 |
|---|
| Koichi Tadano President and C.E.O., Representative Director |
To Our Stakeholders
I am pleased to provide this brief outline of the operating environment, business activities and performance of the TADANO Group for the fiscal year ended March 31, 2010.
Overview
During the period under review, the Japanese economy during this fiscal year saw improving corporate revenue, a halt in the downward trend of capital investment, and recovering exports and production. Nevertheless, employment and income conditions remained harsh, and prospects remained unclear.
Demand for mobile cranes declined dramatically as projects were delayed or suspended, including various overseas energy-related projects, and as domestic customers took a wait-and-see approach, delaying purchases.
In response to these dramatic changes in the business environment, the TADANO Group sought to secure net sales by mining new demand and by achieving dramatic cuts in production in various ways, including the temporary suspension of production. The Group also sought to reduce labor costs and general costs, reassigning human resources to activities targeting quality and service enhancements and launching full-scale cost-cutting activities to slash costs. By the end of this fiscal year, efforts to achieve major cuts in production and to secure net sales led to some success in the area of reducing inventory, the most pressing issue confronting management.
The dramatic changes in the business environment also led to significant declines in the profitability of American subsidiary TADANO MANTIS Corp. ("MANTIS"), acquired in December 2008. For this reason, we have chosen to book impairment losses following a review of MANTIS's goodwill at the end of the fiscal year. In connection with this move, MANTIS has been made a consolidated subsidiary based on our assessment of its significance for the Group.
With significant declines in the sales of mobile cranes and other products, domestic sales fell 34.5% compared with the previous fiscal year, to 48,059 million yen. Plummeting demand and a stronger yen resulted in overseas sales of 56,191 million yen, down 37.1% from the previous fiscal year. Total sales fell 36.0% compared with the previous fiscal year, to 104,251 million yen. The ratio of overseas sales to total sales was 53.9%.
Despite efforts to cut overall labor costs and other expenses, ordinary income was down 97.1% from the previous fiscal year, to 297 million yen, due to major declines in sales and rising costs resulting from lower operating ratios and use of raw materials purchased when prices were high. The company reported a net loss of 895 million yen, vs. net income of 5,539 million yen in the previous fiscal year, primarily due to the booking of 835 million yen in impairment losses for MANTIS. Making MANTIS a consolidated subsidiary reduced operating income by 450 million yen, ordinary income by 471 million yen, and net income by 865 million yen.
Outlook for the Next Term
We expect the Japanese economy to improve gradually as exports continue to grow, despite sluggish private-sector demand. Overseas, the U.S. economy is projected to see a gentle recovery and the European economy to see low levels of growth. Emerging markets such as China are expected to continue driving the world economy.
In the markets in which the TADANO Group operates, while we expect various projects, including energy-related projects, to drive demand for mobile cranes, the Group's primary product, we also expect overseas demand to continue to decline due to the slow pace of recovery in the European and American markets and domestic demand to remain unchanged due to scheduled equipment replacements. Although domestic demand for truck loader cranes is expected to remain flat and domestic demand for aerial work platforms is projected to recover, conditions are expected to remain harsh for some time.
In light of dramatic changes in business conditions, the TADANO Group has suspended its Mid-Term Management Plan (08-10) since fiscal 2009 to focus on urgent countermeasures. In fiscal 2010, in addition to progress in securing sales by boosting market share and expanding sales of Group products, slashing costs through SVE(Super Value Engineering) activities, and achieving appropriate inventory levels, we plan to concentrate on quality and service — the sources of our competitive strength — as well as on improving quality and reinforcing customer service systems.
In the face of these challenging times, we nevertheless recognize that corporations play a key role in ensuring harmony between society and its citizenry. The TADANO Group will therefore continue to promote business activities that contribute to the development of local and international communities and preserve the global environment. We fully intend to continue operating as a corporation that earns respect worldwide for generations to come, by living up to the expectations of all our stakeholders and by maximizing corporate value.
July 2010
Koichi Tadano
President and C.E.O., Representative Director
Company Information
