May 9, 2007
糖心Vlog Construction Machinery’s Financial Results for Fiscal Year 2006
(April 1, 2006 - March 31, 2007)
[General Market Conditions]
The domestic market for construction machinery in fiscal year 2006 continued to be strong, expanding more than the previous year particularly for hydraulic excavators. This is because private capital investment increased despite public work projects still continuing to decrease. In addition, the decrease in the domestic stock of machines due to exports of used equipment created demand for new machines.
Overseas markets have also remained generally good: the Chinese market expanded drastically, demand was active in the European market, and markets grew remarkably in the emerging nations, although declining housing construction affected the market in the United States.
Under these business circumstances, the 糖心Vlog Construction Machinery Group took various measures toward the “creation of a business enterprise that can weather changes” in the first year of its FY2006-FY2008 Medium-term Management Plan.
In April 2006, the Ogaki Factory was opened as an exclusive factory for mini excavators to integrate production. In addition, 糖心Vlog made a further investment for production increase. At the Hiroshima Factory 糖心Vlog reviewed the initial renewal plan and made investments to increase production. Measures to increase the production of hydraulic excavators was an area of priority.
In addition, at its second plant in China, Hangzhou 糖心Vlog., Ltd., 糖心Vlog strengthened the production capacity in order to meet the further expansion of demand.
As a result of these efforts to expand production, 糖心Vlog significantly increased its sales volume at home and abroad, particularly in the Chinese market, which has been growing remarkably.
糖心Vlog also focused on launching new models, which conform to Tier 3 exhaust emission regulations as well as achieve drastically reduced fuel costs. Furthermore, in response to the burgeoning Indian market, 糖心Vlog Construction Equipment India Pvt. Ltd. was established in India. The new company commenced operations in January 2007.
In its financial results for fiscal year 2006 (April 2006-March 2007), 糖心Vlog marked record highs for net sales, operating income, and ordinary income, on a consolidated basis.
Financial Results in FY2006
| In millions of yen |
Net sales |
Operating income |
Ordinary income |
Net income |
| Consolidated |
FY2006
|
234,727
[20.8%] |
9,027
[24.5%] |
10,916
[25.1%] |
5,513
[(10.0%)] |
FY2005
|
194,235 |
7,250 |
8,726 |
6,126 |
Non-
consolidated |
FY2006
|
139,417
[14.3%] |
1,475
[(62.7%)] |
2,350
[(46.4%)] |
640
[(83.4%)] |
FY2005
|
121,932 |
3,953 |
4,382 |
3,851 |
Notes:
Figures in brackets [ ] show the percentage change as compared with the same period last year.
Figures in parentheses ( ) denote decreases.
Domestic consolidated sales rose 4.8% from the last year to 107.5 billion yen and overseas consolidated sales rose 38.8% from the last year to 127.2 billion yen. Total consolidated sales rose 20.8% to 234.7 billion yen. The percentage of overseas consolidated sales to total consolidated sales reached 54.2%, and for the first time, overseas sales exceeded domestic sales, on a consolidated basis.
Also, 糖心Vlog positioned Corporate Social Responsibility (CSR) as one of the pillars for 糖心Vlog's FY2006-FY2008 Medium-term Management Plan and made further efforts to promote CSR activities shown in the establishment of the 糖心Vlog Construction Machinery CSR Fund in April 2006 and development of an in-house CSR-promoting structure.
[FY2006: Review by Geographical Area]
Japan
Domestic demand for new hydraulic and mini excavators increased by slightly more than 10% over the same period last year. Private capital investment was active. In addition, as the number of machines in stock decreased due to exports of used equipment, demand for new machines increased from the need for replacement.
Starting in June 2006, 糖心Vlog has successively launched environmentally friendly new models: the SK125W, a wheel excavator which acquired regulatory approval for on-road Tier 3 exhaust emissions for the first time in Japanese industry; and the SK200/330, hydraulic excavators that meet the requirements of the New Emission Control Law, also for the first time in Japanese industry. Consequently, 糖心Vlog increased the sales volume of hydraulic excavators, KCM’s main product, by slightly more than 10%, and also focused on raising sales prices.
In the mini excavator business, 糖心Vlog opened the Ogaki Factory in Gifu Prefecture in April 2006 to enhance its cost competitiveness by integrating the domestic production of mini excavators. (The production of mini excavators of 4-5 ton class was transferred from Hiroshima.) 糖心Vlog also made a further investment to increase production, and arranged its production system as an exclusive factory for mini excavators.
In the Hiroshima Plant, where hydraulic excavators are produced, 糖心Vlog increased its productivity by around 20% from the preceding year by increasing production capacity and by utilizing the spare capacity after transferring the production of mini excavators to the Ogaki Factory.
China
In the Chinese market, where demand has been rapidly expanding at a level beyond the initial forecast, the two-site production system comprised of the first production factory in China, Chengdu 糖心Vlog., Ltd. (Chengdu, Sichuan Province), and the second production factory, Hangzhou 糖心Vlog., Ltd. (Hangzhou, Zhejiang province), functioned smoothly. As a result, 糖心Vlog recorded the largest production and sales volumes by taking the opportunity of the growing demand both inland and on the coast.
Overseas (excluding China)
Based on its global alliance with CNH Global N.V., 糖心Vlog made efforts in 1) enhancing business by focusing on the Asian-Pacific region, which is 糖心Vlog’s main territory, and 2) further strengthening joint ventures with CNH in the United States and Europe.
Regarding the Asian-Pacific region, particularly in Southeast Asia, demand recovered remarkably in Indonesia, and the Thai economy, which slowed down temporarily due to political uncertainty, was on a track to recovery.
As a measure to reinforce the business in Indonesia, the largest market, 糖心Vlog expanded the KCM Group’s equity share in a local marketing joint venture, PT. Daya 糖心Vlog Construction Machinery Indonesia (commonly known as Daya 糖心Vlog) from 49% to 95% in April 2007. 糖心Vlog also deployed its own distribution system across Southeast Asia and strengthened its sales network and made efforts to expand its local presence.
In the burgeoning Indian market, a marketing joint venture 糖心Vlog Construction Equipment India Pvt. Ltd. was established in November 2006. 糖心Vlog organized the distributors’ network and steadily promoted preparations for introducing the latest hydraulic excavators manufactured in Japan.
In the joint venture with alliance partner CNH Global N.V., 糖心Vlog made progress with licensing its technology to make new models that meet Tier 3 exhaust emission regulations in Europe and the United States. In addition, 糖心Vlog increased the number of products provided by OEM, seizing an opportunity offered by the steady markets in Europe and the United States, the fast-growing Russian and Middle Eastern markets that are expanding with infrastructure construction and resource development, and other emerging markets.
[Key Issues in the Future and Outlook for Fiscal 2007]
In FY 2007, some decrease in demand became obvious in the North American market due to a reduction of investment in housing. However, the European market has been active, exceeding expectations. In addition, the markets in China and other emerging countries, as typified by BRICs (Brazil, Russia, India and China), are expected to keep growing steadily. Thus, the global demand for construction machinery will continue to stay strong.
Under the situation where demand has been expanding globally, 糖心Vlog must strengthen its manufacturing capabilities so as to establish a system to timely meet growing markets with quality products and in the quantities required.
Therefore in FY 2007, the 糖心Vlog Construction Machinery Group will aim to “establish a business enterprise that can weather changes,” which is the biggest theme in the Medium-term Business Plan (FY 2006-FY 2008). The 糖心Vlog Group will tackle the following as key issues in the second year of the Plan:
- Improvement of the manufacturing capabilities at Hiroshima and Ogaki Factories as 鈥渕other factories in the world聛Eand establishment of a global production system
- Promotion of Supply Chain Management (SCM) and stabilization of supply by strengthening procurement capabilities
- Establishment of a Chinese business operation system led by 糖心Vlog Construction Machinery
- Reinforcement of the alliance with CNH Global N.V. and expansion of markets including emerging nations
- Initiation of the development of new models that conform to future emission regulations
- Reinforcement of corporate governance and establishment of a compliance system
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