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We thank you for your attention to our progress in fulfilling our business and management goals at Yokohama. And we thank you, too, for keeping a place in your hearts for the victims of the Great East Japan Earthquake. Let us all pray for the earliest possible recovery in the communities affected by the disaster.
Sales up, earnings down
Net sales in the first six months of the present fiscal term, April 1 to September 30, increased 8.4% over the same period of the previous year, to ¥258.2 billion. Leading that increase were strong sales of tires in Japan and overseas. Japanese demand for original equipment tires declined in the wake of the Great East Japan Earthquake, but we posted strong sales gains in the Japanese replacement market and also registered growth in Europe and China.
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Operating income declined 8.3% from the same period of the previous year, to ¥7.6 billion, on account of rising raw material costs and the appreciation of the yen. Net income declined 75.7%, to ¥294 million, as the appreciation of the yen occasioned losses on currency translation adjustments.
A nine-month fiscal term
We will switch our fiscal accounting in 2011 from an April-to-March basis to a calendar-year basis. That will align the fiscal accounting at our Japanese operations with the fiscal periods employed at our overseas operations, and it will result in a one-time-only nine-month fiscal term: April 1 to December 31, 2011.
Our fiscal projections for the nine months to December 2011 call for net sales of ¥460.0 billion, for operating income of ¥21.0 billion, and for net income of ¥8.5 billion. We plan to pay an aggregate dividend of ¥7 for the nine-month fiscal term: an interim dividend of ¥3 and a term-end dividend of ¥4.
The culmination of Grand Design 100 Phase II
Our blueprint for growth is Grand Design 100, a medium-term management plan. Launched in April 2006, that plan covers the years to 2017, our corporate centennial. The plan's chief target is to raise operating return on sales to 10% on a sustainable basis. We are also working through Grand Design 100 to increase net sales to ¥1 trillion and-in accordance with our target for operating profitability-to raise operating income to ¥100 billion by 2017.
Grand Design 100 consists of four phases of three years each. We completed the first phase in March 2009, and we are now in the third and final fiscal term of Phase II (shortened to nine months on account of the change in our fiscal accounting period). Our core emphasis in Phase II of Grand Design 100 has been on quality growth. Below is a sector-by-sector summary of our strategy and measures for maintaining our gains to date and for laying the groundwork for further gains in Phase III.
Growth strategy: tires
We focus in our tire business on deploying fuel-saving tires globally, on winning factory fitments on a global cast of vehicle models, on strengthening our position further in the Russian market, and on expanding production capacity. The tire industry has adopted product-labeling indications in Japan for rolling resistance, and similar moves are under way in Europe and in the United States. Those moves both reflect and stimulate the growing demand for fuel-saving tires.
The BluEarth product line, which debuted in July 2010, is our showcase offering in fuel-saving tires. We offer BluEarth tires in a growing range of markets worldwide. And we are raising their global profile by featuring them at international motor shows and by deploying them on electric vehicles in prominent races.
Work is progressing on schedule on what will be our first tire plant in Russia, slated to begin operation in December 2011. That plant will have an initial production capacity of 700,000 tires a year, and expansion already planned will double its capacity. Plant construction and expansion projects worldwide will expand our overall production capacity 10% by December 2011 and 12% by December 2012, compared with March 2010.
Growth strategy: diversified products
Our business in diversified products spans (1) industrial products, principally high-pressure hoses, sealants and adhesives, conveyor belts, anti-seismic products, marine hoses, and marine fenders, and (2) other products, principally aircraft products and golf equipment. We focus in industrial products on deploying products globally in sectors where we assert compelling strengths, such as high-pressure hoses and automotive sealants, and on developing business in new product sectors, especially in regard to renewable energies and information technology.
Underlying our competitiveness in diversified products is a global production network. That network comprises plants in the United States, China, Thailand, and Taiwan, as well as Japan. It will soon gain a new Chinese plant for producing high-pressure hoses, scheduled to begin operation in 2013. And we established a division in April 2011 to coordinate our growing business in sealants and other products for equipment used in clean energy generation, telecommunications, and other sectors. We are fortifying our business in golf equipment, meanwhile, by expanding our presence in the economically vibrant markets of China, the Republic of Korea, and Southeast Asian nations.
Technology strategy
The world's tire manufacturers compete aggressively in technological development, especially in the realm of fuel-saving tires. Two trailblazing technologies have buttressed our position in that realm: a tread compound that helps minimize rolling resistance while maximizing grip and an inner liner that minimizes air seepage while reducing the liner thickness and weight. We have dubbed our new compound nano Blend, and we call our new liner, for which we have secured patents worldwide, Advanced inner liner.
Measures for reinforcing our corporate foundationn
Streamlining our Japanese sales organizations for tires and for industrial products has contributed greatly toward strengthening our corporate foundation. We merged our Japanese sales subsidiaries for tires in 2009, and we merged our Japanese sales subsidiaries for industrial products in 2010.
Our Muda-dori activities, meanwhile, tap employee initiative in identifying and eliminating waste. We inaugurated those activities in 2006, the same year that we launched Grand Design 100. Those activities are on track to yield cost savings of ¥7 billion in the fiscal period to December 31, 2011. That would bring their aggregate savings over six years to some ¥51 billion.
Fulfilling our corporate social responsibility is another important dimension of our work to reinforce our corporate foundation. Our efforts in that spirit include tackling priority issues under the ISO 26000 guidelines. Those guidelines are a framework for sustainable development promulgated by the International Organization for Standardization in November 2010. Highlighting our initiatives on behalf of environmental quality is the Yokohama Forever Forest project. In that project, we are working to plant 500,000 trees at Yokohama plants worldwide by 2017. The first plantings took place in 2007, and we had planted 210,000 trees by October 31, 2011.
Measures for reinforcing our corporate foundation also include working to ensure rigorous compliance with high standards of corporate ethics. We are determined to earn people's confidence in Yokohama as a sound global enterprise. And we look forward to your continuing goodwill and support as we tackle the tasks that lie ahead.
November 2011
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Tadanobu Nagumo
Chairman and Chief Executive Officer |
Hikomitsu Noji
President |
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