2PARTReview of OperationsReview of Fiscal 2016In Japan despite positive factors of increases in new orders, transfer of production from overseas facilities and higher sales of aftermarket parts, total orders declined because of weak sales of automobiles in the rst half, decreased production of compact trucks for overseas markets, and lower exports of industrial machinery application products. As the result, sales declined by 2.7% year-on-year to JPY80.9 billion. With regard to prots, efforts to rationalize manufacturing and procurement functions, cost reductions, and reductions in development expenses of overseas group companies allowed operating prot to rise by 26.5% year-on-year to JPY4.1 billion. Review of Fiscal 2016Results of various restructuring measures for the North American operations have been achieved earlier than expected and new business inquiries have recovered in the wake of the production issues. Consequently, orders continued to trend at high levels and sales in local currency rose 1.3% year-on-year. However, sales in yen terms fell by 8.2% year-on-year to JPY153.1 billion due to the impact of the stronger yen (-JPY16.0 billion). In addition, the production issues, which caused large losses to be incurred in the previous term, are approaching an end due to the success of various measures, and a subsequent considerable improvement in protability has allowed the operating loss to contract to JPY3.2 billion in the current term from JPY11.2 billion in the previous term. Outlook for Fiscal 2017 The Japanese economy is projected to grow slightly year on year, reecting expectations for gradual economic expansion and the disappearance of fuel efciency scandals that arose last year. Nevertheless, Akebono forecasts domestic net sales will decline 5.4% year-on-year to JPY76.5 billion in scal 2017. The Company also expects operating prot to decrease due to the decline in net sales and higher labor costs, in spite of efforts to rationalize operations and reduce costs. • Progress in Key Measures for North America Business1. Fundamental organizational reformsA new Chief Executive Ofcer and Chief Financial Ofcer, new plant and marketing managers, production division managers and purchasing division managers have been hired to renew the core management and overall organizational structure, and strengthen the organizational and supervisory structure. In addition, efforts to change the awareness of associates and improve the working environment implemented in the current term are expected to yield results and lead to large improvements in earnings from the coming term onwards. In February 2017, restructuring of the organizational and supervisory structure has been completed with the hiring of a new executive responsible for the human resources division. Furthermore, measures Akebono received the “Best Innovation” award for the development and mass production of high-performance automotive brakes in the Sixth French Business Awards 2017 sponsored by the France Chamber of Commerce and Industry in Japan. These brakes are used in the McLaren P1™ ultra-high-performance road car that came to market in 2013. The French Business Awards were created to honor excellence among members of the French Chamber of Commerce and Industry in Japan. Five members on the panel of judges, including the President of the French Chamber of Commerce and Industry in Japan, opinion leaders, and journalists evaluate companies based on the success of their products and services, innovation, social contributions, and corporate ethics. The awards ceremony was Received “Best Innovation” Award in Sixth French Business Awards 2017 French Business Awards CeremonyReview of Operations by Region|JapanReview of Operations by Region|North Americaattended by Thierry Dana, the French Ambassador to Japan, who personally awarded the trophy. 25 AKEBONO REPORT 2017

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