FY2011 Operating and Financial Results and Medium-Term ...

Copyright © 2012, The Yokohama Rubber Co., Ltd. All rights reserved

Operating and Financial Results and Medium-Term Management Plan

Fiscal period to December 31, 2011

Operating and Financial Results and Operating and Financial Results and MediumMedium--Term Management PlanTerm Management Plan

Fiscal period to December 31, 2011 Fiscal period to December 31, 2011

February 14, 2012

The Yokohama Rubber Co., Ltd.


Outline of This PresentationOutline of This Presentation1.1. Fiscal performanceFiscal performance

Results in the nineResults in the nine--month fiscal period ended December 31, 2011 (a onemonth fiscal period ended December 31, 2011 (a one--timetime--only nineonly nine--month fiscal period that resulted from a switch to calendarmonth fiscal period that resulted from a switch to calendar--year fiscal accounting, from Aprilyear fiscal accounting, from April––March accounting)March accounting)Projections for the fiscal year to December 31, 2012Projections for the fiscal year to December 31, 2012

2.2. Phase III of our Grand Design 100 mediumPhase III of our Grand Design 100 medium--term management planterm management planGrand Design 100 vision and basic policyGrand Design 100 vision and basic policySummary of Phase IISummary of Phase IIFinancial targets in Phase IIIFinancial targets in Phase IIIIssues and themesIssues and themesGrowth strategyGrowth strategy

Tire operationsTire operationsDiversified operationsDiversified operationsTechnology strategyTechnology strategyReinforcing our corporate foundation and stepping up our commitmReinforcing our corporate foundation and stepping up our commitment ent to fulfilling our corporate social responsibilityto fulfilling our corporate social responsibility


Fiscal Performance and ProjectionsFiscal Performance and Projections


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Sales and Earnings Sales and Earnings ((¥¥ billion, percent)billion, percent)

DividendsDividends (yen per share; year(yen per share; year--end dividends subject to shareholder approval)end dividends subject to shareholder approval)

Fiscal Performance and ProjectionsFiscal Performance and Projections

FY2012 (planned) April-Dec. 2011Interim ¥6.00 ¥3.00Year-end (planned) ¥7.00 ¥4.00Annual total (planned) ¥13.00 ¥7.00

Year on year Year on year Year on year

　Net sales ¥575.0 103.1% ¥557.8 107.3% ¥465.1 －

　Operating income ¥40.0 149.5% ¥26.8 90.8% ¥26.3 －

　 Percent of net sales 7.0% 4.8% 5.7%　Ordinary income ¥37.0 167.0% ¥22.2 94.8% ¥20.7 －

　 Percent of net sales 6.4% 4.0% 4.5%　Net income ¥25.0 220.3% ¥11.3 81.5% ¥11.6 －

　 Percent of net sales 4.3% 2.0% 2.5%

*Jan.–Dec. 2011FY2012 (Jan.–Dec. April–Dec. 2011

* Amounts for January-March 2011 duplicate amounts included in fiscal results reported for April 2010-March 2011 fiscalyear

2012, projected) (reference)


Medium-Term Management Plan

Phase III

MediumMedium--Term Management PlanTerm Management Plan

Phase IIIPhase III



Phase III


Phase IIIPhase III

Grand Design 100 Vision and Basic PolicyGrand Design 100 Vision and Basic Policy


• Deliver the best products at competitive prices and on time

• Assert world-class strengths in technologies for protecting the environment

• Foster a customer-oriented corporate culture that honors rigorous standards

of corporate ethics

• Deliver the best products at competitive prices and on time

•• Assert worldAssert world--class strengths in technologies for protecting the environmentclass strengths in technologies for protecting the environment

•• Foster a customerFoster a customer--oriented corporate culture that honors rigorous standardsoriented corporate culture that honors rigorous standards

of corporate ethicsof corporate ethics

Evoke a distinctive global identity in building corporate valueand in building a strong market presenceEvoke a distinctive global identity in building corporate valueEvoke a distinctive global identity in building corporate valueand in building a strong market presenceand in building a strong market presence

Net sales: ¥1 trillion

Net sales: ¥1 trillion

Operating income: ¥100 billion

Operating income: ¥100 billion

Operating return on sales: 10%

Operating return on sales: 10%

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Grand Design 100 Vision and Basic PolicyGrand Design 100 Vision and Basic Policy

To Mark the Yokohama Centennial in 2017To Mark the Yokohama Centennial in 2017

LongLong--Term Financial TargetsTerm Financial Targets

Basic PolicyBasic Policy



Phase III


Phase IIIPhase III

Summary of Phase IISummary of Phase II


Cumulative net sales ¥1,451.2 billionCumulative operating income ¥77.2 billionOperating margin 5.3%

Phase II Results(April 1, 2009–December 31, 2011)

Phase II Results(April 1, 2009–December 31, 2011)

Deteriorating Business EnvironmentDeteriorating Business Environment••Global demand weakened in the wake of the Lehman Shock, and our Global demand weakened in the wake of the Lehman Shock, and our unit sales declinedunit sales declined••The yen continued to strengthen, diminishing yenThe yen continued to strengthen, diminishing yen--denominated sales and reducing our denominated sales and reducing our operating income by a cumulative operating income by a cumulative ¥¥16.7 billion16.7 billion••Prices for raw materials continued to rise, raising our costs byPrices for raw materials continued to rise, raising our costs by a cumulative a cumulative ¥¥31.9 billion31.9 billion

We made progress in We made progress in positioning our company to generate profitspositioning our company to generate profits, even in an adverse , even in an adverse business environmentbusiness environment

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In comparison with Phase I, aggregate operating income was aboutIn comparison with Phase I, aggregate operating income was about 15% higher and the operating margin 15% higher and the operating margin 1 point higher in Phase II despite a decline of about 7% in aggr1 point higher in Phase II despite a decline of about 7% in aggregate net salesegate net sales

Cumulative net sales ¥1,566.0 billionCumulative operating income ¥67.0 billionOperating margin 4.3%

Phase I Results(April 1, 2006–March 31, 2009)

Phase I Results(April 1, 2006–March 31, 2009)

Summary of PhaseSummary of Phase III I (April 1, 2009(April 1, 2009––December 31, 2011)December 31, 2011)


● ●

●

■

●

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●■

●

■

●

■

▲■

▲

● Production Production ■ SalesSales▲ R&DR&D

United StatesUnited States■■Expanded passenger car tire plantExpanded passenger car tire plant■■Expanded hose plantExpanded hose plant

ChinaChina■■Built truckBuilt truck--andand--bus tire plant in bus tire plant in SuzhouSuzhou■■Established tire marketing company in ShanghaiEstablished tire marketing company in Shanghai■■Built conveyor belt plant in Shandong Built conveyor belt plant in Shandong ■■Expanded hose plant in Expanded hose plant in HangzhouHangzhou■■Expanded passenger car tire plant in Expanded passenger car tire plant in HangzhouHangzhou■■Established marketing company for diversified products in Established marketing company for diversified products in ShanghaiShanghai■■Began construction of R&D center in Began construction of R&D center in HangzhouHangzhou■■Began construction of hose plant in Began construction of hose plant in HangzhouHangzhou

ThailandThailand■■Expanded passenger car tire plantExpanded passenger car tire plant■■Established company to manage tire businessEstablished company to manage tire business■■Established tire marketing companyEstablished tire marketing company■■Expanded hose plantExpanded hose plant■■Opened proving ground Opened proving ground ■■Built plant to process natural rubberBuilt plant to process natural rubber■■Expanded passenger car tire plant furtherExpanded passenger car tire plant further

VietnamVietnamBuilt motorcycle tire plantBuilt motorcycle tire plant

BrazilBrazilEstablished Established company to company to manage tire manage tire businessbusiness

IndiaIndiaEstablished company to Established company to manage tire businessmanage tire business

GermanyGermanyEstablished marketing Established marketing company for company for diversified diversified productsproducts

PhilippinesPhilippinesExpanded passenger car tire plantExpanded passenger car tire plantExpanded passenger car tire plant furtherExpanded passenger car tire plant further

Summary of Phase II Summary of Phase II (cont(cont’’d.)d.)

RussiaRussiaBuilt passenger Built passenger

car tire plantcar tire plant

JapanJapan■■Expanded offExpanded off--thethe--road tire plant in road tire plant in OnomichiOnomichi■■Expanded passenger car tire plant in Expanded passenger car tire plant in ShinshiroShinshiro--MinamiMinami■■Expanded passenger car tire plant in Expanded passenger car tire plant in ShinshiroShinshiro--Minami furtherMinami further■■Began expansion work at hose plant in IbarakiBegan expansion work at hose plant in Ibaraki

Operations Established or Expanded during Operations Established or Expanded during Phase IPhase I and and Phase IIPhase II



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Expanded Tire Production CapacityExpanded Tire Production CapacityWe expanded our global production capacity a We expanded our global production capacity a modest 9%modest 9% during the three fiscal periods of during the three fiscal periods of Phase II. The expansion centered on China, mainly to serve domesPhase II. The expansion centered on China, mainly to serve domestic demand, and Thailand, tic demand, and Thailand, mainly to serve export markets. The overseas share of total capamainly to serve export markets. The overseas share of total capacity increased to city increased to 38%38%, from , from 34%34%

Dec. 31, March 31, March 31, March 31,2011 2011 2010 2009

Mie (TB and LT) 5,900 5,900 5,900 5,900Mishima (PC) 13,900 13,900 13,900 13,900Shinshiro (PC) 14,100 14,100 14,100 14,100Shinshiro-Minami (PC) 2,800 2,400 2,000 2,000

Japan total 36,700 36,300 35,900 35,900USA (PC) 6200 5600 5600 5,600USA (TB) 500 500 500 500Phillippines (PC) 7000 7000 6900 6,900China (PC) 5100 3100 3000 3,000China (TB) 340 340 340 200Thailand (PC and LT) 3200 2400 1900 1,800Thailand (TB) 350 350 350 350

Outside Japan total 22,690 19,290 18,590 18,35059,390 55,590 54,490 54,250

PC: Passenger car LT: Light truck TB: Truck and bus

Thousands of tires/year

Japan

OutsideJapan

Total


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Phase II Financial Results and Targets Phase II Financial Results and Targets ((¥ billion, percent))

ReferenceApril 2011– April–Dec. *Jan.–Dec. April 2010– April 2009–March 2012 2011 2011 March 2011 March 2010

Targets Results Results Results Results Net sales ¥550.0 ¥465.1 ¥557.8 ¥519.7 ¥466.4 Year on year 89.5% 107.3% 111.4% 90.2% Operating income ¥38.5 ¥26.3 ¥26.8 ¥29.5 ¥21.5 Percent of net sales 7.0% 5.7% 4.8% 5.7% 4.6% Ordinary income ¥20.7 ¥22.2 ¥23.4 ¥18.7 Percent of net sales 4.5% 4.0% 4.5% 4.0%* Amounts for January-March 2011 duplicate amounts included in fiscal results reported for April 2010-March 2011 fiscal year

¥/US$ ¥95 ¥79 ¥80 ¥86 ¥93¥/euro ¥125 ¥111 ¥111 ¥113 ¥131

ReferenceApril–Dec. *Jan.–Dec. April 2010– April 2009–

2011 2011 March 2011 March 2010- 5.4% 6.2% 4.6%

¥162.0 - ¥146.8 ¥154.7- 1.13 1.10 0.99

1.0 - 0.9 1.0Asset turnover ratio (times)Debt/equity ratio (times)

Averageexchange rates

Operating return on total assetsInterest-bearing debt


Qualitative Initiatives in Phase IIQualitative Initiatives in Phase IIOrganization and human resources Organization and human resources

••We inaugurated an We inaugurated an overseas training program for newly hired employees overseas training program for newly hired employees in 2009 to in 2009 to foster globally competent human resourcesfoster globally competent human resources

••We integrated our Japanese wholesaling companies for tires in JuWe integrated our Japanese wholesaling companies for tires in July 2009 as ly 2009 as Yokohama Yokohama Tire Japan Co., Ltd.Tire Japan Co., Ltd., to streamline our operations in tire marketing , to streamline our operations in tire marketing

••We integrated our Japanese marketing companies for industrial prWe integrated our Japanese marketing companies for industrial products in October 2010 oducts in October 2010 as as Yokohama Industrial Products Japan Co., Ltd.Yokohama Industrial Products Japan Co., Ltd., to sharpen our marketing focus in , to sharpen our marketing focus in that product sectorthat product sector

••We established an We established an electronic materials divisionelectronic materials division in April 2011 to maximize the earnings in April 2011 to maximize the earnings contribution of our promising product lines in that sectorcontribution of our promising product lines in that sector

••We established a subsidiary, We established a subsidiary, YokohamaYokohama Peer Support Peer Support Co., Ltd.Co., Ltd., in January 2012 to , in January 2012 to provide employment to disabled personsprovide employment to disabled persons

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Phase III


Phase IIIPhase III

Financial TargetsFinancial Targets


Net sales ¥1,451.2BOperating income ¥77.2BOperating margin 5.3%

Cumulative and Annual Targets for FY2012 to FY2014Cumulative and Annual Targets for FY2012 to FY2014Years ended December 31¥ billion, percentExchange rate assumptions in regard to Phase III: US$1 = ¥75, 1 euro = ¥95

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Phase III Financial TargetsPhase III Financial Targets

Net salesNet sales ¥¥1,800B1,800BOperating Operating incomeincome ¥¥150B150BOperating Operating marginmargin 8.3%8.3%

Phase I ResultsApril 2006–March 2009

Phase I ResultsPhase I ResultsApril 2006April 2006––March 2009March 2009

Phase II ResultsApril 2009–December 2011

Phase II ResultsPhase II ResultsApril 2009April 2009––December 2011December 2011

Phase III TargetsJanuary 2012–December 2014

Phase III TargetsJanuary 2012–December 2014

Phase III total FY2014 FY2013 FY2012 Net sales ¥1,800.0 ¥630.0 ¥595.0 ¥575.0 Year on year 105.9% 103.5% Operating income ¥150.0 ¥60.0 ¥50.0 ¥40.0 Percent of net sales 8.3% 9.5% 8.4% 7.0%

Net sales ¥1,566.0BOperating income ¥67.0BOperating margin 4.3%

¥ billion, percent



Phase III


Phase IIIPhase III

Issues and Themes in Phase IIIIssues and Themes in Phase III


Shape our business foundation to support a flexible response to changes in the business environment,

and lay the groundwork for resurgent growth in Phase IV

Shape our business foundation to support a flexible response Shape our business foundation to support a flexible response to changes in the business environment, to changes in the business environment,

and lay the groundwork for resurgent growth in Phase IVand lay the groundwork for resurgent growth in Phase IV

Forecast for the Business Environment in Phase IIIWorldwide

• The debt crisis in the European Union will undermine economic vitality there and could affect the global economy adversely

• The world’s principal emerging economies are poised to display resurgent vitality and continue growing over the medium term

Japan•Slowing economic growth worldwide and the persistently strong yen threaten to undermine Japan’s export momentum

•The rises scheduled for Japan’s national sales tax bode ill for domestic demand, though demandassociated with rebuilding in the regions affected by the March 2011 earthquake will stimulate GDP growth

Other •Raw material prices present the risk of continuing upward movement or of disruptive fluctuations

Issues that Had Become Manifest During Phase II•Growth in global tire demand left us with insufficient supply capacity•Growth in some sectors in our diversified operations was slower than our product and technological strengths warranted

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Phase III IssuesPhase III Issues


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•• Global financial crisisGlobal financial crisis•• Uncertain market outlookUncertain market outlook•• Weakening demandWeakening demand

•• Volatile raw material pricesVolatile raw material prices•• Severe threats to the natural environmentSevere threats to the natural environmentPhase II Phase II

April April 20092009––December 2011December 2011

•• Robust global demandRobust global demandPhase I Phase I April 2006April 2006––March 2009March 2009 Profitable GrowthProfitable GrowthProfitable Growth

Quality GrowthQuality GrowthQuality Growth

Robust and Responsive GrowthRobust and Responsive GrowthRobust and Responsive Growth

• Further reinforcement of our corporate robustness

•• Further reinforcement of Further reinforcement of our corporate robustnessour corporate robustness

Phase III Phase III January January 20122012––December 2014December 2014

• Responsiveness that will enable us to cope with change and risk in the business environment

•• Responsiveness that will enable us to cope with Responsiveness that will enable us to cope with change and risk in the business environmentchange and risk in the business environment

Phase III AimsPhase III Aims


Net sales

Operating income

¥ billion

Robust and Responsive Robust and Responsive GrowthGrowth

Phase I

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Changes in the business environment are likely to delay until 2019 or 2020 our attainment of our sales target of ¥1 trillionWe expect to attain on schedule our operating income target of ¥100 billion and to attain ahead of schedule our 10% target for operating return on sales

Changes in the business environment are likely to delay until 2019 or 2020 our attainment of our sales target of ¥1 trillionWe expect to attain on schedule our operating income target of ¥100 billion and to attain ahead of schedule our 10% target for operating return on sales

GD10 Phase IIPhase III

Phase IV

The Positioning of Phase III in Grand Design 100The Positioning of Phase III in Grand Design 100

Renewed growth focus

4,004

232

4,519

5,173

128

5,578

268

600

219

10,000

1,000

8,500

6,300

2002April–March fiscal years

20082005 2011Jan.–Dec. fiscal years

2014 2017 2019–2020



Phase III


Phase IIIPhase III

Growth Strategy in Phase IIIGrowth Strategy in Phase III


Fortify our operations to generate a strong cash flow, and invest heavily in expanding production capacity, especially in tires

Fortify our operations to generate a strong cash flow, and invesFortify our operations to generate a strong cash flow, and invest t heavily in expanding production capacity, especially in tiresheavily in expanding production capacity, especially in tires

Growth strategy: Tires•Undertake large-scale capital spending to increase our supply capacity•Deploy high-value-added products globally

Growth strategy: TiresGrowth strategy: Tires••Undertake largeUndertake large--scale capital spending to scale capital spending to increase our supply capacityincrease our supply capacity••Deploy highDeploy high--valuevalue--added products globallyadded products globally

Growth strategy: Diversified products•Build on three core technologies to assert leadership in selected product categories•Foster business in new market sectors

Growth strategy: Diversified productsGrowth strategy: Diversified products••Build on three core technologies to assert Build on three core technologies to assert leadership in selected product categoriesleadership in selected product categories••Foster business in new market sectorsFoster business in new market sectors

Corporate social responsibility•Continue working to maximize benefits for the natural environment, for society, and for individuals

Corporate social responsibilityCorporate social responsibility••Continue working to maximize benefits for the Continue working to maximize benefits for the natural environment, for society, and for natural environment, for society, and for individualsindividuals

Technology strategy•Develop technologies for safeguarding the earth, society, and individuals•Refine high-functionality tire technologies•Help achieve our corporate goal of supplying the best products at competitive prices and on time

Technology strategyTechnology strategy••Develop technologies for safeguarding the earth, Develop technologies for safeguarding the earth, society, and individualssociety, and individuals••Refine highRefine high--functionality tire technologiesfunctionality tire technologies••Help achieve our corporate goal of supplying the Help achieve our corporate goal of supplying the best products at competitive prices and on timebest products at competitive prices and on time

Strengthening our corporate foundation•Conduct companywide activities on a cross-functional basis to broaden the benefits of our Mudadori cost-cutting activities

Strengthening our corporate foundationStrengthening our corporate foundation••Conduct companywide activities on a crossConduct companywide activities on a cross--functional basis to broaden the benefits of our functional basis to broaden the benefits of our MudadoriMudadori costcost--cutting activities cutting activities

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Expand our supply capacity to keep up with demand in fast-growing economies

Expand our supply capacity to keep up with demand in fast-growing economies

Pursue operating return on sales of 10% by strengthening our cost competitiveness and our branding

Pursue operating return on sales of 10% by strengthening our cost competitiveness and our branding

Basic Approach in Phase IIIBasic Approach in Phase III



Phase III


Phase IIIPhase III

◆◆ Growth strategy: TiresGrowth strategy: Tires◆◆ Growth strategy: Diversified productsGrowth strategy: Diversified products◆◆ Technology strategy Technology strategy ◆◆ Reinforcing our corporate foundationReinforcing our corporate foundation◆◆ Corporate social responsibilityCorporate social responsibility


Asserting a Distinctive Presence in the Global Marketplace

Asserting a Distinctive Presence in Asserting a Distinctive Presence in the Global Marketplacethe Global Marketplace

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Overseas marketsExpand our supply capacity to serve growing demand in emerging economies and elsewhere, and achieve profitable growth

Overseas marketsExpand our supply capacity to serve growing demand in emerging economies and elsewhere, and achieve profitable growth

JapanAmid downward-trending demand, bolster our competitiveness by strengthening our capabilities in technology and in product development

JapanAmid downward-trending demand, bolster our competitiveness by strengthening our capabilities in technology and in product development

Consumer Develop and deploy tires that are the best in their class in regard to fuel economy and to functionality

Commercial Assert original technological strengths and establish lifetime support

Consumer Develop and deploy tires that are the best in their class in regard to fuel economy and to functionality

Commercial Assert original technological strengths and establish lifetime support

Localized R&D• Test course in Thailand• R&D center in China• Other

Local integrationWork toward serving local demand with local production in principal markets

Supply chain managementComplete improvements in Japan and tackle similar improvements worldwide

Growth Strategy: TiresGrowth Strategy: Tires


Fulfilling Our Phase III Plans for Fortifying Production Capacity

Fulfilling Our Phase III Plans for Fortifying Fulfilling Our Phase III Plans for Fortifying Production CapacityProduction Capacity

Increase our annual production capacity by about 7 million tiresIncrease our annual production capacity by about 7 million tires, mainly by . . . , mainly by . . . Expanding our local production capacity for serving local demandExpanding our local production capacity for serving local demand in Russia and Chinain Russia and ChinaExpanding production capacity at our export platforms in the PhiExpanding production capacity at our export platforms in the Philippines and Thailand lippines and Thailand

Raise the overseas share of our global production capacity to 45Raise the overseas share of our global production capacity to 45%%

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Growth Strategy: Tires Growth Strategy: Tires (cont(cont’’d.)d.)

Dec. 31, Dec. 31, Dec. 31,2013 2012 2011

Mie (TB and LT) 5,900 5,900 5,900 5,900Mishima (PC) 13,900 13,900 13,900 13,900Shinshiro (PC) 14,100 14,100 14,100 14,100Shinshiro-Minami (PC) 2,800 2,800 2,800 2,800

Japan total 36,700 55% 36,700 36,700 36,700USA (PC) 6,200 6,200 6,200 6200USA (TB) 600 600 580 500Phillippines (PC) 10,000 8,000 7,000 7000China (PC) 6,500 5,100 5,100 5100China (TB) 340 340 340 340Thailand (PC and LT) 4,000 4,000 4,000 3200Thailand (TB) 400 350 350 350Russia (PC) 1,600 1,400 700 -

Outside Japan total 29,640 45% 25,990 24,270 22,690Total 66,340 100% 62,690 60,970 59,390

PC: Passenger car LT: Light truck TB: Truck and bus

Thousands of tires/year Dec. 31,2014

Japan

OutsideJapan


Increasing the Pace of Growth in Production Capacity in Phase IV

Increasing the Pace of Growth in Production Increasing the Pace of Growth in Production Capacity in Phase IVCapacity in Phase IV

In addition to the 7In addition to the 7--millionmillion--tire increase in annual production tire capacity that we plan intire increase in annual production tire capacity that we plan inPhase III, we plan to increase our annual production capacity byPhase III, we plan to increase our annual production capacity by a further 20 million tires in a further 20 million tires in Phase IV. Phase IV. We will We will allocate allocate ¥¥140 billion to capital spending 140 billion to capital spending for that purpose in Phase III. for that purpose in Phase III.

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New tire plant candidatesSites in China, India, the United States, and Latin AmericaPlant-expansion candidatesPhilippine, Thai, Russian, and Vietnamese plants

2011 2014 2017

Annual production capacity(Million tires)


5959 66668686

+7 million+7 million +20 million+20 million

38% 45%

58%

Overseasshare


Promote all products under Promote all products under our corporateour corporate--namesake brandnamesake brand

Deploy distinctive, highDeploy distinctive, high--value products under value products under focused brandsfocused brands

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Deploying High-Value-Added Products Globally in the Consumer Sector

Deploying HighDeploying High--ValueValue--Added Products Globally Added Products Globally in the Consumer Sectorin the Consumer Sector

Raise our market profile by winning Raise our market profile by winning factory fitments on factory fitments on globally prominent vehicle modelsglobally prominent vehicle models

High-performance flagship brand Environmentally oriented tires

Winter tires

Sport-utility vehicle tires



Deploying High-Value-Added Products Globally in the Commercial Sector

Deploying HighDeploying High--ValueValue--Added Products Globally Added Products Globally in the Commercial Sectorin the Commercial Sector

•• Promote Promote large tires for offlarge tires for off--thethe--road equipment road equipment in nations that in nations that are large producers of mineral oresare large producers of mineral ores

•• Devote special effort to promoting radial tires in sizes of Devote special effort to promoting radial tires in sizes of 49 inches and larger49 inches and larger

•• Expand business in Expand business in advancedadvanced--functionality tires functionality tires for trucks and for trucks and buses, such as buses, such as ultralowultralow--profile tiresprofile tires, that incorporate , that incorporate original original technologytechnology

•• Expand business in Expand business in retreaded tiresretreaded tires for trucks and buses and for for trucks and buses and for light truckslight trucks

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Phase III


Phase IIIPhase III



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Transcend traditional product categories in asserting market leaTranscend traditional product categories in asserting market leadership dership in products based on in products based on three core technologiesthree core technologies

CarryingCarrying AffixingAffixing

BufferingBuffering

Conveyor belts

Solid loads Fluid loads (liquid and gaseous)

High-pressure hoses

Water tanks

Continue to Continue to realign our manufacturing operations in Japan realign our manufacturing operations in Japan and to and to expand manufacturing overseasexpand manufacturing overseas

Growth Strategy: Diversified ProductsGrowth Strategy: Diversified Products

Asserting Leadership in Carrying, Affixing, and BufferingAsserting Leadership in Carrying, Affixing, and BufferingAsserting Leadership in Carrying, Affixing, and Buffering

Construction sealants

Window sealants Hard coatings

Rubber bearings Wheelchair cushions Marine fenders


Cultivating Business OpportunitiesCultivating Business OpportunitiesCultivating Business Opportunities

Generate business opportunitiesGenerate business opportunities by applying and combining by applying and combining telecommunications and telecommunications and measurement technologies measurement technologies innovativelyinnovatively

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Growth Strategy: Diversified Products Growth Strategy: Diversified Products (cont(cont’’d.)d.)

New possibilities in sporting goods and New possibilities in sporting goods and related servicesrelated services

New valueNew value--added in marine productsadded in marine products

Maneuvering-support system for ships Diagnostic system for golf swings



Phase III


Phase IIIPhase III



Contribute toward protecting the global environment through advaContribute toward protecting the global environment through advances in reducing rolling nces in reducing rolling resistance and in reducing tire weight. And resistance and in reducing tire weight. And safeguard society and individuals safeguard society and individuals in in accordance with the accordance with the BluEarthBluEarth conceptconcept

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Safeguarding the Earth, Society, and IndividualsSafeguarding the Earth, Society, and IndividualsSafeguarding the Earth, Society, and Individuals

Technology StrategyTechnology Strategy

Noise • Reduce pass-by noise outside the vehicle and road noise inside the vehicle

Aerodynamics • Conduct wind-tunnel testing and computer simulations to minimize tires’ air drag

• Use our Advanced Inner Liner, which minimizes air seepage, with a broadening range of tires

Environmental quality• Develop and deploy technologies for conserving energy and reducing adverse environmental impact

• Develop natural rubber in cooperation with SongklaUniversity, in Thailand, for contributing to environmental quality and to community vitality


Support our quest for Support our quest for safer and moresafer and more--enjoyable driving enjoyable driving by strengthening our capabilities in by strengthening our capabilities in rubber compounding and in developing tread patterns and tire prorubber compounding and in developing tread patterns and tire profiles. Make the most of files. Make the most of analytical and reanalytical and re--creation technologies for creation technologies for multiscalarmultiscalar simulationssimulations, and supplement our , and supplement our efforts by tapping thirdefforts by tapping third--party resources, such as Japanparty resources, such as Japan’’s s SPringSPring--8 synchrotron radiation 8 synchrotron radiation facility facility and and K Computer supercomputing projectK Computer supercomputing project

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Refining High-Functionality TechnologiesRefining HighRefining High--Functionality TechnologiesFunctionality Technologies

Technology Strategy Technology Strategy (cont(cont’’d.)d.)

•• Elucidate the mechanism of Elucidate the mechanism of friction and wearfriction and wear•• Improve Improve overall handling overall handling and and wetwet--surface surface performanceperformance

•• Improve Improve performance on snow and iceperformance on snow and ice

Image rendering of molecular structure

Photo courtesy of RIKEN/JASRI Photo courtesy of RIKEN/JASRI

© RIKEN/JASRI

“Spring-8” Hyogo, Japan© RIKEN/JASRI


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New R&D center in Hangzhou, China

Fortify our ability to offer products of value to customers by sFortify our ability to offer products of value to customers by strengthening our trengthening our product product planning planning and development functions and by undertaking rigorous and development functions and by undertaking rigorous cost cuttingcost cutting. .

Reinforce our ability to offer valuable products at competitive Reinforce our ability to offer valuable products at competitive prices and in a timely manner by prices and in a timely manner by bolstering our capabilities in bolstering our capabilities in creating basic technologiescreating basic technologies, in , in converting those converting those technologies into productstechnologies into products, and in , and in moving products into mass productionmoving products into mass production. .

Technology Strategy Technology Strategy (cont(cont’’d.)d.)

Delivering the Best Products at Competitive Prices and On Time

Delivering the Best Products at Competitive Delivering the Best Products at Competitive Prices and On TimePrices and On Time

•• Heighten our competence in market analysis and Heighten our competence in market analysis and product planningproduct planning

•• Build Build a global framework for developing and a global framework for developing and evaluating productsevaluating products

Establish an R&D center in ChinaEstablish an R&D center in China•• Develop manufacturing processes that are optimally Develop manufacturing processes that are optimally suited to product and market strategiessuited to product and market strategies

•• Nurture superior technical personnel and work Nurture superior technical personnel and work systematically systematically to ensure the transfer of skills and knowto ensure the transfer of skills and know--how from one how from one generation to the nextgeneration to the next



Phase III


Phase IIIPhase III



We inaugurated our We inaugurated our MudadoriMudadori activities in 2006, the first year of Phase I of Grand Design 10activities in 2006, the first year of Phase I of Grand Design 100. 0. The activities are a program for tapping employee initiative in The activities are a program for tapping employee initiative in identifying and acting on identifying and acting on opportunities for cutting costs. They generated opportunities for cutting costs. They generated aggregate savings of aggregate savings of ¥¥51.5 billion 51.5 billion in the six in the six years of Phase I and Phase II of Grand Design 100years of Phase I and Phase II of Grand Design 100

In Phase III of Grand Design 100, we are supplementing the ongoiIn Phase III of Grand Design 100, we are supplementing the ongoing ng MudadoriMudadori program with program with MudadoriMudadori projects for projects for tackling designated priority themestackling designated priority themes

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Taking Our Mudadori Activities to the Next StageTaking Our Taking Our MudadoriMudadori Activities to the Next StageActivities to the Next Stage

Reinforcing Our Corporate FoundationReinforcing Our Corporate Foundation

•• Management designates the priority themesManagement designates the priority themes•• Vice presidents and other directors assume leadership of the proVice presidents and other directors assume leadership of the project teamsject teams•• The teams tackle their projects on a companywide, crossThe teams tackle their projects on a companywide, cross--functional basisfunctional basis



Phase III


Phase IIIPhase III



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We will focus on seven themes in Phase III of Grand Design 100 iWe will focus on seven themes in Phase III of Grand Design 100 in regard to fulfilling our n regard to fulfilling our corporate social responsibility, based on the ISO 26000 guidelincorporate social responsibility, based on the ISO 26000 guidelineses

Environmental protection

Environmental Environmental protectionprotection

Corporate Social ResponsibilityCorporate Social Responsibility

Building a Trusted Identity as a Contributing Member of the Global Community

Building a Trusted Identity as a Contributing Building a Trusted Identity as a Contributing Member of the Global CommunityMember of the Global Community

Deliver the best products at competitive prices and on time

Assert world-class strengths in technologies for protecting the environment

Foster a customer-oriented corporate culture that honors rigorous standards of corporate ethics

Deliver Deliver the best products at competitive prices and on timethe best products at competitive prices and on time

Assert worldAssert world--class strengths in technologies for protecting the environmentclass strengths in technologies for protecting the environment

Foster a customerFoster a customer--oriented corporate culture that honors rigorous standards of oriented corporate culture that honors rigorous standards of corporate ethicscorporate ethics

Grand Design 100 Basic Policy

Workplace safetyWorkplace safetyWorkplace safety Safety and quality in products and service

Safety and quality Safety and quality in products and servicein products and service

Human rights and labor practices

Human rights and Human rights and labor practiceslabor practices

Supplier relationsSupplier relationsSupplier relations Stakeholder communicationStakeholder communicationStakeholder communication Corporate governance and ethical compliance

Corporate governance and ethical Corporate governance and ethical compliancecompliance


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Environmental protection

Environmental Environmental protectionprotection

Workplace safetyWorkplace safetyWorkplace safety

Corporate Social Responsibility Corporate Social Responsibility (cont(cont’’d.)d.)

Special Emphases in Phase III (partial listing)

•• Foster Foster a safetya safety--oriented corporate cultureoriented corporate culture with an eye to with an eye to eliminating accidentseliminating accidents

•• Undertake thoroughgoing and unflagging Undertake thoroughgoing and unflagging risk assessmentrisk assessment

•• Develop Develop products that minimize environmental impactproducts that minimize environmental impact•• Work to eliminate landfill waste at plantsWork to eliminate landfill waste at plants•• Work to help Work to help preserve biodiversitypreserve biodiversity

We are taking measures to preserve biodiversity in the vicinitieWe are taking measures to preserve biodiversity in the vicinities of s of our operations around the worldour operations around the world

Products in our BluEarth series of environmentally attuned tires

Biological survey work under way near our Mie Plant, in Japan


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Stakeholder communicationStakeholder Stakeholder

communicationcommunication

Corporate governance and

ethical compliance

Corporate Corporate governance and governance and

ethical complianceethical compliance

Corporate Social Responsibility Corporate Social Responsibility (cont(cont’’d.)d.)

Special Emphases in Phase III (partial listing)

Press Press ahead with tree plantings worldwide in ahead with tree plantings worldwide in the Yokohama the Yokohama Forever Forest projectForever Forest project

Plant 500,000 trees at plants and other operations worldwidePlant 500,000 trees at plants and other operations worldwideConsider working with Yokohama National UniversityConsider working with Yokohama National University’’s professor s professor emeritus Akira emeritus Akira MiyawakiMiyawaki in in a project to develop lifesaving forest a project to develop lifesaving forest sylvan breakwaterssylvan breakwaters in areas affected by the March 2011 tsunamiin areas affected by the March 2011 tsunami

Support Support the relief effort the relief effort in areas affected by the Great East in areas affected by the Great East Japan EarthquakeJapan Earthquake

Dispatch employee volunteers and, in Phase III of Grand Design 1Dispatch employee volunteers and, in Phase III of Grand Design 100, 00, provide support for provide support for economic and social renewal in the affected areas economic and social renewal in the affected areas

Globalize our framework Globalize our framework for ensuring compliance with rigorous standards for ensuring compliance with rigorous standards of corporate ethicsof corporate ethics

Growing seedlings from acorns collected at site of tsunami in northeastern Japan

Bucket brigade clearing rubble left by Great East Japan Earthquake



Phase III


Phase IIIPhase III

Financial Targets for 2014Financial Targets for 2014


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Financial Targets for 2014 and Phase IIIFinancial Targets for 2014 and Phase III¥ billion, percentExchange rate assumptions: US$1 = ¥75, 1 euro = ¥95

Phase III total FY2014 FY2013 FY2012 Net sales ¥1,800.0 ¥630.0 ¥595.0 ¥575.0 Year on year 105.9% 103.5% Operating income ¥150.0 ¥60.0 ¥50.0 ¥40.0 Percent of net sales 8.3% 9.5% 8.4% 7.0%

Operating return on total assets More than 9.0%

Interest-bearing debt Less than ¥220.0

Asset turnover ratio (times)

Debt/equity ratio (times) Less than 1

Decmber 31, 2014

More than 1



Phase III


Phase IIIPhase III

Robust and Responsive GrowthRobust and Responsive GrowthNothing in this presentation constitutes a recommendation or invitation to sell or buy shares of

The Yokohama Rubber Co., Ltd. All plans, projections, and other content described in this presentation that are not historical

results reflect judgments based on presently available information, and they are subject to known and unknown risks and to other unforeseeable events.

The company’s actual performance could therefore differ significantly from management’s expectations.

FY2011 Operating and Financial Results and Medium-Term ...

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