Kenwood 2005 Annual Report Download - page 4

Haruo Kawahara, President & CEO
“V”-shape recovery accomplished as efforts for
sweeping restructuring and concentrating on
core businesses take hold
Kenwood Corporation, which had continuously expanded its audio
and wireless radio businesses as its main areas of expertise since its
foundation, had kept its operating balance in the black even after
Japan’s bubble economy collapsed. The strong performance was
achieved as the car electronics and communications equipment
businesses offset unprofitable areas such as home electronics and
new businesses. However, it is true that these unprofitable
businesses weighed on the Company’s business conditions, and the
balance sheet deteriorated markedly due to an extraordinary loss as a
result of the withdrawal from new businesses and an extraordinary
loss due to evaluation losses as deflation worsened. Hurt by these
negative legacies, the Company stated its negative net worth at 17.0
billion yen*1, interest-bearing debt at 110.1 billion yen*1 and a
cumulative loss of 44.6 billion yen*2 as of the end of March 2002.
Against this backdrop, corporate management restructuring was a
pressing task for the Company.
There have been many Japanese corporations whose performance
became sluggish as their industry matured, but I believe that such
industries are intrinsically quite attractive. In a matured field, no
growth is expected, but a large and stable market already exists.
While an increasing number of companies are withdrawing from this
industry due to reduced profitability, it is difficult for new entrants,
because, in this industry, resources such as technologies, facilities and
sales networks have generally been established and brand presence
has been built, constituting an extremely high barrier for entrants.
To eliminate the past negative legacies as soon as possible and
restructure the Company by leveraging the benefits of a mature
industry, we formulated our “Revitalization Action Plan” in July 2002
under which all the staff strived to achieve drastic restructuring of
finances, business, costs and the management of the Company. As
a result, we were able to eliminate the negative net worth in
December 2002 and completed various restructuring measures
within nine months. In fiscal year ended March 31, 2003, the
Company booked the largest consolidated net income in its history,
achieving a “V”-shape recovery in net income.
The first mid-term business plan “Excellent Kenwood Plan”
enhancement of competitiveness and
promotion of growth strategy enabled us to
sweep away the past negative legacies
As earlier mentioned, the Company had completed various
restructuring measures by the end of March 2003, and shifted its
management priorities aiming for a new leap forward as the reborn
Kenwood. In May 2003, aiming to become one of the world’s truly
excellent companies, the Company drafted its first mid-term business
plan, the “Excellent Kenwood Plan” that focuses on the business
domain of “Mobile & Home Multimedia System,” which is expected
04 To Our Stakeholders