Annual Report 2009 アニュアルレポート | SHOWA CORPORATION 株式会社ショーワ

(1)

1 SHOWA Philosophy

2 Message from the President

3 Review of Operations

6 Showa’s Technology

8 Consolidated Financial Statement

13 Topics

14 Outlook of Consolidated Business Performance

15 SHOWA’s Global Network

(2)

SHOWA Philosophy

A N N U A L R E P O R T

2 0 0 9

−

Our Fundamental Beliefs

−

Respect for the individuals

Trust/Fairness/Independence

−

Our Corporate Principle

−

With the aim of becoming a global company

trusted by customers worldwide, we are

committed to making continuous innovations

to provide superior products of the best

technology and the highest quality to meet

users’ needs.

−

Code of Conduct

−

1.Let actions be driven by ideals and visions

2.Value time and ideas, and approach problems based

on fundamentals and principles

3.Place value on communications and understand the

situation of others

4.Maintain operational transparency and soundness

5.Always be aware of environmental preservation,

and make contributions to the community and society

Our Fundamental Beliefs

Corporate Culture

Our Corporate Principle

Code of Conduct

(3)

I would like to express my gratitudes for your continued encouragement and support over the years.

We are pleased to present this summary of our consolidated

results of the fiscal year ended as of March 31, 2009 as follows.

The economic situation facing the Showa Group (hereinafter, “the

Group”) during the fiscal year rapidly became more challenging in

the United States due to the global economic downturn triggered

by financial crisis. Moreover, the economies of Europe and Japan

retreated even further than their bearish standing, and slowing

economic trends in Asia rapidly worsened. Overall, the situation

has become critical and marked by worldwide economic

uncertainty.

In the automobile industry where the Group belongs, sales

decreased especially for the commercial vehicle category in the

United States, and also sales in Europe fell short of the previous

fiscal year, particularly for the passenger vehicle category. On the

other hand, in Asia, though production of automobiles declined, our

sales rose slightly year on year, however, in Japan results fell short

of the previous fiscal year in production, sales, and exports. On the

whole, the situation has become extremely severe for the industry

due to the sudden demand crunch.

Under these formidable conditions, the Group has endeavored to

“Achieve World Class Quality and Technology” with global

measures to enhance management and improve our company

well-being.

We recognize the crisis that faces us as embodied in the sudden

decline in automobile demand with the worldwide economic

downturn, and we have been conducting emergency measures to

strengthen productivity and improve profitability while minimizing

drags on profit.

Kazuto Iiyama

President

As a result, consolidated net sales for the fiscal year decreased

to ¥271,510 million, down 4.2% year on year, due to lower

automobile demand around the world and an unfavorable

exchange rate.

Regarding profits, because of rising material costs, an

unfavorable exchange rate, increased production and rising costs

for supporting new model vehicles in the first half, and because of

decreased production in the second half, consolidated operating

income dropped to ¥2,409 million, down 82.4% year on year.

Consolidated ordinary loss was ¥1,137 million (compared to a

consolidated ordinary income of ¥14,254 million the previous year)

and the net loss for the period was ¥1,169 million (compared to a

net income of ¥6,597 million the previous year), mainly due to the

fact that deferred tax assets were drawn-out and an amount was

posted under income taxes-deferred.

Ta k i n g b u s i n e s s p e r f o r m a n c e d u r i n g t h e p e r i o d i n t o consideration, Showa chose to set the year-end dividend at ¥7 per

share. As a result, the dividend for the fiscal year totaled ¥21 per

share including the interim dividend of ¥14.

The future outlook calls for even more challenging economic

conditions in the United States, Europe and Japan, with concerns

about a prolonged downturn of the global economy and no sign of

recovery in sight. In Asia we are concerned that an already slowing

economic climate may be pulled by the global economy toward

recession. In the automotive industry, the market is expected to

continue growing in some regions such as China, but recovery of

automobile demand is uncertain for the United States, Europe and

Japan due to the recession that started with the US financial crisis.

To survive these harsh conditions, the Group, following the

motto of “Be Selective and Focused with Speed,” will focus our

limited management resources into essential areas with timely

managerial decision-making and we will work to improve our

profits and profit-making structure, recognizing the urgency. Also,

the Group as a whole will make a concentrated effort to restructure

our production bases for the future to build high-efficiency lines

that respond flexibly to fluctuation in production as well as to

strengthen production performance.

Our hope is that our shareholders will continue in their enduring

support over the years to come.

August 2009

(4)

0 50,000 100,000 150,000 200,000 250,000 300,000

(Unit: Millions of yen) (Unit: Millions of yen)

(Unit: Millions of yen) (Unit: Yen) 250,448

,₀₆ ,₀₇ ,₀₈ ,₀₉

261,897

283,370

271,510

△4,000 0 4,000 8,000 120,000 160,000 200,000

17,716

,₀₆ ,₀₇ ,₀₈ ,₀₉

18,766

14,254

△1,137

△16,000

10,451

137.56

119.56

86.84

,₀₆ ,₀₇ ,₀₈ ,₀₉

9,083 6,597

△11,609 △152.82

△12,000

△8,000

△4,000 0 4,000 8,000 12,000 16,000

△60

△20

△80

△40 0 40 80 120 160

0

87,825

1,156.02

1,285.76

1,330.96

,₀₆ ,₀₇ ,₀₈ ,₀₉

110,740

117,127

40,000 60,000 80,000 100,000 120,000

0 600 800 1,000 1,200 1,400

87,228

984.38

Net Income Net Income

Net Assets Net Assets (Unit: Millions of yen)

Net Income per Share

Shareholder’s Equity per Share

Shareholder’s Equity per Share (Unit: Yen)

Review of Operations

Finacial and Operating Highlights

Net Sales

Ordinary Income

Net Income /

Net Income per Share

Net Assets /

(5)

Others ¥11,881 million (4.4%)

Automotive Components ¥259,628 million

(95.6%)

Japan 100,523 million (37.0%)

North America 68,554 million (25.3%) Europe

20,072 million (7.4%)

Southeast Asia 34,270 million (12.6%)

South America 27,699 million (10.2%)

Others 20,390 million (7.5%)

Motorcycle ¥84,189 million (31.0%)

Automobile ¥175,439 million (64.6%)

Review of Operations

Net Sales by Business Segments

Net Sales by Geographical Areas

Though increased sales at our major customers,

especially in Asia, pulled our results slightly upward, still the sudden drop in automobile demand as caused by the worldwide economic downturn affected the performance of the Group. In such a severe situation, we have been conducting global measures to enhance management and improve our company well-being as well as carrying out emergency measures to strengthen productivity and improve profitability while at the same time minimizing drags on profit.

However, the first half was affected by factors such as the rise in material costs, an unfavorable exchange rate with an abrupt appreciation of the yen, and increased production and costs for supporting new model vehicles, while a sudden drop in automobile demand characterized the second half, and consequently the results came out as follows.

Overview of the fiscal year

Japan

Both production and sales of parts for automobiles and motorcycles decreased, which resulted in a decline in income due to shrinkage of the automotive market and a decrease in exports due to recession.

North America

In the U.S., revenue increased as a whole due to sales of new model automobile despite the slump of automobile market, in case of automotive parts, and decrease of motorcycle parts sales hurt by decline in sales of large motorcycles. However, the unfavorable exchange rate led to a decline in income as measured in yen. In Canada, revenue decreased due to sales decline of sub-assembled suspension modules dragged by decline in volume and change in costs of supplied parts determined by the customer.

Performance by Business Segments

Net Sales ¥271,510 million

(down 4.2

％

year on year)

Operating Income ¥2,409 million

(down 82.4

％

year on year)

Ordinary Loss ¥1,137 million

(Ordinary Income of 2008 ¥14,254 million)

Net Loss ¥11,609 million

(Net Income of 2008 ¥6,597 million)

Automotive Components

(6)

Review of Operations

Europe

In England, though the market environment was very

severe, the year ended with an increase in revenue owing to increased sales of automobile parts such as shock absorbers. However, income converted to yen declined because of the unfavorable exchange rate. In Spain, our business brought in increasing revenue because sales of motorcycle shock absorbers increased as customers enjoyed good conditions.

Southeast Asia

Performance in Indonesia showed an increase in revenue due to increased sales of motorcycle shock absorbers and automotive parts such as drivetrain components, with much credit going to customers enjoying strong conditions. In Thailand as well, there was an increase in revenue because sales of both motorcycle shock absorbers and automobile parts increased.sub-assembled suspensions, which was the outcome of customers paying less for the parts they purchased, as well as decreased sales.

South America

The Brazilian market ended with an increase in revenue due to rising sales of shock absorbers for motorcycles. The year was characterized by good conditions at customers and in the overall market.

Others

In China, revenue increased due to sales of shock

absorbers and power steering for automobiles due to a firm automobile market as well as the positive impact of new models introduced by customers.

As a result net sales for the automotive parts segment totaled ¥259,628 million, which was down 6.7% year on year. Operating income fell to ¥1,510 million, down 88.4% year on year.

Net sales of other segments totaled ¥11,881 million, up 129.6% year on year. Operating Income totaled ¥899 million, up 36.8% year on year.

Business forecast for the next fiscal year

Turning to the outlook for the fiscal year ended as of March 31, 2010 there is still no sign of recovery from the “once in a century” global downturn, and there is some concern that it will drag on in the United States, Europe and Japan. There is also concern in Asia that the worsening global economy could provoke further recession.

In the automotive industry, an expanding market is

expected to continue in some regions such as China, but recovery of automobile demand is uncertain in the United States, Europe and Japan owing to the recession.

To survive these harsh conditions, the Group, following the motto of “Be Selective and Focused with Speed,” will focus our limited management resources into essential areas and recognize the urgency of improving our profits and profit-making structure.

We forecast our performance in the next term to be as follows, reflecting anticipation of a sharp decrease in automobile demand and fluctuation in assumed exchange rates.

Net Sales ¥191,000 million

(down 29.7

％

year on year)

Operating Loss ¥9,600 million

Ordinary Loss ¥9,000 million

Net Loss ¥11,200 million

The above forecasts are based on average exchange rates of

¥

95/US$ and

¥

125/Euro during the next fisical year.

Other Segments

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Showa’s Technology

Shock absorbers are critical to an automobile’s character because they make the auto comfortable to ride and affect the attitude and stability of the automobile body. With their superior performance and quality, Showa brand shock absorbers have created satisfied customers around the world. Showa has years of experience with strut modules and is also working on s u s p e n s i o n m o d u l e s c o m b i n e d w i t h p e r i p h e r a l components.

Shock Absorbers

The propeller shaft’s function is to transmit the driving force of the engine to the wheel axis. The long cylindrical shaft rotates at high speed. It must limit vibration and noise while ensuring high durability. Showa supplies leading-edge technologies, and our structural analysis enables a smaller number of components and lighter weight. Further, we have implemented friction welding to achieve high precision, dynamic balance and ultra–strong parts connections.

Propeller Shafts

The role of a differential mechanism is to absorb the difference in rotation between the right and left wheels when an automobile is cornering. These products must offer durability, transmission efficiency and quiet operation. Showa’s differential gears are light in weight while exhibiting high performance in automobiles from subcompacts to SUVs.

Differential Gears

Gas springs help to open and close front hoods and rear gates by using gas reaction force. They come with speed-adjustment devices that enable operators to open and close the hood and trunk at optimal speed. S h o w a d e v e l o p s a v a r i e t y o f p ro d u c t s t o m e e t customers’ diverse needs.

Gas Springs

Of all automobile components, steering systems must provide performance and reliability. The steering system is the man/machine interface that transmits the driver’s steering motion to the automobile and conveys information on running conditions from the automobile to the driver. The term “power steering system” refers to a component that assists steering and provides drivers with comfortable maneuverability.

Power steering systems are classified into hydraulic power steering systems (HPS), which use the engine’s power as a drive source, and electric power steering systems (EPS), utilizing the vehicle’s battery. Showa has a full line of power steering models.

Automotive Components

(8)

Showa’s Technology

Power trim and tilt units change the angle of outboard engines and provide the following three functions. The trim function provides good screw efficiency and steady cruising by adjusting the angle of the outboard engine while running. The tilt function enables owners to prevent outboard engine damage from clinging shellfish by raising the engine above the water’s surface when moored. When driftwood or other objects strike the outboard engine while under way, shocks are absorbed, helping to prevent damage to the outboard engine and boat.

Power Trim and Tilt Units

For motorcycle and ATV drive unit products, Showa has achieved lighter weights through analysis of functions, shapes, and materials, while maintaining excellent durability, transmission efficiency and quiet operation.

Drive Unit Products

S h o w a m o t o r c y c l e s h o c k a b s o r b e r s a r e u s e d extensively in motorcycle races around the world. From racing machines to scooters, we use our technology and experience to meet a wide variety of performance needs.

Front Fork

The front fork is a key structural c o m p o n e n t o f a m o t o r c y c l e , holding the front wheel securely and providing the steering function. This vital part must be able to

closely follow road contours through smooth operation and steady damping force, while retaining high rigidity.

Rear Cushion

The rear cushion is attached to the rear fork directly or through a link. By controlling the attitude and energy absorption of the motorcycle body, the rear cushion helps the rear wheel to follow road contours.

Shock Absorbers

Outboard Engine Components

(9)

Current assets Assets

Consolidated Balance Sheet (Unaudited)

31st March 2008 and 2009

Cash and deposits

Notes and accounts receivable-trade Short-term investment securities Inventories

Merchandise and finished goods Work in process

Raw materials and supplies Deferred tax assets Other

Allowance for doubtful accounts Total current assets

14,705 27,404 -3,986 4,545 18,272 321 7,550 (144) 19,272 45,316 7,600 24,971 -2.939 4,970 (111) Noncurrent assets

Property, plant and equipment

Buildings, net

Machinery, equipment and vehicles, net Tools, furniture and fixtures, net Land

Lease assets, net Construction in progress

Total property, plant and equipment Intangible assets

Investments and other assets

Investment securities Long-term loans receivable Deferred tax assets Other

Allowance for doubtful accounts Total investments and other assets

Total noncurrent assets

14,233 38,478 2.389 7,160 83 11,674 74,020 904 8,336 154 136 2,379 (12) 14,110 36,515 2,629 7,467 -7,887 68,610 1,350 11,255 182 11 1,720 (12)

Total assets 187,778 162,562

Current liabilities Liabilities

Notes and accounts payable-trade Short-term loans payable

Accounts payable-other and accrued expenses Lease obligations

Income taxes payable Provision for product warranties Provision for bonuses Provision for directors' bonuses Other

Total current liabilities

21,184 18,960 10,654 24 499 1,343 2,389 65 2,371 34,160 10,339 13,249 -1,100 1,239 2,735 76 2,192 Noncurrent liabilities

Long-term loans payable Lease obligations Deferred tax liabilities Provision for product warranties Provision for retirement benefits Provision for directors' retirement benefits Other

Total noncurrent liabilities

10,376 65 2,497 832 3,634 391 43 -963 750 3,391 343 108

Total liabilities 70,650 75,334

Shareholders' equity Net assets Capital stock Capital surplus Retained earnings Treasury stock

Total shareholders' equity

12,698 13,455 58,908 (52) 12,698 13,558 70,784 (51)

Valuation and translation adjustments Valuation difference on available-for-sale securities Deferred gains or losses on hedges

Foreign currency translation adjustment Valuation and translation adjustments

2,978 (43) (13,163) 4,069 14 38 ...

Minority interests 16,015 12,446

Total net assets 117,127 87,228

Total liabilities and net assets 187,778 162,562 Following consolidated financical statements have been compiled from the

consolidated financial statements prepared by the Company as required under the Financial Instruments and Exchange Law of Japan and, therefore have been prepared in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.

The translation of yen amounts into U.S. dollar amounts is included solely for the convenience and has been made, as a matter of arithmetic computation only, at the rate of ¥98.23 = U.S.$1.00, the exchange rate prevailing at 31st March, 2009.The translation should not be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

76,642 104,658 780,233 149,706 278,979 -40,584 46,278 186,016 3,272 76,866 (1,470) ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 10,995 85,919 13,158 83,120 111,933 874,681 144,896 391,721 24.324 72,894 854 118,850 753,541 9,205 84,862 1,576 1,391 24,224 (122) 1,654,915 57,492 65,092 585,285 215,663 193,023 108,462 251 5,082 13,678 24,322 663 24,138 17,841 5,558 181,628 105,630 664 25,426 8,479 37,003 3,980 442 766,914 85,010 96,989 865,425 129,275 136,983 599,703 (536) (10,229) 4,122 (104,136) 30,318 (447) (134,007) ... 126,711 888,000 1,654,915 2009 2008 2009

(10)

Net sales

Consolidated Statements of Income (Unaudited)

Year ended 31st March 2008 and 2009

Overview of Assets, Liabilities and Net Assets

271,510

283,370

Non-operating income

Total non-operating income 1,626 1,329

Interest income Dividend income

Equity in earnings of affiliates Other ... ... 685 281 71 290 738 357 354 175 ...

Cost of sales 243,918 241,935

Gross profit 39,451 29,574

Selling, general and administrative expenses 25,787 27,164

Operating income 13,663 2,409

Income (loss) before income taxes 13,549 (2,594)

Income taxes-current 3,822 2,317

Income taxes-deferred (238) 4,493

Total income taxes 3,583 6,810

Minority interests in income 3,368 2,204

Net income (loss) 6,597 (11,609)

Extraordinary loss

Loss on valuation of inventories Loss on sales of noncurrent assets Loss on abandonment of noncurrent assets Impairment loss

Provision for product warranties Total extraordinary loss

... ... 64 72 319 645 404 -10 294 24 388 ... Extraordinary income

Gain on sales of noncurrent assets Total extraordinary income

... ...

48

11

...

Ordinary income (loss) 14,254 (1,137)

Non-operating expenses

Interest expense Foreign exchange losses

Loss on abandonment of inventories Loss on valuation of inventories Others

Total non-operating expenses

... ... 581 4,046 -249 266 460 105 163 39 ... 2,764,024 13,532 6,974 2,869 731 2,957 ... 2,462,953 301,071 276,537 24,534 (26,413) 23,592 45,740 69,333 22,437 (118,183) 1,505 716 15,329 653 739 3,248 6,571 4,116 ... 48 11 494 494 ... (11,578) 4,876 1,035 49,645 5,918 41,191 -2,535 ...

Consolidated assets at the end of the fiscal year totaled ¥162,562 million, down ¥25,215 million year on year. The major factors affecting each item are described as follows.

Current assets totaled ¥76,642 million, down ¥28,015 million year on year. This was mainly due to a decrease in notes and accounts receivable.

Noncurrent assets totaled ¥85,919 million, up ¥2,799 million year on year. This was mainly due to an increase in tangible fixed assets because of capital investments such as the construction of the new Gotemba plant, domestic and international production capacity upgrades and expansions, and so on.

Current liabilities totaled ¥57,492 million, down ¥7,599 million year on year.

This was mainly due to a decrease in accounts payable, though short-term bank loans increased.

Noncurrent liabilities totaled ¥17,841 million, up ¥12,283 million year on year. This was mainly caused by the loans taken to raise funds for capital investments such as the construction of the new Gotemba plant.

Net assets totaled ¥87,228 million, down ¥29,899 million year on year. This was mainly due to foreign currency translation adjustments and a decrease in retained earnings.

2009

2008 2009

(11)

Net cash provided by (used in) operating activities

Consolidated Statements of Cash Flows (Unaudited)

Income (loss) before income taxes Depreciation and amortization Impairment loss

Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for product warranties Increase (decrease) in provision for directors' bonuses Increase (decrease) in provision for retirement benefits Interest and dividends income

Interest expenses

Foreign exchange losses (gains) Equity in (earnings) losses of affiliates

Loss (gain) on sales and retirement of property, plant and equipment Loss (gain) on sales of property, plant and equipment Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories

Increase (decrease) in notes and accounts payable-trade Other, net

Subtotal

Interest and dividends income received Interest expenses paid

Income taxes paid

Net cash provided by (used in) operating activities

... ... (2,594) 10,508 645 65 349 (21) 302 (966) 581 601 (71) 343 -12,329 (8,687) (10,803) (2,705) (124) 999 (566) (2,707) 13,549 8,732 24 (6) (580) (5) (148) (1,095) 266 (210) (354) 304 (11) (4,609) (2,003) 5,010 240 19,101 1,165 (261) (4,265) ...

Net cash provided by (used in) investing activities

(29,151)

(23,799)

Payments into time deposits

Proceeds from withdrawal of time deposits Purchase of property, plant and equipment

Proceeds from sales of property, plant and equipment Purchase of investment securities

Purchase of stocks of subsidiaries and affiliates Other, net

Net cash provided by (used in) investing activities

(1,796) 1,530 (28,641) 209 (6) -(447) (5,126) 2,978 (21,273) 24 (3) (184) (214)

Net cash provided by (used in) financing activities

11,887

3,526

Net increase (decrease) in short-term loans payable Proceeds from short-term loans payable

Decrease in short-term loans payable Proceeds from long-term loans payable

Proceeds from stock issuance to minority shareholder Cash dividends paid

Cash dividends paid to minority shareholders Other, net

Net cash provided by (used in) financing activities

... ... 2,523 -12,069 265 (2,128) (824) (18) -19,060 (12,562) -(2,125) (845) (1) ...

Increase in cash and cash equivalents from newly consolidated subsidiary 1,205 1,351

Cash and Cash Equivalents at End of Year 21,436 5,206

Effect of exchange rate change on cash and cash equivalents 236 2,083

Net increase (decrease) in cash and cash equivalents (4,296) (17,580)

Cash and Cash Equivalents at Beginning of Year 24,527 21,436 (2,399) 15,739 (24,425) (26,413) 106,978 6,571 667 3,562 (218) 3,084 (9,844) 5,918 6,121 (731) 3,494 -125,516 (88,444) (109,981) (27,544) (1,264) 10,170 (5,767) (27,563) ... ... ... ... ... (296,772) (18,288) 15,577 (291,578) 2,137 (62) -(4,558) 121,013 25,693 -122,868 2,707 (21,672) (8,394) (187) ... 13,753 53,003 21,208 (178,974) 218,224 2009 2008 2009

(12)

Capital stock

Consolidated Statement of Changes in Net Assets (Unaudited)

Balance as of March 31, 2008 Changes of items during the period Total changes of items during the period

Balance as of March 31, 2009

Capital surplus

Effect of changes in accounting policies applied to foreign subsidiaries Changes of items during the period

Total changes of items during the period

Retained earnings

Dividends from surplus Net income (loss)

Change of scope of consolidation Total changes of items during the period

Treasury stock

Balance as of March 31, 2008 Changes of items during the period Purchase of treasury stock

Total changes of items during the period

Total shareholders' equity

Dividends from surplus Net income (loss)

Purchase of treasury stock Change of scope of consolidation Total changes of items during the period

12,698

-12,698

13,558

-13,558

66,376 -(2,127) 6,597 (62) 4,407

70,784

(50) (1) (1)

(51)

92,583 -(2,127) 6,597 (1) (62) 4,406

96,989

12,698

-12,698

13,558 (102)

-13,455

70,784 652

(2,127) (11,609) 1,208 (12,528)

58,908

(51)

(0) (0)

(52)

96,989 549

(2,127) (11,609) (0) 1,208 (12,528)

85,010

... ... ...

Shareholders' equity

129,275

-129,275

138,030 (1,047)

-136,983

720,597 6,645

(21,654) (118,183) 12,299 (127,538)

599,703

(529)

(7) (7)

(536)

987,373 5,598

(21,654) (118,183) (7) 12,299 (127,545)

865,425

...

2009

2008 2009

(13)

Valuation difference on available-for-sale securities

Consolidated Statement of Changes in Net Assets (Unaudited)

Balance as of March 31, 2008 Changes of items during the period

Net changes of items other than shareholders' equity Total changes of items during the period

Deferred gains or losses on hedges

Balance as of March 31, 2009 6,080 (2,010) (2,010) 4,069 (14) 29 29 14 (967) 1,006 1,006 38 5,097 (974) (974) 4,122 13,059 2,955 2,955 16,015 110,740 -(2,127) 6,597 (1) (62) 1,980 6,387 117,127 4,069 (1,091) (1,091) 2,978 14 (58) (58) (43) 38 (13,202) (13,202) (13,163) 4,122 (14,351) (14,351) (10,229) 16,015 (3,568) (3,568) 12,446 117,127 549 (2,127) (11,609) (0) 1,208 (17,920) (30,449) 87,228 ... ... ... ... ... ...

Foreign currency translation adjustment

... ... ...

Valuation and translation adjustments 2008 2009

Total valuation and translation adjustments

Minority interest

... ... ...

Total net assets

Dividends from surplus Net income (loss) Purchase of treasury stock Change of scope of consolidation

Balance as of March 31, 2009 ... ... ... 41,425 (11,107) (11,107) 30,318 148 (595) (595) (447) 393 (134,401) (134,401) (134,007) 41,967 (146,103) (146,103) (104,136) 163,039 (36,327) (36,327) 126,711 1,192,380 5,598 (21,654) (118,183) (7) 12,299 (182,430) (309,978) 888,000 ... ... ... 2009 ... ... ...

(14)

A new electric power steering plant, construction of which began last year near the existing facility in Gotemba, Shizuoka, has completed and started full production.

Established to be a model plant for all of our manufacturing bases around the world, the new plant pursuits highly competitive production of electric power steering systems, with high quality, build with advanced production engineering and know-hows whilst making both safety and environmental considerations as well as strengthening “mother plant” functionalities.

Completion of New Gotemba Plant

We have established a new procurement center in Chonburi, Thailand for the purpose of optimum

procurement and strengthening cost competitiveness. The new procurement center starts its operation by handling shock absorbers for motorcycles, then move on to procure components and gather information in ASEAN region, eventually constructing a consolidated database for global component procurement. We aim to cut costs in the Showa Group and further strengthen our cost

competitiveness at the global level by exporting cost effective, high quality

components from the ASEAN region to production sites in Japan, North America and around the globe.

Procurement Center in Thailand

Currently, the Group’s sintered parts, especially for

automobiles, are manufactured at three bases: Saitama Plant, Showa Kyushu Corporation and American Showa Inc.

In order to flexibly respond to changes in production level caused by recent recession, we have shifted sintering process from Saitama to Showa Kyushu. Process shifting from American Showa to Showa Kyushu is also in picture. By consolidating production of sintered parts to Showa Kyushu, we aim to enhance our cost competitiveness with better production efficiency and improved sintering technology.

Consolidation of Sintering Process

Appearance of the building Sintered parts

New Gotemba Plant

Showa Kyushu

Topics

Japan ASEAN region

North America

Thailand Procurement

Center South

America

Europe

ASEAN

(15)

29.0%

(44)

37.8%

(131)

17.0%

(118)

15.4%

(8,380)

Individuals / others

Financial institutions

0.8%

(36)

Securities Traders Other corporations

Foreign Investors

0 50 100 150 200 250

‘03/4 7 10 ‘04/1 4 7 10 ‘05/1 4 7 10 ‘06/1 4 7 10 ‘07/1 4 7 10 ‘08/1 4 7 10 ‘09/1 4 7

Outlook of Consolidated Business Performance

As of 31st March 2009

Overview of Shares

Total number of authorized shares

180,000,000 shares

Total number of issued shares

76,020,019 shares

Number of shareholders

8,709

Share Distribution by Shareholders

Name of shareholder

Honda Motor Co., Ltd.

Japan Trustee Service Bank Ltd. (Trust Account)

Japan Trustee Service Bank Ltd. (Trust 4G Account)

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

DANSKE BANK CLIENTS HOLDINGS The Bank of Tokyo-Mitsubishi UFJ, Ltd. Showa Corporation Business Partner’s Shareholding Association

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) RBC Dexia Investor Services Bank Account Luxembourg Non-Resident Domestic Rate Sanyo Foods Co., Ltd.

Overview of Major Shareholders

Showa’s Stock Price (03’/4=100)

Showa’s Stock Price Nikkei Average

Shares held

(shares)

Investment ratio (%)

25,447,856 5,173,500 3,288,400 2,921,400 2,711,000 2,151,480 1,469,660 1,359,600 1,227,330 996,000

33.5 6.8 4.3 3.8 3.6 2.8 1.9 1.8 1.6 1.3

Board of Directors and Corporate Auditors

As of 23rd June 2009

President Kazuto Iiyama

Executive Vice President Yasuhisa Maekawa

Executive Managing Director Kenshi Hirai Takeshi Kawamoto

Managing Director Yoshitaka Terazawa Norio Ukai

Hisao Hirono

Akira Kadoya

Director Mitsutaka Sugino Kazuhiro Takagi

Teru Oda

Atsushi Izumina

Akira Wada

Takeshi Nagao

Toyotaka Itagaki

Statutory Auditor Tetsuro Aoyama Tetsuo Nishikiori*

Auditor Hiroshi Iwakami* Masahiko Sano*

(16)

Showa Kyushu Corporation

Honda Cars Saitama Kita Co., Ltd.

Automotive Parts R&D Center (Saitama)

Nagoya Plant

Asaba Plant

Corporate Head Office Manufacturing Plants

Domestic Subsidiaries & Affiliates

R&D Facilities Hadano Plant

Gotemba Plants (No.1 / No.2)

Motorcycle Parts R&D Center (Asaba)

Automotive Parts R&D Center (Tochigi)

Corporate Head Office / Saitama Plant

Showa Seiko Co., Ltd.

SHOWA’s Global Network

Overview of Business

The SHOWA Group consists of our company, 15 subsidiaries and three affiliates, and our main businesses are the manufacture and sale of automotive parts.

Corporate Head Office, Plants and R&D Facilities

Corporate Head Office 1-14-1, Fujiwara-cho, Gyoda, Saitama

Plants Saitama Plant (Gyoda, Saitama), Hadano Plant (Hadano, Kanagawa),

Gotemba Plant (Gotemba, Shizuoka),

Asaba Plant (Fukuroi, Shizuoka),

Nagoya Plant (Kasugai, Aichi)

R&D Facilities Automotive Parts R&D Centers (Haga, Tochigi / Gyoda, Saitama) Motorcycle Parts R&D Center (Fukuroi, Shizuoka)

(17)

SHOWA’s Global Network

Overview of Subsidiaries and Affiliates

Consolidated Subsidiaries Showa Kyushu Corporation Showa Seiko Co., Ltd.

Honda Cars Saitama Kita Co., Ltd. SHOWA CANADA Inc.

AMERICAN SHOWA, Inc. SHOWA EUROPE, S.A. NISSIN SHOWA UK LTD.

SHOWA AUTOPARTS (THAILAND) CO., LTD. P.T. SHOWA INDONESIA MANUFACTURING SUMMIT SHOWA MANUFACTURING CO., LTD. SHOWA INDUSTRIA E COMERICO LTDA. SHANGHAI SHOWA AUTO PARTS CO., LTD. SHOWA INDIA PVT. LTD.

SHOWA DO BRAZIL LTDA.

GUANGZHOU SHOWA AUTOPARTS CO., LTD.

Equity Method Affiliates CHENGDU NINGJIANG SHOWA AUTOPARTS CO.,LTD KAI FA INDUSTRY CO., LTD

MUNJAL SHOWA LTD.

Overseas

Net Sales by Business Segments

Net Sales by Geographical Areas

Others

¥11,881 million (4.4%)

Automotive Components

¥259,628 million (95.6%)

Motorcycle

¥84,189 million (31.0%)

Automobile

¥175,439 million (64.6%)

Japan

100,523 million (37.0%)

North America

68,554 million (25.3%)

Europe

20,072 million (7.4%)

Southeast Asia

34,270 million (12.6%)

South America

27,699 million (10.2%)

Others

20,390 million (7.5%)

North America Japan

China Europe

Southeast Asia

South America

SHOWA CANADA, Inc.

SHANGHAI SHOWA AUTO PARTS CO.,LTD. GUANGZHOU SHOWA AUTOPARTS CO.,LTD. WUHAN PLANT

CHENGDU NINGJIANG SHOWA AUTOPARTS CO.,LTD. MUNJAL SHOWA LTD.

AMERICAN SHOWA, Inc. Los Angeles Office

SHOWA DO BRAZIL LTDA.

SHOWA INDUSTRIA E COMERCIO LTDA. NISSIN SHOWA UK LTD.

SHOWA EUROPE, S.A.

SHOWA INDIA PVT. LTD.

SUMMIT SHOWA MANUFACTURING CO.,LTD. SHOWA AUTOPARTS (THAILAND) CO., LTD. P.T. SHOWA INDONESIA MANUFACTURING

KAIFA INDUSTRY CO.,LTD. GUANGZHOU SHOWA AUTOPARTS CO.,LTD.

AMERICAN SHOWA, Inc. Head Office and Sunbury Plant AMERICAN SHOWA, Inc. Blanchester Plant

Automobile sales Motorcycle sales Other sales

’07 ’08 ’09