Nikon 2006 Annual Report Download - page 28

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OPERATIONAL REVIEW AND ANALYSIS
During the year, the Nikon Group worked to expand sales through the speedy introduction of products that clearly match market needs, and
to develop high-growth-potential markets. Elsewhere, management resources were channeled into creating and fostering promising new busi-
ness areas. To enhance financial standing, the Group devoted energy to shortening processing time and cutting costs by further boosting effi-
ciency in core businesses, and to reducing inventories and interest-bearing debt. Efforts were also made to create a management system
focused on cash flow. As a result of these initiatives, consolidated net sales totaled ¥730,944 million, up ¥92,476 million, or 14.5%, relative to
the previous year, while consolidated net income amounted to ¥28,945 million. Both of these results marked new record highs for the Group.
Breaking down the results by business segment, the Precision Equipment Business posted ¥242,318 million in net sales, a year-on-year
increase of 14.0%, and operating income of ¥26,375 million. In IC steppers, the Group not only strove to expand sales of existing products, it
began shipments of immersion lithography products using advanced lithography technology ahead of the competition. Sales of LCD steppers
grew considerably thanks to aggressive efforts to increase sales to meet demand from LCD panel makers.
The Imaging Products Business recorded net sales of ¥415,686 million, a 17.4% gain, and operating income of ¥34,369 million. Nikon
was successful in significantly expanding sales in this segment through the release of new digital SLR cameras, including the D70s with
enhanced basic functions and ease-of-use, which was well-received by markets, and by augmenting the COOLPIX line and the range of digital
SLR cameras.
The Instruments Business registered net sales of ¥53,280 million, up 5.2%, and operating income of ¥4,085 million. This result was due to
aggressive efforts to raise sales of new products and the CNC video measuring system NEXIV.
Breaking down results by geographic segment, sales increased in Japan due to sales growth in Instruments on the back of increased
demand for equipment to measure asbestos and increased production of microscopes, which offset declining sales in Precision Equipment due
to lower sales volume relative to the previous year. Meanwhile, in Imaging Products, sales of digital SLR cameras were strong. Overall sales in
Japan dipped by 0.4% to ¥274,907 million and operating income totaled ¥45,204 million.
Overseas, sales in North America surged by 31.4% to ¥216,849 million and operating income was ¥8,391 million due to brisk sales of dig-
ital SLR cameras.
In Europe, although sales of digital SLR cameras remained flat year-on-year, appreciation of the Euro led to overall sales growth. The region
recorded sales of ¥166,734 million, up 17.3%, and operating income of ¥4,827 million.
In Asia, sales of service components increased as customers' capacity utilization rose, while sales of digital SLR cameras performed well,
leading to overall sales expansion. Regional sales climbed 31.1% to ¥72,454 million and operating income totaled ¥8,474 million.
Income Analysis
Years ended March 31, 2006 and 2005
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.
2005
100.0%
(67.2)
32.8
(28.0)
4.8
(0.2)
0.6
5.2
1.4
0.0
3.8
2006
100.0%
(64.2)
35.8
(26.7)
9.1
0.0
3.5
5.6
1.6
0.0
4.0
(% of Net Sales)