Kenwood 2005 Annual Report Download - page 11

*Even though a new “Profit Center Organization” was established, there were no changes with the three
business segments used for account settlements (car electronics business, communications equipment
business and home electronics business).
repayments for existing debts. Independence was gained in terms of financial affairs
by terminating the financial agreement with the financial institutions we deal with
one year ahead of schedule. We also made a dramatic reduction in the interest-
bearing liabilities, making a giant leap toward the realization of “Management with
No Substantial Debts (Zero Net Debt).”
Aside from the above strategies for the term ended in March 2005 we attained a
consolidated shareholders’ equity of JY33.1 billion, a shareholders’ equity ratio of
28.5%, consolidated retained earnings of JY13.2 billion and a net debt of JY15.1
billion, which is half when compared with the previous term. As a result, we
resumed the distribution of dividends for the first time in six years.
Progress made by car electronics OEM business and growth of
communications equipment business
The Car Electronics Division was divided into the Car Electronics Consumer Division
and Car Electronics OEM Division as of April 1, 2004. These newly-formed divisions,
combined with the Home Electronics Division and Communications Equipment
Division, constituted our transition into an “organization consisting of four profit
centers,” thereby enhancing our business competitiveness and promoting a growth
strategy.
We succeeded in bringing a new undertaking into fruition in the car electronics
OEM business through the enhancement of a production organization made
possible by the new organization, “Production Innovation” and from the new
activities that utilized technological, planning and developing capabilities as well as
credibility and brand presence nurtured through experiences gained in the car
electronics consumer business. Our sales amount for the term ended March 2005
was 1.5 times the recorded amount of the previous term, which indicated that we
succeeded in accomplishing our goals by exceeding our planned targets.
Development investments and sales strategies that have been implemented so far
come to fruition in the wireless radio business, which are the main operations in the
communications equipment business. This, along with the fact that there have been
favorable trends, primarily in the United States, promoted our successful expansion
in the emerging markets. Further, the favorable impact of M&A, intended to
enhance our wireless radio business for the domestic market, also contributed and
resulted in a growth in terms of sales amount for the term that ended in March
2005, which exceeded the performance record from the previous term by 9.3%.
Normalization of activities following completion of “Production
Innovation”
Complete profit reforms and cash flow reforms through
implementation of “Kenwood Quarter QCD Revolution”
฀
The last term ended in March 2005 was the final fiscal year for activities intended to
bring about “Production Innovation.” This term was completed with the overall
finalization of the production innovation that enhanced our production
organization, through the implementation of the vastly progressive best practice for
reforms in all manufacturing factories including the three production factories
(Yamagata factory, Nagano factory and Singapore factory), where advance
implementation of the production innovation is still taking place as the headquarters
for these activities by enhancing relationships among individual business divisions
and production companies and through the vertical integration of domestic and
overseas manufacturing factories.
In addition, International Procurement Offices (IPOs) were established at our
Shanghai and Singapore factories to enhance our global procurement functions and
our business competitiveness as well as our profit earning capacity by promoting
logistical cost reductions through the elimination of intermediate stocks, the
commencement of direct shipments from manufacturing factories to sales locations
and through the utilization of outsourcing.
Through such efforts, activities intended for the “Production Innovation,”
targeting profit reform and cash flow reform, resulted in a reduction of costs over
the past two years by 23% in comparison with the term ended March 2003. More
than half of the ground gained through this result was used to respond to the needs
of competitive enhancements, such as price reductions. Inventory assets were
reduced by about 27% in comparison with the term ended March 2003, which
contributed to the improvement of cash flow. The “Production Innovation,”
therefore, was completed as scheduled in this last term ended March 2005.
0
20
40
60
80
100
120
Cost Reduction
Production Procurement
Return to market
2004/32003/3 2005/3
Cost reduction
Car Electronics Consumer Business Others
Communications Equipment Business
Consolidated Sales
Car Electronics OEM Business
Home Electronics Business
250
200
0
50
100
150
2004/32003/3 2005/3
225.6
178.7
Consumer
Business
Growing
181.1
Billions of yen Billions of yen
Inventory Reduction
Product Raw material Work in progress
40
0
10
20
30
2004/32003/3 2005/3
Billions of yenBillions of yen
-20
-10
0
10
20
30
40
Changes in Shareholders’ Equity and Equity Ratio
Shareholders’ equity Shareholders’ equity ratio%฀
40
-20
-10
0
20
10
30
2003/3
13.7
2002/3
-17.0
2005/3
33.1
-9.3%
9.6%
2004/3
20.2
14.9%
28.5%
Kenwood Corporation 11 Annual Report 2005