-for-sale, which are reported at fair value,with unrealized gains and losses included in equity as net unrealized gain on available-for-sale securities. Other investment securities without quoted market prices are stated atcost. Realized gains or losses on the sale of securities are(9) Impairment of long-lived assets
Long-lived assets are evaluated for impairment using an estimate of undiscounted cash flows whenever events or changes
in circumstances indicate that the carrying amount of such
assets may not be recoverable. If the estimate of undiscounted cash flow is less than the carrying amount of theasset, an impairment loss is recorded based on the fair valueof the asset. Fair value is determined primarily by using the
anticipated cash flows discounted at a rate commensuratewith the risk involved. For assets held for sale, an impairment
loss is further increased by costs to sell. Long-lived assets tobe disposed of other than by sale are considered held andused until disposed of.
(10) Retirement benefits and pension plans
The Company, domestic consolidated subsidiaries and certain
foreign consolidated subsidiaries have defined benefit plansand defined contribution plans that cover substantially all
employees. Under the defined benefit plans, the annual provision for retirement benefits is calculated to state the asset(12) Research and development costs
Research and development costs are charged to income as
incurred.
(13) 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 and liabilities for the expected future tax
consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferredtaxes are measured by applying currently enacted tax laws to
the temporary differences.

Financials

78(4) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits
placed with banks on demand and highly liquid investmentswith insignificant risk of changes in value which have maturities of six months or less when purchased.

(8) Goodwill
The difference between the cost and underlying fair value ofthe equity of investments in subsidiaries at acquisition is included in goodwill and amortized on a straight-line basis over
five to seven years.

Management Framework

iaries and affiliates in foreign currencies are translated at the(3) Foreign currency financial statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate at the balance sheet date except for equity,which is translated by the historical rate. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average annual exchange rate.
Translation adjustments are presented under noncontrolling interests and foreign currency translation adjustments as
a separate component of equity.

(11) Stock options
The accounting standard for stock options requires companies to recognize compensation expense for employee stock
options based on the fair value at the date of grant and overthe vesting period as consideration for receiving goods or services. The standard also requires companies to account for
stock options granted to non-employees based on the fairvalue of either the stock option or the goods or services received. On the balance sheet, the stock option is presented asa stock acquisition right as a separate component of equity
until exercised. The standard covers equity-settled, sharebased 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.

Value Creation(2) 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 currency exchange gains and losses fromtranslation are recognized in the consolidated statements ofincome to the extent that they are not hedged by forward
exchange contracts.
Investments in and advances to nonconsolidated subsid-

historical rates effective at the dates of transaction fromwhich such accounts were originated.

Strategy(1) Consolidation
The consolidated financial statements include the accountsof Nisshinbo Holdings Inc. (hereinafter the “Company”) andits 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 thosecompanies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
Investments in nonconsolidated subsidiaries and affiliatedcompanies are accounted for by the equity method.
Investments in the remaining nonconsolidated subsidiaries and affiliated companies are stated at cost. If the equity
method of accounting had been applied to the investmentsin these companies, the effect on 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.

(7) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is computed principally on the straight-line method overtheir estimated useful lives. Contributions in aid of purchasesof property, plant and equipment from national and local
governments are deducted from the acquisition costs of related assets in accordance with tax regulations.

and 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.
Actuarial gains and losses are amortized on a straight-line
basis mainly over 10 to 15 years within the average remaining
service period.
Expenses for post-retirement benefits are allotted on astraight-line basis over 13 to 15 years within the average remaining service period.
However, at certain consolidated subsidiaries, actuarial
gains and losses and past service cost that arose in the current period are recognized in profit or loss in the current
period.

ProfileThe accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments 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 to application anddisclosure requirements of International Financial ReportingStandards.
In addition, the accompanying notes include information
which is not required under generally accepted accounting

based on the average cost of a particular security held at thetime of sale.
Marketable and investment securities are regularly reviewed for other-than-temporary declines in carrying amountbased on criteria that include the length of time and the extent to which the market value has been less than cost, thefinancial condition and near-term prospects of the issuer andthe Company’s intent and ability to retain securities for a period of time sufficient to allow for any anticipated recovery inmarket value.
When such a decline exists, the Company recognizes an
impairment loss to the extent of such decline.

79

(16) Changes in accounting estimates
A change in an accounting estimate is accounted for in the
period of the change if the change affects that period only,
and is accounted for prospectively if the change affects boththe period of the change and future periods.
(A) Japan Radio Co., Ltd, a consolidated subsidiary, was inspected by Japan Fair Trade Commission (hereinafter the“JFTC”) on November 18, 2014 due to suspicion of violationof the Antimonopoly Act, with regard to the transactions related to the emergency first aid digital radio equipment.
Based on the new notification asking JFTC’s opinion about
the matter received on October 20, 2016, the estimated provision for contingent loss of Japan Radio Co., Ltd. is changed
based on the draft of the disbursement order. The effect of
the increase in provision for contingent loss is the decrease inincome before income taxes for the fiscal year by ¥1,687 million ($15,336 thousand).

4. Marketable and Investment Securities
The carrying amounts and aggregate fair values of available-for-sale securities included in marketable and investment securities
at March 31, 2017 and 2016 were as follows:(millions of yen)(thousands of US dollars)

2017

2016

2017

Cost

¥22,982¥24,475$208,927

Unrealized gains

55,25953,775502,355

Unrealized losses
Fair value

(166)

(502)

(1,509)¥78,075¥77,748$709,773

Aggregate cost of non-marketable securities accounted for under the cost method totaled ¥2,439 million ($22,173 thousand)and ¥2,485 million at March 31, 2017 and 2016, respectively.

5. Short-Term and Long-Term Debt
The weighted average interest rates applicable to the short-term bank loans at March 31, 2017 and 2016 were 0.6% to 0.7%.
The weighted average interest rates applicable to the short-term debt of commercial paper at March 31, 2017 and 2016
were △0.0% to 0.0%.

StrategyLong-term debt at March 31, 2017 and 2016 consisted of the following:(B) The estimated provision for business structure improvement of TMD Friction EsCo GmbH, a consolidated subsidiary,is changed based on the current agreement with related­laborers’ party as to conditions of the factory relocation, early
retirement, etc. The effect of reversal of provision for business structure improvement is the increase of income before
income taxes for the fiscal year by ¥267 million ($2,427
thousand).

(millions of yen)(thousands of US dollars)

2017

2016

2017

¥30,372¥35,323$276,109

46,693

28,114424,482Long-term debt with collateral:
Loans from banks maturing serially to 2025, weighted average interest
		 rates 0.8% in March 2017, 1.0% in March 2016

Value Creation

Long-term debt without collateral:
Loans from banks maturing serially to 2023, weighted average interest
		 rates 0.5% in March 2017, 0.5% in March 2016
Capital lease obligations, due through 2025
Less current portion

2,072

2,724

18,836

79,137

66,161

719,427(8,661)(16,015)(78,736)¥70,476¥50,146$640,691

Management Framework(15) Asset retirement obligation
The asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from theacquisition, construction, development and the normal operation of such tangible fixed assets under the Japanese accounting standard.
The asset retirement obligation is recognized as the sumof the discounted cash flows required for the future asset
retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made.

The asset retirement cost is allocated to expense throughdepreciation over the remaining useful life of the assets.

Profile(14) Derivative financial instruments
The Group uses a variety of derivative financial instruments,
including foreign currency forward contracts, commodity
swap contracts and interest rate swaps, as a means of hedging exposure to foreign currency and interest rate risks. The
Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (a) all derivatives are recognized aseither assets or liabilities and measured at fair value, andgains or losses on derivative transactions are recognized in
the consolidated statements of income, and (b) for derivatives used for hedging purposes if derivatives qualify forhedge accounting because of the high correlation and effectiveness between the hedging instruments and hedged items,
gains or losses on derivatives are deferred until maturity of
the hedged transactions.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured atmarket value, but the differential paid or received under theswap agreements is recognized and included in interest
expense.

3. Inventories
Annual maturities of long-term debt were as follows:

Inventories at March 31, 2017 and 2016 were as follows:(millions of yen)(millions of yen)(thousands of US dollars)

2017

2016

2017

Finished products¥34,192¥39,003$310,836

Work in process

44,55936,781

405,082

201912,813

116,482

2020

27,235247,591

2021

21,618

196,528

533

4,845

¥70,476$640,691

21,01921,017

191,082¥99,770¥96,801$907,000

20182022 and thereafter¥8,277$75,245

Financials

Materials and supplies

80(thousands of US dollars)Year ending March 31,

81

At March 31, 2017 and 2016, net book value of assets pledged as collateral for short-term bank loans and long-term debt wereas follows:(millions of yen)

Changes of the liability for employees’ retirement benefits for the years ended March 31, 2017 and 2016 were as follows:(millions of yen)

2016

2017

¥109,011¥101,611$991,009

Service cost

5,650

5,111

51,364

Interest cost

922

1,366

8,382

2,259

5,894

20,536

—

(337)

—

Actual payment of retirement benefits(4,583)(4,926)(41,664)

Exchange differences(1,506)(1,382)(13,691)

—

1,674

—

2017

2016

2017

¥13,196¥17,480$119,963

Balance at beginning of year

Inventories

108

—

982

Accounts receivable, trade

704

561

6,400

Investment securities

—

392

—

¥14,008¥18,433$127,345

At March 31, 2017 and 2016, in addition, pledged assets as collateral for liabilities other than the above were as follows:

Recognized actuarial loss
Prior service cost

Increase due to newly consolidated subsidiaries
Other(millions of yen)(thousands of US dollars)

2017

Balance at beginning of year

¥64,599¥66,375$587,264¥6,760¥7,125$61,455

Expected return on plan assets

1,497

1,595

13,609

870

901

7,909

Recognized actuarial (gain) loss

1,216

(2,493)

11,054¥7,630¥8,026$69,364

Contributions to the defined pension plan

1,961

2,246

17,827

Payment(2,654)(2,759)(24,127)

Exchange differences(1,314)(595)(11,945)

—

230

—

¥65,305¥64,599$593,682

2017

2016

(thousands of US dollars)

2017

Fair value of plan assets

Increase due to newly consolidated subsidiaries
Balance at end of year

Liabilities with collateral:¥5,772¥6,336$52,472

1,020

1,107

9,273

¥6,792¥7,443$61,745

Reconciliation of ending balance of retirement benefit obligation and pension assets, and the book value of liabilities and assets
for retirement benefits for the years ended March 31, 2017 and 2016 were as follows:(millions of yen)

6. Retirement Benefits and Pension Plans
The liability for retirement benefits for directors and­corporate auditors at March 31, 2017 and 2016 was ¥102
million ($927 thousand) and ¥95 million, respectively. The­retirement benefits for directors and corporate auditors arepaid subject to the approval of the shareholders.

(thousands of US dollars)

2017

2016

2017

Funded retirement benefit obligation¥63,457¥69,500$576,882

Fair value of plan assets(65,305)(64,599)(593,682)(1,848)

4,901(16,800)

Unfunded retirement benefit obligation

48,17339,511

437,936

Net amount of liabilities and assets in consolidated balance sheets¥46,325¥44,412$421,136

Liabilities for retirement benefits¥49,180¥47,086$447,091

Assets for retirement benefits(2,855)(2,674)(25,955)¥46,325¥44,412$421,136

Net amount of liabilities and assets in consolidated balance sheets

Management Framework

Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on the rate of pay at termination, years of service andcertain other factors.
The Group provides defined benefit plans and defined
contribution plans.

Value Creation

Notes and accounts payable, trade(1,118)$1,014,818

2016(millions of yen)

Other long-term liabilities (Guarantee deposits)—¥109,011

Strategy

Investment securities(123)¥111,630

2017
Assets pledged:
Property, plant and equipment

Balance at end of year

Profile2017(thousands of US dollars)

Projected benefit obligation

Property, plant and equipment(thousands of US dollars)

The components of net periodic retirement benefit costs for the years ended March 31, 2017 and 2016 were as follows:(millions of yen)(thousands of US dollars)

2016

2017

Service cost

¥5,650¥5,111$51,364

Interest cost

922

1,366

8,382

Expected return on plan assets(1,497)(1,595)(13,609)

Amortization of prior service cost

(198)

(290)

(1,800)Recognized actuarial loss

1,027

782

9,336

¥5,904¥5,374$53,673

Financials

2017
Defined benefits plans:82

83Assumptions used for the years ended March 31, 2017 and 2016 were set forth as follows:

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2017 and 2016 and the actual
effective tax rates reflected in the accompanying consolidated statements of income was as follows:
2017

2016

△0.0%–0.9%△0.0%–0.9%

Expected rate of return on plan assets

1.5%–3.5%

1.5%–5.0%

Rate of expected salary increase

1.4%–9.0%

2.0%–9.0%

Discount rate

The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2017 and 2016 were as follows:(millions of yen)

2016

30.9%
22.7

33.1%
(3.6)

Amortization of goodwill

37.9

10.6

Lower income tax rates applicable to income in certain foreign countries(26.8)(3.5)

Equity in earnings of a nonconsolidated subsidiary and affiliates(20.2)(4.2)

Additional taxes on retained earnings in foreign subsidiaries

7.0

(0.4)

Unrealized gain on inventories or property, plant and equipment

18.0

0.1

Other
Actual effective tax rate

2016

2017

Loss on devaluation of inventories¥1,939¥1,584$17,627

Tax loss carryforwards

13,68014,906124,364

Unrealized gain caused by intercompany transactions

1,556

1,494

14,145

8. Derivatives
The Group enters into foreign currency forward contracts andcommodity swap contracts to hedge exchange risk associated with certain assets and liabilities denominated in foreign
currencies and also into interest rate swap contracts to

1,998

1,884

18,164

Accrued severance benefits

13,422

11,899122,018

Impairment of long-lived assets and depreciation in excess of tax limitation

2,014

1,563

18,309Devaluation of investment securities

2,373

2,488

21,573

Not hedged:

Software costs

1,333

1,380

12,118

—

2,377

—

Interest rate swap:
Fixed rate payments, floating rate receipt

5,301

5,127

48,191(21,534)(21,178)(195,763)

Less valuation allowance¥22,082¥23,524$200,746

Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Deferred gains on sale of property
Assets recognized in business combination

Net deferred tax

2017¥(16,569)$(155,054)(7,173)(6,060)(65,209)(5,815)(9,319)

2016

2017

Contract
amountFair value

Unrealized
gain (loss)

Contract
amountFair value

Unrealized
gain (loss)

Contract
amountFair value

Unrealized
gain (loss)

¥—

¥—

¥—

¥34

¥(1)

¥(1)

$—

$—

$—

Commodity swap:
Purchased raw materials¥1,946¥569¥569¥3,573¥(319)¥(319)$17,691$5,173$5,173Foreign currency forward contracts:
Sold¥1,804¥13¥13¥1,150¥26¥26$16,400

$118

$118

¥3,554¥19¥19¥2,572¥27¥27$32,309

$173

$173

Purchased¥(17,056)(thousands of US dollars)(millions of yen)

2017

(52,864)(7,224)(6,473)(65,673)¥(37,268)¥(38,421)$(338,800)

Hedged:¥(15,186)¥(14,897)$(138,054)

Foreign currency forward contracts:
Sold
Purchased

Contract
amountContract
amountdue after
one year

Fair value(thousands of US dollars)

2016
Contract
amountContract
amountdue after
one year

Fair value

2017
Contract
Contract amount due
amountafter oneyear

Management Framework

Other(millions of yen)

Value Creation

Accrued employees’ bonuses

manage its interest rate exposures on certain liabilities. Suchcontracts outstanding at March 31, 2017 and 2016 were as
follows:

Strategy

2017

Other

3.2
35.3%

(thousands of US dollars)

Deferred tax assets:

Loss of investment in subsidiary in liquidation

3.2
72.7%

Profile7. Income Taxes

2017
Normal effective statutory tax rate
Net changes in valuation allowance

Fair value

¥168

¥—

¥1

¥71

¥—

¥2

$1,527$—$9¥1,280¥—¥4¥1,812¥—¥(84)$11,636$—$36

Net deferred taxes were included in the consolidated balance sheets as follows:(millions of yen)(thousands of US dollars)

2016

2017

Current assets–deferred tax assets¥6,001¥7,216$54,555

Investments and other assets–deferred tax assets

9,744

12,162

88,582Current liabilities–deferred tax liabilities

(190)

(0)

(1,727)Long-term liabilities–deferred tax liabilities(30,741)(34,275)(279,464)

Net deferred tax¥(15,186)¥(14,897)$(138,054)

9. Other Income (Expenses) — Other, Net
Other income (expenses) — Other, net consisted of the following:(millions of yen)

Gain (loss) on sale of property, plant and equipment, net
Impairment of long-lived assets

2016

2017

¥(662)(4,093)

¥972
(414)

$(6,018)(37,209)

Gain on sale of securities, net

2,358

6,252

21,436

Provision for contingent loss

(2,046)(575)(18,600)

Gain on transfer of business

958

—

8,709

Other, net
84(thousands of US dollars)

2017

(855)

(1,663)(7,773)¥(4,340)¥4,572$(39,455)

Financials

2017

85

10. Contingent Liabilities and Commitments

12. Segment Information

Contingent liabilities at March 31, 2016 for trade notes discounted with banks amounted to ¥421 million.
Contingent liabilities at March 31, 2017 and 2016 forloans guaranteed amounted to ¥87 million ($791 thousand)and ¥89 million, respectively.

Information about industry segments of the Company and its consolidated subsidiaries for the years ended March 31, 2017 and2016 was as follows:

Commitments for capital expenditures outstanding at
March 31, 2017 and 2016 were in the approximate amountsof ¥5,771 million ($52,464 thousand) and ¥1,189 million,
respectively.

(millions of yen)

2017
Electronics

Automobile
Precision
Chemicals
Brakes Instruments

TextilesPapersReal Estate

Other Eliminations/
Consolidated
Businesses
Corporate

Sales and Segment Profit (loss):¥9,483¥55,842¥32,648¥8,084¥23,616

798

116

7

765

2,074

1,686

		Total sales¥190,882 ¥146,089¥61,485¥9,599¥55,849¥33,413¥10,158¥25,302

Segment profit (loss)
		 [Operating income (loss)]¥(3,240)¥(7)¥1,049¥1,309¥1,777¥2,603¥5,811¥(91)

Segment assets:¥215,959 ¥151,264¥72,135¥8,430¥56,660¥21,494¥53,762¥37,392

Intersegment sales(1) Company demerger and transfer of shares in subsidiary
On April 3, 2017, the Company transferred the paper product business conducted primarily by a consolidated subsidiary, Nisshinbo Paper Products Inc. to Daio Paper Corporation.

company demerger (simple absorption-type demerger), andall outstanding shares of Nisshinbo Paper Products Inc. weretransferred to Daio Paper Corporation. The assets related to

The Company’s assets related to the paper product businesswere transferred to Nisshinbo Paper Products Inc. through athe paper product business include real estate, equipment,
intellectual property rights, shares in subsidiaries, etc.

¥190,852 ¥146,06230¥— ¥527,274(5,503)—¥(5,503) ¥527,274¥(4,321)¥4,890¥29,192 ¥646,288

Other:
Depreciation and amortization¥4,832¥9,556¥3,048¥307¥1,493¥989¥1,556¥194¥289¥22,264

Increase in property, plant andequipment and intangible assets¥8,597¥11,150¥4,994¥322¥1,282¥561¥1,053¥3,065¥(519)¥30,505

wholly owned subsidiary.
The Share Exchange is scheduled to be effective as of
October­2, 2017.

Strategy(2) Agreement of share exchange
The Company and Japan Radio Co., Ltd. (hereinafter “JRC”),
a consolidated subsidiary of the Company, have approved a
Share Exchange Agreement between the two companies thatwill make the Company the sole parent company and JRC its¥60,687

27

Sales to customers

Profile11. Subsequent Events(millions of yen)

2016
Electronics

Automobile
Precision
Chemicals
Brakes Instruments

TextilesPapersReal Estate

Other Eliminations/
Consolidated
Businesses
Corporate

Sales and Segment Profit (loss):

Details of allotment of shares in the Share Exchange

Details of allotment of shares in the Share Exchange
Number of shares to be delivered in the Share Exchange

JRC(Wholly owned subsidiary inShare Exchange)

1

1.28

Shares of common shares of the Company:
15,860,220 shares (planned)

Intersegment sales
		Total sales
Segment profit (loss)
		 [Operating income (loss)]
Segment assets:¥205,368 ¥165,037¥29,525¥8,285¥60,127¥32,585¥8,358¥24,704

20

331

104

6

760

2,073

1,432

¥205,419 ¥165,057¥29,856¥8,389¥60,133¥33,345¥10,431¥26,136¥(887)¥318¥753¥1,779¥742¥5,795¥(123)¥218,040 ¥160,018¥72,294¥7,799¥61,948¥22,976¥43,280¥35,65551¥8,318¥— ¥533,989(4,777)—

Value Creation

Company nameSales to customers
The Company(The sole parent company inShare Exchange)¥(4,777) ¥533,989¥(4,078)¥12,617¥29,783 ¥651,793

Other:
Depreciation and amortization¥4,742¥10,829¥1,884¥299¥1,667¥1,027¥1,571¥177¥375¥22,571

With the resolution of the meeting of the Board of Directors
held on March 30, 2017, the Company approved the transfer
of certain land, buildings and structures located in Nagoya,and concluded a relevant transfer agreement on May 26,
2017. The fixed assets are scheduled to be delivered on June

Increase in property, plant andequipment and intangible assets¥9,945¥8,519¥3,647

¥412

¥822

¥696

¥575

¥62

¥(1,816)¥22,86230, 2017. Booking of a gain from sale of fixed assets in theamount of approximately ¥5,000 million ($45,455 thousand)as an extraordinary income is to be envisaged for the firstquarter (April-June 2017) of the fiscal year ended March2018.

(thousands of US dollars)

2017Electronics

Automobile
Precision
Chemicals
Brakes Instruments

TextilesPapersReal Estate

Other Eliminations/
Consolidated
Businesses
Corporate

Sales and Segment Profit (loss):(4) Stock option plan
At the general shareholders meeting held on June 29, 2017,
the Company’s shareholders approved a stock option plan togrant stock purchase rights up to 200 thousand shares of theManagement Framework(3) Transfer of certain fixed assets

Company’s common stock to directors and key employees in
the period from August 1, 2019 to July 31, 2024.

Sales to customers
Intersegment sales
		Total sales

Segment assets:

273

245

$1,735,291 $1,328,081$(29,455)$551,700 $86,209$507,655$296,800$73,491$214,691

1,055

63

6,955

18,854

15,327$558,955 $87,264$507,718$303,755$92,345$230,018

7,255

$(64)

$9,536 $11,900$16,155$23,664$52,827$(827)$1,963,264 $1,375,127$655,773 $76,636$515,091$195,400$488,745$339,927$— $4,793,400(50,027)—$(50,027) $4,793,400$(39,281)

Financials

Segment profit (loss)
		 [Operating income (loss)]$1,735,018 $1,327,836$44,455$265,382 $5,875,345

Other:

86

Depreciation and amortization$43,927$86,873$27,709$2,791$13,573$8,991$14,145$1,764$2,627$202,400

Increase in property, plant andequipment and intangible assets$78,155$101,364$45,400$2,927$11,655$5,100$9,573$27,863$(4,719)$277,318

87Independent Auditor’s Report

To the Board of Directors of Nisshinbo Holdings Inc.
We have audited the accompanying consolidated balance sheet of Nisshinbo Holdings Inc. and its subsidiaries asof March 31, 2017, and the related consolidated statements of income, comprehensive income, changes inequity, and cash ﬂows for the year then ended, and a summary of signiﬁcant accounting policies and otherexplanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated ﬁnancial statementsin accordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of the consolidated ﬁnancial statements that are free frommaterial misstatement, whether due to fraud or error.

History
1907

Established Nisshin Cotton Spinning Co., Ltd.

1958

Established Nippon Kohbunshikan Co., Ltd. (name changed to Nippon Kohbunshi Co., Ltd. in 1986)(acquired by Nisshinbo Mechatronics Inc. in 2010)1972

Established Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)

1985

Acquired Nisshin Denim Inc.

1989

Established Kohbunshi (Thailand) Ltd. (Thailand)(name changed to Nisshinbo Mechatronics (Thailand) Ltd. in 2011)

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.

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated ﬁnancial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated ﬁnancial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated ﬁnancial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our
audit opinion.

1996

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

1997

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

1998

Established P.T. Gistex Nisshinbo Indonesia (Indonesia)(name changed to P.T. Nisshinbo Indonesia in 2010)

1999

Established Saeron Automotive Corporation (South Korea)

2000

Purchased additional shares of P.T. Nikawa Textile Industry (Indonesia)

OpinionIn our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material respects, theconsolidated ﬁnancial position of Nisshinbo Holdings Inc. and its subsidiaries as of March 31, 2017, and theconsolidated results of their operations and their cash ﬂows for the year then ended in accordance withaccounting principles generally accepted in Japan.
Emphasis of Matters
As discussed in Note 11 (1) to the consolidated financial statements, the Company transferred the paper productbusiness conducted primarily by a consolidated subsidiary, Nisshinbo Paper Products Inc. to Daio Paper
Corporation.
As discussed in Note 11 (2) to the consolidated financial statements, the Company and Japan Radio Co., Ltd.,a consolidated subsidiary of the Company, have approved a Share Exchange Agreement between the twocompanies that will make the Company the sole parent company and Japan Radio Co., Ltd. its wholly owned
subsidiary.
Our opinion is not modified in respect of these matters.

Established Continental Teves Co., Ltd. through merger with Continental Teves AG & Co. oHG(name changed to Continental Automotive Co., Ltd. in 2007)
2002

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

2003

Established Saeron Automotive Beijing Corporation (China)

2004

Established Continental Automotive Corporation (Lian Yun Gang) Co., Ltd. (China)

2005

Acquired additional shares in New Japan Radio Co., Ltd.

2006

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

2008

Acquired all shares of Nisshinbo Brake Sales Co., Ltd. (acquired by Nisshinbo Brake Inc. in 2010)2009

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

2010

Established Nisshinbo-Yawei Precision Instruments & Machinery (Jiangsu) Co., Ltd. (China)(formerly Jiangsu Yawei Nisshinbo Precision Instruments & Machinery Co., Ltd.)
Acquired additional shares in Japan Radio Co., Ltd., making it a consolidated subsidiary
Nagano Japan Radio Co., Ltd. also became a consolidated subsidiary as a result

2011

Established Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (China)
Established Nisshinbo Singapore Pte. Ltd. (Singapore)
Acquired all shares of TMD Friction Group S.A. (Luxembourg)

Convenience Translations
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated
ﬁnancial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

2012

Established Nisshinbo Business Management (Shanghai) Co., Ltd. (China)

2013

Established Nisshinbo Commercial Vehicle Brake Ltd. (Thailand)

2014

Established Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd. (China)

2015

Acquired all outstanding shares in TOKYO SHIRTS CO., LTD.
Changed Company’s sector classification on stock markets from textile products to electrical equipment

VERITAS & Co.
June 29, 2017
Tokyo, Japan

Acquired all outstanding shares in Nanbu Plastics Co., Ltd.
2016

Nagano Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd. became wholly consolidated subsidiaries ofJapan Radio Co., Ltd.

2017

Sold the papers businessJapan Radio Co., Ltd. became a wholly owned consolidated subsidiary88

89Corporate Data

Key Companies in the Nisshinbo Group(As of March 31, 2017)
Company

Location

Main Products and Services

FoundedCommon StockFebruary 5, 1907

Authorized 371,755,000 shares

Electronics

Issued 178,798,939 shares

Japan Radio Co., LtdJapan

Disaster prevention systems,
mobile communications equipment

New Japan Radio Co., LtdJapan

Analog semiconductors, SAW filters

Alphatron Marine Beheer B.V.

The Netherlands

Mobile communications equipment

PT. JRC SPECTRA INDONESIA

Indonesia

Disaster prevention systems,
mobile communications equipment

Head Office¥27,588 million (US$251 million)

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku,
Tokyo 103-8650, Japan

Shareholders

Tel: +81-3-5695-8833

13,894

Fax: +81-3-5695-8970

Composition of Shareholders
Osaka Branch

Treasury stock2-4-2, Kitakyuhouji-machi, Chuo-ku,

Automobile Brakes
Nisshinbo Brake Inc.

Japan

Automobile brake friction materials

TMD FRICTION GROUP S.A.

Luxembourg

Automobile brake friction materials

SAERON AUTOMOTIVE CORPORATIONSouth Korea

Automobile brake friction materials

NISSHINBO AUTOMOTIVE MANUFACTURING INC.

U.S.A.

Automobile brake friction materials

Nagoya Branch

NISSHINBO SOMBOON AUTOMOTIVE CO., LTD.

Thailand

Automobile brake friction materials

5-2-38, Sakae, Naka-ku,

NISSHINBO COMMERCIAL VEHICLE BRAKE LTD.

Thailand

Automobile brake friction materials

Nisshinbo Saeron Changshu Automotive Corporation

China

Automobile brake friction materials

Precision Instruments

Securities
firms

Osaka 541-0057, Japan
Tel: +81-6-6267-5501

11.2%
Japanese financial
institutions

3.4%

Fax: +81-6-6267-5529

38.6%

Japanese
individuals andothers13.0%

Nagoya 460-0008, Japan
Tel: +81-52-261-6151

Other Japaneseinstitutions

Fax: +81-52-263-9480

Foreigninstitutions

16.2%

Employees

Nisshinbo Mechatronics Inc.

Japan

Plastic products, automotive precision parts

Parent Company

Nanbu Plastics Co., Ltd.

Japan

Plastic products

Subsidiaries

23,065

Nisshinbo Precision Instrument & Machinery Hiroshima Corporation

Japan

Automotive precision parts

Total

23,256

Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd.

China

Automotive precision parts

NISSHINBO MECHATRONICS (THAILAND) LTD.

Thailand

Plastic productsContinental Automotive Corporation

Japan

Automotive precision parts

Japan

Urethane products,
high-performance chemical products

17.6%

Listings

191

Tokyo, Nagoya, Fukuoka and Sapporo

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

Chemicals
Nisshinbo Chemical Inc.

Textiles

Stock Price and Trading Volume

Nisshinbo Textile Inc.

Japan

Shirt fabric, developed materials(yen)

NISSHINTOA IWAO INC.

Japan

Textile products

1,800TOKYO SHIRTS CO., LTD.

Japan

ShirtsNISSHINBO DO BRASIL INDUSTRIA TEXTIL LTDA.

BrazilTextile spinning

PT. NIKAWA TEXTILE INDUSTRY

Indonesia

Textile spinning and weaving

PT. NISSHINBO INDONESIA

Indonesia

Textile weaving and dyeing(million shares)

Stock price (left)

35
30

1,500

25
1,200
20
900

Real Estate
Nisshinbo Urban Development Co., Ltd.

15

Japan

Real estate operations

600
10

Other

Trading volume (right)

300

NISSHINBO SINGAPORE PTE. LTD.

Singapore

Group company support

Nisshinbo Business Management (Shanghai) Co., Ltd.

China

Group company support

0

0

9/14

90

5

12/14

3/15

6/15

9/15

12/15

3/16

6/16

9/16

12/16

3/17

6/17

91