Pioneer 2007 Annual Report Download - page 5

Annual Report 2007 4
Fiscal 2007 in Review
Although economic conditions are characterized by steady growth, Pioneer faces an
extremely challenging operating climate due to persistent price-based competition in
core product fields.
In fiscal 2007, the year ended March 31, 2007, consolidated operating revenue
rose 5.6% year on year to ¥797.1 billion (US$6,755.1 million). This increase mainly
reflected higher sales of car navigation systems and DVD drives and the weaker yen,
despite a drop in sales of DVD recorders. Operating income was ¥12.5 billion
(US$105.8 million), compared with an operating loss of ¥16.4 billion in the previous
fiscal year. This was due chiefly to higher sales, as well as an improved gross profit
margin and lower selling, general and administrative expenses due to the benefits of
business restructuring measures, and the weaker yen. Meanwhile, Pioneer recorded a
net loss of ¥6.8 billion (US$57.3 million) due to impairment losses on property, plant
and equipment mainly for plasma displays. However, this result was a significant
improvement on the previous fiscal year, when the net loss was ¥85.0 billion mainly
due to expenses and losses accompanying business restructuring measures.
The operating climate will remain challenging, but the results of a series of busi-
ness restructuring measures are starting to feed into our earnings. Accordingly, we
will step up efforts to improve our earnings structure to accelerate the turnaround.
Home Electronics Business
In fiscal 2007, the plasma display business faced rapidly falling market prices from the
end of 2006. Pioneer responded by taking steps to minimize the drop in its product
prices, which led to a large improvement in profitability. One step was to launch prod-
ucts that boast not only superior picture quality, but also innovative design and user
friendliness. Another was to conduct marketing activities centered on specialty stores
that can directly explain Pioneer’s value proposition to customers mainly in Europe.
Pioneer must establish distinctive strategies and policies in order to generate
earnings in the flat-panel TV market, where it is difficult to set products apart in
terms of their functions and prices are falling. Our basic policy is to convince the
markets of the exceptional picture quality of our plasma displays by reinforcing our
superior panel technologies while having customers purchase our products based on
an understanding of their premium value. Our drive to restore profitability will
continue to be guided by this basic policy. The core products will be high-resolution
plasma displays that realize a high contrast ratio far surpassing existing standards and
that raise the bar in terms of black expression. These products are being promoted
worldwide following their launch in North America and Europe in June 2007.
Furthermore, we plan on conducting marketing activities globally in an entirely differ-
ent manner than before to effectively convince the markets of this product’s value.
Efforts will also focus on developing Blu-ray Disc players and home theater systems
that bring out even better picture quality from our plasma displays. In these and other
ways, we will offer value propositions combining video and audio that are
quintessentially Pioneer.