Outline of the sales for the first half of this year

In this period, the drastic cooling of the world economy continued from the second half of the pervious year. In the middle of this period, however, steady movement toward recovery started. The Japanese economy also moved into a phase in which worst of the downturn is behind, inventory adjustment is almost completed, and export and production are gradually increasing. Under such economic circumstances, with respect to motor sales performance of Mabuchi Group, the sales volume decreased 38.5% compared with the same period the previous year, and the sales amount decreased 39.8% compared with the same period the previous year. The sales volume increased 1.3% and the sales amount increased 2.1% compared to the sales expectations in forecast for this first half in the full-year sales projection announced together with year-end financial statements for the previous year (January 1st, 2008 through December 31st, 2008). Thus, the sales for this first half decreased (39.8% from the same period the previous year) to 29,140 million yen. At the same time, regarding manufacturing cost, cost reduction is making progress mainly due to the reduction in material cost caused by the markdowns on commodities such as copper or due to securing of the reasonable number of personnel in production bases. However, lowering of capacity utilization caused by the dramatic decrease in sales and production volumes increased burden of unit fixed cost, and this is a factor contributing to depression of profit rate compared with performance of the same period the previous year. Moreover, although SG&A expense decreased compared with the same period the previous year due to the progress of Mabuchi Group-wide cost reduction activities, this decrease was not sufficient to cover decrease in sales. Therefore, for the first half of this year, we posted an operating loss of 1,457 million yen. Ordinary income decreased (98.9% from the same period the previous year) to 63 million yen resulted from the recording of exchange gain due to the weaker yen at the end of this second quarter compared with the beginning of fiscal 2009 and improvement of non-operating income and expense because of interest received and the like. Net loss for this second quarter before taxes and other adjustments totaled 281 million yen due to the recording of extraordinary retirement allowances in some overseas subsidiaries as an extraordinary loss and the like. Regarding net income and loss for this second quarter, net income for this second quarter decreased (10.8% from the same period the previous year) to 2,724 million yen, since reversal of deferred tax liability, which had been recorded for undivided profit of overseas consolidated subsidiaries, was recorded for this second quarter due to introduction of an non-accrual system for dividends received from overseas subsidiaries according to 2009 taxation system amendment.

Outlook for the full year

The inventory adjustment in the market advanced steadily in the first half of the year and the demands increased with the perspectives that the economy bottomed out. However, the economy seems to have no momentum for the real recovery and there are some concerns about the economy after the policies to stimulate the economies adopted by governments over. Among others, it is expected that the fragile market conditions of "Automotive Products Market", which is a key market for us, will continue since the outlook of U.S. economy and the economic trend for the second half of the year is uncertain and the financial uneasiness is still remains. On the other hand, the demands, not only for those of automotive but also for others, of emerging countries such as Brics countries represented by China are being expected recover in this year. For our "Audio & Visual Equipment Market" and "Optical & Precision Instruments Market", sales are expected to exceed our original plan slightly as a result of the rebound of the inventory adjustment and because our competitor is being in a slump. However, our forecast that sales will fall substantially compared to the last year for all market segments including "Automotive Products Market" and "Home Appliances & Power Tools, Others Market" is unchanged. We amended our previous forecast (announced on April 27, 2009) on the business profit, ordinary income and net profit as follows taking into consideration of performance for the first half of this year. Sales 66 billion yen (previous forecast: 65 billion yen), business profit 0 yen (previous forecast: Loss of 1.5 billion yen), ordinary income 1.9 billion yen (previous forecast: Loss of 0.2 billion yen) and net profit 3.8 billion yen (previous forecast: 2.9 billion yen).
There is no amendment from the original forecast about the dividend for the first half of the year and the dividend forecast for the full year.

Situation of the activities to be focused on 2009

Activities toward the immediate earnings recovery

As a result of implementing a multidimensional approach to reduce the cost with setting a goal of 10% reduction of SG&A expenses of the headquarter by the end of 2009 compared to the last year, the cost reduction more than planned was gained. We will continue this approach. The direct workers of our production bases which become redundant due to the sharp decline of demands which has been continuing since the second half of the previous year have been reducing and are at the appropriate level as results of the natural wastage, the resignation due to the contract expiration and the exhaustive review of the labor scheduling focused on the review of the shift working system. We addressed the productivity improvement of motors for power window lifters and the manufacturing cost reduction in DaNang plant as top priority issues. We conducted the thorough investigation of the unproductiveness and the losses lying in such work and tried to eliminate such unproductiveness and the losses. In addition to such activities, we conducted the wide-ranging manufacturing cost reduction activities. As a result of these activities, the cost reduction substantially exceeding the plan was gained in the first half of the year. However, such reduction was partially offset by the capacity utilization decrease due to the more than expected production volume decrease in the first quarter. We are expecting the manufacturing cost improvement tendency will continue taking into consideration that the cost reduction gained so far substantially exceeded the plan and the productivity improvement, which exceeds that of gained in the first half of the year, is expected because the increase of numbers in both sales and production is expected. We keep doing our best to add further cost reduction effects.

Promotion of the growth strategy

"Automotive Products Market" remained stagnant due to the substantial reduction of demands mainly triggered by the fall of vehicle production volume. However, the demands for motors for power window lifters, which are our strategic products, show signs of rapid recovery in China market backed by the economic-stimulus measures taken by Chinese government. In addition to that, the automotive aftermarket in the U.S. is growing owing to the prolonged automobile repurchase period. Thus the demands for motors for power window lifters have been outstripping our plan so far. Besides, a Japanese major automobile manufacturer decided to adopt our motors for power window lifters to their 2011 year global strategic model. Moreover, referring to the markets for new applications such as for power seats and electric parking brake systems, the automobile models which use our motors are expanding and are on a growth trajectory. In particular, a major seat manufacturer newly decided to use our motors for power seats, of which potential growth ability is thought to be strong, to their power seat system. We aim at realizing the business expansion of this market as well as pursuing synergistic effects both in sales and technical aspects, with business of motors for power window lifters.

Strengthening of the production foundations

We are restructuring the production bases centering on the enhancement of our Vietnamese bases. The second phase of construction of DaNang plant, of which we are enhancing as the relocation destination of our Chinese bases, completed recently and the plant-production-area has tripled. The purpose of relocating to Vietnamese bases is to strengthen our position as a global leader in the industry and we think that such relocation will contribute to gain the strength in the competitiveness of our products for American and European markets as well as coping smoothly with the demand expansion in ASEAN countries. On the other hand, referring to our Guangdong plant in China, we focus their managerial resources on efforts to shorten the launching lead time for brand new products, to cope effectively with the market demands and to strengthen the support for overseas bases through strengthening Guangdong plants’ functions as "mother plants" which set examples of Mabuchi-production-model with the aim to foster the strong competitiveness. We decided to establish a new production base in Yingtan, Jiangxi, China as a small experimental base to explore the capabilities to strengthen the cost competitiveness further. The production system of the new plant is designed so as to avoid the increase of manufacturing fixed costs, which often incur along with the plant-size-expansion, while utilizing manufacturing know-how accumulated in the existing Guangdong plants and to make it possible to keep pace with circumstance changes quickly.

September 2009
Takaichi Mabuchi, Chairman
Shinji Kamei, President