Nikon 2005 Annual Report Download - page 24

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OPERATIONAL REVIEW AND ANALYSIS
During the year, the Nikon Group pursued policies aimed at improving corporate performance. Besides assertively striving to increase sales,
especially of digital cameras and LCD steppers, to take advantage of the improvement in market conditions, efforts were made to further
expand and strengthen existing businesses by developing new competitive products. The Group also worked to carve out and foster new
business territories. To enhance financial standing, the Group devoted energies to cutting down on inventories and reducing interest-bearing
debt by compressing accounts receivable. The Group also endeavored to maximize consolidated management potential. This was accomplished
through business process reforms to create a system that facilitates a clearer understanding of changes in the business environment, in turn
enhancing speed and efficiency in business activities. As a result of these actions, consolidated net sales totaled ¥638,468 million, climbing
¥132,090 million, or 26.1%, relative to the previous year. Consolidated net income amounted to ¥24,141 million.
Breaking down the results by business segment, the Precision Equipment Business posted ¥212,471 million in net sales, a year-on-year
increase of 35.7%, and operating income of ¥11,387 million. In IC steppers, the Group not only aggressively expanded sales of new and
existing products, it pushed forward with the development of polarized illumination systems and immersion lithography products by proactively
promoting R&D. In LCD steppers, full-scale efforts aimed at boosting sales amid revitalized capital investment at LCD panel makers ensured
a record high in sales volume.
The Imaging Products Business recorded net sales of ¥354,181 million, a 25.0% gain, while operating income amounted to ¥16,841 million.
Despite lower sales of traditional film cameras due to a contacting market, Nikon expanded the COOLPIX line and its range of digital SLR
cameras, notably with the Nikon D70, which was released at the end of the previous fiscal term and was well received by markets the world
over. This culminated in steady sales growth in digital cameras.
The Instruments Business registered net sales of ¥50,657 million, up 8.5%, and operating income of ¥2,826 million. This result was due
primarily to aggressive efforts to raise sales through the introduction of new products, including the advanced research microscope ECLIPSE90i
and the CNC video measuring system NEXIV VMR.
Breaking down results by geographic segment, sales increased in Japan due to higher sales of IC steppers and LCD steppers to Asia in
Precision Equipment, and higher sales of industrial microscopes to Asia in Instruments. Meanwhile, Precision Equipment posted increased sales
due to steady growth in digital SLR cameras and the positive effects of an expanding digital camera market. Overall sales in Japan surged by
40.4% to ¥275,992 million and operating income totaled ¥17,838 million.
Overseas sales rose by 11.0% to ¥165,085 million as sales of digital cameras increased in North America driven by a robust digital SLR
camera market. Operating income stood at ¥5,608 million.
In Europe, a steady sales gain in digital SLR cameras coupled with sales growth resulting from the positive effects of the strong euro led to
sales increasing 14.5% to ¥142,143 million. The region recorded operating income of ¥2,862 million.
In Asia, sales of service components increased as customers’ capacity utilization rose in line with resurgence in the semiconductor market
and expansion of the LCD market. Together with this, sales of industrial microscopes and semiconductor inspection equipment grew, while
production of digital SLR cameras increased as the market expanded. Regional sales climbed 49.4% to ¥55,248 million. Operating income
totaled ¥5,125 million.
Notes: 1. All sales amounts for geographic segments in this review are disclosed exclusive of the intersegment sales in the fiscal year ended March 31, 2005.
2. Operating income for each geographic segment in this review includes ¥888 million of income that occurred through inter-company transactions in this
fiscal year ended March 31, 2005.
Income Analysis
Years ended March 31, 2005 and 2004
Net sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Net interest expense and dividend income
Net other income
Income before income taxes and minority interest
Income taxes
Minority interest
Net income
Note: All expenses and subtractive amounts are in parentheses.
2004
100.0%
(68.5)
31.5
(30.8)
0.7
(0.3)
1.5
1.9
(1.4)
0.0
0.5
2005
100.0%
(67.2)
32.8
(28.0)
4.8
(0.2)
0.6
5.2
1.4
0.0
3.8
(% of Net Sales)