For its operating areas in Asia, Europe and the Americas, HORIBA maintains a regional balance in sales, production and other business aspects in order to minimize the impact of differing economic cycles in each region. Another benefit of this arrangement is the ability to avoid foreign exchange risk associated with fluctuations in currency exchange rates and country risks stemming from natural disasters, political turmoil or other factors.

In the analytical and measurement equipment market, successful products that have become the standard in specific countries or regions are sometimes difficult to sell globally. Success requires a network able to provide comprehensive sales, service, engineering and other support functions in all areas of Asia, Europe, and the Americas, and to flexibly respond to the needs of local customers. At the same time, there is a need to improve quality and efficiency. This requires unifying on a regional basis the services common to all divisions, such as accounting and finance, legal affairs, intellectual property management, human resources and IT.

To this point, HORIBA’s Asia focus has been mainly in Japan. We have many products that command high market shares, particularly those for R&D applications and environmental regulations. Going forward, we will develop products tailored to local market needs and build supply structures incorporating production bases in rapidly expanding markets such as China and India.

Regional Overview
In Japan, the central company is HORIBA, Ltd., established in 1953 and serving as the head office for the corporate group. Operations have steadily expanded. HORIBA STEC, Co., Ltd., which concentrates on control devices for semiconductor manufacturing, was established in 1974. HORIBA Advanced Techno Co., Ltd, specializing in water quality analysis, was established in 1975. The service division was spun off in 2000 to form HORIBA TECHNO SERVICE Co., Ltd. Outside Japan, HORIBA-owned companies were established in South Korea in 1988, Singapore in 1997 and China in 2002.

Net Sales in the Fiscal Year Ended December 31, 2006
As a result of the change in the 2006 fiscal period for HORIBA, Ltd. and key domestic subsidiaries, net sales decreased compared to the previous fiscal period. However, the Analytical Instruments & Systems segment achieved higher sales—primarily to the electronics industry—of X-ray Analytical Microscopes meeting the requirements of European Restriction of Hazardous Substances (RoHS) Directive. In addition, products in the Semiconductor Instruments & Systems segment also achieved robust sales reflecting a strong semiconductor market.

HORIBA has rapidly expanded its European sales in the automotive, analytical and medical fields through several M&As in recent years (HORIBA ABX SAS (France), HORIBA Jobin Yvon SAS (France), and the DTS business of Carl Schenck AG (Germany)). Looking ahead, we expect consistent increases in demand backed by growth in the East European and Russian markets.

Regional Overview
Full-scale business operations in Europe began with the establishment of HORIBA Europe GmbH in Germany in 1972, which provided sales and service for HORIBA-manufactured products. The product line and marketing capacity have been significantly improved in recent years with the addition of HORIBA ABX SAS in France in 1996, HORIBA Jobin Yvon SAS in France in 1997, and the automotive development test systems (DTS) business of Carl Schenck AG in Germany in September 2005.

Net Sales for Fiscal 2006
Net sales in Europe benefited from a full year's results recorded for the DTS business. Meanwhile, the Medical/Diagnostic Instruments & Systems segment recorded higher sales of testing reagents and testing equipment such as large hematology analyzers and medium-sized clinical chemistry analyzers. Sales of HORIBA Jobin Yvon SAS in France products also increased, primarily in cutting edge scientific fields.

The Americas account for 40% of the global demand for analytical and measurement instruments, so sales expansion in this major market is essential to HORIBA’s global development. We are particularly focused on product development and marketing for the medical and semiconductor fields, where our market penetration is still low.

Regional Overview
In the Americas, HORIBA established a local corporation in 1972 to conduct overseas business activities, including activities both in the U.S. and in Europe, and gather market information, and its operations began by focusing mainly on emission measurement systems. In 2005, HORIBA purchased the DTS business, further bolstering its lineup of products and services provided to the large North American automotive industry. Also by utilizing the sales and marketing forces of HORIBA ABX SAS (France) and HORIBA Jobin Yvon SAS (France), stronger sales forces for medical and analytical equipments were provided in the Americas.

Net Sales for Fiscal 2006
In the Automotive Test Systems segment, sales were relatively lower compared to the previous fiscal period, when there was unusually high demand due to U.S. automotive emission regulations. In the Analytical Instruments & Systems segment, sales of analyzers for measuring sulfur in oil were higher to the petroleum industry, while in the Semiconductor Instruments & Systems segment, sales increased for mass flow controllers used in semiconductor manufacturing equipment.