Isuzu 2004 Annual Report Download - page 7

07
Isuzu Motors Limited Annual Report 2004
We have drastically transformed the shape
of our business. We have restructured our
North American SUV operations and we are
concentrating our resources in the areas
where we are strongest—commercial
vehicles and diesel engines. Sales in these
areas grew remarkably thanks to the
introduction of stricter emission regulations
in Japan and our aggressive marketing
efforts overseas. Our business is steadily
growing in ASEAN and China locations
where we took the lead in establishing local
facilities.
As a result of these efforts, in fiscal 2004
(ended March 31, 2004) consolidated-basis
sales rose 6% from a year earlier to
¥1,430,339 million and operating income
jumped 446.4% to ¥84,490 million.
As we overhauled our earnings structure,
over the past few years we have booked
massive restructuring charges at the parent
level. And to further buttress our earnings
capacity, we have also moved ahead on
making provisions for anticipated future
expenses. But even after booking these
charges for fiscal 2004, our net result
rebounded from the previous year’s loss of
¥144,301 million to a profit of ¥54,713
million.
These restructuring charges have impacted
profitability in recent years, but now we are
positioned for a brighter future. We are
growing stronger not only at the parent
company, but also at our affiliates. Our
affiliated dealers returned to the black, and
our parts suppliers also further improved
earnings thanks to streamlining measures
and higher sales. As a result, our
consolidated-basis operating margin
widened 4.8 points to 5.9%.
We are also strengthening our balance
sheet. In fiscal 2004, we reached the debt-
reduction target set forth in our New Three-
Year Business Plan one year earlier than
planned. Our consolidated-basis
shareholders equity ratio also rose 7.6
points to 10.2% thanks to fiscal 2004’s
record earnings and fresh capital from the
conversion of bonds with stock acquisition
rights. While we still view this level of equity
as inadequate, we aim to continue building
equity at this pace going forward to further
shore up our balance sheet.
This is the final year of our New Three-Year
Business Plan, and we intend to forge
ahead on meeting its goals. This year in
particular, we believe that achieving these
targets is crucial for ensuring a bright future,
so Isuzu—the company and the group as a
whole—will strive to meet these objectives.
By moving ahead with structural changes
outlined in the plan, we aim to put Isuzu in
on a footing where we can begin paying
dividends to our shareholders again as soon
as possible.
Though we expect the Japanese economy
to continue its slow recovery this fiscal year,
we do not believe this will mean an
automatic end to the challenging business
environment. We foresee a downturn this
year after the brisk truck sales recorded in
Japan in fiscal 2004, and the stronger yen
could impact exports. Competition is also
intensifying at home and abroad.
Going forward we aim to work even harder
to use our superior emissions control
technology and other environmental
technologies to proactively address
environmental issues. Furthermore, as
replacement demand for vehicles in Japan
stemming from the introduction of new
emission runs its course, we are committed
to making earnings less vulnerable to
fluctuations in domestic demand by
strengthening our brands and technologies
while diligently pursuing cost reductions.
The Japanese economy is expected to
continue slowly recovering, and the market
for trucks will likely remain resilient.
However, partly due to the strong base of
comparison from the prior year and also due
to the impact of the strengthening yen on
exports as well as intensifying competition
at home and abroad, the business
environment will remain difficult. Currently,
we see sales declining 5.6% from a year
earlier to ¥1,350,000 million, working profit
falling 20.4% to ¥65,000 million, and net
profit shrinking 8.6% to ¥50,000 million in
the fiscal year ending March 31, 2005.
However, these figures either meet or
exceed the targets set forth in our New
Three-Year Business Plan, so we expect
earnings to remain on track.
We wish to note that Isuzu is striving to be a
leader in environmental responsibility. Not
only have we taken the lead in developing
diesel engines that meet Japan’s rigorous
new emissions regulations, we have also
expanded our lineup of CNG-powered
trucks and we are opening CNG filling
stations to fuel these vehicles.
On my desk I keep a piece of Japanese
calligraphy that says sekisei, or “absolute
sincerity.” This motto is derived from the
words of Kaishu Katsu, a prominent
statesman of the Meiji Period, when Japan
was opening up to the West. He
admonished his readers that people are
easily swayed, but one must live life in such
a way that one will not be ashamed before
heaven.
As someone who enjoys hiking on the
nearby Tanzawa and Hakone Mountains, I
am frequently in awe of nature and I
appreciate how dependent we are upon it.
We have an obligation to hand down this
natural environment to future generations.
Although the Kyoto Protocol has yet to be
enforced, companies that consume large
amounts of energy in the course of business
must be cognizant of our responsibility as
members of society, and do what we can.
Companies like Isuzu that make products
that emit CO2in the course of operation
have a particular obligation to strive to
minimize exhaust gases.
As we move into the final year of our New
Three-Year Business Plan, we look forward
to your continued support as we continue to
transform Isuzu into a leader in engineering
distribution systems.
June 2004
Yoshinori Ida
President & Representative Director