We aim to achieve further growth according to our globalization strategy.
In addition to yen appreciation and the issue of restructuring Japan’s public finances, a major earthquake struck Japan on March 11, 2011, causing power shortages. All these factors have fueled concern about the Japanese economic situation. Accordingly, among the growth sectors in our fields of business, the tendency for businesses to shift overseas grows more pronounced each year. Nikkiso is meeting these challenges by stepping up its potential in business where it boasts a high share of the domestic market. At the same time, we aim to achieve further growth according to our globalization strategy, which includes taking advantage of synergies engendered by our acquisition of Germany’s LEWA, the formation of a joint venture in China involving dialysis machines and the full-scale operation of our aircraft parts plant in Vietnam.
Business Results
For more than half a century, the Nikkiso Group has met the demands of its customers, the needs of society and the changing times with products in core industries. Central to our business are pumps—used in energy and petrochemical sectors—and dialysis-related equipment, particularly for hemodialysis. We also provide water conditioning systems for power plants and carboncomposite aircraft components.
During the fiscal year ended March 31, 2011, the Group posted year-on-year increases in revenues but lower profits, securing orders of ¥84.5 billion, net sales of ¥83.1 billion, operating income of ¥5.3 billion, ordinary income of ¥4.6 billion and net income of ¥2.6 billion.
This performance reflected the inclusion of the first full year of performance of the LEWA Group, a leading global manufacturer of reciprocating pumps that we acquired in August 2009. On the profit front, however, the Group posted year-on-year decreases in operating income, ordinary income and net income, affected by ongoing yen appreciation and the impact of the March 11 earthquake.
The Nikkiso Group’s operations can be broadly divided into the industrial and medical businesses. The Industrial Business experienced a substantial drop in orders in the domestic pump segment amid the economic malaise following the global economic crisis. However,revenues increased, thanks to the sales contribution of a full 12 months of performance by the LEWA Group and a slight recovery in sales of water conditioning systems and electronic component manufacturing systems. Furthermore, sales in the aerospace business grew, as signs of stagnation in this field began to ease. As a result, Aerospace Division sales were up slightly year on year.
In the medical business, sales competition heated up for dialysis machines and related consumables, resulting in sluggish sales of dialysis machines. However, overall sector sales were approximately equal to the previous year’s levels, owing to increased sales of blood tubing lines and expanded sales of Fresenius-made dialyzers, in line with the domestic distribution agreement we signed with the company in July 2010, although profitability was difficult.
The Nikkiso Group suffered only slight damage to its facilities as a result of the earthquake that struck Japan in March 2011. In addition to donating dialysis products, our efforts to assist recovery included setting up a 24-hour system to deliver medical dialysis instruments and supplies to the stricken region, as well as to repair systems already in place. We will continue putting forth every effort to aid reconstruction in the region.
Achieving Further Growth
In the fiscal year ending March 31, 2012, we foresee the possibility of a decline in orders related to nuclear power plants and rises in the prices of materials and parts. On the other hand, moves are under way to reinforce Japan’s thermal power plants and augment LNG facilities, and we anticipate other reconstruction-related demand, as well as a surge in overseas oil and gas development projects. LEWA’s operating performance is recovering dramatically.
By formulating a global Group strategy centered on LEWA, we expect to reinforce our position as a manufacturer with a global network in unique and high-performance specialty pumps, including reciprocating, cryogenic and leak-free non-seal pumps.
In the industrial business, on April 1, 2011, we made the Precision Equipment Business Division independent from the Industrial Division. In such areas as electronic parts production devices and particle analysis instruments, we plan to create a clear-cut and agile strategic structure that will enable us to expand our operations.
In the medical business, we conducted a full-scale launch in the Japanese market of an automated multiparameter dialysis machine—a new product for which development had been delayed—as we mounted a campaign designed to halt the decline in sales that commenced in the preceding fiscal year. Furthermore, we are expanding our production and development bases and reinforcing our sales networks in preparation for a rapid expansion in dialysis market demand in China, India and other emerging markets.
Nikkiso is setting its rudder firmly on a course of globalization. In addition to expanding the synergistic effects of the LEWA Group, we will increase production of aircraft parts at our plant in Hanoi, Vietnam. We are also reinforcing our manufacturing and sales of dialysis machines in Europe and moving steadily forward with a joint venture in China involving dialysis machines. Through such efforts, we have steadily laid the stepping-stones to globalization. While extending overseas the performance we have developed in Japan, we also aim to raise the efficiency of our domestic operations to achieve further growth.
We would like to ask our shareholders and other investors for their ongoing support as we work toward further growth going forward.
