Kenwood 2005 Annual Report Download - page 5

*1 Consolidated figures posted as of the end of March 2004
*2 Non-consolidated figures registered as of the end of March 2004
to be one of the most promising fields in the 21st century.
In fiscal year ended March 2004, the initial year of the first mid-
term business plan, the Company focused on “Production
Innovation” to improve the profitability and cash flows, while
enhancing its consolidated management system. As a result, net
income rose to a record high for two consecutive years. Managing
to reduce cumulative loss and interest-bearing debt significantly, the
balance sheet also became healthier, as the Company took its first
step towards becoming an excellent company.
In fiscal year ended March 2005, the second year of the mid-term
business plan, the Company promoted the “New Financial Strategy,”
which involves the simultaneous execution of four measures: entirely
eliminating cumulative loss; redeeming half of the preferred stocks
through public share offering; terminating the repayment agreement
through refinancing; and substantially reducing interest-bearing debt.
The Company completed this unprecedented scheme (for Japan) by
the end of August 2004. This accomplishment translated into a
dramatic improvement in its financial basis and capital structure. As a
result, the Company was able to achieve the goal of resuming
dividend payments, one of the four objectives set in the first mid-term
business plan, one year ahead of schedule. In addition, we have the
prospect of accomplishing two other goals; “achieving a 20% return
on equity (ROE)” and “implementing zero net-debt business
management.”
In fiscal year ending March 2006, the final year of the first mid-
term business plan, we made efforts to redeem the remaining half of
the preferred stocks and we completed the redemption of all
preferred stocks issued through a debt-for-equity swap to eliminate
the negative net worth by the end of August 2005, producing a
healthier balance sheet and an increase in shareholder value.
We could complete the above-mentioned scheme thanks to the
understanding and support of every shareholder; financial
institutions as well as our customers. Taking this opportunity, I would
like to express my heartfelt gratitude to you.
With the completion of this redemption of preferred stocks, the
Company broke free from its past negative legacies, shifting its
management priorities to full-scale growth.
In fiscal year ended March 2005, the Company pushed forward its
growth strategy through measures such as strategic investment of
about 4 billion yen as well as strategic partnership and M&A to
prepare for the final year of the first mid-term business plan in fiscal
year ending March 2006. However, the Company was forced to
revise the goal of achieving an operating profit margin of 10%, the
remaining objective of the first mid-term business plan, due to such
factors as fluctuations in foreign exchange rates and dramatic
changes in the consumer electronics market environment, and
reformed its business structure to address these changes and
implement measures such as strategic investment. As a result, we
initiated our new efforts after formulating the second mid-term
business plan, the “Value Creation Plan,” in May 2005 rather than
waiting for the final year of the first mid-term business plan. While
implementing the second mid-term business plan, we will strive to
become one of the most profitable companies in the industry
through significant growth and reconstruction of revenue base and
enhance corporate value to join the billion-dollar club at an early
stage.
The second mid-term business plan “Value Creation Plan”
working on the strategy to enhance corporate
value for the purpose of joining billion-dollar
club to realize significant growth and become
one of the most profitable companies in the
industry
In fiscal year ending March 2006, the first year of the second mid-
term business plan, we will enhance the revenue base with the car
electronics consumer (audio) and wireless radio equipment
businesses as our core operations. Based on this, the Company will
restructure the profit structure of the car electronics OEM and car
multimedia (consumer) businesses, two of the growing businesses,
and dynamically overlay it on top of that of the stable businesses.
In addition, we will embrace the digitization of music media as a
new business opportunity. Combining these businesses together,
we will create a new sound entertainment business, primarily in
home electronics.
To achieve the above-mentioned goal, we will further accelerate
our growth strategy through such measures as enhancing strategic
development in each business and strengthening marketing systems
in new markets, centering on the BRICs nations, as well as fully-
utilizing surplus funds, by for example, reinvesting in each business
including M&As.
Looking ahead, we recognize the development of technology in
the field of digital, network, wireless and multimedia as a new
business opportunity. As the sole manufacturer that simultaneously
operates in the three businesses of car electronics, communications
equipment and home electronics, we will strive to combine our
technology in the audio visual field that we have nurtured over the
years with the cutting-edge digital network technology to expand
seamless entertainment of home-use, mobile and car-mounted
equipment, as well as promote networking with PCs and the
Internet. Through these measures, we will actively strive to develop
new businesses that match our target Mobile & Home Multimedia
System business and create added value for the marketplace.
In proceeding with these measures for growth, we will increase
the transparency of our corporate management and strengthen
accountability so that all the stakeholders, including the
shareholders, investors, financial institutions and customers, can
understand well what we are doing. The Company will also strive to
contribute to the public good through its business operations as well
as to improve corporate value. We appreciate your continued
understanding and support.
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Kenwood Corporation Annual Report 2005