Nikon 2007 Annual Report Download - page 26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS
24 NIKON ANNUAL REPORT 2007
OPERATIONAL REVIEW AND ANALYSIS
During the year, the Nikon Group worked aggressively to implement key strategies in its three-year medium term management plan
announced in March 2006 that will run until March 31, 2009. Specific initiatives included: strengthening competitiveness in core businesses,
particularly by securing market share in cutting-edge models and developing high-value-added products; boosting cost competitiveness
through hard-hitting measures to bolster manufacturing; and creating and fostering new businesses, beginning with the glass business.
Attention was also given to promoting CSR-oriented management, such as enhancing the internal auditing system, and to further improving
financial structure. As a result of these efforts, consolidated net sales totaled ¥822,813 million, up ¥91,869 million, or 12.6%, relative to the
previous year, and consolidated net income amounted to ¥54,825 million. Both of these results marked new record highs for the Group.
Breaking down the results by business segment, the Precision Equipment Business posted ¥291,913 million in net sales, a year-on-year
increase of 20.5%, and considerable growth in operating income to ¥49,321 million. In IC steppers, the Group not only strove to expand sales
of existing products, but sales of state-of-the-art immersion lithography products were strong. Sales of 7th and 8th generation LCD steppers
increased as Nikon made effective use of its outstanding technological expertise.
The Imaging Products Business recorded net sales of ¥448,825 million, up 8.0%, and a substantial increase in operating income to
¥45,678 million. Sales of digital SLR cameras were brisk, due in part to the release of the D80, which realizes excellent image quality as a
mid-range camera, compact design and ease-of-use. Amid intensifying competition in the compact digital camera market, Nikon strove to
expand sales through the proactive launch of new products in its COOLPIX line.
The Instruments Business registered net sales of ¥59,252 million, up 11.2%, and operating income of ¥5,123 million. These results were
due to efforts to raise sales of new products and to strong sales in the NEXIV line of CNC video measuring systems.
Breaking down results by geographic segment, sales increased in Japan due to overall sales growth of LCD exposure systems in Precision
Equipment, despite a year-on-year decline in IC steppers, while the proportion of state-of-the-art systems was increased. Additionally, in
Imaging Products, sales of digital SLR cameras and replacement lenses were robust. Overall sales in Japan were up 22.8% relative to the
previous year to ¥337,455 million and operating income totaled ¥84,786 million.
Overseas, sales in North America dipped by 0.3% to ¥216,113 million and operating income was ¥6,688 million. Sales in Precision
Equipment were down due to a decline in sales volume of IC steppers compared with the previous year. In Imaging Products, sales of digital
SLR cameras were firm.
In Europe, sales of digital SLR cameras grew, while results were buoyed by the strong Euro. The region recorded net sales of ¥177,386
million, up 6.4%, and operating income of ¥5,261 million.
In Asia, sales increased in Precision Equipment due to higher component sales as well as in Imaging Products due to solid performances in
digital SLR cameras and digital compact cameras. Regional sales climbed 26.8% to ¥91,859 million and operating income amounted to
¥4,691 million.
Income Analysis
Years ended March 31, 2007 and 2006
Net sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Net interest expense and dividend income
Net other expenses
Income before income taxes and minority interest
Income taxes
Minority interest
Net income
Note: All expenses and subtractive amounts are in parentheses.
2006
100.0%
(64.2)
35.8
(26.7)
9.1
0.0
(3.5)
5.6
(1.6)
0.0
4.0
2007
100.0%
(60.1)
39.9
(27.5)
12.4
0.0
(1.7)
10.7
(4.0)
0.0
6.7
(% of Net Sales)