Management Policy - EBARA CORPORATION

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Basic Policies
The corporate philosophy of the Ebara Group is “to contribute broadly to society by offering superior technologies and optimal services in the areas of water, the air, and the environment.” As a manufacturer of industrial machinery, the EBARA Group will grasp and anticipate customer needs, manufacture and sell superior products, and provide high-quality support to its customers with the aims of thereby contributing to society and attaining the further development in the Group as a whole.
　In addition, the Group’s basic management policy is to endeavor to strengthen its management base and increase profitability and increase its corporate value and the value of its shares by managing its corporate resources efficiently.

Target Management Performance Measures
The EBARA Group has prepared a medium-term management plan, E-Plan2013, which began in May 2011 and will conclude its final fiscal year in March 2014. Under this plan, the Group has positioned return on invested capital (ROIC)* as its key management indicator and is taking steps toward improving it. In addition, the Group positioned the debt-to-equity (D/E) ratio (a measure of financial stability) and the return on shareholders’ equity ratio (ROE), a measure of efficiency, as key indicators and is working to attain a proper balance between the two. In view of these corporate objectives, each business unit is positioning its ratio of operating income to net sales as a key management indicator, and is working to maximize this ratio.

　* Return on invested capital (ROIC)
　　　= Net income/ Invested capital = Net income / (Interest bearing deb + Shareholders’equity)
　　Key management indicator
　　　ROIC: 8.0% or more
　　　Ratio of operating income to net sales: 9.0% or more

Medium-to-Long Term Management Policies
During the period of the plan, the Group has established an overall policy that will involve the implementation of the following four policies.

1)	EBARA will promote “producing locally and consuming locally” in priority areas and establish an optimally located production and supply system from a global perspective.
		EBARA will grasp the currents of change that are the motive power for growth of emerging countries and will introduce the measures for strengthening its competitiveness in the world economy. Specifically, EBARA will shift from the previous approach it has taken to developing overseas operations, which was focused on manufacturing in Japan and exporting to other countries, to an approach under which it will manufacture in the locations that are optimal from a global perspective, taking logistics capabilities into account. As part of this shift in approach, in the areas selected as strategic priority regions (China, Southeast Asia, the Middle East, India, Brazil, and the United States), mainly from among the emerging areas, EBARA will establish and expand sales and service functions as well as production capabilities based on the characteristics of these regions. EBARA will also implement a local strategy based on the concept of “producing locally and consuming locally.” At the same time, by having these bases work together organically, EBARA will create a Group network that will make possible the development of other markets without passing through Japan.
2)	EBARA will work to enter new markets by expanding core business domains.
		Among the Group’s five core businesses (pumps business, compressors and turbines business, precision machinery business, environment business, and chillers business), EBARA will position the first three as businesses that will pursue growth and the remaining two as businesses that will attain stability. In each of these businesses, EBARA will implement thoroughgoing measures to maximize corporate value. 　In the three businesses positioned as growth areas, namely: the pumps business (including custom pumps, standard pumps, as well as fluid and gas pumping equipment), compressors and turbines (including compressors and fans), and precision machinery, EBARA will implement all possible measures to increase the efficiency of the current business base and will expand into new business domains that it has not yet developed but are viewed as an extension of the current business domains. To this end, in addition to the development of new products and markets that use the Group’s existing resources, EBARA will draw on resources outside the Group through M&A and other means, making the needed strategic investments. By fiscal 2015, EBARA will aim to increase sales of these three businesses to 1.5 times or more over their current levels, and will finish making improvements in its business base during the period covered by this medium-term plan. 　In the remaining two core businesses where EBARA will aim for stability, in the engineering business, it will position the O&M business as the core profit base and aim for solid growth in the EPC business. In the chillers business, EBARA will expand its production base in China and broaden its product portfolio through the integration of Group companies. Thereby, it will be able to tap into industrial demand in the expanding Chinese market and capture rapidly growing demand for more-pleasant living environments in other emerging countries.
3)	EBARA will aim to optimize “monozukuri” (manufacturing) processes through scientific approaches.
		The processing chain of “monozukuri” (manufacturing) includes marketing, development, sales, planning, procurement, manufacturing, inspection, and logistics. Within this chain, EBARA will work toward optimization by promoting a shift from implicit (unwritten) knowledge to formal (written and transferable) knowledge as well as by adopting logical and scientific approaches to thoroughly review and improve all processes. EBARA will put into place functions for productivity reform throughout the Group, and, with key domestic bases as the core, it will implement a productivity reform movement at all Group bases, including those located overseas. As a result of this, EBARA will strive to minimize costs, the level of inventories, and lead times as it also meets the requirements of its customers. During the time frame of this medium-term plan, EBARA will aim to create the most-efficient production systems in its industries.
4)	EBARA will expand the functions of the corporate headquarters in keeping with the globalization of business domains.
		As EBARA expands its business operations to the global market through Group bases around the world, it will secure the necessary resources for sustainable growth of the Group as a whole. It will also be necessary to develop the governance systems appropriate for a company expanding its activities globally and establish Groupwide operating systems, including global human resource development programs. To realize these objectives, EBARA will strengthen the functions of its Group headquarters and Global headquarters.