NACHI-FUJIKOSHI CORP.

• In recent years, in order to reduce customers' cost for cutting tools, reuse of cutting tools is active by regrinding and recoating of cutting edges, for the cutting tools for which precision cannot be assured due to the abrasion. Regrinding and recoating are increasing especially for high function round tools including carbide drills, and precision cutting tools including broaches and gear cutting tools. It comes near to the market of new products, and it is expected as a new pillar of business.
  (Market of new products such as carbide round tools and precision cutting tools in the fiscal year 2003: 48 billion yen, regrinding market: 32 billion yen)
• As cutting achieves high efficiency and high precision, for reground and recoated products, the same cutting performance as new products is required. Therefore, general technological response capability such as grinding technology and coating technology of cutting edges is required. Including precision and tool life, a quality assurance system for a total cutting tool is needed.
• As for a customer who has done regrinding by oneself, problems such as aging and absence of engineers and aging of equipment appeared, and out sourcing is advancing.
• From these backgrounds, there is a rapidly increasing movement to entrust regrinding and recoating of cutting tools to a reliable manufacturer who has cutting technology, know-how and a quality assurance system.

• Utilizing the synergy of having technology for material, heat treatment, surface modification (coating) and grinding, we have established a stable position in a cutting tool field.
• In the three major elements for cutting tools-material, coating, and precision and shape of cutting edges-we are the only company in the world who perform machining and manufacture equipment by ourselves. We have accumulated unique technology and know-how that other companies cannot imitate.
• Utilizing these advantages, we have supplied regrinding and recoating service to meet the demand from some major customers, in addition to the production and sales of new products. This time, we will increase equipment capability and develop Tool & Coating business in the full scale, to expand business and strengthen service for customers.
• We are going to develop it to a pillar of machining business in future.

• In addition to the sales expansion of new products, by actively promoting regrinding and recoating, we will provide high quality products and service through the whole life cycle of products, and we will expand business.
• By investigating used cutting tools and checking the advisability of use conditions, and evaluation of product performance and features, we will develop them to future product development. Moreover, by preserving and analyzing the results of investigation, we will also utilize it as a tool to assist marketing including diagnosing of customers' lines.

(1)Activities up to now

• As a regrinding service base for Nachi group, in 1992, we established "Eastern Japan Service Center" in a sales company, NACHI Kanto Co., Ltd., and we have developed a regrinding service for mainly precision cutting tools such as broaches and gear cutting tools. (As for the cutting tools that need test grinding or quality assurance of work, we have performed regrinding in the Toyama Plant.)
• In 2003, we moved and expanded the center and strengthened the regrinding capacity for round tools.
• In October 2004, we established "T&C Room" in the Machine and Cutting Tool Division, as a department to generalize and promote regrinding and recoating business, to create a system for consistent response and control of the processes from grinding to coating.

(2)Future activities

<Establishment of a regrinding factory >

• In the Toyama Plant, we will establish a regrinding line for high function round tools including carbide drills and end mills, and for precision cutting tools including hobs, shaving cutters, and broaches.
• Up to now, we have used a production line for new products to regrind, but we will establish a dedicated line, and we will double the production capacity.

<Equipment reinforcement in Eastern Japan Service Center>

• We will reinforce regrinding equipment for round tools to increase whole production capacity 1.5 times.
• We will introduce several small-size coating furnaces, to enable latest coating that has been done in the Toyama Plant. We will increase machining ability and substantially shorten delivery time.

<Creation of a regrinding and recoating control system>

• We will create a regrinding and recoating control system to share information including customers' product data and records between manufacturing companies and sales companies. We will utilize it to collect use conditions and quality information.
  

(3)Sales target

• For the whole group companies, 3 billion yen for the fiscal year 2007.