News Release

Operating Income Rises 4.7% in Latest Fiscal Year at Yokohama Rubber on Record Sales

Company also posts highest-ever net income

Tokyo—The Yokohama Rubber Co., Ltd., announced today that it posted a 4.7% increase in operating income, to 21.9 billion yen, in the fiscal year ended March 31, 2006. Net sales increased 7.7%, to 451.9 billion yen, their highest level ever. Operating profitability benefited from growth in unit sales of tires, progress in reducing costs, price increases, and the weakening of the yen relative to the dollar. Net income climbed 89.4%, to 21.4 billion yen, also a highest-ever figure. The increase in net income included a 4.3 billion yen extraordinary gain in connection with changes in the parent company's pension plan. It also included a tax benefit in connection with an earlier write-down of equity in a U.S. subsidiary. Management has proposed a year-end dividend of 6 yen. Together with the interim dividend of 4 yen, that would raise the annual dividend 2 yen, to 10 yen.

By business segment, operating income declined 0.4% in Yokohama's Tire Group, to 18.1 billion yen, despite a 9.1% increase in sales, to 335.7 billion yen, and increased 41.9% in the Multiple Business Group (diversified products), to 3.9 billion yen, on a 3.8% increase in sales, to 116.1 billion yen. Yokohama's tires sales increased in Japan, led by strong growth in snow tires in an especially snowy winter. They increased overseas, too, led by growth in North America. The decline in operating income in the tire segment reflected higher raw material costs. In diversified products, the sales growth occurred as gains in high-pressure hoses, sealants, and aerospace products more than offset a decline in golf products. Yokohama succeeded in improving the structure of earnings notably in aerospace products and in industrial products.

Management projects that operating income in the year to March 31, 2007, will decline 4.3%, to 21 billion yen, on an increase of 7.3% in net sales, to 485 billion yen. High and rising raw material costs are the reason for the projected decline in operating profitability. Yokohama's projections call for net income to decline 51.0%, to 10.5 billion yen.