NGK Insulators, Ltd. Oct. 2008

1

1stH Result ¥ Bil.

■Sales

■Operating Income ■Net Income

173.7 156.0

152.0

152.3

34.9 30.0

28.0

29.0

25.8 15.5

Sep.'07

(Result)

Sep.'08Est. Sep.'08Est.

(May'08)

(Sep'08)

Sep.'08

(Result)

Sep.'07 (Result)

■Points of 1stH Result Ø

Sep'08Est. Sep'08Est. (May'08) (Sep'08)

Sep.'08 (Result)

Sep.'07 (Result)

18.5

Sep.'08Est. Sep.'08Est. (May'08) (Sep'08)

18.8

Sep.'08 (Result)

（Unit：¥ Bil.）

Sales & Income decreased from the 1stH of previous year Due to U.S economic slow down and high crude oil prices, sales of automotive related products (Honeycomb & DPF) dropped off. Weaker demand for ceramic components for Semi-conductor production equipment. Negative impact of higher prices of raw materials. 【Change from the 1stH of previous year】 Sales △21（Power△1, Ceramic products△4, Electronics△4, Engineering△12） Op. Income △6（Power△1, Ceramic products△4, Electronics△2, Engineering+1） Impact of stronger yen (106¥/$,162¥/ER)

Ø

Sales △3

Op.Income △2

1stH Sales & Income increased from the September forecast 【Change】 Sales

+0.3 （Power+0.6, Ceramic products△0.3） Op. Income + 1.0（Power+0.6, Ceramic products△0.2, Electronics+0.6）

■Forecast for Fiscal year Ended March 2009 Ø Ø

Strong demand for insulators in China and NAS batteries. Weaker demand for automotive related products and ceramic components for Semi-conductor production equipment will continue for the full year.

2

Net Sales of NGK After consolidation elimination

¥ Bil.

365

350

320

300

284

250

53

200

68

45

(Engineering)

44

315

310

75

71

162

158

155

144

Ceramic Products

82

84

84

Power

78

295 Electronics

68

73

150

127 96

100 50

68

75

81

03/'06

03/'07

03/'08

0 03/'09Est. 03/'09Est. 03/'09Est. （Apr.’08)

Income of NGK

（Sep’08)

（Oct.’08)

‹Major extraordinary items ;

03/’08 ¥10.0Bil. Gain on sales of securities

¥ Bil. Operating Income 69.4 Net Income

70 60

52.0

50 40

31.3

30

58.0 50.0

46.0

29.4

42.0 34.0

34.5

03/'09Est.

03/'09Est.

30.0

16.5

20 10 0 annual average



03/'06



03/'07



03/'08



03/'09Est.

（Apr’08)

（Sep’08)

（Oct’08)







3

Factors of Sales Variation ¥ Bil. 400 365

Exclusion from Consolidation

350 FX Rate

-40

Others

-11

300

250

Automobile related

-13

295

-6

03/'09

03/'08 Revised Estimate (Oct.’08)

Factors of Op. Income Variation ¥ Bil. 75 70

69.4

Exclusion from Consolidation FX Rate

65

-2.5

Depreciation

-4.5

60

Automobile related

-1.4

55 50 Others

45

-3.4

40 35

42.0

-15.6

03/'08

03/'09 Revised Estimate (Oct.’08)

4

Power Business Sales & Operating Income ¥Bil.

After consolidation elimination

Sales

100 80

Op. Income Ratio

75

68

40

84

84

（7.5）

（7.5）

8.9%

8.9%

（6.4）

（1.9）

60

81

（8.7）

( )Op.Income 16.0

10.7% 8.5%

11.0

6.0 2.8% 1.0

20 0

-4.0 03/'06

03/'07

03/'08

03/'09Est. （Sep. ’08)

03/'09Est. （Oct.’08)

Overview Ø

Insulators - Overseas demand in China and domestic demand for 500KV are active.

Ø

Demand for NAS (sodium-sulfur) batteries is expected to increase in overseas and domestic market. NGK decided to increase the production capacity from 90MW to 150MW.

Tasks Ø

Insulators : Reinforce production base and improve profitability

・Keep up with expanding Chinese market (Need for investment in substation plant in China.)

・Promote replacement of insulators in Japan. Ø

NAS batteries : Enlarge business & Improve profitability

・Capture domestic demand for wind power generation and reinforce overseas business.

・Promote cost reduction

5

Sales & Income of NAS batteries business ¥Bil.

Sales(Export) Sales(Domestic) Op.income (right axis)

30.0

30.0 22.0

20.0

5.0

17.0

3.0

10.0

6.3 0.0

10.2

6.3

13.3

1.5

2.0 0.0

0.6 -0.7

-10.0

-2.3 -3.1

-20.0

-5.0 03/'05

03/'06

03/'07

03/'08

03/'09Est. 03/'10Est. 03/'11Est.

Overview / Tasks in Power Business - NAS batteries Ø

NAS (sodium-sulfur) batteries - Demand is increasing ¾Domestic market Capture demand for application of renewable energy. ¾Overseas market Various demand, not only for renewable energy but also for Load leveling and for Peak saving, has been appearing. To correspond to growing demand, NGK has decided to expand its production capacity from 90MW to 150MW with investment of 11.3 billion yen.

6

Ceramic Products Business Sales & Operating Income ¥Bil. 180 160

After consolidation elimination

Sales Op. Income Ratio ( )Op.Income 162 （43.8）

100 80

（33.0）

40.0

144 （26.5）

126

140 120

155

30.0

（31.0）

96

（17.7）

35.0

25.0

27.0% 24.5%

20.0

21.3% 18.5%

18.5%

60

15.0 10.0

40

5.0

20

0.0

0 03/'06

03/'07

03/'08

03/'09Est. （Sep’08)

03/'09Est. （Oct.’08)

Overview Ø

Lower automobile sales due to economic slowdown in US SiC-DPF, Automotive catalytic converters (“Honeycomb Ceramics”), Cd-DPF and Large-size honeycombs (LSH) Demand in US substantially decreased.

Ø

Emission regulations being tightened worldwide Automotive catalytic converters (“Honeycomb Ceramics”) Demand is expanding due to an increase in automotive sales in emerging countries. Cd-DPF & Large-size honeycombs (LSH) Greater demand is expected in 2010 and after to meet tighter regulations for truck and construction equipment.

Tasks Ø Ø

Cd-DPF & LSH Establish worldwide production framework. SiC-DPF Discrimination from other materials in terms of performance & price.

7

Sales Forecast of Ceramic Products Business After consolidation elimination

¥Bil.

Sales of Other products Sales of Honeycomb ceramics Sales of Cd-DPF & Large size Honeycomb Sales of SiC-DPF

150

162 144

34

126

38

27

96

100

61

23

53

56 20

50

53

16 12

Diesel related

47 8 13

31

03/'06

03/'07

0

products

37

03/'08.

03/'09Est. （Oct.’08)

Emission Regulations for Diesel & Technical Trends 2004 Japan Passenger US car Europe

Truck

Japan US Europe

2005

2006

2007

2008

2009

2010

EuroⅢ

New Long Term Regulation US’04 US’07 EuroⅣ

Post New Long Term Regulation US’10 EuroⅥ

EuroⅤ

2014

EuroⅥ

Same level as Tier4 & Tier4-b Tier4-a Tier4-b Step-3 Step-4 DOC +DPF

DOC

DOC +DPF

DOC+DPF+SCR

DOC+DPF

Light, Medium

DOC+DPF+SCR

DOC+SCR

Heavy

US

2013

EuroⅢ

Passenger car

Truck

2012

Post New Long Term Regulation Tier2/Bin#5 EuroⅤ

Japan Off-road US Europe

Japan

2011

New Long Term Regulation Tier2/Bin#8 EuroⅣ

DOC

Europe

(Light Truck: DOC+NAC+DPF)

DOC+DPF

DOC+DPF+SCR

DOC+DPF+SCR

DOC+SCR

Off-road

DOC+DPF DOC：Diesel Oxidation Catalyst

SCR：Selective Catalyst Reduction

DOC+DPF+SCR

NAC：NOx Adsorber Catalyst）

8

Electronics Business Sales & Operating Income After consolidation elimination

¥Bil.

Sales

100 80

68

（10.1）

60

Op. Income Ratio

73 （13.1） 17.8%

78

（13.5）

( )Op.Income

71

（9.5）

68

（8.0）

17.4%

15.0%

13.4% 11.9%

40 20 0 03/'06

03/'07

03/'08

03/'09Est. （Sep’08)

03/'09Est. （Oct’08)

Overview “Beryllium Copper”: Cellular phone market shows signs of slowdown. Ø “Ceramic Components for Semi-conductor Production Equipment”: Semi-conductor maker reduces investment for semi-conductor production. Ø “Ceramic Actuators for Color Printer Heads”: Overview of demand is not clear due to U.S economic slowdown although sales of ink-jet printers by SEIKO EPSON increased. Ø “Soshin Electric Products”: Market for Electronic Components is shrinking. Ø

Tasks Ø

Promote creation of new products and expand sales. (High-performance ceramics actuators, Electrostatic Chuck and Lighting products etc.)

9

Semi-annual Sales and Operating Income by Segment After consolidation elimination

( ¥ Bil.) 03/’09 Est. (Oct.’08)

03/’08Actual

Total

1st H

2nd H

Total

1st H

2nd H

Total

173.7

191.2

364.9

152.3

142.7

295.0

Operating Income

34.9

34.5

69.4

29.0

13.0

42.0

OI Margin

20%

18%

19%

19%

9%

14%

37.5

43.8

81.3

36.1

47.9

84.0

4.0

4.7

8.7

3.1

4.4

7.5

11%

11%

11%

9%

9%

9%

Sales

Power Business

Sales Operating Income

OI Margin

Ceramic Products Business

03/’08 Actual 1st H

2nd H

03/’09 Est. (Oct.’08) Total

Sales

83.9

78.1

162.0

Operating Income

23.6

20.2

43.8

OI Margin

28%

26%

40.5

1st H

2nd H

Total

27%

79.7 19.8 25%

63.8 6.7 11%

143.5 26.5 18%

370

77.5

36.5

31.0

67.5

8.1

5.4

13.5

6.1

1.9

8.0

20%

15%

17%

17%

6%

12%

Sales

11.8

32.3

44.1

Operating Income

-0.9

4.1

3.2

-

13%

7%

Electronics Business

Sales Operating Income

OI Margin Engineering Business

OI Margin

10

Summary of Cash Flow (¥ Bil.) 03/’07 03/’08 03/’09Est. Income before taxes Income taxes paid Depreciation Increase in Acct. Rec. Increase / Decrease in inventories

Other changes

Operating Activities Property, plant & equip. Disposal, investment securities Other investments

Investing Activities

51.3 -17.0 23.8 -3.8 -4.1 -11.9 38.3

78.2 -21.6 26.3 3.4 -7.1 -12.5 66.7

41.0 -24.6 27.5 0.2 -0.3 -9.8 34.0

-24.2 4.7 -1.8 -21.3

-21.0 1.1 3.2 -16.7

-40.0 0.0 -0.5 -40.5

03/’07

03/’08 03/’09Est.

Acquisition of treasury stock

-0.3

-0.6

-13.7

Cash dividends Redemption of bonds Proceeds from new borrowings

-4.7 6.4

-6.7 -

-7.4 -10.0 -

Other

-0.5

-2.8

-2.9

Financing Activities

0.9

-10.1

-34.0

Effect of exchange rate change

1.3

1.6

-

Net Changes in Cash & eq.

19.2

41.5

-40.5

-

-

-4.3

78.3

119.8

75.0

Change in consolidated subsidiaries

Cash & eq. at End of Year

11

R&D Input

(¥ Bil.)

Consolidated R&D Consolidated R&D/Sales Ratio

Parent R&D Parent R&D/Sales Ratio

5.7% 5.2% 4.7%

4.9%

4.7%

4.4% 4.6%

3.6% 4.0%

12.2 10.5

03/'05

11.3 9.6

03/'06

3.8% 12.2 10.6

13.2

03/'07

10.6

03/'08

13.0 11.0

03/'09Est. （Sep.’08)

Capital Expenditures ¥Bil. 45

41

Corporate Electronics Bus.

2

35

31

5 0

30

1 2 0

26

20

17

3 3 1

15

24

25

19

2 4

24

17

26

4

3

3

03/'05

03/'06

03/'07

28

21 2 4 1

26

9

5 0

40

Depreciation and amortization

31

10

42（May ’08 ）

Engineering Bus. Ceramic Prod.Bus. Power Bus.

40

6 03/'08

8 03/'09Est. （Sep.’08)

12

Number of Outstanding Shares Mar.’96 Mar.’97 Mar.’98 Mar.’99 Mar.’00 Mar.’01 Mar.’02 Mar.’03 Mar.’07 Mar.’08 Sep.’08

355 Mil. Shares -10 Buyback of Stocks 345 +29 Exercise of Warrants -10 Buyback of Stocks 364 -10 Buyback of Stocks 354 -15 Buyback of Stocks 339 +37 Conversion of CBs -10 Buyback of Stocks 367 -10 Buyback of Stocks 357 -10 Buyback of Stocks 346 -8.4 Buyback of Stocks 337 -0.2 Buyback of Stocks from subsidiary 337 -5 Buyback of Stocks 332

Accumulated Buyback 88.6Mil. Shares ¥99.0Bil. NGK decided to buyback stock in 2nd half with 5 million shares or 6 billion yen as ceiling. （from end of 08’/10)

ROE & EPS %

¥

136.36

140

EPS

120

16

ROE

14

15.3% 87.23

100 80

90.31

10

10.8% 48.99

60 40

34.75

20

5.1%

12

9.4%

8 6

6.7%

4

0

2 03/'05

03/'06

03/'07

03/'08

03/'09Est. （Sep.’08)

13

Disclaimer : This material is not an offer or a solicitation of an offer to buy or sell securities. Please note that although NGK has made careful efforts to update the contents in order to ensure the accuracy, this material may not provide or reflect the latest information. NGK assumes no responsibility for losses that result from use of this material. Please be aware that decisions regarding investing are the responsibility of users themselves.

NGK Insulators, Ltd. 2-56, Suda-cho, Mizuho-ku, Nagoya 467-8530, Japan Finance & Accounting Department Tel. : + 81-52-872-7186 Fax. : + 81-52-872-7160 E-mail : [email protected] NGK Homepage Address (English Version) ： http://www.ngk.co.jp/english/ir/index.html

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