Business development and results for fiscal 2005

Transcription

1 Review of Operations Japan Shutter products Commercial building doors Partitions Stainless steel products Facade products Material handling equipment Net Sales By Region 165, , , , ,981 Net Sales 6,042 7,877 9,100 11,076 Japan 10,901 Operating Income 56.7% In Japan, efforts are being made to realize growth in non-shutter areas through Sanwa Shutter and the Group s domestic subsidiaries. Shutter products are manufactured as made-to-order, while other products are manufactured and sold either made-to-order or as standardized items. Products include heavy-duty and lightweight shutters, window shutters, commercial building and condominium doors, partitions, stainless steel products, facades, maintenance services, and home improvement products. In Japan, in the core business, although there was growth in sales of heavy-duty shutters on account of increased demand from large commercial facilities, office buildings, factories and warehouses, sales of lightweight shutters, which had previously grown as a result of several factors including natural disasters in the previous fiscal year, decreased. In the Emerging Business Unit, revenue from the stainless steel business decreased. However, the business was able to record a profit and there was steady growth in the facade, partition, and maintenance service businesses. In Japan, as a result, consolidated net sales increased by 0.1% over the previous fiscal year to 180,054 million. However, although efforts were made to improve productivity of the whole Group and cut costs through our CR21 Initiatives, increases in the price of raw materials had a major impact on operating income, which fell 1.6%, to 10,901 million. In the markets for facade products and various types of shutters, demand is expected from last minute purchases by large-scale stores due to revisions to the so-called three city planning laws, and in response to fire prevention shutters becoming mandatory as a result of revisions to the Building Standard Law in December In addition, there is a visible trend toward greater awareness of crime prevention. In the market for commercial building and condominium doors, due to fiercer price competition triggered by increases in the price of raw materials, the industry is undergoing restructuring with medium- and small-size manufacturers going bankrupt, some companies withdrawing from the market, and companies in other industries entering the market. These changes are taking place although there is greater demand accompanying private-sector construction investment and the construction of new condominiums. In the partition market, although no major trends are visible, demand is expected to increase following the privatization of the postal services. As for maintenance services, amidst concerns about stagnant growth in the overall market, firms have become legally required to ensure the safety of fire prevention shutters following the December

2 Garage door (Cookie) A residential garage door for urban areas that features simple design and compact storage. Toilet booth (Celebooth) A high-class toilet booth with glass covered by a decorative film on the surface. revisions to the Building Standard Law, and there is also debate about making maintenance mandatory. In Japan as well as overseas, efforts are being made to further reduce costs in response to the increasing raw material prices, and progress is also being made in raising the selling price of products. Furthermore, the Group is striving to create new growth by increasing the profitability of existing businesses and expanding into related business areas, and is also working to increase orders in the non-shutter fields project teams (doors, partitions, stainless steel products, and crime prevention products) through various efforts, including increasing the synergies from the alliance with the Hochiki Corporation in the area of crime prevention. For the heavy-duty shutter market, while differentiating itself from competitors by providing safer products, the Group is improving its price competitiveness through the introduction of low-cost fire prevention shutters for large-scale stores. In the lightweight shutter market, the Group is expanding its sales channels to specified users and through home centers. At the same time, it works to differentiate itself from the competition by increasing sales of value-added products, crime prevention products, and products for the garage. In the building and condominium door market, the Group is aiming to increase its share of the market of special purpose products for welfare and medical facilities while strengthening its introduction of products with improved design and crime prevention functions. In addition, efforts are being made to reduce costs through new manufacturing methods. In the market for window shutters, the Group is expanding its business by continuing to actively promote the use of crime prevention products. In the maintenance service and home improvement markets, the Group is establishing an easy-to-understand payment system and improving the level of its services. The goal is to increase orders by making use of Sanwa s credibility to capture New window shutter (Sunpack Slim II) A window shutter dramatically upgraded for ease of construction. Crime-prevention types certified to prevent a thief's entry for 5 minutes are also available. 25

3 Review of Operations North America Residential Garage Doors Rolling Doors Sectional Steel Doors Garage Door Openers Commercial Operators Automatic Entrance System Truck and Trailer Doors Net Sales By Region 87, ,998 72,612 68,237 Net Sales 1,105 5,236 5,043 5,429 North America 27.5% 4,981 The Group s business development in the U.S. market is centered on the Overhead Door Corporation (ODC), which is based in Texas. ODC is involved in the manufacturing and distribution of doors for both commercial and residential applications. Key products are overhead sectional doors for garages, door operators, automatic entrance systems by Horton Automatics, and truck and trailer doors by TODCO. As a result of adjustments to the selling price of products and increased demand primarily caused by firm housing investment, net sales increased by 20.1% over the previous fiscal year to 87,177 million. However, operating income fell by 8.3% 4,981 million, for reasons including a fall in profitability caused by hikes in the price of raw materials, efforts to strengthen new product lines for large mass retailers and an increase in transportation costs due to a fuel price increase. Regarding U.S. construction demand, which has supported orders for overhead doors and operators, growth in the field of new housing construction is weakening. However, there appears to be an increase in demand for products used for residential remodeling at stores such as home centers. In addition, demand is expected to remain firm in the commercial field. For the automatic door market, in addition to fiercer competition to develop products to provide greater security and ones with more advanced features, price competition is increasing as a result of various factors, including the entrance of European manufacturers into the market. In addition, in the truck and trailer door market, there are concerns about the effects of the higher price of crude oil, but demand for truck and trailer doors is expected to remain at a high level. In addition, as restrictions on exhaust gas emissions become stricter, demand is forecast to increase as a result of last-minute purchases. To strengthen its business foundation in the U.S. market, the Group is moving forward with plans to improve profitability by making product price adjustments that absorb raw material price increases, strengthening its distribution channels, increasing its shares of the commercial market, and implementing cost reduction initiatives in all divisions. For the overhead door and operator product markets, efforts are being made to strengthen sales promotion to major housing developers, construction firms and distributors, and to increase sales through the home Operating Income 26

4 center channel in order to expand the Group s market share. In addition, by introducing products with more advanced features and superior design, such as operators that incorporate security systems interlocking with the door, the Group is expanding its product lineup and differentiating itself from competitors. In the automatic door market, the focus has been on reorganizing business in the UK market while expanding the product lineup and strengthening the relationships with distributors. In the vehicle door market, the Group is working to expand its product lineup while maintaining its market share as the market leader using value-added products. Automatic slide door system (Elegant ) All-glass, design-oriented entrance system, sealed for weather and microprocessor controlled for smooth and safe operation. Garage door (Thermacore ) A premier steel insulated garage door product providing exceptional thermal efficiency, strength and durability. Garage door opener (Overdrive ) A revolutionary new product that opens twice as fast, yet closes gently at a standard speed. Insulated door for trailer or truck bodies (PolarGuard ) This premier insulated door is the lightest and most efficient in the U.S. market. 27

5 Review of Operations Europe Doors & Door Frames Residential Garage Doors Garage Door Operators Industrial Doors Fireproof Doors Sectional Steel Doors Net Sales By Region 12,086 48,670 50, Net Sales Europe 15.8% 1, Operating Income The Group is expanding its business in the European region, centered on the Germanybased Novoferm Group (NF), the second largest door-related manufacturer in Europe. In addition to Germany, the Group has manufacturing bases in France, Holland, Italy, Spain, and South Korea. Furthermore, the Group manufactures and sells built-to-order products as well as standard products for both businesses and general consumers across the whole of Europe. In particular, the Group handles doors, door frames, garage doors and doors for industrial use. In Europe, net sales rose 2.7% over the previous fiscal year to 50,006 million, and operating income increased by 102.2% to 1,438 million, for reasons that include contributions from a maintenance service company that was purchased in fiscal 2004, a strengthening of sales activities, and the beneficial effects of restructuring measures undertaken in fiscal The positive results were achieved even though the Group continued to be exposed to fierce price competition. In the European door and door frame markets, there is visible movement towards uniform standards, and Italian and Spanish manufacturers made earnest efforts to expand their business. Furthermore, since the rate of GDP growth for the whole of Europe is forecast to improve, there are expectations that construction demand will increase throughout Europe, including Germany where the economy has so far been stagnant. For the garage market, there has been growth in various countries including Germany, France, England and Italy, and the overall market is expected to heat up since the populous emerging markets of Eastern Europe, for example Poland, are drawing a lot of attention. However, in the industrial door market, competition is becoming fiercer on account of aggressive pricing by competitors, and it has become even more necessary to ensure competitive superiority. In order to secure a solid business structure in the European region as the Group approaches the final year of its second threeyear plan, the Group will raise the selling price of its products to match price hikes in raw materials and work to strengthen its competitiveness by reducing production and distribution costs. In addition, while focusing efforts on growth markets such as the ones for maintenance service and the areas of Southern and Eastern Europe, the Group is striving to further increase the efficiency of its production and sales systems. In the door and door frame markets, efforts will be made to expand business in both the United Kingdom and Eastern Europe, in 28

6 which the Group has a small market share, and the Group will push forward with improving the efficiency of the sales system in Germany. Furthermore, the Group is aiming to enhance profitability by strengthening its product line-up for remodeling. In the garage door market, while strengthening production and sales in order to increase the Group s share of the markets in Germany, France, and Italy, focus is being placed on expanding business in England, Italy, and Eastern Europe. The Group will also step up its product development capabilities to differentiate itself from its rivals and establish a brand name. In the industrial door market, the Group is enhancing its product line-up by introducing high-speed aluminum shutters thanks to stronger R&D, in addition to strengthening the price competitiveness of its products. The Company is also working to improve profitability by increasing the efficiency of its sales organization and pursuing Group synergies. Steel sectional garage door Double-skinned insulated garage door made of galvanized steel and ideal for residential garages. Flexible-leaf, rapid-roll door (Speedroller) Novoferm s electrically-driven rapid roll doors are used in industrial buildings and public utilities to keep out drafts and reduce energy bills. Fire/smoke-proof door (Europa) Certified fire and smoke resistant in accordance with British standards. Suitable for commercial and private buildings. Roller shutter exterior door (TH80) Double-skinned and heat-insulated in natural aluminum with clear varnish or color. Two-box shell/rigid foam, non-glued construction for maximum rigidity. 29

7 Review of Operations Asia Rolling Shutters Doors & Door Frames Elevator Doors Hinge Doors Oversliders Sheet Shutters In the vast Chinese market, the Group is creating concrete plans for its expansion through top-class order-made products that make use of the high technological abilities, quality and brand power of the Group. In addition, the Group is focusing on using production sites in China. In fiscal 2005, the Group concluded a joint venture agreement with Shanghai BaoSteel Business Development Co., Ltd., a wholly owned subsidiary of the major steel company BaoSteel Group, thereby establishing a foundation for its business development in China. Construction market in China has experienced high growth rates, particularly in Shanghai, and the pace with which cities are being built up is expected to accelerate on account of the 2008 Beijing Olympics and 2010 Shanghai Expo. Overall, the Chinese market is forecast to continue to expand very rapidly. Shanghai BaoSteel-Sanwa Door Co., Ltd., a joint venture created with Shanghai BaoSteel Business Development Co., Ltd. is expected to begin manufacturing, distribution and installation related to shutters and overhead doors for commercial applications, with a focus on the Yangtze delta economic area. In addition, Novoferm (Shanghai) Co., Ltd., a joint venture with ThyssenKrupp Elevators, a subsidiary of the major European steel company ThyssenKrupp, has begun to supply elevator doors to ThyssenKrupp Elevators and has launched sales and manufacturing of fireproof doors for buildings. While establishing business operations in China, the Group is working to create ties between its existing sites in Japan, the United States and Europe, and is striving to quickly benefit from these global synergies, which constitute the strengths of the Sanwa Shutter Group. In the final year of the second three-year plan, which included the major goal of establishing China business, the Group will make greater use of its Global Procurement Office in China at the same time as it aims to quickly launch full operations in China. Celebrating the creation of the joint venture Shanghai BaoSteel-Sanwa Door Co., Ltd. in December