Financial Report, 2002, to TSE
-Management Policies-
Contributing to the betterment of society through products and services
with world-class technologies are basic management policies of Hitachi
Koki Co., Ltd. We supply the world with high-quality products in three
principal fields: power tools, printing systems and life science instrument.
(This last business used to be the Scientific Instruments Group.) We
aim to develop attractive new products rapidly and aggressively market
them in anticipation of customer requirements. To this end, we are building
up the strength of the Hitachi Koki Group by creating a fully global
and consolidated management.
1. Basic Management Policies
While keeping customer satisfaction and environmental interests in mind,
Hitachi Koki will continue to meet the challenges of product creation
as it seeks to become the global leader in each product and business
category.
As part of efforts to select and focus management resources on core
businesses, Hitachi Koki plans to split off its Printing Systems Group
on October 1, 2002, and transfer the relevant stockholding to Hitachi,
Ltd. This move will further increase the Group’s competitiveness
in the market.
2. Strategies For Establishing a Stronger Consolidated Management
We are strengthening our global consolidated management so as to be able
to continue improving performance, even though little change is expected
in the severe economic and operating conditions we face, by speeding up
new product development, strengthening marketing, rationalizing and merging
or closing production bases, forming business alliances with other companies
and taking other measures.
3. Medium-and Long-Term Management Strategy
Hitachi Koki remains resolutely committed to fulfilling the goals laid
down in the Medium-Term Management Plan for the period from fiscal 2001
through fiscal 2003.
Because we plan to split off the Printing Systems Group on October 1,
2002, and transfer stock to Hitachi, Ltd., the Medium-Term Management
Plan will effectively be completed during the interim period ending September
30, 2002. We are currently compiling a new five-year plan.
We continue to draw up aggresive management measures despite sustained
severe operating conditions.
(1) Policies for Entire Group
a. Strengthening Group consolidated management
b. Strengthening Group strategy
c. Maximizing management efficiency
d. Strengthening cost-competitiveness
e. Strengthening product development capacity
(2) Policies for Individual Businesses
1) Power Tools Group
a. Strengthening production in China as well as plant mergers and closures
Having beefed up capacity in China through the addition of new
facilities at Guangdong Hitachi Koki Co., Ltd. and Fujian Hitachi Koki
Co., Ltd. and other measures, we have already smoothly initiated manufacturing
operations there for new products and transferred production. In the
future, we plan to further strengthen our bases in China to increase
global production efficiency.
In further efforts to focus production and streamline management, in
the fiscal year ended March 31, 2002, we integrated the manufacturing
operations of Hitachi Koki (Singapore) Pte. Ltd. into Hitachi Koki (Malaysia)
Sdn. Bhd. and scaled down operations at Hitachi Koki Haramachi Co.,
Ltd., transferring some manufacturing operations to Hitachi Koki Sawa
Co., Ltd. Other efficiency measures to concentrate production are under
way.
b. Strengthening marketing activities
In the domestic market, we will continue to maximize sales of the
WH12DM cordless impact driver, which has proved a major hit since its
launch in March 2001, and will vigorously work to launch cordless and
other new products and increase sales of accessories and consumable
goods. We will also maintain and expand sales by strengthening sales
to home centers through the establishment of a chief sales partner system
and the launch of new products designed specifically for home centers.
Overseas, as well, we are expanding sales to home centers, embarking
on a full-fledged partnership with Lowe’s Companies, Inc., the
second-largest home improvement retailer in the United States. In addition,
we will seek to create new customers for such pneumatic power tools
as nailers through conventional sales channels, thereby increasing sales.
In European operations, we are working to expand sales by strengthening
marketing channels in Russia and making a full-scale entry into central
European markets, aiming to create new demand and increase sales.
c. Quicker product development
Advanced functionality and significantly shortened development times
thanks to the use of 3-D CAD and other digital design methods have made
the WH12DM cordless impact driver a major hit. We plan to continue to
aggressively use digital design techniques to create attractive new
products in the shortest possible time.
2) Printing Systems Group
On October 1, 2002, the Printing Systems Group will be divided to a
subsidiary and its shares will be transferred to Hitachi, Ltd.
a. Rebuilding HIKIS
In November 2001, operating income at our subsidiary Hitachi Koki
Imaging Solutions, Inc. (HIKIS) was brought back to the break-even point
after the implementation of a management restructuring plan. The next
task, after further restructuring, is returning income before income
taxes to the break-even point as soon as possible. In this way, we are
strengthening consolidated Group management globally.
b. Strengthening the high-speed, continuous-form laser printer business
Drawing on our high-speed printer technologies, which are among
the world’s most advanced, we are developing products that will
further increase the speed and improve the image quality of laser printers.
We are expanding sales to consolidate our lead in the world market in
this field.
c. Building up the cut-sheet laser printer business
In the cut-sheet laser printer field, we are developing ever more
sophisticated products for the print-on-demand sector and reinforcing
marketing to major OEM customers.
d. Developing high-speed continuous-form color printers
To quickly bring new products to market to meet to rising demand
for color printers, we are zealously developing high-speed, continuous-form
color printers as a new business.
e. Increasing market share for Kanji (Chinese characters) dot line
printers
We aim to increase our market share in Japan, China and Southeast
Asia of low-cost, high-performance Kanji dot line printers made by Hitachi
Koki Asia Co., Ltd., a production base in Hong Kong.
3) Life Science Instruments Group (the former Scientific Instruments
Group)
a. Expanding sales of main products
We are working to increase sales of our popular compact centrifuges
and centrifuges essential for research and vaccine production in the
biotechnological fields of genetics, proteins and medicine development.
In this way, we are expanding our share of the life sciences market.
b. Strengthening global development of ultracentrifuges
We aim to increase our share of the global market for ultracentrifuges
by strengthening our alliance with Kendro Laboratory Products of the
United States.
4. Distribution of Profits
Decisions regarding the distribution of profits to shareholders and
retained earnings are made after an overall consideration is made of
future business plans, performance, financial conditions and other factors.
In allocating retained capital, our priority is its efficient use in
key investments, such as those made in core products, technologies and
rationalization measures.
After due consideration of relevant factors, the year-end dividend was
set at ¥4.00 per share, yielding a total of ¥8.00 per share
for the full year, including the already paid interim dividend. In addition
to the dividend, the Company plans a stock buyback as part of efforts
to return profits to shareholders. We are committed to increasing capital
efficiency.
5. Relations with Other Members of the Hitachi Group
With a stake of approximately 23%, Hitachi, Ltd. is the main shareholder
in Hitachi Koki. About 32% of Hitachi Koki’s issued shares are
held by members of the wider Group, including Hitachi, Ltd.
Furthermore, one of our eight directors and two of our four statutory
auditors also hold the office concurrently at Hitachi, Ltd. or other
members of the Group.
- RESULTS AND FINANCIAL POSITION -
Results
With global IT demand dampened by the slowdown in the U.S. economy, the
health of the Japanese economy worsened in the period under review, showing
falls in personal spending, housing investment and facilities investment.
Corporate profitability came under growing pressure, and total unemployment
reached unprecedented levels, pushing the economy overall into a very
difficult phase. Although signs of bottoming out at last appeared toward
the end of the period in the United States and some Asian countries, the
European and Asian regions overall performed poorly due to sluggishness
in the U.S. economy resulting chiefly from the IT slowdown.
To ensure the survival of Hitachi Koki amid intensifying global competition,
we have worked to establish a technological edge by offering valued-added
technologies, products and services that other companies cannot match,
and build up management efficiency and competitive strength.
In the year under review, Hitachi Koki recorded consolidated net sales
of ¥127.17 billion, recurring income of ¥3.10 billion and net
income for the period of ¥1.01 billion. Below is a breakdown by Group.
1) Power Tools Group
The new WH12DM cordless impact driver performed very well in the Japanese
market, but Group sales growth overall was pallid, due chiefly to a fall
in housing investment in the latter half of the fiscal year. However,
sales in overseas markets were steady. Despite the dampening effect on
the United States economy of the terrorist attacks of September 11 and
the slowdown in European economies and other factors contributing to a
difficult operating environment, sales in North America and Europe held
up, thanks to sales expansion drives undertaken by our subsidiaries in
those countries. As a result, net sales in this segment totaled ¥78.27
billion.
Sales in the Printing Systems Group were sluggish overall due to the adverse economic conditions in the Japanese market. Despite signs of sales recovery toward the end of the fiscal year in overseas markets, sales fell overall due to the slowdown in the United States economy. Net sales in the segment totaled ¥45.28 billion.
3) Life Science Instruments Group
Although sales of ultracentrifuge and high-speed refrigerated centrifuges
were buoyant, chiefly in the Chinese market, overseas sales overall were
anemic. However, in the Japanese market, a boom in biotech research and
new product launches fueled sales growth for ultracentrifuges and compact
centrifuges. Net sales in the segment totaled ¥3.61 billion.
The Coming Year
Despite the emergence of signs of bottoming out at the beginning of
2002, the Japanese economy remains embattled and subject to deflationary
pressures. Recovery in the world economy and government policies for fundamental
structural reform can be expected to bring some relief, but long-standing
bad debt problems rule out optimistic prognoses for our operating environment.
Hitachi Koki’s forecasts for the coming fiscal year are as follows.
In the half-year ending September 30, 2002, consolidated net sales are
expected to total ¥68.4 billion (Power Tools Group: ¥42.0 billion;
Printing Systems Group: ¥24.5 billion; Life Science Instruments Group:
¥1.9 billion). Operating income is expected to total ¥2.4 billion,
net income before taxes ¥1.8 billion, and net income ¥960 million.
Forecasts for the full fiscal year ending March 31, 2003, are difficult
to prepare at the present time because of the planned spin-off of the
Printing Systems Group on October 1, 2002, and the transfer of relevant
shares to Hitachi Ltd. The forecast for the full period will be made public
at a later date after details of the move have been finalized.
Financial Position
Cash flows from operating activities in the period under review increased ¥7.91 billion, due to a reduction in trade receivables and inventory assets. Cash flows from investment activities decreased ¥848 million, due to acquisition of fixed assets. Cash flows from financing activities decreased ¥13.12 billion, due primarily to reductions in borrowings. Cash and cash equivalents at year-end totaled ¥23.00 billion.
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