Nikon 2003 Annual Report Download - page 4

The฀fiscal฀year฀ended฀March฀31,฀2003,฀proved฀another฀
difficult฀one฀for฀the฀Nikon฀Group.฀Although฀private-sector฀
capital฀investment฀stopped฀contracting฀and฀began฀to฀
grow฀again,฀the฀economic฀slowdown฀in฀the฀United฀States฀
intensified฀as฀growth฀in฀consumer฀spending฀tapered฀off.฀
European฀economies฀also฀continued฀to฀stagnate฀amid฀
poor฀export฀conditions.฀Asia฀experienced฀a฀mild฀economic฀
expansion,฀with฀growth฀still฀vigorous฀in฀China.฀In฀Japan,฀
deflation฀became฀more฀entrenched฀across฀many฀sectors฀of฀
the฀economy฀and฀consumer฀spending฀remained฀lackluster.฀
Depressed฀levels฀of฀capital฀investment,฀housing฀investment฀
and฀public-works฀spending฀contributed฀to฀persistently฀
stagnant฀growth.฀Overall,฀harsh฀business฀conditions฀
continued฀to฀prevail.
Looking฀at฀industry฀trends฀that฀had฀a฀direct฀influence฀
on฀our฀business,฀signs฀were฀generally฀favorable฀in฀the฀glob-
al฀semiconductor฀industry฀at฀the฀start฀of฀the฀fiscal฀year.฀
Conditions฀quickly฀deteriorated,฀however,฀and฀from฀mid-
2002฀onwards฀many฀semiconductor฀manufacturers฀started฀to฀
reduce฀capital฀investment฀once฀more.฀This฀had฀a฀highly฀neg-
ative฀effect฀on฀sales฀of฀steppers฀in฀our฀Precision฀Equipment฀
segment.฀On฀a฀more฀positive฀note,฀the฀market฀for฀digital฀
cameras฀continued฀to฀expand฀rapidly฀around฀the฀world,฀
which฀helped฀to฀generate฀excellent฀business฀conditions฀in฀
the฀Imaging฀Products฀segment.
We฀responded฀by฀working฀to฀expand฀sales฀through฀time -
ly฀launches฀of฀new฀products฀and฀by฀continuing฀to฀develop฀
our฀overseas฀network฀of฀production฀and฀service฀bases.฀We฀
also฀sought฀to฀develop฀new฀businesses฀based฀on฀our฀propri-
etary฀technology.฀Consolidated฀net฀sales฀declined฀2.9%฀from฀
the฀previous฀year,฀to฀¥468,959฀million.฀
To฀strengthen฀the฀Nikon฀Group฀earnings฀structure,฀our฀
efforts฀focused฀on฀reducing฀variable฀costs,฀including฀manu-
facturing฀costs,฀and฀other฀fixed฀costs฀through฀measures฀such฀
as฀the฀expansion฀of฀an฀early฀retirement฀program฀for฀employ-
ees,฀which฀helped฀to฀trim฀headcount.฀Elsewhere,฀we฀focused฀
on฀restructuring฀and฀liquidating฀unprofitable฀businesses฀and฀
subsidiary฀companies,฀and฀on฀numerous฀cost-reduction฀ini-
tiatives฀to฀lower฀costs฀further.฀
These฀moves฀could฀not฀fully฀offset฀the฀severe฀downturn฀
in฀the฀Precision฀Equipment฀segment,฀and฀operating฀income฀
slumped฀81.2%฀year-on-year฀to฀¥4,187฀million.฀Partly฀due฀
to฀the฀effects฀of฀a฀write -down฀of฀investment฀securities฀and฀
the฀tax-effect฀accounting฀implications฀of฀the฀introduction฀
of฀a฀new฀local฀corporate฀taxation฀system฀based฀on฀business฀
size,฀we฀posted฀a฀consolidated฀net฀loss฀of฀¥8,143฀million฀for฀
the฀year.
Our฀consolidated฀operating฀profitability฀varied฀mark-
edly฀by฀business฀segment.฀For฀the฀Nikon฀Group฀as฀a฀whole,฀
although฀increased฀digital฀camera฀sales฀boosted฀profits฀
in฀the฀Imaging฀Products฀segment฀considerably,฀the฀gains฀
were฀insufficient฀to฀compensate฀for฀the฀loss฀recorded฀in฀the฀
Precision฀Equipment฀segment฀as฀a฀result฀of฀the฀deteriora-
tion฀in฀business฀conditions฀in฀that฀area.฀Operating฀conditions฀
and฀results฀in฀each฀business฀segment฀are฀discussed฀in฀greater฀
detail฀in฀other฀sections฀of฀this฀report.
Although฀there฀are฀a฀few฀signs฀of฀impending฀recovery฀in฀
the฀fiscal฀year฀ending฀March฀2004,฀we฀still฀anticipate฀harsh฀
business฀conditions฀for฀the฀Nikon฀Group฀as฀a฀whole.฀We฀have฀
therefore฀regrettably฀decided฀to฀suspend฀payment฀of฀interim฀
and฀final฀dividends฀for฀the฀year฀ended฀March฀31,฀2003.฀
As฀the฀top฀management฀of฀the฀Nikon฀Group,฀we฀intend฀
to฀redouble฀efforts฀to฀cut฀costs฀across฀the฀Nikon฀Group฀while฀
boosting฀business฀efficiency.฀We฀will฀also฀continue฀to฀try฀to฀
apply฀our฀core฀technical฀expertise฀to฀produce฀higher฀Nikon฀
Group฀growth฀through฀the฀creation฀and฀development฀of฀new,฀
profit-generating฀businesses.฀
The฀entire฀Nikon฀Group฀is฀currently฀applying฀itself฀to฀
concentrate฀on฀improving฀results฀from฀a฀variety฀of฀angles.฀
While฀the฀business฀environment฀is฀still฀tough฀at฀present,฀we฀
are฀confident฀that฀the฀future฀for฀the฀Nikon฀Group฀remains฀
promising.฀We฀believe฀that฀Nikon฀possesses฀important฀core฀
technologies฀that฀can฀make฀a฀significant฀contribution฀in฀areas฀
with฀high฀growth฀potential฀such฀as฀nanotechnology฀and฀life
science.฀Once฀our฀development฀work฀in฀these฀areas฀comes฀to฀
fruition,฀we฀expect฀new฀businesses฀to฀emerge.
We฀ask฀shareholders฀and฀investors฀to฀understand฀our฀cur-
rent฀situation.฀Now฀more฀than฀ever,฀we฀trust฀that฀you฀will฀
continue฀to฀extend฀us฀your฀support.
July฀2003
Shoichiro฀Yoshida
Chairman฀of฀the฀Board฀and฀
Chief฀Executive฀Officer
Kenji฀Enya
Vice฀Chairman฀of฀the฀Board฀and฀
Chief฀Financial฀Officer฀
Teruo฀Shimamura
President,฀Member฀of฀the฀Board฀and฀
Chief฀Operating฀Officer
T O ฀ O U R ฀ S H A R E H O L D E R S ฀ A N D ฀ I N V E S T O R S
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