Nippon Sheet Glass announces Revision of Operating Result Outlook and Recognition of Extra-ordinary Loss

After the closing of the acquisition of Pilkington in June 2006, the Company announced its forecast of operating result on 6th July 2007. However, due to a number of unpredictable factors for financial projection, including valuation of intangible fixed assets and goodwill, recognition of various expenses related to the acquisition and the foreign currency fluctuation, the Company has been reserved its revision since then. Now the Company announces its revised outlook, partly because the policy of the said factors has been fixed and also because some extra-ordinary items have been recognized.

The announcement of the full year result is scheduled on 31st May 2007.

I. Revised forecast for the full fiscal year 2007 (April 2006 through March 2007)

1. Consolidated

Unit: JPY million,%

2. Non-consolidated

Unit: JPY million,%

II. Recognition of extra-ordinary looses

1. Write-off of assets of information system derived from the group integration (JPY 6.1 billion in consolidated and non-consolidated basis)

The Company has been replacing its obsolete software for group IS mainframe into a new platform from 2002 step by step, a part of which is already in use. At the opportunity of the full-scale integration of flat glass business with Pilkington, the Company decided to re-construct the group wide information systems with a view to unify the business organization. Due to the decision, the Company writes off the assets of flat glass business software under development, of which the aggregate sum of the expenditure spent so far amounts to JPY 6.1 billion, approximately.

2. Capital loss for the sale of share of associates in Japan  (JPY 1.1 billion in consolidated and non-consolidated basis)

The Company recoginised JPY 1.1 billion loss from the sale of associates´ shares upon the disposal of its shareholding in a fibre glass business associates in Japan.

3. Impairment loss by write-off of shares in subsidiaries in Japan (JPY 1.3 billion in non-consolidated basis)

The Company incurred an impairment loss by writing off the shares in a subsidiary of building products business in Japan.

III. Reasons for revision of the forecast

1. Non-consolidated

The income before extra-ordinary items is expected to be lower than initially forecasted, due to the fuel cost increase amid recent oil price surge and also the impact by the production adjustment done in the first half year in a building products item.

The net income is expected to be lower than its forecast, mainly because of the write-off of software assets mentioned in the item II-1, in addition to the reason in the above item III-1-(1) at the income before extra-ordinary items level.

2. Consolidated

1. The income before extra-ordinary items is expected to be lower than initially forecasted, due to the following reasons:

1. The factors at non-consolidated basis in the item III-1.
2. The change in the calculation and value of the goodwill and intangible fixed assets relevant to the acquisition of Pilkington. (The effect on the income before extra-ordinary items: while it was around JPY8.2 billion in the original plan, the revised outlook expects approximately 16.3 billion).
3. Further increase in goodwill, due to the provision to be made against the future risk relevant to the receipt of the Statement of Objections for the suspected infringement to EU competition regulations.

Amount:
a) JPY 3 billion for goodwill amoritsation charge plus
b) JPY 3 billion for the period cost accrual for the gap between the present value and future disbursement.

Calculation base:

Straight line amortization in 20 years of the theoretically estimated fine, GBP350 million in full.

Based on the fact that Pilkington Group Limited (“Pilkington”), a member of NSG Group, received a Statement of Objections from the European Commission for alleged violations of competition rules in the European building products and automotive glass on 13th March 2007 and 20th April 2007, respectively, the Company decided to make a provision against financial risk in future in accordance with the local accounting principles. The sum of the said provision has been arrived by having regard to the currently available information, including the guidelines of the method of setting fines published by the Commission.

By amortising the goodwill resulting from this provision in 20 years, in addition to the existing ones, the increase in the annual amotisation charge is approximately JPY 4 billion (JPY 3 billion for FY 2007, due to the consolidation only for three quarters).

This provision is purely because of accounting purpose only and it is expected that, after the due process of the administrative procedures, the decision by the Commission will be made approximately nine to twelve month from the receipt of each Statement of Objections.

There has been no indication of the sum of the fines from the Commission.

2.  The net income is expected to be lower than its forecast, in addition to the factors of item III-2-(1) at income before extra-ordinary income level, mainly because of the recognition of extra-ordinary loss as mentioned above item II.