Towards Innovative Growth

Transcription

1 Annual Report 215 Year Ended March 31, 215 Towards Innovative Growth As part of our efforts to protect the global environment, this annual report uses paper approved by the Forest Stewardship Council and was printed in Japan. The inside pages were printed with vegetable-based inks that do not include volatile organic compounds. Cat. No. HE-A ( S ) FT 3

2 A Letter from the CEO Thank you for taking the time to read this annual report about the activities of Hitachi Metals, Ltd. Hitachi Metals is currently facing a crucial turning point. During fiscal 214, we acquired the shares of MMC Superalloy Corporation and added the company to our corporate group as Hitachi Metals MMC Superalloy, Ltd. from July to expand the scope of our business in the aircraft and energy segment. In November, we acquired Waupaca Foundry, Inc. of the U.S. as a strategy to grow the automotive iron casting business in the global market. To restructure our existing portfolio, we also transferred the majority of the shares we held in To our Shareholders and Investors: Hitachi Tool Engineering, Ltd. (now Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi Materials Corporation in the cemented carbide tool business, and sold the shares of Hitachi Metals Techno, Ltd. in the construction and industrial machinery-related business to provide the company a new structure to enable it to grow. We are pursuing the establishment of a joint venture in China in the rare earth magnet business, as we work to take a new step forward. We are implementing a broad range of measures, but each of this is an initiative that makes steady progress toward establishing a base for sustained growth. The Hitachi Metals Group has sales exceeding one trillion yen and more than 5% of sales derive from overseas sales. We have achieved a business structure for doing business on a global scale. Fiscal 215 is the final year of the Medium-Term Management Plan we are currently pursuing, and we will complete restructuring and continue to restructure the business portfolio to achieve further growth. Our keywords are Change and Challenge. Hitachi Metals will aim for new heights in the future as well. It is my profound hope that this report will serve to further bond us to our valued stakeholders, increase your understanding of Hitachi Metals, and earn your renewed support of the Group s vision and business endeavors over the years to come. Hideaki Takahashi President and Chief Executive Officer 2 Hitachi Metals, Ltd. Annual Report 215 3

3 Contents Financial Highlights Hitachi Metals, Ltd. and Consolidated Subsidiaries (As of and for the years ended March 31, , 214, 213, 212 and 211) At a Glance Revenues/Net Sales Operating income Operating income margin Net income (loss) ROS Our Business 1 8 The Hitachi Metals Group is a materials manufacturer that possesses competitive core technologies in the high-performance materials field. We offer global top brand products and develop various businesses related to the automobile, electronics, and infrastructure areas. A Message from the CEO Revenues/Net Sales and Operating Income Margin ( million) 1,, 8, 6, 4, 2, (%) 1,4, Operating Income, Net Income (Loss) and ROS ( million) 1, 8, 6, 4, 2, 7. 84,47 (%) 1 8 7, Business Performance 28 Reports on segment-specific revenues/net sales and operating income, financial activities, and other aspects of the FY214 business performance. Revenues/Net Sales by Business Segment 28 High-Grade Metal Products and Materials 26% of Revenues/ Net Sales Magnetic Materials and Applications 13% of Revenues/ Net Sales High-Grade Functional Components and Equipment 28% of Revenues/ Net Sales Wires, Cables, and Related Products 33% of Revenues/ Net Sales Change to be a competitive business; Challenge ourselves to meet new targets Products by Segment 3 Review of Operations by Segment 32 High-Grade Metal Products and Materials High-Grade Functional Components and Equipment FY215 Medium-Term Management Plan 2 Financial Results Topics Financial Results Topics 4 42 Revenues/ Net Sales ( billion) 1, 25 Plan 28 Plan 212 Plan 215 Plan Urgent measures to Merger with 1,4.4 strengthen foundations Hitachi Cable Profits ( billion) % 1.% % % % 8.3% % % % Magnetic Materials and Applications Wires, Cables, and Related Products (3.) 1.9 (1.5%) 1.% Action Plan Overview 22 Financial Results Topics Financial Results Topics High-Grade Metal Products and Materials Magnetic Materials and Applications High-Grade Functional Components and Equipment Wires, Cables, and Related Products Financial Management Research and Development Hitachi Metals, Ltd. Annual Report 215 5

4 Corporate Profile 51 Towards Sustainable Growth Diversified Operational Structure to Respond to Various Needs Hitachi Metals is striving to achieve new growth through Change and Challenge. We will introduce the driving force behind that from various perspectives. Products by Market 52 Automotive-Related Products 52 Manufacturing Safe, Environmentally Friendly Cars Business Units 58 High-Grade Metal Products and Materials 58 Creating an uninterrupted stream of high-performance materials by combining innovative ideas with core technologies developed through proven tradition Magnetic Materials and Applications We supply unique products based on advanced new material development and original component design technology High-Grade Functional Components and Equipment With unparalleled casting technologies nurtured from age-old tradition, Hitachi Metals supplies highly functional casting components and equipment Wires, Cables, and Related Products We continue to pursue the technology needed to transmit energy and information Global Expansion 62 Meeting Global Customer Needs on a Timely Basis Electronics-Related Products 55 Solutions That Show the Way to the Future Management Corporate Governance and Compliance Corporate Social Responsibility Stock Information Corporate Data / Stock Price Communication Symbol Infrastructure-Related Products For Tomorrow s Enriched, Carefree Society 56 Disclaimer This document contains forward-looking statements, such as results forecasts, management plans and projections that are not historical facts. All such forward-looking statements are based on assumptions and projections that were both current and rational for the purpose of making projections at the time this document was prepared. Changes to the underlying assumptions or circumstances could cause actual results to differ substantially. Unless otherwise noted, the information included in this document was compiled at the time this annual report was prepared. With the passage of time, the information may become outdated or inaccurate. Hitachi Metals assumes no obligation to update the information in this document in order to reflect circumstances that may occur after the date of the document s creation. On July 1, 213, the Company merged with Hitachi Cable, Ltd. and established a new company called the Cable Materials Company. The operating results of the Group include those of the new company in the Wires, Cables, and Related Products segment starting from the second quarter ended September 3, Hitachi Metals, Ltd. Annual Report 215 7

5 Financial Highlights Hitachi Metals, Ltd. and Consolidated Subsidiaries (As of and for the years ended March 31, 215, 214, 213, 212 and 211) Hitachi Metals, Ltd. and its consolidated subsidiaries have adopted the International Financial Reporting Standards (""), effective from the year ended March 31, 215 (or FY215). Millions of yen 1USD= EUR=13.32 Thousands of U.S. dollars Thousands of Euros Millions of yen 1USD= EUR=13.32 Thousands of U.S. dollars Thousands of Euros For the period Operating results: Revenues/Net sales Cost of sales Selling, general and administrative expenses Other income Other expenses Operating income Income (loss) before income taxes Net income (loss) Cash flows: Operating cash flows Free cash flows Net cash flows Growth initiative costs: Capital expenditures Depreciation and amortization Research and development At the period-end: Total assets Interest-bearing debt Net assets Number of outstanding shares (thousands of shares) Number of employees Per share of common stock (yen, U.S. dollars and euros): Net income (loss): Basic Cash dividends Net assets J-GAAP J-GAAP J-GAAP 1,4, , ,446 21,33 21,36 84,47 86,391 7,569 18,983 (4,767) (7,443) 51,474 39,917 2,93 1,83,45 255,35 476, ,61 3, , , ,81 16,851 5,844 16,278 53,428 55,82 48,133 99,171 89,339 61,765 31,987 33,762 16, , , ,84 427,657 26, ,779 44,684 74,16 21,79 17,23 12,955 62,975 34,257 6,136 26,688 24,219 11,76 541, , , ,42 17, ,914 44,867 36,414 17,886 3,8 (18,761) (6,28) 24,3 27,544 12, , ,232 24, ,43 18, ,186 43,143 36,61 22,24 42,688 18,81 (9,645) 2,369 28,389 12, , , ,1 352,442 18, $ 8,357,935 6,63,287 1,52, , ,299 72, ,97 587,243 96,97 (39,669) (61,938) 428, , ,945 $ 9,15,978 2,124,96 3,962,52 $ ,76,975 6,88,989 97, , ,49 647,69 662, ,56 836,272 (36,579) (57,113) 394,982 36,3 16,397 8,313,766 1,959,48 3,653, Reference information: Aggregate market value of shares Enterprise value (EV) EBITDA EBITDA margin (%) EV/EBITDA ratio (times) Key financial indicators: Operating income margin (%) Operating cash flow margin (%) ROS (%) ROA (%) ROIC (%) ROE (%) Total assets turnover (times) Shareholders' equity ratio (%) Debt/equity ratio (times) Debt/operating cash flow ratio (times) Notes: J-GAAP J-GAAP J-GAAP 788, , , , ,512 9, , ,768 42, ,298 53,564 65, , ,187 65, The above amounts were accounted for and presented in accordance with the generally accepted accounting principles in Japan for the fiscal years from 211 through 213, and in accordance with for the fiscal years of 214 and The translation of Japanese yen amounts into U.S. dollars and euros for the year ended March 31, 215, is included in this annual report solely for the convenience of readers outside Japan. The translation has been made at the rates of 12.17=$1 and 13.32= 1, the approximate exchange rates as of March 31, Diluted net income per share is not provided as Hitachi Metals, Ltd. had no dilutive common stock outstanding during the fiscal year ended March 31, Interest-bearing debt represents the total of short-term debt, commercial paper, long-term debt and corporate bonds. 5. Net income (loss) represents net income (loss) attributable to shareholders of the parent company. Net income (loss) per share is calculated by dividing net income (loss) by the average number of outstanding shares for the period. Net assets per share is calculated by dividing net assets attributable to shareholders of the parent by the number of outstanding shares as of the period-end. 6. EV represents the sum of aggregate market value of shares and net interest-bearing debts. 7. Earnings before interest, taxes, depreciation and amortization (EBITDA) refer to income (loss) before income taxes and non-controlling interest/minority interests before deducting net interest, depreciation and amortization. 8. EBITDA margin refers to EBITDA divided by revenues/net sales. 9. Return on sales (ROS) refers to the net income (loss) divided by revenues/net sales. 1. Return on assets (ROA) is computed as the income (loss) before income taxes and non-controlling interests/minority interests divided by the average total assets (the average of beginning and ending balance of the year). 11. Return on invested capital (ROIC) is computed as the net operating income after tax divided by the sum of the average total shareholders' equity, the average total accumulated other comprehensive income and the average interest-bearing debts (the average of beginning and ending balance of the year). 12. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders' equity and the average total accumulated comprehensive income (the average of the beginning and ending of the year) J-GAAP J-GAAP J-GAAP $ 6,565,66 8,32,329 1,68,786 6,53,744 7,46,73 985,543 Financial Highlights Revenues/Net Sales and Operating Income Margin Operating Income, Net Income (Loss) and ROS Total Assets and ROA Net Assets and ROE ( million) 1,, 8, 6, (%) 1,4, ( million) 1, 8, 6, (%) 1 84, ,569 6 ( million) 1,, 8, 6, 1,83,45 (%) ( million) 5, 4, 3, 476,176 (%) , 4 4, 4 4, 4 2, 1 2, 2 2, 2 2, 2 1, Revenues/Net Sales Operating income Total assets Net assets Operating income margin Net income (loss) ROA ROE ROS Note: In this report, unless otherwise noted, years in graphs refer to fiscal years ended March Hitachi Metals, Ltd. Annual Report 215 9

6 Our Business New Growth Driven by Sustainable Development The Hitachi Metals Group is a materials manufacturer that possesses competitive core technologies in the high-performance materials field. We offer global top brand products and develop various businesses related to the automobile, electronics, and infrastructure areas. Hitachi Metals Target Sectors Business Segment Business Principal Products Infrastructure Automobiles Electronics High-Grade Metals Company High-Grade Metal Products and Materials Specialty Steel Rolls YSS brand high-grade specialty steel products (molds and tool steel, alloys for electronic products [display-related materials and semiconductor and other package materials], materials for industrial equipment [automobile-, aircraft-, and energy-related materials], and razor and blade materials) Precision cast components Rolls for steel mills Injection molding machine parts Structural ceramic products Steel-frame joints for construction Amorphous Metals Metglas amorphous metals Magnetic Materials Company Business Portfolio Magnetic Materials and Applications Magnets Soft Ferrite and Other Soft Magnetic Materials, and Their Applications Magnets (NEOMAX rare-earth magnets; ferrite magnets; and other magnets and applied products) Soft magnetic materials (soft ferrite; FINEMET nanocrystalline magnetic material; and Metglas amorphous metals) and applied products Materials and components for IT devices Materials and components for medical equipment Business Segment Infrastructure Automobiles Electronics High-Grade Metal Products and Materials Rolls High-grade specialty steel Amorphous metals Alloys for electronic products High-Grade Functional Components Company High-Grade Functional Components and Equipment Casting Components for Automobiles Casting components for automobiles (HNM high-grade ductile cast iron products, cast iron products for transportation equipment, and HERCUNITE heat-resistant exhaust casting components) SCUBA aluminum wheels and other aluminum components Forged components for automobiles Magnetic Materials and Applications Magnets Soft ferrite and other soft magnetic materials, and their applications Piping Components Cable Materials Company Piping and infrastructure components ( Gourd brand pipe fittings, stainless steel and plastic piping components, water cooling equipment, precision mass flow control devices, and sealed expansion tanks) High-Grade Functional Components and Equipment Piping components Casting components for automobiles Wires, Cables, and Related Products Electric Wires and Cables Automotive Products Electric power and industrial systems, electronic and telecommunication materials, electric equipment materials, and industrial rubber products Electronic components and brake hoses Wires, Cables, and Related Products Electric wires and cables Automotive products Information Systems Information networks and wireless systems Information systems 1 Hitachi Metals, Ltd. Annual Report

7 A Message from the CEO Change to be a competitive business; Challenge ourselves to meet new targets Strong business performance in fiscal 214 Hitachi Metals is now at a crucial turning point. Hitachi Metals chose Change and Challenge as our keywords for pursuing sustained growth. Every department is taking the initiative on this accordingly. Despite changes in demand, mainly in the Japanese automobile sector, that impacted some businesses and products from the third quarter, we were able to clear our numerical targets for fiscal 214 business performance as a whole. We expect residual effects from changes in demand to linger in fiscal 215 and the uncertain environment will persist. Nevertheless, we plan make steady progress toward our targets for the fiscal 215 Medium-Term Management Plan (215 Medium-Term Plan) and pave the way for our next step. We also intend to build a solid base for the start of the next Medium-Term Management Plan. A Message from the CEO Issues that have surfaced in our journey toward sustained growth In May we announced our fiscal 214 results. I subsequently had many opportunities to talk to securities analysts and institutional and overseas investors who hold our shares. Their feedback was very positive. Some said, I can sense that Hitachi Metals has reached a new stage of growth. Others said, Now is not the time to rest. I look forward to your further growth and progress. The people I talked to certainly had big expectations for the company s future. However, some analysts and investors were more critical. For example, one said, It s so important that you keep up a continuous growth strategy. I expect Hitachi Metals to set and achieve high targets. Another stated, Some of your business areas seem to have stopped growing. You need to be constantly innovating and demonstrating higher business value. Sustained growth is the aim of Hitachi Metals. In fiscal 215, we will continue to steadily follow our strategy and work for growth on the global market to keep growth from stalling. Certain issues that need to be addressed have surfaced, however. If we ask what it takes to be a competitive business in the global market, the answers include: Build a strong business portfolio and continuously restructure it Strengthen the technical superiority at the core of our competitive advantage Manage risks with respect to change Have a common sense of values and a strong organization in which we all work together Hideaki Takahashi President and Chief Executive Officer All of these are important elements of global competitiveness. We will pursue these initiatives. 12 Hitachi Metals, Ltd. Annual Report

8 A Message from the CEO 1 To be a competitive business 1 Build a strong business portfolio and continuously restructure it Aim to achieve a high-profit structure and profit expansion through sales growth In fiscal 214, we actively restructured our business portfolio as a growth strategy. This includes the High-Grade Metal Products and Materials segment (High-Grade Metals Company). We transferred the majority of shares of Hitachi Tool Engineering, Ltd. (now Mitsubishi Hitachi Tool Engineering, Ltd.) to Mitsubishi Materials Corporation. We also invested in the aircraft and energy field. Here, we expect market growth and the chance to put our excellent materials technology to work. We are also investing heavily in processes upstream to our Yasugi Works, a source for sustained growth. This will help us build a steady cash flow from molds and tool steel. We have made similar moves in the High-Grade Functional Components and Equipment segment (High-Grade Functional Components Company). While we sold shares of Hitachi Metals Techno, Ltd. because we felt that global growth would be difficult on our own, we purchased Waupaca Foundry, Inc., which offers the potential to increase business scale and expand our market range in the iron casting business. Main Initiatives Implemented in Fiscal 214 A review of the business portfolio was conducted with the goal of achieving sustainable growth. As the market expands globally and our business environment changes, industries will rise and fall and markets will be transformed. Inevitably, our markets and business regions will expand and move. How can we sustain growth given all this change? First, we must build a high-profit foundation by restructuring our business portfolio. Then, we will strive to grow profits by continuously increasing sales in the global market. We will also implement structural reform as another essential aspect of our business. Hitachi Metals will continue to restructure our business portfolio and reform structurally. We will seek to use our capital more efficiently and achieve a higher ROE. For example, we will move away from mature businesses and let go of low-profit businesses. Speed is also crucial. There are four business segments in the company, but the market and business structure applicable to each is different. The Magnetic Materials segment and the Cable Materials segment differ starkly from the High-Grade Metals segment and High-Grade Functional Components segment. This is true as measured by the speed and impact of market change and relative competition. That is to say, the Magnetic Materials segment and Cable Materials segment cannot compete by creating ideas and taking action at the same speed as the other two segments. Increasing the speed from decision-making to execution will give us a competitive advantage. The Hitachi Metals Group is at a crucial turning point. It is no longer enough to continue on our old trajectory. We are taking on our challenges directly, and we are using new perspectives and ideas to build a competitive business portfolio at a faster pace. We are practicing strong and proactive management in recognition of this, and will aim to achieve a high-profit structure and profit expansion through sales growth. A Message from the CEO Business (Segment) Measures Overview Expanded aircraft and energy segment business domains Acquired MMC Superalloy Corporation shares (boosting holdings from zero to 51%), and consolidated the company Implemented strategic investment in Hitachi Metals MMC Superalloy, Ltd. (large ring mill) Restructured the tool steel business Enhanced the competitiveness of industrial machinery materials Reorganized domestic distribution network (reorganized subsidiaries) and improved the efficiency of the sales system Revised prices and boosted profitability by restructuring the product lineup and adjusting prices Expanded demand for automotive materials (piston ring materials, CVT belt materials) Started up a 24t vacuum induction melting and casting furnace, the largest in the world (CVT belt materials) Business Portfolio Shift to profit-generating segments and build a structure targeted at sustainable growth. Decided on major capital investment in casting, forging, etc. New casting equipment, 1,-ton class free forging press, high speed four-surface forging machine, etc. Invest will begin in FY215 and commence in stages, with completion and start-up of operation scheduled for FY217 FY212 FY215 Reinforced the business base for cemented carbide tools Increased production capacity at domestic locations Explored establishment of a production site in China Transferred 51% of shares held in Hitachi Tool Engineering, Ltd. to Mitsubishi Materials Corporation, strengthening the technology base Increased production capacity for rare-earth magnets used in HEV (NEOMAX KINKI Co., Ltd.) Explored establishment of a joint venture with Beijing Zhong Ke San Huan Hi-Tech Co., Ltd. of China Operating margin 14% 1% Magnetic Materials and Applications Secure competitive superiority in technology and accelerate global expansion in China and other regions. Magnetic Materials and Applications High-Grade Metal Products and Materials Sphere size = Scope of sales High-Grade Metal Products and Materials Further reinforce manufacturing power and configure a sales structure for the U.S. and Europe to implement major investments and realize results quickly. Strengthened the casting business in the Americas Transferred shares in Hitachi Metals Techno, Ltd. Reviewed business portfolio and reinforced the business base Shifted to areas of anticipated growth Acquired Waupaca Foundry, Inc., establishing a commanding position in the ferrous casting for transport machinery business, and strengthened the business base by utilizing production technology, sales, procurement, and other management resources Accepted a tender offer and sold all shares held in Hitachi Metals Techno, Ltd., a listed company. The company is targeting growth based on the new structure Transferred J-Power Systems Corporation shares (cutting holdings from 5% to zero) Reduced equity stake in Sumiden Hitachi Cable Ltd. from 5 to 34% Reduced equity stake in Shanghai Sunshine Copper Products Co., Ltd. from 49 to 13% Transferred the compound semiconductor business (completed transfer to Sumitomo Chemical Co., Ltd. on April 1) Rolling stock cable operations in China, Europe, and the U.S. Medical wire (improved operational efficiency by consolidating production of probe cables) Automotive products (Grew sensor cables, and strengthen locations in Asia and Central America) 6% 2% % Wires, Cables, and Related Products Wires, Cables, and Related Products Complete restructuring and implement global growth strategies. High-Grade Functional Components and Equipment High-Grade Functional Components and Equipment Pursue greater global expansion through effective utilization of management resources and strengthening of the Americas business. Operating income ( billions) 14 Hitachi Metals, Ltd. Annual Report

9 A Message from the CEO 2 Strengthen the technical superiority at the core of our competitive advantage Hone our technical superiority from the customer s perspective Hitachi Metals has long created and offered products distinguished by our unique technologies. On the other hand, our customers are changing as market needs become more diverse. To survive, we must merge our aim-for-the-top market strategy based on technical superiority with product development and business strategy for meeting customer needs. We must break free from any strategy mired in past success. We must innovate from the customer s perspective as we aim for new growth. To do this, we persistently research leading-edge technology and develop new products. It is important that we do this to constantly improve our basic strengths as a company. Recent years have brought remarkable advancements in materials technology and development. Chemical materials with properties similar to those of metal materials have emerged. As the customer sees it, our products are materials and finished products at the same time. We are actively seeking to gain entry into new fields and offer customer-centered solutions. This will help customers make their own products and create value for the final user. Technical superiority, objectively improved, is the foundation of our growth strategy. We will embody our ideal of offering solutions by finding out what will sell and what customers want, and then making it. 3 Manage risks with respect to change Improve our ability to sense and respond to change, especially when taking the offense We are a materials developer and manufacturer actively investing for growth. Our risk is that business confidence may change and we will be unable to respond before our investment pays off. The business environment is always changing. Recently, we are facing more diverse risks and the waves of change are becoming more intense. Foreign exchange rates fluctuate wildly. Business confidence in growth markets can evaporate suddenly. Geopolitical risks can cause rapid change. We must not be slow to respond to changes. For a company like ours, our operating rate has a big impact on profits. So any delay in response could cause great losses from which it would take long to recover. Although we need not worry about it excessively, we recognize the potential for such losses and will practice stricter risk management that anticipates deteriorating business conditions. Business conditions are not the only risk to our operations. To operate our business in the global market, many things are important, including legal and cultural differences and geopolitical risk. We have to concretely identify risks inherent in the operation of each business and take preventive measures. We must also constantly brush up our response in the event that a risk develops into a crisis, and improve our ability to respond. Risks are unpredictable and vary greatly in nature. Nonetheless, it is possible to see early signs of problems and take measures against them. We will improve our ability to sense and respond to change and will strengthen our business in every respect, especially when going on the offense. 4 Have a common sense of values and a strong organization in which we all work together The role of regional headquarters outside Japan As our business expands globally, we need to fortify our regional headquarters as a means of keeping the management of operations close to the market. We have been pursuing that initiative since fiscal 214. With business in the Americas and China expanding in scale, in particular, the ability to configure a management structure capable of responding rapidly to the market, rather than management by company segment alone, is a matter of urgency. During fiscal 215 we will strengthen the regional headquarters functions to ensure efficient business expansion. To be a competitive business, we need a common sense of values and more capacity to act as an organization. Currently we seek to grow in the global market. Our business strategy and competitive conditions will be different in each area outside Japan. In the past we would have responded to these separately in each internal company and business area. Now, however, the key is to take a wider view and decide how to use management resources effectively in each market. Offices and staff located outside Japan have the capacity to mobilize this way. In each region we need a variety of ideas and the ability to act dynamically. This includes expanding our customer base and enhancing business efficiency as part of a growth strategy in the region. Our four regional headquarters (the Americas, Europe, Asia, and China) will seek sales growth in their respective areas. Each area will also work to improve its profitability. We intend to move to a business model guided by professionals with deep knowledge of their region and industry. Measures to achieve global business growth 1 2 Strengthen governance by the regional headquarters Strengthen regional headquarter functions by actively recruiting and securing local management level human resources. The four regional headquarters (Americas, Europe, China, and Asia) will devise and implement regional business strategies based on the market conditions and customer status in each region. Strengthen the CSR and compliance structure overseas. Continue active investment directed at achieving global growth and work to expand business scale. Continue to implement the growth strategy in the tool steel and aircraft and energy segments. Concentrate investment in upstream processes that are the source of competitiveness in Japan and localize processing. Establish a structure for expanding global sales in the automotive segment, the rolling stock and medical devices segments, and work to expand sales to achieve profit growth. A Message from the CEO 16 Hitachi Metals, Ltd. Annual Report

10 A Message from the CEO 2 Enhance corporate quality: strengthening risk governance To achieve sustained growth, we must never forget that everything must stand on a foundation of stable business activities. Obeying the law and walking the path of virtue have always been the basis for action at Hitachi Metals Group. That is why our compliance initiatives have been so thorough. We will adopt stricter risk governance both in Japan and elsewhere. My aim is to strengthen our programs and mechanisms for stamping out misconduct. I seek to have systems in place to expose risk and therefore keep improper transactions from happening. We need to have stronger auditing systems, third-party checks, and support functions. By enacting these, my goal is to have a more transparent business. As our business grows globally, moreover, there are other risks. A problem with product quality or function risks a large-scale recall and the resulting financial loss. To strengthen and improve quality, we must begin by considering the maturity of our production and processes academically and systematically. Our approach to this will not be based just on our own view. Rather, we need to take the customer s perspective to ensure quality that is convincing to the customer and community and will practice this kind of Quality First. Of course, safety is vital to any manufacturing industry. We cannot really call ourselves a growth business if we do not have a good safety record. We must each have a common belief in safety above all else. There should be a sense of tension leading us to create a safe workplace. Naturally, to practice compliance is to obey the law. Compliance, however, extends to every corporate initiative and the actions of each individual employee. Each employee will work consciously to enhance the corporate quality of the Hitachi Metals Group. 3 Policy on shareholder return Generating sustainable, long-term returns to shareholders by increasing corporate value and increasing the profits available for dividends is the basic policy of Hitachi Metals. We strive to maintain a strong, stable financial structure that enables investment and manage the company in a manner that enables us to share that growth with our shareholders and all other stakeholders consistently, over the long-term. Hitachi Metals takes a holistic view of a number of factors in determining shareholder return. These include investment in growth and internal reserves, as we improve the earning power of Hitachi Metals as a whole as well as our ability to generate cash. The company paid annual dividends of 23 yen per share in fiscal 214. The dividend payout ratio for fiscal 214 was not high, due in part to temporary gains on the sale of subsidiary shares and other factors, as we worked to implement our growth strategy and restructure our business portfolio. We also intend to take the consolidated payout ratio into consideration in the future as we implement the Medium-Term Management Plan. As we generate profits by achieving new growth, we will return profits to our shareholders while investing some of the cash acquired in growth. 31 % 19 % Europe Expand sales of automotive/ eco- friendly products. Magnets, casting components for automobiles Expand business scale for infrastructure- related products. Tool steel, aircraft and energy- related materials, electrical cables and wires Europe 46. bn Sales ratio: 4% 3 % 2 % Expand business scale in global markets with regional strategy 15 % 13 % 38 % Asia 127. bn Sales ratio: 11% China and the rest of Asia Strengthen functions for local strategic locations Expand business scale in automotive and infrastructure- related segments China % % 34 % 5 % 82. bn Sales ratio: 8% product strategy Challenge ourselves to meet higher targets in the next Medium-Term Management Plan 25 % + Hideaki Takahashi President and Chief Executive Officer North and Central America Expand nonautomotive sector operations. Tool steel Aircraft and energy- related materials Electrical cable for rolling stock Electrical wire for medical devices, etc. 1 % 7 % 3 % North and Central America 341. bn Sales ratio: 31% 8 % High-Grade Metal Products and Materials Magnetic Materials and Applications High-Grade Functional Components and Equipment Wires, Cables, and Related Products Figures show the FY215 forecast. Overseas sales ratio: From 42% in FY213 to 55% in FY215 (projected) Hitachi Metals Group is now at a crucial turning point. Let us state clearly what we aim to be as a business by setting high targets that merit growth. Let us take appropriate risks and pursue our business proactively. May we clearly communicate our strategy and carry it out with a sense of speed. With Change and Challenge as keywords, we aim to be one of the top metal materials companies in the world. Let each of us go forward with a strong sense of awareness and challenge ourselves to meet higher targets. A Message from the CEO 18 Hitachi Metals, Ltd. Annual Report

11 FY215 Medium-Term Management Plan Fiscal 215 Medium-Term Management Plan Basic Policies Fiscal 215 Medium-Term Management Plan Putting in place the foundations for sustained growth by establishing robust corporate foundations and implementing growth strategies Overall Basic Policies Priority 215 Medium-Term Plan Items Strengthen and accelerate global growth strategies Strengthen capabilities to create new products and develop new technologies Use selectivity in domestic operations and cut fixed costs Quickly achieve corporate merger benefits 1. Be more selective regarding products manufactured in Japan and increase our overseas manufacturing ratio 2. Increase shares of new products and expand business domains 3. Cut costs in response to shrinking domestic markets 4. Minimize fluctuating costs by improving our manufacturing and technological capabilities and promoting global procurement 5. Improve cash flow Strengthen and Accelerate Global Growth Strategies Expand New Products Share and Increase Business Domains Improve and Generate Cash Flow Review sales organization Overseas sales ratio of over 45% Cut sales costs by reorganizing our domestic sales organization and commercial distribution Build a sales organization that can accelerate global growth strategies Global expansion Overseas manufacturing ratio of over 3% Draft overall global strategies (establish dedicated departments, conduct semiannual reviews) Accelerate profit-generating overseas expansion and expand business domains, including M&A Global procurement Boost the share of items procured overseas Implement multi-source, optimized centralized purchasing and reinforce cost-competitiveness Human resource training and development Accelerate local hiring overseas Train personnel to maintain a global outlook and strengthen training Firmly maintain sustained growth by continuously creating new products Strengthen the global competitiveness of new core products Create new products and businesses that will be mainstays for succeeding generations Manufacturing reforms Cut fluctuating costs and improve productivity Strengthen global competitiveness through innovations in core technologies Reap reliable benefits from unit cost cuts Slash fixed costs Implement unceasing measures to cut absolute fixed costs Establish the foundations for sustained growth Medium-Term Management Plan Performance Trends Revenues/ Net Sales ( billion) 1, Plan 28 Plan 212 Plan 215 Plan % 1.% % % Urgent measures to strengthen foundations (3.) % (1.5%) Revenues/Net Sales Operating Income Net Income ROE(%) On July 1, 213, the Company merged with Hitachi Cable, Ltd. and established a new company called the Cable Materials Company. The operating results of the Group include those of the new company in the Wires, Cables, and Related Products segment starting from the second quarter ended September 3, % % 17.9 Merger with Hitachi Cable % % , % Profits ( billion) Hitachi Metals, Ltd. Annual Report

12 FY215 Medium-Term Management Plan Action Plan Overview High-Grade Metal Products and Materials Specialty Steels Achieve new business and growth through major investments Establish the tool steel business as a cash cow Position specialty steels as the growth driver for the next generation Enhance competitiveness of automotive materials (piston ring materials, CVT belt materials). 2 Position specialty steels as a future growth driver for Hitachi Metals Enhance competitiveness in the production of premium quality Steels for the industrial markets Install a large vacuum induction melting and casting furnace (VIM). Move CVT belt materials into mass production. VIM: Vacuum Induction Melting & Casting 1 Expand the business domains of the aircraft and energy segments. Accelerate expansion in the U.S. and European markets Grow sales and profits from tool steel products Bolster key steels by installing innovative large equipment Cold rolled (SLD series) and hot rolled (DAC series) tool steel Strengthen the sales structure Build a network to expand sales in the U.S. and European markets in addition to Japan and Asia Expand global branding Generate synergistic benefits by using the same pre-process for tool steel as for aircraft and energy materials. CVT belt materials Expand products offerings and grow sales into the aircraft and energy segments Enhance competitiveness through increased product offerings by Hitachi Metals MMC Superalloy, Ltd. (HMSA) and Hitachi Metals Ltd. Add human resources overseas and build a network to grow global sales. Explore opportunities for further investment to drive growth. Medium-Term Management Plan Grow sales of products into the aircraft and energy market with the consolidation of HMSA Major Investments 1,-ton class free forging press (scheduled for completion in FY217) High speed four-surface forging machine (scheduled for completion in FY217), etc. Investment More than 15 billion over three years CASE HPC Forging DISK HPC Forging CASE LPT Forging DISK LPT Forging Specialize in high grade steel. Engage in strategic investments directed at global growth. YSS SLD-MAGIC cold-working Tool Steel YSS Advanced Die Steel for Die Casting DAC-MAGIC FY213 Share 1, tons/mth. FY218 Goal 1,8 tons/mth. TRF Forging CASE HPT Forging Size of Market for Cold Rolled Tool Steel Europe Japan North America FAN Case DISK HPT Forging Asia, Other SHAFT Forging CASE Combustion Forging Global market demand: 11, tons/month (213) 22 Hitachi Metals, Ltd. Annual Report

13 FY215 Medium-Term Management Plan Action Plan Overview Magnetic Materials and Applications Magnets Establish a structure to expand global sales of rare-earth magnets 2 Establish technological superiority Develop high performance Dy-free materials and expand mass production Establish local production facility in China Develop Dy-free materials with even higher performance. Consider establishing a joint venture with Beijing Zhong Ke San Huan Hi-Tech Co., Ltd. of China. Establish technological superiority Improve cost competitiveness by reducing the amount of Dy used. Develop new technology (Tb diffusion) for mass production 1 Establish a local production facility in China Overview of Zhong Ke San Huan Hi-Tech Develop high-performance Dy-free materials and expand mass production. Develop new technology (Tb diffusion) for mass production. Strengthen cost-competitiveness Dy: Dysprosium Tb: Terbium Establish a joint venture with Beijing Zhong Ke San Huan Hi-Tech Co., Ltd. Position the company as an integrated producer of neodymium magnets in the Chinese market, handling everything from material supply to manufacturing and sales. Expand market territory and business scale through steady efforts to achieve market growth and building a global production and sales structure. Establish a stable supply structure for materials. Beijing Zhong Ke San Huan Hi-Tech Co., Ltd. Established in July Top manufacturer of neodymium magnets in China. Expand sales to the U.S. and Europe in addition to China and Asia, based on advanced technical capabilities and a track record in supply. Hitachi Metals has long had a licensing agreement with the company. NMF -15 Series Features the World s Best Magnetic Characteristics for Ferrite Magnets Mass Production to Commence in FY215 The Magnetic Materials Company recently announced its pioneering development of the NMF -15 series a high-performance ferrite-15 material that delivers the best magnetic characteristics of any ferrite magnet in the world. The company is currently mass-producing the NMF -12 series, a ferrite magnet line that boasts the world s highest-grade magnetic characteristics. The NMF -12 series is a new composition ferrite magnet notably superior to the NMF -9 series, the NMF -6 series and other previously developed ferrite magnets. With the NMF -15 series, however, magnetic characteristics have been carried to even greater heights to clearly eclipse the levels the NMF -12 series has achieved. The NMF -15 series also has the advantage of outstanding temperature characteristics, rendering it more resistant to magnetic loss at low temperatures than any ferrite magnet offered to date. Backed by such outstanding traits, expectations are high that the new NMF -15 series will make an impressive contribution to lowering the size and boosting the energy efficiency of all types of different motors, while excelling as a pivotal driver in expanding the overall ferrite magnet market. Trial production of the NMF -15 series is currently being pursued in collaboration with customers, along with studies aimed at mapping out specific routes for commercialization. The current schedule calls for mass-production of the series to get under way sometime during FY215. Medium-Term Management Plan Development stage in 215 Trial-production stage Rare-earth Magnet Sales by Use 5 NEOMAX rare-earth magnets 11% 8% 25% 56% Residual flux density Br (mt) NMF -9 Series NMF -15 Series NMF -12 Series Automotive motors Automotive FA/industrial machinery 4 2 NMF -6 Series Coercive force HcJ (ka/m) Higher performance enables smaller, slimmer ferrite magnets Home electronics Other Ferrite Magnet s Magnetic Property Map (Actual results for FY214, excluding VCM) 24 Hitachi Metals, Ltd. Annual Report

14 Review FY215 Medium-Term of Operations Management by Segment Plan Action Plan Overview High-Grade Functional Components and Equipment Action Plan Overview Wires, Cables, and Related Products Casting components for automobiles Enhance global competitiveness and make effective use of management resources Realize synergistic benefits stemming from Waupaca Foundry, Inc. Improve productivity at other locations through use of production technology. Improve efficiency in procurement and logistics. Improve management efficiency of Americas locations through consolidation of functions. Develop new products and new materials, and expand the customer base. Reinforce the product base with products having growth potential 1 Early synergies: Generate benefits in management efficiency Improve efficiency in procurement and logistics Make use of joint purchasing and logistics for casting locations in the Americas. Improve management efficiency at locations in the Americas through consolidation of functions Reduce management costs. Electric wires and cables business 1 Review business portfolio Strengthen differentiable products and expand business globally Electrical wire for rolling stock Medical wire (probe cables) Automotive products (electronic products) Complete structural reform Electric wires and cables business Electrical cables for rolling stock Achieve full-scale entry into the Chinese, European, and the U.S. markets, and expand business scale. Medical wire Improve profitability of probe cables. Enter new medical segments and expand business domains. Electrical cables for rolling stock Probe cables Medium-Term Management Plan 2 Medium to long-term targets: Enhance competitiveness and expand market scale Roll out the superior production technology of Waupaca Foundry, Inc. Hitachi Metals Automotive Components USA, LLC Locations in India and South Korea 2 Automotive products Electronic products Expand line-up of torque sensors, EPB harnesses, and other products. Reinforce the global production structure and expand business scale. Develop new products and new materials, and expand the customer base Torque sensors EPB harnesses Review business portfolio to pursue global growth European market India Expand customer base South Korea Japan Roll out technology Roll out technology WFI Plant 1-4 WFI Plant 5 Roll out technology Expand customer base WFI Plant 6 Waupaca production plants HMAC Mexican market Operating Margin Information systems Electric cable and wires Electric equipment materials Automotive products Electrical cable for rolling stock Medical wire Automotive products Circle size: Scope of sales Develop & launch new products. Move to local production in China. Improve production efficiency at processing locations in China. Pursue automation in assembly. Torque sensors Begin volume production in Mexico in addition to Thailand. EPB harnesses Begin volume production in Mexico and Thailand along with China and the Czech Republic. Production bases 3% 5% 8% Overseas markets' share of sales 26 Hitachi Metals, Ltd. Annual Report

15 At a Glance High-Grade Metal Products and Materials Specialty steel Rolls Amorphous metals Magnetic Materials and Applications Magnets Soft ferrite and other soft magnetic materials, and their applications Revenues/Net Sales by Business Segment [Year ended March 31, 215] 26% of Revenues/ Net Sales [YSS ] molds and tool steel Major Products [SLD-MAGIC ] cold-working die steel [CENA1 ] plastic molding steel [YSS ] high-performance steel for die-cast molds Piston ring materials Alloys for IC packaging Sputtering target materials Space and aviation materials [HINEX ] rolls for steel mills Cylinders and screws Steel frame joints for construction [Metglas ] amorphous metals for power transformers Revenues/Net Sales by Business Segment [Year ended March 31, 215] 13% of Revenues/ Net Sales Major Products [NEOMAX ] rare-earth magnets High-performance ferrite magnets Information system components Ceramic scintillator materials Soft ferrite [FINEMET ] EMC components Amorphous metal cut cores Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales Revenues/ Net Sales 1 Operating income 5 Operating income margin(%) Markets Automobiles Electronics Infrastructure Markets Operating income 36 Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales Revenues/ 6 Net Sales Operating income 3 Operating income margin(%) Automobiles Electronics Infrastructure Operating income High-Grade Functional Components and Equipment Casting components for automobiles Piping components Wires, Cables, and Related Products Electric wires and cables Automotive products Information systems Revenues/Net Sales by Business Segment [Year ended March 31, 215] 28% of Revenues/ Net Sales Major Products [HERCUNITE ] heat-resistant casting components Aluminum alloy casting components [SCUBA ] aluminum wheels Polyethylene gas piping system [Gourd Brand] pipe fittings, stainless steel and plastic piping components [Chilled Tower ] water cooling equipment [SAM ] and [Aera ] mass flow controllers Major Products Revenues/Net Sales Revenues/ Net Sales 1 Operating income 5 Operating income margin(%) Markets Operating income 3 Automobiles Electronics Infrastructure Revenues/Net Sales by Business Segment [Year ended March 31, 215] 33% of Revenues/ Net Sales Wires and cables for rolling stock [MLFC ] flame-retardant polyflex insulated wire Probe cables for ultrasound diagnostic equipment Enameled wire for high-efficiency motors Harnesses for Electric Parking Brakes Brake hoses [APRESIA ] Ethernet switches Revenues/Net Sales, Operating Income and Income Margin ( billion) Markets Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales 18 Revenues/ Net Sales 12 Operating income 6 Operating income margin(%) Automobiles Electronics Infrastructure Operating income Business Performance At a Glance Notes: 1.In addition to the above business segments, Hitachi Metals also operates Other Businesses, which accounted for 4,359 million of sales in the year ended March 31, 215. Adjustments at March 31, 215 totaled 6,588 million. 2. In the graphs above, sales figures and percentages are based on each segment s sales, including intersegment sales. 3. The numbers following product names correspond to picture numbers. 28 Hitachi Metals, Ltd. Annual Report

16 Products by Segment Leveraging the Vast Potential of Materials to Fulfill the Needs of the Global Community High-Grade Metal Products and Materials The Hitachi Metals Group boasts a treasure trove of global only one, number one products with applications spanning a variety of fields. This achievement is the result of well-coordinated efforts in our production, development and marketing sections to ascertain the requirements of society at large and work in unison with customers. Committed to anticipating future needs, we will eagerly pursue new challenges and responsibilities. As a manufacturer of highly functional materials, the Hitachi Metals Group will continue to develop innovative products that create new markets. High-Grade Functional Components and Equipment Specialty steel Rolls Amorphous metals Casting components for automobiles Piping components DAC-MAGIC die cast tool steel This die cast tool steel combines sufficient high-temperature strength and durability to tolerate the heat cycle of heating and cooling. Piston ring materials Contributing to enhanced engine performance, high-performance piston ring materials are available in contour and multi-gauge strips. High-toughness ductile iron castings HNM series The HNM series of castings have excellent low-temperature toughness and extremely accurate dimensions. With the use of computer-aided engineering (CAE) technologies, they can be delivered in a near-net-shape state, contributing to the production of thin-walled automobile components that are lighter. HERCUNITE heat-resistant exhaust casting components Offering increased resistance to heat and oxidation, these components are used in the exhaust lines of automobiles, including exhaust manifolds and turbine housings. They improve the environmental friendliness of automotive products. Sputtering target materials Unique new materials are developed and supplied for use in liquid crystal displays, touchscreens and other next-generation applications. Magnetic Materials and Applications Magnets Soft ferrite and other soft magnetic materials, and their applications Rolls for steel mills A broad spectrum of rolls is available for steel, nonferrous and non-metal rolling applications. Metglas amorphous metals This soft magnetic material lowers electric energy consumption by reducing the loss from transformers and related devices, thereby contributing to the reduction of CO2 emissions. SCUBA aluminum wheels These automobile wheels are created by employing high-precision casting and CAE technologies, and meet discerning demands for high strength, light weight and advanced design. Wires, Cables, and Related Products Electric wires and cables Automotive products Information systems Polyethylene gas piping systems Our corrosion-free, serviceable and earthquake-resistant polyethylene tubes and joints provide better solutions for gas piping. Pipe fittings for general use These eco-friendly pipe fittings for general use are galvanized with a highly pure form of zinc that has a significantly low lead and cadmium content. Business Performance Products by Segment NEOMAX rare-earth magnets NMF series sintered ferrite magnets Magnets A variety of high-performance products are supplied, including the world s top brand NEOMAX rare-earth magnets, as well as ferrite magnets. Wires and cables for rolling stock Our wires and cables are used in bullet trains and many other trains operated in Japan and overseas in cabs, underfloor wiring, and wiring between rolling stock, transmitting electricity and signals for railways and thereby supporting railroad infrastructure. Probe cables for ultrasound diagnostic equipment These lightweight cables excel in elasticity and flexibility, and have high-quality electrical characteristics. They provide ease of handling and high-definition images, contributing to the development of medical equipment. Soft ferrite and other soft magnetic materials, and their applications Soft ferrite is an iron oxide-based soft magnetic material. Its applications range from use in household products to use in products for industrial, IT-related, automotive, and various other products. FINEMET nanocrystalline magnetic materials FINEMET nanocrystalline magnetic materials developed by Hitachi Metals are used in products we supply to reduce electromagnetic noise, power electronic components, etc. Amorphous metal cut cores Through their use as solar power generation inverters, wind power generation converters, and other power conversion system reactors, amorphous metal cut cores make a handsome contribution to further raising power conversion efficiency. Enameled wire for high-efficiency motors This wire product is used in the drive motors of hybrid vehicles, industrial-use servomotors, and other such products, reducing the impact on the environment and saving energy. Harness for Electric Parking Brakes We developed harnesses for use in electric parking brakes that excel in flexural resistance and durability. This helps conserve space inside the cabin and elevates vehicle safety and convenience. APRESIA Ethernet switches Our wide variety of products are used by telecommunications carriers in their wide-area Ethernets and mobile networks, and also meet the LAN system construction needs of general businesses and government agencies, thereby comprehensively supporting the information and telecommunication infrastructure. * Ethernet is a registered trademark of Fuji Xerox Co., Ltd. 3 Hitachi Metals, Ltd. Annual Report

17 Review of Operations by Segment High-Grade Metal Products and Materials Sales in the High-Grade Metal Products and Materials segment were 26,794 million, an increase of 9.6% from the previous year. Operating income also increased by 14,93 million to 34,661 million. High-Grade Metals Company Specialty Steel Rolls Amorphous Metals YSS brand high-grade specialty steel products (molds and tool steel, alloys for electronic products [display-related materials and semiconductor and other package materials], materials for industrial equipment [automobile-, aircraft-, and energy-related materials], and razor and blade materials) Precision cast components Rolls for steel mills Injection molding machine parts Structural ceramic products Steel-frame joints for construction Metglas amorphous metals Financial Results (Sales) Specialty Steel Sales of molds and tool steels increased in the fiscal year ended March 31, 215, as the demand in overseas markets has recovered and the demand in Japanese market has also improved in the second half of the fiscal year ended March 31, 215, mainly because of the rebound in automobile production. Sales of alloys of electronic products also increased in the fiscal year ended March 31, 215. Strong demand for display-related materials for medium- to small-sized panels, as well as a recovery trend in semiconductors and other package materials contributed to a sales increase compared with those for the fiscal year ended March 31, 214. Sales of industrial equipment and energy-related materials increased as the demand for automobile-related materials, including environment-friendly products, remained robust. The brisk demand for materials for aircraft components also contributed to the increase in sales of energy-related materials. Rolls Sales of rolls decreased because of low demand in the domestic market, offsetting increased demand in overseas markets. Sales of injection molding machine parts increased from the previous year, reflecting the recovery of demand in both domestic and overseas markets. Amorphous Metals Sales of amorphous materials increased in the fiscal year ended March 31, 215. The demand in the Chinese market, a leading market, remained solid as a result of policies of the Chinese government to encourage the deployment of energy-saving equipment as well as the effects of the weak yen, despite the demand slightly dropping in the second half of the fiscal year ended March 31, 215. Cutting Tools Sales of cutting tools increased because of steady demand in overseas markets supported by improved exports and recovering domestic demand for industrial machinery. Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales Operating income Operating income margin(%) Capital Expenditures, Depreciation and Amortization, and R&D expenses ( billion) Capital Expenditures Depreciation and Amortization Research and Development Expenses YSS SLD-MAGIC cold-working Tool Steel This die steel is suited to high-tensile plates widely used in making lighter cars with safer designs. Its characteristics are high machinability and fewer dimensional deformities following heat treatment. It contributes to overall die cost reductions because its superior quality means that dies last longer. CVT Belt Materials These metal belt materials have excellent fatigue endurance and were developed for use in CVT* systems. Preventing nonmetallic inclusions that can cause damage when melting and cold rolling techniques are used, we contribute to improved transmission performance and increased reliability. *CVT: Continuously Variable Transmission Rolls for Steel Mills Our rolls for steel mills are extremely heat and shock resistant qualities needed to roll out very hot steel and iron ingots at high-pressure levels. Moreover, the rolls have the superior abrasion resistance required to make highly precise product shapes. Above all, our HINEX line of high-speed steel rolls, which is produced through new casting methods, has vastly improved performance compared to traditional rolls, making it possible to reduce rolling costs. Metglas Amorphous Metals These materials are used in the cores of transformers used in electrical substations and pole transformers as well as for cut cores used in photovoltaic cell inverters, wind power generation converters, and other power conversion systems. The use of these materials effectively reduces electrical power loss in the core section, boosting efficiency and reducing power consumption. Amorphous metals are being used in an increasing number of applications as electrical power infrastructure demand related to environmental regulations and smart grids rises. Metglas is expected to find applications both in Japan and overseas. Akitoshi Hiraki Representative Executive Officer President, High-Grade Metals Company Business Performance Review of Operations by Segment 32 Hitachi Metals, Ltd. Annual Report

18 Review of Operations by Segment High-Grade Metal Products and Materials TOPICS Striving to Be the Best Partner and Earn the Trust of Customers Worldwide Hitachi Metals MMC Superalloy, Ltd. Ascending to the Next Phase of Growth On July 1, Hitachi Metals MMC Superalloy, Ltd. (HMSA) became a member of the Hitachi Metals Group, determined to strengthen the Group s capacity in the aircraft and energy materials businesses. Integrated into the High-Grade Metals Company and creating a fusion of the strengths of both sides, HMSA is gearing up to achieve global growth in key industries such as aircraft and energy. The management motto of the new HMSA is Speed and Action. We are adopting an uncompromising stance that reflects this motto, putting our business operations on track to sustainable growth. The first key point of this policy is the need to invest in a large ring mill. Reflecting rising demand for improved environmental performance, the aircraft and energy markets are projected to pick up momentum on a global scale. The second key point is the quest to generate genuine synergy. I m referring to streamlining the merger of the High-Grade Metals Company, HMSA and Japan Aeroforge, Ltd. to quickly get our business off the ground. The combination of these three players promises to maximize the synergy rather than just combining our strengths. The respective management resources of each party will be strategically merged as we move through free and open-minded discussions to fuel the PDCA cycle and steadfastly address customer needs in our products. Hitachi Metals MMC Superalloy, Ltd. Corporate Profile Name Hitachi Metals MMC Superalloy, Ltd. Location 123 Kamihideya, Okegawa, Saitama, Japan Tsutomu Oka, Representative Director and President Representative (General Manager, Aerospace & Energy Materials Business Unit, High-Grade Metals Company) Established Sales Business activities Sales offices Works Employees Capital Equity shares July 1, billion (FY213 performance) Manufacturing, R&D and sales of heat-resistant alloys, corrosion-resistant alloys, abrasion-resistant alloys and special copper alloys Head Office (Okegawa), Osaka Branch, Nagoya Branch Head Office/Plant (Okegawa) 345 (end of March 214) billion Hitachi Metals, Ltd.: 51%; Mitsubishi Materials Corporation: 49% Yasugi Works: Lighting ceremony marks completion of 24-ton vacuum induction melter, among world s largest The High-Grade Metals Company performed the ceremonial lighting of a newly completed vacuum induction melter (VIM) March 19. At 24 tons, the new VIM at Yasugi Works is among the world s largest. The 24-ton VIM will melt and refine materials in a vacuum to remove impure elements and gases. The state-of-the-art equipment is not only among the largest; it also enhances the performance and quality of specialty steel. The equipment will provide important processes for performance products required to meet stringent quality standards. Examples include material for continuously variable transmission (CVT) belts. The outlook calls for rising demand for CVT belt material to enhance automobile environmental performance. The high acclaim such material is getting from customers is already boosting its share of the market. Starting up the 24-ton VIM greatly increases Yasugi Works s high-performance material production capacity and efficiency. It will ensure that the High-Grade Metals Company is able to meet customer expectations. We also foresee using the 24-ton VIM for aircraft and energy-related materials. This is an area where we expect great growth. Many guests from Japan and abroad attended the lighting ceremony. They included representatives from the Ministry of Economy, Trade and Industry, Shimane Prefecture, Yasugi City, and the equipment builder. Another special guest was Akira Kihara, the murage (operator) from the Nittoho Tatara, a traditional furnace. Media covering the event included NHK (Japan Broadcasting Corporation) and Nikkei Inc. 8 people attended. Amidst all the outside attention, the solemn ceremony went forward. The crowd made a wish for safety, an early start of mass production with the 24-ton VIM, and a prospering business. Yasugi Works will continue to make large investments. These include introducing a 1,-ton class free forging press and enlarging the high-speed radial forging machine. We will accelerate our global expansion by strengthening our foundation and competitiveness. Metglas Amorphous Metal Materials HB1M for Energy-Efficient Distribution Transformers Awarded Top Ten New Products Prize The atmosphere was solemn during the ceremony. The High-Grade Metals Company s Soft Magnetic Materials Business Unit was awarded one of Nikkan Kogyo Shimbun Ltd. s Top Ten New Products prizes in 213 for its HB1M metal alloy. Nikkan Kogyo Shimbun began conferring the awards in 1958, which are seen as the most authoritative awards for superior new products. Every year around ten products are recognized as original inventions that had a great impact in Japan and elsewhere, and for their pioneering roles in helping industry and society progress. This was Hitachi Metals first prize since the 53 rd awards program in 21, and the HB1M alloy was the only winner in the materials field this time around. Using Hitachi Metals Metglas 265HB1M amorphous metal alloy with high saturation magnetic flux density (Bs) for energy-efficient transformers in the electric power grid makes smaller, lighter, quieter distribution transformers possible. Compared to the usual material grain-oriented electrical steel sheet amorphous metal alloy cores ensure around one third less no-load loss (core loss). They are distinctive for their ability to conserve energy and cut carbon dioxide (CO2) emissions. Resolving casting issues has made it possible to preserve high-saturation magnetic flux density (Bs) while reducing core loss and exciting current. Business Performance Review of Operations by Segment 34 Hitachi Metals, Ltd. Annual Report

19 Review of Operations by Segment Magnetic Materials and Applications Sales in the Magnetic Materials and Applications segment were 135,486 million, a slight increase of.8% from the previous year. Operating income was 11,492 million, an increase of 1,434 million from the previous year. Magnetic Materials Company Magnets Soft Ferrite and Other Soft Magnetic Materials, and Their Applications Magnets (NEOMAX rare-earth magnets; ferrite magnets; and other magnets and applied products) Soft magnetic materials (soft ferrite; FINEMET nanocrystalline magnetic material; and Metglas amorphous metals) and applied products Materials and components for IT devices Materials and components for medical equipment Financial Results (Sales) Magnets Sales of rare earth magnets decreased from the previous year. Strong sales of automotive electronic components for hybrid cars and domestic cars and a recovery trend of the demand for factory automation-related products were not sufficient to offset the continued low demand for hard disk drives and the impact of the fall in raw material prices. Sales of ferrite magnets increased with strong demand for automotive electronic components and household appliance parts in both domestic and overseas markets. Soft Ferrite and Other Soft Magnetic Materials, and Their Applications Overall sales of soft ferrite materials increased on strong demand for parts for solar power generation systems and automotive electronic components. Sales of FINEMET also increased in the first half of the fiscal year ended March 31, 215, with robust demand for parts for solar power generation systems in the European markets. Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales Operating income Operating income margin(%) Capital Expenditures, Depreciation and Amortization, and R&D expenses ( billion) Capital Expenditures Depreciation and Amortization Research and Development Expenses NEOMAX Series Nd-Fe-B Sintered Magnets These rare-earth magnets have world-leading magnetic properties. They serve an important role as materials indispensable in making smaller, lighter, more energy-efficient motors used in the automobile, IT, household appliance, medical equipment, environmental, energy, and other industrial sectors. Soft ferrite with superior magnetic properties These soft magnetic materials are mainly composed of iron oxide. While their saturation magnetic flux density is somewhat low, these materials feature high electrical resistance and excel in magnetic characteristics at high frequency domains. They enjoy widespread use as the coil cores in communications devices, TVs, refrigerators, PCs and other products. FINEMET nanocrystalline magnetic materials Developed by Hitachi Metals, FINEMET is the world s first nanocrystalline soft magnetic material. This new Fe-based soft magnetic material is composed of nanocrystals and has excellent temperature characteristics and temporal stability because it has high saturation flux density and magnetic permeability. FINEMET is employed in a wide range of applications, such as in manufacturing magnetic head cores, power supply units, and electromagnetic-noise-suppression components, because it is easily formed and processed. It contributes to the realization of low-noise electronic devices that are smaller, lighter, and more energy-efficient. Amorphous metal cut cores These products are attracting keen attention as materials oriented for use in power conditioner inverters. In the solar and wind power generation fields, demand is for high conversion efficiency for the electricity that is produced. Thanks to their outstanding magnetic properties, Hitachi Metals amorphous cut cores make a solid contribution to raising power conversion efficiency in such applications. Shigekazu Suwabe Executive Officer President, Magnetic Materials Company Business Performance Review of Operations by Segment 36 Hitachi Metals, Ltd. Annual Report

20 Review of Operations by Segment Magnetic Materials and Applications TOPICS Neodymium-Iron-Boron magnet joint venture established in China Aim is to expand scale of business to grow globally The Magnetic Materials Company aims to see its neodymium magnet business grow globally in the medium- to long-term. To that end, it has decided to form a joint venture in China with Chinese magnet manufacturer Beijing Zhong Ke San Huan Hi-Tech Co., Ltd. NEOMAX Neodymium-Iron-Boron magnets are among the most powerful in the world. They can make final products smaller and lighter, more efficient, less energy-consuming, and thus better for the environment. They are used widely in the automotive, IT, home appliance, industrial equipment, medical, environmental, and energy fields, among others. As environmental regulations around the world grow stricter, we foresee demand for Neodymium-Iron-Boron magnets only growing larger. This is true of the global market and especially China. The Chinese market is particularly promising because it will use the magnets in hybrid vehicles, industrial motors, and the like. The Magnetic Materials Company decided to establish the joint venture with the Chinese firm for several reasons. The venture will create an organization for local production in China. It will promote sales in the global market, including the market in China. It will furthermore expand the scale of our business. Hitachi Metals will take a 51% interest in the venture, and Beijing Zhong Ke San Huan Hi-Tech 49%. The new Hitachi Metals consolidated subsidiary will cover everything from raw materials procurement to manufacturing and sale in the Chinese market. In all, it will provide start-to-finish production of 2, tons of Neodymium-Iron-Boron magnets annually. The joint venture will be established in Jiangsu Province in December 215. It will be equipped initially to produce 1, tons/year from December 216. Thus it will try to quickly meet the demand of growing market sectors. The plan is to increase capacity soon after, taking demand trends into account. We project sales of around 1 billion yen in fiscal 217. Through the venture, the Magnetic Materials Company will procure, produce, and sell in China. It will target a wide range of products, expanding beyond our established high-end business. It will enhance our global market competitiveness and expand the scale of our Neodymium-Iron-Boron magnet business in China. The Top Magnetic Materials Company in Customer Satisfaction Developing New Magnetic Materials to Lower the Environmental Load Amid growing awareness of the need to reduce the burden on the environment, demands are increasing for greater energy savings, smaller size and higher efficiency in automobiles, industrial equipment, home appliances and so on. The same improvements are required in the motors and electronic components mounted in such products. Additionally, in the automotive-related industry, motors and electronic components shall show reliability and stability under harsh temperature environments. In addition to the magnetic materials business rare earth and ferrite magnets, magnet-applied products, soft magnetic materials and their applied products and their ceramics business with its distinctive products such as low-temperature co-fired ceramics, scintillators, and AlTiC substrates, the Magnetic Materials Company will expand its contribution into a wider range of fields such as automobiles, industrial equipment, home appliances, information communications and medical appliances. The company will focus on the development of new magnetic materials that provide greater efficiency, reliability and smaller size, and will start mass production of new soft magnetic material core products and high-performance ferrite magnets. New Soft Magnetic Materials introduced to the market in FY214 HRM4 Metal Powder Core MB2D Mn-Zn Ferrite Material Metal powder core soft magnetic material is a new magnetic core product created through the application of the company s powder metallurgy and powder-processing technologies. Compared to the current soft ferrite material, this new type of core material not only shows around three times higher saturation flux density, it also keeps stable magnetic characteristics across wide temperature ranges. This breakthrough likewise offers outstanding mechanical strength and better corrosion resistance than other ferroalloy soft magnetic materials. Made using the company s original technologies for powder metallurgy, processing and heat treatment, the Mn-Zn ferrite material MB2D boasts low core loss and high saturation magnetic flux density. Such low core loss and high saturation magnetic flux density especially in high-temperature environments makes it possible to cut power consumption and heat generation. It is anticipated that using this product as the core for inductors and transformers will lead to electric circuits of automobiles that are smaller, more stable and more reliable. Business Performance Review of Operations by Segment NEOMAX Series Nd-Fe-B Sintered Magnets Overview of new joint venture Company name Location Date of establishment Title and name of representative Business details Stated capital Annual production capacity Investment interest Hitachi Metals San Huan Magnetic Materials (Nantong) Co., Ltd. Qidong, Nantong, Jiangsu Province, China December 215 (plan) Shigekazu Suwabe, Chairman of the Board Manufacture and sale of Neodymium-Iron-Boron magnets 45 million yuan 2, tons/year Hitachi Metals: 51% Zhong Ke San Huan: 49% NMF -15 Series Features the World s Best Magnetic Characteristics for Ferrite Magnets Mass Production to Commence in FY215 The Magnetic Materials Company recently announced its pioneering development of the NMF -15 series a high-performance ferrite-15 material that delivers the best magnetic characteristics of any ferrite magnet in the world. The NMF -15 series also has the advantage of outstanding temperature characteristics, rendering it more resistant to magnetic loss at low temperatures than any ferrite magnet offered to date. Backed by such outstanding traits, expectations are high that the new NMF -15 series will make an impressive contribution to lowering the size and boosting the energy efficiency of all types of different motors, while excelling as a pivotal driver in expanding the overall ferrite magnet market. Higher performance enables smaller, slimmer ferrite magnets 38 Hitachi Metals, Ltd. Annual Report

21 Review of Operations by Segment High-Grade Functional Components and Equipment Sales in the High-grade Functional Components and Equipment segment were 282,33 million, an increase of 51.6% from the previous year. Operating income increased by 15,159 million to 28,74 million. High-Grade Functional Components Company Casting Components for Automobiles Piping Components Casting components for automobiles (HNM high-grade ductile cast iron products, cast iron products for transportation equipment, and HERCUNITE heat-resistant exhaust casting components) SCUBA aluminum wheels and other aluminum components Forged components for automobiles Piping and infrastructure components ( Gourd brand pipe fittings, stainless steel and plastic piping components, water cooling equipment, precision mass flow control devices, and sealed expansion tanks) Financial Results (Sales) Casting Components for Automobiles Overall sales of casting components for automobiles increased for fiscal year ended March 31, 215. While sales of heat-resistant exhaust casting components did not reach the previous year s level due to the effects of the decline in demand in the leading market for these types of products under the economic downturn in Europe, sales of high-grade ductile iron products increased with the favorable demand for passenger vehicles in overseas markets, including the U.S. automobile market, and the brisk demand mainly for commercial vehicles in the Japanese automobile market. Sales of aluminum wheels fell below target and decreased in both the United States and Japan compared with those for the fiscal year ended March 31, 214. Piping Components Sales of pipe fittings increased mainly because of the continued improvement in the U.S. housing market, as well as a sign of recovery in the housing starts in Japan. Sales of stainless steel and plastic piping components also increased since proven advantages in light of construction and earthquake resistance triggered demand for the gas-related products. Construction Components Sales of construction components increased because of the strong demand for steel construction supported by private capital expenditures in the domestic market and robust public investments. Further, gain on transfer of business resulting from transferring the Company s entire shares in Hitachi Metals Techno, Ltd. largely contributed to the improvement in operating income of this segment. Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales Operating income Operating income margin(%) Capital Expenditures, Depreciation and Amortization, and R&D expenses ( billion) Capital Expenditures Depreciation and Amortization Research and Development Expenses High-toughness ductile iron castings HNM series The HNM series of castings have excellent low-temperature toughness and extremely accurate dimensions and can be delivered in a near-net-shape state. They contribute to the production of thin-walled automobile components that are lighter. HERCUNITE heat-resistant exhaust casting components HERCUNITE is a series of cast iron and cast steel materials that are highly heat resistant and strongly resistant to oxidation, heat deformation, and thermal shock. Hitachi Metals boasts exhaust system components that are manufactured using HERCUNITE. The parts are used in the world s high-performance, fuel-efficient car engines. Besides this, Hitachi Metals supplies suspension components engineered to contribute to automobile stability, aluminum wheels in pursuit of lower weight and chic designs, and other products in support of the ongoing evolution of motor vehicles. The origin of the name HERCUNITE The name HERCUNITE is an acronym for heat resisting cast materials for unit of exhaust parts. However, the name has another derivation. The suffix nite, which stands for a metal compound, is preceded by the name "Hercules"- a hero in Greek mythology. Pipe fittings for general use The high-purity zinc plating in these fittings dramatically reduces lead and cadmium content. The fittings are used primarily in pipes for firefighting and air-conditioning applications. SOFLEX Corrugated Stainless Steel Tubes and Fittings SOFLEX is the name of our line of flexible stainless steel gas tubes and fittings. They are easy to install and maintain because the tubes require few connections along the way. Eiji Nakano Executive Officer President, High-Grade Functional Components Company Business Performance Review of Operations by Segment 4 Hitachi Metals, Ltd. Annual Report

22 Review of Operations by Segment High-Grade Functional Components and Equipment TOPICS Waupaca Foundry, Inc. Acquisition Targeting a Major Casting Business Upgrade and Global Medium- to Long-Term Growth On August 19, 214, Hitachi Metals, Ltd. announced plans to acquire all shares in Waupaca Foundry, Inc., a supplier of iron castings to the transport machinery market in North America, which will effectively transform the company into a wholly owned subsidiary. The iron-casting business has been a major focus of our operations for many years, particularly the production of items used in automobiles. We had already strengthened our global supply capacity in high-grade ductile cast iron products by building new production bases in Japan, South Korea and the United States, for example, as well as by acquiring an Indian automobile iron castings manufacturer subsidiary this April. To achieve further growth in this area, however, we need to expand our business domain and forge a solid foundation for establishing dominant competitive strength in the global market. Waupaca Foundry operates an iron-casting business for transport machinery in the North American market. The company supplies a wide array of products, and while the focus is on automobile brake parts, it also casts products for use in industrial, agricultural and construction machinery. Utilizing its outstanding manufacturing technologies and production management expertise, Waupaca Foundry has the world s largest iron-casting operation and claims the dominant market share of that business in North America. Waupaca Foundry s reliable supply track record over the years has earned it a solid customer base, which is the main source of its competitive strength. The global market for iron castings for transport machinery is projected to expand steadily over the years to come, driven largely by automobile demand in emerging countries. Against that backdrop, the company is positioned to chart continual growth thanks to its high competitive strength and stellar performance to date. By transforming Waupaca Foundry into a subsidiary, Hitachi Metals gains a competitive advantage in the global market, taking a stronger position in the high-value-added field that we have long pursued. By acquiring Waupaca Foundry s excellent production technology, we will also expand our business domain and customer base. We will continue to strengthen our business foundations in the global market and aim for medium-to long-term growth. Waupaca Foundry, Inc. Corporate Profile A New Page in Iron-Casting Business History On November 1, 214, the final steps were taken to complete Hitachi Metals acquisition of the shares in U.S. iron-casting company Waupaca Foundry, Inc. A gala celebration was held the following day, November 11, in Waupaca City, Wisconsin to mark the launch of the New Waupaca as a member of the Hitachi Metals Group. This integration is a critical process for us to become a global number one corporate group, and a significant turning point in the history of the Hitachi Metals Group s foundry business. Instead of a simple merger of companies, it is absolutely essential to create and promptly maximize synergies between the two businesses. We strive to be a global number one corporate group both in name and reality, and continue to generate sustainable growth. Our most important customers automobile manufacturers are strongly advancing the globalization of their businesses, so we need to view the market from a borderless standpoint and expand our business. We will be focusing on market share in the global market. In addition to expanding our business to emerging countries with rapidly growing demands, we will also take an aggressive management approach to M&A, establishing bases and businesses all over the world. The sake barrel-opening ceremony inspired cheers from all present Business Performance Review of Operations by Segment Name Location Corporate Representative Established Sales Business Activities Principle Products Employees Acquisition Price Stock Acquisition Waupaca Foundry, Inc Brunner Drive, Waupaca, Wisconsin, USA Gary Gigante, chief executive officer May 4, 1955 US $1.735 billion (year ended September 213) Development, manufacture and sales of iron castings for transport machinery (automobiles and agricultural, industrial and construction machinery) in the North American market. Annual production capacity: 1.57 million tons Brakes, engines, driving parts, knuckle arms Approx. 3,9 (as of the end of May 214) US$1.3 billion November Hitachi Metals, Ltd. Annual Report

23 Review of Operations by Segment Wires, Cables, and Related Products Sales in the Wires, Cables, and Related Products segment for the fiscal year ended March 31, 215 were 327,992 million, an increase of 3.2% from the previous year. Operating income increased by 3,87 million to 19,845 million. Cable Materials Company Electric Wires and Cables Automotive Products Information Systems Electric power and industrial systems, electronic and telecommunication materials, electric equipment materials, and industrial rubber products Electronic components and brake hoses Information networks and wireless systems Financial Results (Sales) Electric Wires and Cables Sales of electric power and industrial wires and cables increased on strong demand for overseas railway projects and construction, including the construction of solar power facilities, in addition to the demand for construction investments. Sales of metals for electronic and communication products increased mainly because of the brisk demand for semiconductor manufacturing equipment. In materials for electronic devices, sales of magnet wires increased due to a recovery in demand, mainly for products for automobiles and remained steady, while sales of photovoltaic cells increased primarily because of the favorable domestic demand. Automotive Products Sales of automotive products steadily increased on solid demand, especially for electronic components, a focused product of the Group, backed by solid performance in North American markets. Information Systems Sales of information system devices and materials increased because of growth in sales of network products associated with increased capital investments in infrastructure by telecommunication carriers along with the widespread use of smartphones. Revenues/Net Sales, Operating Income and Income Margin ( billion) Revenues/Net Sales Operating income Operating income margin(%) Capital Expenditures, Depreciation and Amortization, and R&D expenses ( billion) Capital Expenditures Depreciation and Amortization Research and Development Expenses Wires and cables for rolling stock For bullet trains and many other trains, operated both in Japan and overseas, our wires and cables are used in cabs, underfloor wiring, and wiring between rolling stock. We also provide railway vehicle cables and trolley wires as well as signal cables, thus supporting power supply and information transmission for railways. MLFC Flame-Retardant Polyflex Insulated Wire MLFC flame-retardant polyflex insulated wire has been widely used for electric wiring, including insulated wire inside switchboards and motor lead wires, because of its outstanding heat resistance, flame-retardant properties, and flexibility. Probe cables for ultrasound diagnostic equipment The cable connects the main body of ultrasound diagnostic equipment and the probe used for echographic investigation. It is lightweight, excels in elasticity and flexibility, and has high-quality electric characteristics, realizing ease of handling and high-definition images, thereby contributing to the development of medical equipment. Magnet Wires for Heavy Electrical Machinery These wires are used in large generators found in power plants, transformers in electrical substations, motors for railroad cars and other applications. Our product lineup spans glass, heat-resistant paper and other insulating materials keyed to heat resistance and dielectric strength demanded, supporting electrical power and transportation infrastructure. Masato Hasegawa Executive Officer President, Cable Materials Company Business Performance Review of Operations by Segment 44 Hitachi Metals, Ltd. Annual Report

24 Review of Operations by Segment Wires, Cables, and Related Products TOPICS Mexico Site Expands ABS Sensor Harness Production Capacity in June The Cable Materials Company recently expanded production capacity at its Mexico business site, HC Queretaro, S.A. de C.V., to address the growing demand for anti-lock braking system (ABS) sensor harnesses. The newly expanded line began operations in June this year. The ABS is a preventive safety system designed to keep vehicle wheels from locking up (failing to rotate) when the brakes are applied and bring the vehicle to a safe and controlled stop. These systems are considered highly effective in preventing accidents, and demand for them has been rising in recent years against the background of the intensified pursuit of automobile safety. The Cable Materials Company manufactures and sells ABS sensor harnesses a key component in the ABS mechanism. The surge in demand for ABS encouraged the move to expand the production line at HC Queretaro, a core site for the production of ABS sensor harnesses. The higher-capacity line began operations in June. ABS sensor harnesses detect wheel rotation and relay the information to the engine control unit. To suit this task, the cables must be flexible, offer excellent thermal characteristics and otherwise be durable under various conditions. The sensor head components, meanwhile, must be available in a wide range of configurations to fit specific vehicle models. The ABS sensor harness pools an impressive selection of the Company s brake hose know-how, along with the expertise to effectively combine electrical wire and cable materials. The Company first moved into producing ABS sensor harnesses in 1996, with manufacturing launched at its Thailand base, Hitachi Metals (Thailand) Ltd. in 28. Production began at HC Queretaro, the second Cable Materials Company overseas business base, in June 213. An ever-growing number of automotive-related companies are moving their production and sales operations to Mexico and other nations in North and Central America. The line expansion has roughly doubled the production capacity at HC Queretaro. As a pivotal base for supplying South America a region where market expansion is predicted the importance of HC Queretaro is definitely growing. The increased production capabilities represent a significant step as we continue to expand sales. Accelerating Global Business Development of Electrical Wires for Railway Cars Capitalizing on the technological expertise we developed through manufacturing electric wires and cables of all types, the Cable Materials Company manufactures electric wires both for railway cars and onboard devices. In Japan, our various wires and cables have been widely used in cars for various railways, including the Shinkansen, traditional non-shinkansen railways and underground railways, driving our market share to a level as high as around 8 percent. Meanwhile, we have also been manufacturing electric wires for export-bound railway cars since the 198s. We have built up an excellent track record of delivering our products to railways in global markets, not least for the high-speed railways in the UK and China. Furthermore, as part of an effort to globalize our operations, we have been mass producing electric wires for railway cars at Hitachi Cable (Suzhou) Co., Ltd. located in Suzhou, China, since 213. The company was recently selected to supply the electric wires for railway cars for the Intercity Express Programme (IEP) in the UK, partly due to our strong experience in Japan and other global markets. This order, received from Hitachi Rail Europe Ltd. (HRE) through Hitachi Metals Europe GmbH (HME) is for electric wires for 866 Class 8 and 81 cars to be used on the Great Western Main Line and the East Coast Main Line. Shipments of this cable began from last March, and are scheduled to finish around 219. HRE has designated the Cable Materials Company as a core supplier in supporting its contract with IEP. Last year, in the interests of further expanding global sales of rolling stock cable, the company participated in InnoTrans 214 between September 23 and 26 in Berlin, Germany. InnoTrans is an international railway technology trade fair held every other year, and we have exhibited at consecutive events in 21, 212 and 214. In 214, at the first fair following the company s merger with Hitachi Metals, we took advantage of the opportunity to showcase an impressive lineup of products and technologies. Those exhibits included electric wires and harnesses for railway cars adopted by IEP, FINEMET from the Magnetic Materials Company, and ductile castings for railway cars made by the High-Grade Functional Components Company, which are anticipated to be used in rolling stock in the near future. To make electric wires for railway cars a business that can beat out global competition, the Cable Materials Company will continue to invest in product development and strengthen its overseas bases. As the main driving force of Hitachi Metal s railway business, we will also continue to accelerate global business development. Business Performance Review of Operations by Segment An ABS sensor harness HC Queretaro, S.A. de C.V. (located in Queretaro State in central Mexico) POLYENEX halogen-free cable, which complies with EN standards 46 Hitachi Metals, Ltd. Annual Report

25 Financial Management 1. Financial Policy Hitachi Metals makes growth investments and delivers consistently stable and appropriate returns to shareholders to generate sustainable, long-term growth. Management maintains a financial policy that aims to ensure a healthy financial platform. The Company thus builds on the reach of its diverse businesses across various industries to invest strategically and flexibly to enhance financial efficiency and profitability. At the same time, the Company accords top priority to accelerating the cash generation cycle to ensure a balanced financial position. 2. Shareholder Returns Policy The Company s basic dividend policy is to determine profit distributions to shareholders and internal reserves by comprehensively assessing business environment, business development, and business performance. Management s primary commitment is to generate robust growth over the medium- to long-term by strengthening international competitiveness and enhancing the corporate value of the Company, and to deliver appropriate returns of profits to shareholders in the long-term under a business environment with evolving customer needs and technology and globalization. Further, the Company s basic policy is to pay out dividends from retained earnings twice a year as interim dividends and year-end dividends. The Company s board of directors retains explicit decision-making control over dividend payments. The internal reserves are to be used for development and commercialization of new materials, incubation of new businesses, and expansion and streamlining of competitive product lines by considering future business development. In the fiscal year ended March 31, 215, the Company recorded an increase in earnings from continuing solid demand for automotive-, industrial infrastructure-, and energy-related products, as well as results from efforts to revise the business portfolio. Consequently, the Company paid annual dividends of 23 per share. Management plans to pay annual dividends of 26 per share in the fiscal year ending March 31, 216. In the years ahead, Hitachi Metals will endeavor to enhance earnings and profitability while deploying financial strategies to boost capital efficiency, thereby increasing shareholder value. 3. Funding In principle, the Group covers funding for growth investments with operating cash flows generated in the normal course of business with cash and cash equivalents. For other financing, Hitachi Metals flexibly accesses financial and capital markets to minimize opportunity losses. In the fiscal year ended March 31, 215, the funds generated by an increase in earnings or changes in working capital were primarily allocated to capital investments aimed at strengthening a platform to achieve further growth. The Company financed the acquisition of shares of Waupaca Foundry, Inc. with available funds on hand, supplemented by long-term borrowings. During the fiscal year, the Company repaid certain long-term borrowings to ensure its funding stability. 4. Liquidity Liquidity is a key component of Hitachi Metals overall financial management policy. For short-term obligations that have maturities of less than 12 months, Hitachi Metals maintains sufficient liquidity to flexibly address unforeseen circumstances. As of March 31, 215, total liquid funds of the Company stood at 79. billion. 5. Interest-Bearing Debt As of March 31, 215, interest-bearing debts stood at billion, an increase of 78.2 billion from the previous year. Short-term interest-bearing debts were 61.3 billion, a decrease of 21.7 billion from the previous year. Long-term interest-bearing debts were billion, an increase of 1. billion from the previous year. The debt-to-equity ratio improved by.7 percentage points to.55 percentage points as of March 31, Ratings Hitachi Metals recognizes that a high and stable credit rating is essential to maintain adequate liquidity and selective flexibility in its financial policies. Each year, the Company acquires a credit rating from Rating and Investment Information, Inc., a major credit agency in Japan. As of March 31, 215, the Company received the rating A for its long-term corporate bonds and unsecured corporate bonds. Subsequently, the Company s rating was upgraded to A+ in June 215 updates, reflecting the Company s financial soundness. 7. Cash Flows Hitachi Metals aims to generate cash by increasing operating income, enhancing profitability, and reducing working capital. The Company pays particular attention to managing and reducing inventories. To that end, Hitachi Metals clarified responsibilities for each inventory category. Production departments and internal companies oversee manufactured products, including work-in-process and finished goods. Domestic and overseas sales companies collaborate with internal companies to look after transit inventories. The Company thus maintains a structure to optimally control and streamline inventories, reducing them over the medium-to long-term. The Group aims to make consolidated net sales forecasts more accurate and implement timely related measures to properly manage and rationalize inventories by reducing the number of working capital turnover days. Hitachi Metals adopted a Group cash pooling system to help manage its own and subsidiaries working capital. In principle, consolidated subsidiaries procure funds through this system rather than by taking on external debt. By consolidating surplus funds and financing requirements across the Group, Hitachi Metals has better positioned itself to become more financially efficient. U.S. subsidiaries also use the cash pooling system, through which they are enhancing financial efficiency. 8. Investment Efficiency Hitachi Metals invests flexibly in key businesses to drive sustainable growth. Activities include mergers and acquisitions, plant and equipment upgrades, initiatives to streamline operations and set up units to increase production capacity, and investments in employee welfare benefits. In this context, Hitachi Metals differentiates between regular and strategic investments, taking returns and other factors into account. Hitachi Metals formulates strategic investment proposals based on the present value of discounted cash flows and internal rates of return. Business Performance Financial Management 48 Hitachi Metals, Ltd. Annual Report

26 Research and Development The fiscal 215 Medium-Term Management Plan is targeting new product revenues of 3% or more of total revenues (in fiscal 215), and we are strengthening our ability to generate new products and develop new technologies. Corporate Profile Overview of Hitachi Metals, Ltd The basic policy on research and development Maintain a firm hold on sustainable growth through continual generation of new products Enhance the global competitiveness of new core products Generate new products and new businesses that will form the pillars of the next generation R&D Investment 25 Hitachi Metals uses a divisional lab system with a market-in approach to research and development. Each Company (business) pursues development in that Company s R&D division according to its business strategy. Development of new products and technologies that are important to the entire corporation is pursued under a system that incorporates the participation of corporate top management as well. Total group R&D expenses for fiscal 214 were 2,93 million yen (2.1% of total revenues), and new product revenues comprised 27% of total revenues ( billion) Towards Sustainable Growth High-Grade Metal Products and Materials This business segment develops molds and tools, high-grade specialty steel for industrial equipment, energy, and other sectors, amorphous metals and nanocrystalline soft magnetic materials, various kinds of rolls for steel mills, structural ceramic components and materials, and cutting tools, among other products. Main achievements during the current consolidated fiscal year include CVT belt materials with high fatigue endurance, materials for large forged turbine blades, high-performance molds and tool steel through innovative processes, sputtering target materials for FPD, and high-performance amorphous cores used in distribution transformers. Magnetic Materials and Applications This business segment develops high-performance magnets, high-frequency components and materials for information devices, and soft magnetic materials applied products. Main achievements during the current consolidated fiscal year include low-dy rare earth sintered magnets (Low Dy Series), an environmentally friendly method of recycling rare earth magnet sludge, high-performance ferrite magnets, and high-performance soft ferrite material for conserving energy. R&D by Business Segment Years ended March 31 High-Grade Metal Products and Materials Magnetic Materials and Applications High-Grade Functional Components and Equipment Wires, Cables, and Related Products Total High-Grade Functional Components and Equipment This business segment develops high-grade cast products for automotive use and systems to evaluate the manufacturing technologies and designs for those; total pipe systems and peripheral technologies, including pipe fittings and valves, other pipe components and materials, and manufacturing methods; and construction components. Main achievements for the current consolidated fiscal year include expansion of the line of heat-resistant cast steel products for downsizing engines for improved fuel consumption and ductile products for lightweight underbody components, and expansion of the Sof-Lex System piping components for emerging countries. Wires, Cables, and Related Products This business segment develops manufacturing technologies and connecting technologies for various kinds of electric wires, cables, and wire coils for industrial use, rolling stock, communications, machinery, and automotive use; electronic components and hoses for automotive use; industrial rubber; information network devices; antennas for broadcasting and cell phone stations; and compound semiconductor products. Main achievements during the current consolidated fiscal year include HiFC high-performance pure copper, composite harnesses for power parking brakes and wheel speed sensors, and piezoelectric sensors to prevent entrapment in power doors ( billion) Hitachi Metals is striving to achieve new growth through Change and Challenge. We will introduce the driving force behind that from various perspectives. The Hitachi Metals Group possesses a diversified business structure based on the development of materials and provides products to a wide range of industries. The business structure, capable of meeting the wide-ranging needs of society through broad-based business and fusion of technologies, is the driving force behind the growth of the Hitachi Metals Group. Our arena of activity has now expanded to the global stage. The Hitachi Metals Group strives to achieve new growth through Change and Challenge. The development of materials in the Hitachi Metals Group that drives industrial change and evolution is the source of Group contributions to society and the continuing existence of the Hitachi Metals Group. We will target new product revenues of 3% or more of total revenues and enhance our ability to generate new products and develop new technologies to secure our position as an innovative materials manufacturer. 5 Hitachi Metals, Ltd. Annual Report

27 Products by Market Automobile-Related Products Automobile-Related Products Manufacturing Safe, Environmentally Friendly Cars Alternative-Fuel Green Cars In the future, more vehicles will be electric or hybrid models that run on alternative fuels. We contribute to automotive advances by developing magnets used in drive motors, soft magnetic materials used inside inverters, etc. NEOMAX Nd-Fe-B Sintered Magnets We are leading the way globally in manufacturing Nd-Fe-B sintered magnets, which have optimum magnetic properties for use in the drive motors of electric and hybrid vehicles. The NEOMAX, which we developed and mass produce, can be used in a broad spectrum of applications and in environments that range from room temperature to the mercilessly high temperatures around engines. Magnetic Materials Company Steering and Power Train Systems Providing materials and components for electric power steering (EPS) and continuously variable transmission (CVT) systems, we support improvements in the basic performance of vehicles. Nd-Fe-B Radial-Oriented Ring Magnets (NEOMAX Series Nd-Fe-B Sintered Magnets) Because these magnets are radial in anisotropic direction and shaped in separate rings, they improve the ease with which rotors can be assembled. Also, cogging torque can be reduced by skew magnetization relative to the axis of rotation. Hitachi Metals is able to meet the requirements of segment-shaped designs that excel in magnetic performance and design flexibility, enabling customers to select the best shape and material properties for their specific purposes. These magnets are useful for not only electrical power steering but also gearshifts and electric brakes. Magnetic Materials Company Engines and Exhaust Systems High-Grade Specialty Steel Engine Materials and Parts Piston Ring Materials With the call for more compact yet more powerful engines, steel piston rings have come to be widely employed. Controlling metal texture at the nanoscale has made it possible for Hitachi Metals to provide piston ring materials with increased abrasion resistance and improved sliding friction in the form of deformed wires that have undergone plastic working and heat treatment. Piston ring materials Fuel-Efficient Green Cars HERCUNITE * Series of Heat-Resistant Cast Components This series of heat-resistant cast-iron and steel components help reduce CO2 emissions and fuel consumption in the next generation of gas engine vehicles. The exhaust manifolds, turbine housings, and other exhaust system components in this series are able to withstand the extreme heat generated by an internal combustion engine and contribute to improving a car s environmental performance. We produce cast materials and components that promote the development of engines and exhaust systems. Employing the alloy design technology developed in the specialty steel field and the casting technology with which it got its start, Hitachi Metals offers products tailored to diverse requirements. High-Grade Metals Company High-Grade Functional Components Company MANITURBO HERCUNITE Series of Heat-Resistant Cast Components HERCUNITE is a series of heat-resistant cast-iron and steel materials that are suitable for the manufacturing of exhaust manifolds, turbine housings, and other exhaust system components. Our complete product line starts with the HERCUNITE S Series, which can be used in temperatures of up to approximately 1,5 C. HERCUNITE will find wider applications in smaller turbocharged engines, giving them more environmentally friendly performance. High-Grade Functional Components Company Suspension Systems High-Toughness Ductile Iron Castings HNM series of castings have excellent low-temperature toughness and extremely accurate dimensions and can be delivered in a near-net-shape state. They contribute to the production of thin-walled automobile components that are lighter. CVT Belt Materials These metal belt materials have excellent fatigue endurance and were developed for use in CVT systems. Preventing nonmetallic inclusions that can cause damage when melting and cold rolling techniques are used, we contribute to improved transmission performance and increased reliability. High-Grade Metals Company Pursuing optimum materials, forms, and manufacturing methods, we contribute to car bodies that are lighter and safer, which lead to better fuel efficiency. Also, we produce well-designed, lighter aluminum wheels by employing casting and computer-aided engineering (CAE) technologies. High-Grade Functional Components Company Harness for Electric Parking Brakes We developed harnesses for use in electric parking brakes that excel in flexural resistance and durability. This helps conserve space inside the cabin and elevates vehicle safety and convenience. Cable Materials Company Corporate Profile Products by Market Engine Valve Materials Engine valve materials that are highly heat and oxidation resistant, with excellent cost performance, contribute to lighter and more durable engine valves. High-Grade Metals Company Turbine Wheels for Turbochargers Turbine wheels for turbochargers are made of nickel-based heat-resistant super alloy that exhibit superior resistance to heat. The lost-wax process is employed to produce three-dimensional components with complicated forms in a single piece. High-Grade Metals Company Aluminum Wheels Our SCUBA * aluminum wheels were created by employing high-precision CAE technology. They are very strong, rigid, and light (15% lighter than our previous products) and contribute to fuel savings as well as reduced CO2 emissions. Chic, delicate designs are possible thanks to the advanced aluminum casting techniques that are employed as well as the high-grade surface treatment, such as our high-quality LUSTERIC coating, that is utilized. High-Grade Functional Components Company SCUBA Brake Hoses With outstanding durability and low expansion characteristics, our brake hoses have been widely acclaimed and are used by the world s leading automakers. We also have a range of hoses developed for motorcycles, which require a very subtle touch when braking. Cable Materials Company Engine valve materials *The origin of the name SCUBA SCUBA stands for sharp-styled casting and uncompromisingly bright appearance. 52 Hitachi Metals, Ltd. Annual Report

28 Products by Market Automobile-Related Products Electronics-Related Products Electronic Devices and Power Transfer Equipment As cars have incorporated more electronics, we support the manufacturing of comfortable, convenient cars by providing numerous magnets used in various electronic devices, noise suppression components used to prevent device malfunctions, power semiconductor module substrates, etc. NMF Series Sintered Ferrite Magnets Ferrite magnets the principal component of which is iron oxide have excellent cost performance and are most widely used in motors found in automotive electrical equipment. The excellent magnetic properties of ferrite magnets and their ability to withstand temperature variations can be put to use in a broad range of applications, including starter motors, power window motors, cooling fan motors, electric power steering motors, and windshield wiper motors. Magnetic Materials Company Solutions That Show the Way to the Future IT and Home Appliances We offer products that enhance the technical and energy-saving performance of information technology (IT) devices and home appliances, such as materials and components for use in mobile telecommunication devices, including smartphones, and liquid crystal displays, as well as magnets for air-conditioner motors. Sputtering Target Materials for LCDs These materials are used in thin film interconnects in LCDs. Employing the hot isostatic pressing (HIP) method gives sputtering target materials the finest, most uniform structures, and they can be adapted to larger displays. Further, our alloy design techniques make it possible for us to offer alloys suited to various purposes, including those that require low resistance and heat or moisture resistance. High-Grade Metals Company Target materials for eighth-generation LCD panels Manufacturing Facilities Highly durable and easy-to-process molds are needed for highly efficient manufacturing at automotive production facilities. We develop and offer products used in manufacturing sites according to customers requirements. TM YSS DAC-MAGIC Die Cast Tool Steel This die cast tool steel is used in manufacturing highly precise castings in large volumes quickly. It combines the ability to withstand high temperatures during heating and quenching in the heat treatment cycle with toughness, and minimal cracking in cooling channels contributes to improvements that mean longer-lasting dies. High-Grade Metals Company YSS SLD-MAGIC Cold Work Tool Steel This die steel is suited to high-tensile plates widely used in making lighter cars with safer designs. Its characteristics are high machinability and fewer dimensional deformities following heat treatment. It contributes to overall die cost reductions because its superior quality means that dies last longer. Center Pillar High-Grade Metals Company Steel for Die Casting Electronic Devices NEOMAX Series Nd-Fe-B Sintered Magnets These rare-earth magnets have world-leading magnetic properties. They serve an important role as materials indispensable in making smaller, lighter, more energy-efficient motors used in the automobile, IT, household appliance, medical equipment, environmental, energy, and other industrial sectors. Magnetic Materials Company NMF Series Sintered Ferrite Magnets Among the ferrite magnets, the NMF -12 series provides the world s best magnet properties as a mass production ferrite magnet. On the back of the increasing trend for conserving rare earth resources and moving away from the use of rare earth magnets, studies are in progress to switch to the use of the NMF -series from neodymium-iron-boron (Nd-Fe-B) magnets, primarily for air-conditioner compressor motors. Magnetic Materials Company Corporate Profile Products by Market This section contains information about magnetic materials used for various applications, such as in manufacturing magnetic heads and coils, transformer cores, and magnetic shields, as well as products that play important roles in the automobile, household appliance, IT, and medical equipment sectors and various others. Cylinder Block FINEMET Nanocrystalline Magnetic Materials Developed by Hitachi Metals, FINEMET is the world s first nanocrystalline soft magnetic material. This new Fe-based soft magnetic material is composed of nanocrystals and has excellent temperature characteristics and temporal stability because it has high saturation flux density and magnetic permeability. FINEMET is utilized in noise-suppression components and other applications where it contributes to downsizing and lightening filters. Magnetic Materials Company Lamp YSS HI-PM Series Plastic Mold Steel This die steel is suited for a wide range of plastic products. It blends the contradictory characteristics of machinability and toughness to bring die costs down while reducing such problems as mold damage. High-Grade Metals Company Amorphous Metals Metglas These low-loss metal materials have no crystalline structure. Their low-loss properties are put to work in transformer cores and other applications. High-Grade Metals Company Soft Ferrite These soft magnetic materials are mainly composed of iron oxide. Although they have a slightly low saturation flux density, their electrical resistance is high, and they are characterized by excellent magnetic properties in high-frequency bands. They are used in coil cores for communications equipment, televisions, refrigerators, personal computers, etc. Magnetic Materials Company YSS is a registered trademark of Hitachi Metals, Ltd. 54 Hitachi Metals, Ltd. Annual Report

29 Products by Market Electronics-Related Products Infrastructure-Related Products Medical and Analytical Equipment Materials for Aircraft Components Ceramic Scintillator Materials Scintillator materials absorb the energy of radiation that strikes them and emit it as visible light. Because of their high sensitivity and large X-ray absorption coefficients, they contribute to reductions in device sizes. They are used in X-ray CT scanners and other medical equipment as well as analytical devices. Magnetic Materials Company Probe Cables for Ultrasound Diagnostic Equipment The cable connects the main body of ultrasound diagnostic equipment and the probe used for echographic investigation. It is lightweight, excels in elasticity and flexibility, and has high-quality electric characteristics, realizing ease of handling and high-definition images, thereby contributing to the development of medical equipment. Cable Materials Company Shafts Turbine case Ring disc Landing gear forging Materials for Engine Parts and Structural Parts Materials for aircraft engines and fuselage components, such as landing gears, must be durable enough to withstand high-temperature, high-pressure combustion gases, high-speed revolutions, or repetitive heavy loads for an extended period of time. Therefore, such component materials must be highly reliable and durable. Our materials for aircraft components are highly acclaimed and trusted thanks to our special melting technologies and manufacturing processes that have been nurtured over the years. High-Grade Metals Company Infrastructure-Related Products For Tomorrow s Enriched, Carefree Society Energy Businesses Energy use is becoming increasingly sophisticated and power generation systems more diversified worldwide, and Hitachi Metals supplies materials and components for the machinery, rechargeable batteries, and transformers that are indispensable to solar, wind, thermal, and nuclear power facilities. Sputtering Target Materials for CIGS* Photovoltaic Cell Panels Hitachi Metals is using the alloy design, manufacturing, and testing expertise cultivated in the production of target materials for LCDs, hard disks, and semiconductors to supply target materials for electrodes and absorption layers on the rear of CIGS photovoltaic cell panels. In addition, we supply cylindrical target materials designed to boost usage efficiency. High-Grade Metals Company *CIGS is a thin-film substance comprising Copper, Indium, Gallium, and Selenium. Industrial Equipment We offer products used at research and manufacturing sites, such as undulators used at large-scale synchrotron radiation facilities and rolls for steel mills. Industrial Cables HINEX rolls Rolls for Steel Mills Our rolls for steel mills are extremely heat and shock resistant, which is needed to roll out very hot steel and iron ingots with great pressure. Moreover, the rolls have the superior abrasion resistance required to make highly precise product shapes. Our wide-ranging product lineup for steel sheets and plates, shapes, pipes, and wires is designed to meet steel manufacturers diverse needs. Above all, our HINEX line of high-speed steel rolls, which are produced through new casting methods, have vastly improved performance compared to traditional rolls, making it possible to reduce rolling costs. High-Grade Metals Company Corporate Profile Products by Market Amorphous Metals Metglas These materials are used in the cores of transformers used in electrical substations and on utility poles as well as for photovoltaic cells cut cores because making electric steel sheets amorphous makes it possible to cut electrical power losses in cores, enabling highly efficient power conservation. Amorphous metal materials are being used in an increasing number of applications as electrical power infrastructure demand related to environmental regulations and smart grids rises. Metglas is expected to find applications both in Japan and overseas. High-Grade Metals Company Turbine Blade Materials Turbine blades rotate at high speeds of thousands of revolutions per minute and are vital components that need to be durable enough to withstand extreme conditions in which they are exposed to steam that is hundreds of degrees hot. As such, they must be strong at high temperatures, have a high degree of fracture toughness, and be reliable in terms of quality. We provide the most reliable products by utilizing our integrated manufacturing system, which draws upon our broad expertise and the latest technologies, helping our customers generate power more efficiently. High-Grade Metals Company We provide wires and cables that are used in diverse areas, from electric power facilities to general building construction and industrial applications. With our advanced technologies and ample expertise, we provide optimal products for our customers. Wires and Cables for Rolling Stock For bullet trains and many other trains, operated both in Japan and overseas, our wires and cables are used in cabs, underfloor wiring, and wiring between rolling stock. We also provide railway vehicle cables and trolley wires as well as signal cables, thus supporting power supply and information transmission for railways. Cable Materials Company Wires and cables for rolling stock Trolley wires with abrasion detection line for bullet trains Transformer core Highly efficient gas turbine for power stations Turbine blades 56 Hitachi Metals, Ltd. Annual Report

30 Business Units High-Grade Metal Products and Materials Magnetic Materials and Applications Creating an uninterrupted stream of high-performance materials by combining innovative ideas with core technologies developed through proven tradition. The Hitachi Metals Group maintains two long-trusted core technologies: technology for manufacturing high-grade specialty steel, represented by the YSS brand, and casting technology used in the manufacture of rolls. In combining each technology with forward-looking ideas, the Group delivers a range of high-performance materials that anticipate the needs of each era. A supplier to a variety of target markets, Hitachi Metals is active in basic industries including steel, automobiles, energy and industrial machineries electronics-related fields that demand constant innovation. In amorphous metals, we are bolstering our lineup of eco-friendly products to help curtail the energy consumption of devices and reduce CO2 emissions. We supply unique products based on advanced new material development and original component design technology. Cars now contain more and more electronics, their performance is becoming more environmentally friendly, and their various devices have become more energy efficient. We continue to meet these kinds of needs by manufacturing unique products using the materials sector expertise we have developed related to magnetic materials and ceramics. Starting with our NEOMAX brand magnets which have world-class magnetic properties we offer magnet product lines for practical applications. Furthermore, our unique products in the soft magnetic materials sector include Metglas amorphous metals and FINEMET nanocrystalline magnetic materials. As a world-leading supplier of magnetic materials, we offer pioneering products for use in vehicles, for electromagnetic compatibility and noise measures, and in components for solar power generation, putting the materials special characteristics to best use. High-Grade Metal Products and Materials Magnetic Materials and Applications Business Principal Manufacturing Bases / R&D Bases Business Principal Manufacturing Bases / R&D Bases High-Grade Metals Company Magnetic Materials Company Specialty Steel Rolls Amorphous Metals Business Overview High-Grade Metals Company Yasugi Works Hitachi Metals (Suzhou) Technology, Ltd. Hitachi Metals Taiwan, Ltd., Five Ace Factory Hitachi Metals Wakamatsu, Ltd. Metglas Yasugi Works Metglas, Inc. Manufacturing Bases Metallurgical Research Laboratory Production System Laboratory Group Companies Magnets Soft Ferrite and Other Soft Magnetic Materials, and Their Applications Business Overview Magnetic Materials Company Kumagaya Works Saga Works NEOMAX KINKI Co., Ltd. Yamazaki Manufacturing Dept. Hitachi Ferrite Electronics, Ltd. Hitachi Metals Hong Kong Ltd., Pan Yu Factory Hitachi Metals (Thailand) Ltd. Manufacturing Bases Magnetic Materials Research Laboratory Production System Laboratory Group Companies Corporate Profile Business Units Specialty Steel A history of innovation in advanced metallurgical technology and materials development True to our tradition, we strive to consistently refine our material development capabilities. With the same intensity required to create tama-hagane a highvalue-added material produced by the tatara foundry method we enhance the full luster of the materials we produce. While enhancing steel purity through stringent raw material selection methods, we continue to support the development of a variety of industries by providing highly functional materials. Yasugi Works (Japan) (Yasugi Works and the Metallurgical Research Laboratory are located within the same grounds) Hitachi Metals (Suzhou) Technology, Ltd. (China) Hitachi Metals Taiwan, Ltd. Five Ace Factory (Asia) Hitachi Metals Tool Steel, Ltd. (Japan) HMY, Ltd. (Japan) NEOMAX MATERIALS Co., Ltd. (Japan) Hitachi Metals Nanotech Co., Ltd. (Japan) Hitachi Metals Precision, Ltd. (Japan) Hitachi Metals MMC Superalloy, Ltd. (Japan) Hitachi Metals (Dong Guan) Specialty Steel Co., Ltd. (China) Hitachi Metals Korea Co., Ltd. (Asia) Others Magnets As a world-leading supplier of magnetic materials, Hitachi Metals Group supports industry s foundations with its NEOMAX brand We boast an extensive line of magnets, including ferrite magnets and NEOMAX rare earth magnets, and offer products for use in the automotive, electronics, household appliance sectors, among others. As a magnetic materials pioneer, we take on the challenges related to new materials and production technologies to meet customers various needs and also contribute to achieving energy conservation in our societies. Kumagaya Works (Japan) Saga Works (Japan) NEOMAX KINKI Co., Ltd. (Japan) NEOMAX ENGINEERING Co., Ltd. (Japan) NEOMAX KYUSHU Co., Ltd. (Japan) Hitachi Metals North Carolina, Ltd. (North America) PT. NX INDONESIA (Asia) San Technology, Inc. (Asia) Dongguan Sumitok-Super Electronics Co., Ltd. (China) Pacific Metals Co., Ltd. (Asia) Hitachi Metals (Thailand) Ltd. (Asia) Others Rolls Advanced roll technological capabilities We boast a wealth of leading brands including HINEX rolls for steel mills. We are also engaged in the manufacture of injection-molding machine cylinders, ceramics, and steel-frame structures as well as related component processing. Amorphous Metals Contributing to energy conservation through innovative materials Demand is on the rise worldwide for our Metglas amorphous metals for use in power transformers, an area with increasing needs for energy conservation. Hitachi Metals Wakamatsu, Ltd. (Japan) Metglas Yasugi Works (Japan) Metglas, Inc. (North America) SinterMet, LLC (North America) Baosteel Hitachi Rolls (Nantong) Co., Ltd. (China) Soft Ferrite and Other Soft Magnetic Materials, and Their Applications We develop lines of soft magnetic materials products with distinctive characteristics Together with our soft ferrite materials of which we boast many years of successes we offer Metglas amorphous metals, FINEMET nanocrystalline magnetic materials, and other distinctive products to many different industry sectors and uses that include everything from portable handsets, IT devices and other electronic components, to car antennas, electromagnetic compatibility and noise reduction components, and solar power generator parts. Yamazaki Manufacturing Dept. (Japan) Hitachi Ferrite Electronics, Ltd. (Japan) Hitachi Metals Hong Kong Ltd. Pan Yu Factory (China) Hitachi Metals (Thailand) Ltd. (Asia) Hitachi Metals (India) Private Limited (Asia) 58 Hitachi Metals, Ltd. Annual Report

31 Business Units High-Grade Functional Components and Equipment Wires, Cables, and Related Products With unparalleled casting technologies nurtured from age-old tradition, Hitachi Metals supplies highly functional casting components and equipment. In the field of highly functional automotive casting components, the Hitachi Metals Group s unique materials development, global product development, and production and marketing network has helped supply products that meet local market needs in diverse nations throughout the world. In piping components, represented by products under the (Gourd brand), the Group has led the industry in product development. Hitachi Metals continues to introduce new materials that are highly durable and easy to handle. We continue to pursue the technology needed to transmit energy and information. In the realm of wires, cables, and related products, we continually pursue technologies related to energy and information technology. Our business scope is expanding to areas such as wires and cables, automotive products and information systems. Our lineup is diverse, from wires and cables used for data transmission and supplying electric power that support social infrastructure to internal wiring products designed to achieve miniaturization and increased functionality in devices of all kinds. We also provide automotive brake hoses and electrical components that improve automotive safety, energy conservation, and overall convenience, as well as IT network devices to support telecommunications infrastructure, thereby contributing to society with superior technologies. High-Grade Functional Components and Equipment Wires, Cables, and Related Products Business Principal Manufacturing Bases / R&D Bases Business Principal Manufacturing Bases / R&D Bases High-Grade Functional Components Company Cable Materials Company Casting Components for Automobiles Piping Components Business Overview Casting Components for Automobiles Global development of eco-friendly products Drawing on its roots that date back to Tobata Foundry Co., Hitachi Metals has applied malleable cast iron manufacturing technologies to produce casting components for automobiles. In recent years, we developed HERCUNITE heat-resistant exhaust casting components and are striving to meet the growing need for eco-friendly products. Piping Components Development of (Gourd brand) gas and water piping components When the Tobata Foundry Co., the forerunner of Hitachi Metals, Ltd., shipped its first product in 191, it bore a (Gourd) symbol. This symbol bore the hopes and aspirations that products would be tougher, smoother, and aesthetically pleasing. Since this time, the Gourd brand has been widely used in industrial and household fields, as well as overseas markets. Today, the (Gourd brand) is well respected throughout the world. Waupaca Foundry, Inc. Kyushu Works Moka Works Kumagaya Works AAP St. Marys Corp. Hitachi Metals Automotive Components USA, LLC Namyang Metals Co., Ltd. HNV Castings Private Limited Kuwana Works Hitachi Metals FineTech, Ltd. Hitachi Metals Precision Instruments (Shenzhen), Ltd. High-Grade Functional Components Company Manufacturing Bases Waupaca Foundry, Inc. (North America) Kyushu Works (Japan) Moka Works (Japan) Kumagaya Works (Japan) AAP St. Marys Corp. (North America) Hitachi Metals Automotive Components USA, LLC (North America) Namyang Metals Co., Ltd. (Asia) HNV Castings Private Limited (Asia) Kuwana Works (Japan) Hitachi Metals FineTech, Ltd. (Japan) Hitachi Metals Precision Instruments (Shenzhen), Ltd. (China) Casting Technology Research Laboratory Kuwana Works R&D Center Production System Laboratory Group Companies Auto-tech, Ltd. (Japan) Moka Technos, Ltd. (Japan) Kyushu Technometal Co., Ltd. (Japan) Seitan, Inc. (Japan) Alcast, Ltd. (Japan) Others Hitachi Valve, Ltd. (Japan) Ward Manufacturing, LLC (North America) Others Electric Wires and Cables Automotive Products Information Systems Business Overview Cable Materials Company Takasago Works Hitaka Works Toyoura Works Densen Works Electric Wires and Cables Supplying a wide range of products that contribute to improvements in social infrastructure and moves to downsize equipment and upgrade performance The Cable Materials Company mobilizes its outstanding achievements and rich experience accumulated over the years to build a diverse range of wire products that improve the social infrastructure as well as products that support moves to decrease size and boost performance. This ranges from adoption in electric power facilities to general construction and industrial use. We provide customers with the optimum support by supplying these products. Automotive Products Contributing to better automotive safety, energy savings and convenience On a solid foundation of precisely targeting market needs and mobilizing the materials properties, we develop, manufacture and sell products with guaranteed quality on a global scale, meeting customer requirements. The products we offer include a range of efficient, reliable sensors and power supply harnesses that transmit energy or signals, as well as brake harnesses and hoses. Information Systems Offering distinctive products and solutions for telecommunications infrastructure We offer a wide variety of cutting-edge products, technology and solutions, such as information network equipment and mobile phone base station antenna systems. Manufacturing Bases Takasago Works (Japan) Hitaka Works (Japan) Toyoura Works (Japan) Densen Works (Japan) Cable Materials Research Laboratory Group Companies Tonichi Kyosan Cable, Ltd. (Japan) Hitachi Magnet Wire Corp. (Japan) Tohoku Rubber Co., Ltd. (Japan) Hitachi Cable Fine Tech, Ltd. (Japan) Hitachi Cable (Johor) Sdn. Bhd. (Asia) Thai Hitachi Enamel Wire Co., Ltd. (Asia) Hitachi Cable Philippines, Inc. (Asia) Hitachi Cable Vietnam Co., Ltd. (Asia) Hitachi Cable (Suzhou) Co., Ltd. (China) Shenzhen Hitachi Cable Co., Ltd. (China) HC Queretaro, S.A. de C.V. (Central and South America) Hitachi Metals (Thailand) Ltd. (Asia) Hitachi Cable Networks, Ltd. (Japan) Corporate Profile Business Units 6 Hitachi Metals, Ltd. Annual Report

32 Global Expansion Meeting Global Customer Needs on a Timely Basis Europe Hitachi Metals Europe GmbH South Germany Office, Leonberg South Germany Office, Munich Milano Branch Office London Branch Office Paris Branch Office Asia Beijing Branch Office Guangzhou Branch Office Suzhou Branch Office Dalian Branch Office Hitachi Metals Hong Kong Ltd. Hitachi Metals Taiwan, Ltd. Taipei Branch Hitachi Metals Korea Co., Ltd. Hitachi Metals Singapore Pte. Ltd. Hitachi Metals (Thailand) Ltd. Hitachi Metals (India) Private Limited High-Grade Metals Company Magnetic Materials Company High-Grade Functional Components Company Cable Materials Company Japan Kitanihon Sales Office Hokkaido Sales Office Niigata Sales Office Ibaraki Sales Office Chubu-Tokai Sales Office Hokuriku Sales Office Hamamatsu Sales Office Shizuoka Sales Office Kansai Sales Office Shikoku Sales Office Chugoku Sales Office Kyushu Sales Office Okinawa Sales Office Production System Laboratory Hitachi Metals Trading, Ltd. Hokkai Hitachi Densen Kihan, Ltd. North America Hitachi Metals America, LLC New York Office Chicago Office Detroit Office Pittsburgh Office San Jose Office Corporate Profile Global Expansion Specialty Steel Japan Yasugi Works Metallurgical Research Laboratory Hitachi Metals Tool Steel, Ltd. HMY, Ltd. NEOMAX MATERIALS Co., Ltd. Hitachi Metals Nanotech Co., Ltd. Hitachi Metals Precision, Ltd. Hitachi Metals MMC Superalloy, Ltd. Overseas Hitachi Metals Taiwan, Ltd. Five Ace Factory (Asia) Hitachi Metals Korea Co., Ltd. (Asia) Hitachi Metals (Dong Guan) Specialty Steel Co., Ltd. (China) Hitachi Metals (Suzhou) Technology, Ltd. (China) Rolls Japan Hitachi Metals Wakamatsu, Ltd. Overseas SinterMet, LLC (North America) Baosteel Hitachi Rolls (Nantong) Co., Ltd. (China) Amorphous Metals Japan Metglas Yasugi Works Overseas Metglas, Inc. (North America) Japan Kumagaya Works Saga Works Magnetic Materials Research Laboratory NEOMAX KINKI Co., Ltd. NEOMAX ENGINEERING Co., Ltd. NEOMAX KYUSHU Co., Ltd. Yamazaki Manufacturing Dept. Hitachi Ferrite Electronics, Ltd. Overseas Hitachi Metals North Carolina, Ltd. (North America) Hitachi Metals (Thailand) Ltd. (Asia) San Technology, Inc. (Asia) PT. NX INDONESIA (Asia) Pacific Metals Co., Ltd. (Asia) Dongguan Sumitok-Super Electronics Co., Ltd. (China) Hitachi Metals (India) Private Limited (Asia) Hitachi Metals Hong Kong Ltd. Pan Yu Factory (China) Automotive Components Japan Kyushu Works Moka Works Kumagaya Works Casting Technology Research Laboratory Alcast, Ltd. Seitan, Inc. Overseas Waupaca Foundry, Inc. (North America) AAP St. Marys Corp. (North America) Hitachi Metals Automotive Components USA, LLC (North America) Namyang Metals Co., Ltd. (Asia) HNV Castings Private Limited (Asia) Piping Components Japan Kuwana Works Kuwana Works R&D Center Hitachi Metals FineTech, Ltd. Hitachi Valve, Ltd. Overseas Ward Manufacturing, LLC (North America) Hitachi Metals Precision Instruments (Shenzhen), Ltd. (China) Japan Takasago Works Hitaka Works Toyoura Works Densen Works Cable Materials Research Laboratory Tonichi Kyosan Cable, Ltd. Hitachi Magnet Wire Corp. Tohoku Rubber Co., Ltd. Hitachi Cable Fine Tech, Ltd. Hitachi Cable Networks, Ltd. Overseas Hitachi Cable America Inc. (North America) HC Queretaro, S.A. de C.V. (Central and South America) Hitachi Cable (Johor) Sdn. Bhd. (Asia) Hitachi Metals (Thailand) Ltd. (Asia) Thai Hitachi Enamel Wire Co., Ltd. (Asia) Hitachi Cable Philippines, Inc. (Asia) Hitachi Cable Vietnam Co., Ltd. (Asia) Hitachi Cable (Suzhou) Co., Ltd. (China) Shenzhen Hitachi Cable Co., Ltd. (China) Hitachi Cable Trading (Dalian F.T.Z.) Co., Ltd. (China) 62 Hitachi Metals, Ltd. Annual Report

33 Management (As of August 31, 215) Directors Executive Officers Hideaki Takahashi Representative Executive Officer President and Chief Executive Officer Akitoshi Hiraki Vice President and Representative Executive Officer President, High-Grade Metals Company Deputy General Manager, Corporate Export Regulation Office Kenichi Nishiie Representative Executive Officer General Manager, Procurement Center General Manager, Corporate Export Regulation Office Kazuyuki Konishi Chairman of the Board Member of the Nominating Committee Keiji Kojima Director Vice President and Executive Officer, Hitachi, Ltd. Takashi Shimada Director Member of the Nominating Committee Member of the Audit Committee Member of the Compensation Committee Toyoaki Nakamura Director Representative Executive Officer, Executive Vice President and Executive Officer, Hitachi, Ltd. Masashi Aisa Executive Officer General Manager, Corporate Sales Administration Center Fumio Kanaya Executive Officer Deputy General Manager, Cable Materials Company General Manager, Metal Materials & Component Products Unit Masahiro Otsuka Executive Officer General Manager, Corporate Management Planning Center Yasuhiko Sakamoto Executive Officer Vice President, Cable Materials Company General Manager, Ibaraki Works, Takasago Works, Hitaka Works, Toyoura Works, and Densen Works Hiroyuki Okada Executive Officer Chief Financial Officer General Manager, Finance Center General Manager, Information Systems Center Shigekazu Suwabe Executive Officer President, Magnetic Materials Company Deputy General Manager, Corporate Export Regulation Office Corporate Profile Management Eiji Nakano Executive Officer President, High-Grade Functional Components Company Deputy General Manager, Corporate Export Regulation Office Masato Hasegawa Executive Officer President, Cable Materials Company Deputy General Manager, Corporate Export Regulation Office Hisashi Machida Director Member of the Nominating Committee Member of the Audit Committee Member of the Compensation Committee Junichi Kamata Director Member of the Audit Committee Hideaki Takahashi Director Member of the Compensation Committee Akitoshi Hiraki Director 64 Hitachi Metals, Ltd. Annual Report