AKEBONO REPORT 2015

46/64

Fiscal 2014 ResultsWith less-than-robust automobile production reflecting a trend towardoverseas production among automakers automobile sales remainedsluggish in Japan and were further weakened by stagnant demand fornew cars due the market recoil that followed the last-minute surge inanticipation of the consumption tax hike. However sales of commercialvehicles rose backed by the expansion of infrastructure developmentbusinesses due to the reconstruction of areas stricken by the Great EastJapan Earthquake. Demand for industrial machinery components alsogrew. Nevertheless domestic sales edged down 2.8% year on year to?86.7 billion reflecting the aforementioned poor automobile sales and adecline in sales of aftermarket products for exports.Looking at earnings operating income rose 5.1% year on year to?3.6 billion despite a decrease in orders. The growth in operatingFiscal 2014 ResultsAutomobile sales rose 5.9% year on year reflecting an economicupturn and low interest rates that enhanced the availability of car loans.Reflecting these circumstances as well as the effect of the depreciationof the yen which contributed ?11.2 billion to sales growth sales fromNorth American operations rose 14.2% year on year to ?140.3 billion.However from the second half of fiscal 2014 the production workloadincreased particularly for ABE’s disc brake production lines reflectinga huge increase in production demand and the launch of newproducts due to model changes. Because ABE was forced to introduce around-the-clock three-shift labor system to meet orders labor costssurged beyond reasonable expectations. Also to supplement its overloadedproduction lines products were flown in from other facilities generating additional expenses. Addressing these problems Akebonoallocated greater human resources to local facilities by for example dispatchingassociates from its facilities in Japan. Simultaneously Akebonotransferred some production to other facilities including those in Japan while augmenting overall capacity. Despite these efforts in the fourthquarter ABE recorded such additional costs as overtime pay expenses asincome was mainly attributable to the success of the Company’s effortsaimed at streamlining production and procurement and reducing costsas well as an increase in royalties from overseas Group members.Fiscal 2015 OutlookEven though the Company forecasts that sales will stay virtuallyunchanged year on year it remains committed to improving operatingincome. To enhance profitability the Company will steadily implementsuch initiatives as restructuring its disc brake production structure optimizing the distribution of production items securing responsivenessto radical fluctuations in production demand and allocating greatermanagement resources to the development and production of highperformancebrakes?a priority product group?while pursuing forwardlookingR&D of electric parking brakes and eco-friendly friction materials.it fielded automaker requests that could not be satisfied without operatingfacilities through the winter vacation season. Likewise ABG sawrapid growth in orders for disc brake pads in the fourth quarter and wasforced to institute round-the-clock three-shift operations. In addition toposting such additional labor costs as overtime vacation pay expenses ABG was unable to reach agreement with automakers or its supplierswith regard to revising product prices.As a result Akebono posted an operating loss of ?3.2 billion comparedwith operating income of ?0.7 billion in the previous fiscal year.Fiscal 2015 OutlookWhile stepping up the development of stable profit structure Akebonowill offer greater career opportunities to local associates with the aim ofnurturing competitive managers. We expect sales to increase significantly taking into account such factors as firm automobile sales in the UnitedStates the production launch of new items and the effect of favorableforeign currency exchange rate. Also we will work to optimize the profitstructure of our North American operations and thereby record operatingincome in the fiscal 2015.60120087.093.1 96.289.5 89.2 86.72010 2011 2012 2013 2014 2015(Billions of yen)(FY)(Outlook)Net Sales1002000107.096.3 98.4140.3165.6122.82010 2011 2012 2013 2014 2015(Billions of yen)(FY)(Outlook)Net Sales4.08.003.27.15.92.33.4 3.62010 2011 2012 2013 2014 2015(Billions of yen)(FY)(Outlook)Operating Income(2.5)(5.0)02.5(7.5)(0.2)0.4(5.4)0.10.7(3.2)2010 2011 2012 2013 2014 2015(Billions of yen)(FY)(Outlook)Operating Income32%Ratio of Net Sales52%Ratio of Net SalesJapan