Before reporting our business results, we at the Komatsu Group hereby pray for the victims of the Great East Japan Earthquake and tsunami and extend our sincere condolences to the people and their families who have been adversely affected. We wish for the quick recovery and reconstruction of the disaster-stricken regions.
The Great East Japan Earthquake of March 11, 2011 and the subsequent tsunami brought about very extensive damages, especially in the Tohoku and northern Kanto regions of Japan. Immediately after this tragic disaster, we checked the safety of our Group employees and their families, worked to secure their safety, and made all-out efforts in transporting relief items to disaster-stricken employees and their families. We also focused our efforts to recover the operations of affected plants, suppliers and other business bases.
With respect to production, the buildings and facilities of some plants of the Komatsu Group were damaged but we quickly worked to repair them. For our suppliers, many employees from the Production and Procurement divisions rushed to their facilities and worked together with their employees on the quick repair of their equipment. As a result of these efforts, all our affected plants resumed production by the end of March; however, we are still experiencing uncertain procurement conditions for some electronic parts of construction equipment as well as for our electric power supply.
Our sales and service operations were seriously affected by the tsunami. At some bases located along the Pacific coast of the Tohoku region, their buildings, facilities and construction equipment were washed away. While it will take some time for us to recover those full-scale operations, soon after the devastation brought by the tsunami, we restarted our maintenance and repair service for construction equipment, which is indispensable for the restoration and reconstruction of the affected regions, by deploying manpower from other Komatsu bases nearby.
As our biggest effort within our best capacity to offer equipment and materials needed in the affected regions, we have decided on a ¥800 million worth assistance action plan centering on free-of-charge lending of our own construction equipment, forklift trucks, temporary housing and power generators. We have delivered them per the requests of local governments.
It is projected that reconstruction work will last for a long time. We recognize the importance of producing construction equipment, an indispensable tool of restoration and reconstruction, promptly delivering the equipment to the needed areas, and continuing our maintenance and repair operations to ensure trouble-free use of equipment, while continuing to work to normalize our operations.
During the fiscal year, ended March 31, 2011, demand for construction and mining equipment remained at a high level in Strategic Markets,*1 especially in China, Asia and Latin America, while demand recovered and increased from the previous fiscal year in the Traditional Markets*1 of Japan, North America and Europe. Demand for industrial machinery also turned toward recovery, reflecting an increased volume of production of cars in Strategic Markets*1 and growth of the solar cell industry in China and Asia.
With respect to our business results for the fiscal year under review, we were able to record a substantial gain in both sales and profits by capitalizing on expanding demand in all regions. While the Japanese currency appreciated sharply against the U.S. dollar, Euro and Renminbi from the previous fiscal year and we incurred a loss resulting from the damages by the Great East Japan Earthquake and the subsequent tsunami, we managed to register a sizable gain of 7.4 percentage points in operating income ratio to 12.1%. We believe this improvement is a direct result of expanding the volume of sales and continuing structural reform efforts, such as the realization of selling prices and the reduction of production costs.
*1: Komatsu Group’s Markets
Traditional Markets: Japan, North America and Europe
Strategic Markets: China, Latin America, Asia, Oceania, Africa, Middle East and CIS*2
*2: The Commonwealth of Independent States was founded with former Soviet republics,except for the Baltic States, in 1991.
Our production and procurement remain vulnerable to being affected by such conditions as the electric power supply, suppliers' recovery of operations, aftershocks and the crippled nuclear plant in Fukushima Prefecture. We will continue our all-out efforts to stabilize production and procurement as we monitor the conditions very carefully.
Concerning the restoration of the regions devastated by the Great East Japan Earthquake, we created the Tohoku Operation Department in Sendai City, Miyagi Prefecture. The Department will ensure dynamic decision-making operations in the affected regions, provide for the smooth transportation of construction equipment, forklift trucks, temporary housing materials, and spare parts for equipment, and reinforce our service operations.
As we look at our global group-wide business environment, Strategic Markets are steadily expanding in the construction and mining equipment business. We are projecting that the economic growth of countries in Strategic Markets will play the role of driving the demand for equipment. In the industrial machinery and others business, we are also anticipating that demand will continue to grow, as the volume of automobile production is increasing, especially in Strategic Markets.
We at the Komatsu Group draw our strengths especially from ICT*3 applications, in-house development and production capabilities of key components, global sales and service networks, and flexible procurement and manufacturing operations. In the new mid-range management plan, "Global Teamwork for Tomorrow," with the goals set for the fiscal year ending March 31, 2013, we are working to further refine our strengths by focusing our efforts on the following activities of importance and will steadfastly generate results.
*3: Information & Communication Technology
We will also continue our efforts to disseminate and anchor The KOMATSU Way, as all employees of Komatsu engage in Kaizen (improvement) activities in their own work. In addition, we will focus our efforts on our brand management activities designed to further enrich the relationship with our customers for mutual growth with them and foster the growth of employees who are needed for our global business expansion.
Based on the belief that "our corporate value is the total sum of trust given to us by society and all our stakeholders," we at Komatsu are further strengthening our corporate governance to ensure sound and transparent management, while improving management efficiency. Being committed to promoting thorough compliance, we will also ensure that all employees share The KOMATSU Way. In addition to improving our business performance, we will facilitate both the development of corporate strength and the achievement of social responsibility in a well balanced manner.
On behalf of the members of the Board, we would like to extend our sincere appreciation to our valued shareholders, customers and business partners around the world for their support.
July 2011
