Nikon 2010 Annual Report Download - page 27

Management’s Discussion and Analysis
Nikon Corporation and Consolidated Subsidiaries
For the year ended March 31, 2010
25
Nikon Corporation Annual Report 2010
Business Environment
Business conditions remained tight during the consolidated fi s-
cal year ended March 31, 2010. Despite recovery in certain mar-
ket areas, business was strained by curbs on corporate capital
expenditures, sluggish consumer spending, and the impact from
the appreciation of the yen.
In the Precision Equipment Business, the market scale for
IC and LCD steppers and scanners shrank to approximately half
its sales volume of a year earlier, due mainly to the decline in
global demand for semiconductor devices, and curbs on capital
expenditures by LCD panel manufacturers. Demand showed signs
of recovery from the second half of the period, but unit sales
decreased for both IC and LCD steppers and scanners.
In the Imaging Products Business, the market for digital SLR
cameras regained a growth track, while demand also recovered
in the compact digital camera market, which had been on a de-
clining trend. Nikon’s performance exceeded that of the market
due to the introduction of a new fl agship model of digital SLR
camera, and efforts to introduce the joy of photography.
In the Instruments Business, sales of products for the indus-
trial instruments market was sluggish due to continued curbs
on capital expenditures stemming from the economic downturn.
Products in the bioscience fi eld benefi ted from robust markets
in Japan, the United States and Asia, mainly for areas concerned
with live cells. The outlook for future growth in the bioscience
brightened due to such factors as expectation for R&D-related
capital expenditures in the United States.
In all its main businesses, Nikon focused on new product de-
velopment to exceed the expectations of customers, pursue new
business and explore new fi elds, as well as develop and cultivate
markets in emerging countries.
Financial Performance
The Nikon Group, under the guidance of the Management
Reform Committee, established to respond to rapid changes in
the business climate, took steps to reform its business and earn-
ings structures. These included reorganizing and consolidating
development, sales and service sites in Japan and overseas, opti-
mizing inventories, and building a production structure capable
of withstanding further appreciation of the yen. Despite these
efforts, net sales for the subject fi scal year decreased ¥94,220
million (10.7%) from the previous fi scal year to ¥785,499 million,
and the Company posted an operating loss of ¥13,854 million
(compared to operating income of ¥48,185 million the previous
fi scal year), and a net loss of ¥12,615 million (compared to net
income of ¥28,056 million). The net loss per share was ¥31.82.
Income Analysis
Years ended March 31, 2010 and 2009
% of Net Sales
2010 2009
Net sales 100.0% 100.0%
Cost of sales (70.3) (63.8)
Gross profi t 29.7 36.2
SG&A expenses (31.4) (30.7)
Operating income (loss) (1.7) 5.5
Net interest expense and dividend income 0.0 0.1
Net other expenses (0.5) (1.1)
Income (loss) before income taxes (2.2) 4.5
Income taxes 0.6 (1.3)
Net income (loss) (1.6) 3.2
Note: Expenses, losses and subtractive amounts are in parentheses.
Performance by Business Segment
Business Segment Results
In the Precision Equipment Business segment, Nikon stepped
up sales efforts for leading-edge equipment models, centered
on the NSR-S610C ArF immersion scanner, as well as for the
NSR-S620 ArF immersion scanner that meets more stringent
miniaturization requirements for line widths of 32 nm and
beyond in double patterning. In the area of LCD steppers and
scanners, the Company expanded sales efforts for the FX-101S
scanner, which is compatible with 10th generation large glass
plates, as well as for devices optimally suited to the production
of the small to medium-sized high-precision liquid crystal dis-
plays used in cell phones and automotive electronic devices. We
also advanced successfully into the Chinese market, where rapid
expansion is expected. As part of its cost containment program,
the Company took steps to reduce fi xed costs by shortening
manufacturing periods and adopting common platforms, as well
as by reorganizing and consolidating domestic manufacturing
subsidiaries. As a result, net sales in the Precision Equipment
Business segment amounted to ¥150,101 million (down 31.7%
year on year), and the segment posted an operating loss of
¥58,557 million (compared to operating income of ¥8,041 mil-
lion the previous fi scal year).
In the Imaging Products Business segment, sales of digital
SLR cameras were steady for the high-end D3S model and mid-
range D3000 and D5000 models. Unit sales of compact digital
cameras increased, centered on the COOLPIX S220. We also
launched the COOLPIX S1000pj, a compact digital camera with