Kenwood 2001 Annual Report Download - page 16

KENWOOD Corporation Annual Report 2001
14
Net Sales by Segment
(Billions of yen)
1997
1998
1999
2000
0 10050 200 250150 300
2001
Operationg Income
(Billions of yen)
1997
1998
1999
2000
01591263
2001
Audio equipment Communications equipment
Financial Review
The Japanese economy during the term under
review continued to struggle under a prolonged
recession and intensified competition in the
market. The trend was no different in the audio-
visual market in which the falling market prices of
home and car audio products prohibited Kenwood
from increasing its income despite the increased
number of units sold. Meanwhile, the communications
business has come to a turning point as the
cellular phone market, of which rapid growth
provided an opportunity for business expansion, is
showing more signs of transition from the growth
stage to the maturity stage.
Overseas, the business climate was mixed as the
prolonged growth of the US economy has slowed
down in the latter half of the year while consumer
spending in the European market remained solid.
Sales
Sales of the Kenwood Group for the year ended in
March 2001 rose 10.5% from the previous year to
303.4 billion. Looking at the sales amount by region,
131.9 billion (an increase of 6.8% from the previous
year) was earned in Japan while overseas sales
amounted to 171.5 billion (an increase of 13.5%).
Composition-wise, 43.5% (45% the previous year) of
total sales were from domestic market and 56.5% (55%
the previous year) overseas.
Sales from the audio business increased 9.5% from the
previous year to 231.8 billion thanks largely to the solid
performances of value added products such as audio
systems with built-in CD-R/RW drive, MD-LP compatible
audio systems, and car audio receivers with a MP3
decoder, as well as MD built-in portable stereo players.
On the other hand, sales from the communications
business were 71.6 billion (an increase of 13.7%).
While the LMRs (Land Mobile Radio - commercial radio
transceivers), the staple product in the overseas market,
struggled in the US due to the economic slow down, the
introduction of new PDC cellular phones has contributed
to increased sales in the domestic market.
Expenses and Earnings
The cost to sales ratio deteriorated from the previous
year's 74.5% mark to 77.8% affected by the price
drop in the market owing to the fierce competition for
home audio and car audio products. Sales cost rose
to 235.9 billion (204.5 billion for the previous year),
gross profit was down by 3.7% to 67.4 billion, and
selling, general and administrative expenses increased
3.9% to 67.4 billion. Consequently, the company's
operation ended up right at the break-even point (5.1
billion operational income for the previous year).
Other expenses swelled from 6.3 billion in the
previous year to 18.0 billion due to the cost
associated with the withdrawal from non-profitable
businesses. As a result, the company posted a loss
of 18.0 billion before tax (a 1.2 billion loss the
previous year) and a net loss of 21.8 billion (1.0
Performance