On March 11 this year, Eastern Japan was struck by an earthquake of unprecedented size. We would like to offer our condolences to the bereaved, and our deepest sympathies to all victims of the disaster. Ever since our foundation, KUBOTA has been supported by people in all parts of Japan, and we believe in looking after our supporters. So, when the disaster occurred, we promptly launched initiatives aimed at relief and reconstruction. Besides praying for the swiftest possible reconstruction of the stricken area, the whole of the KUBOTA Group is continuing to muster its collective power and undertaking various practical endeavors.
I would now like to report the result of operation for the year ended March 31, 2011.
Review of operations
In the midst of adversity, we succeeded in raising our revenue and our profits by increasing our overseas revenues and cutting costs on a group-wide basis.
The conditions that surrounded us were changing with a steadily increasing harshness. The yen had undergone a sharp surge in strength: having traded at more than 90 yen to the dollar for the last year or so, it suddenly rocketed up to a historical high of almost 80 yen to the dollar. In addition to this, the KUBOTA Group had to contend with the rising prices of raw materials. Then, in the run-up to the end of the fiscal year, the whole of the Japanese economy was plunged into adversity in the form of the Great East Japan Earthquake.
The main factors that made up for these adversities were our increased overseas revenues, supported by the worldwide economic recovery, and our group-wide progress in cutting costs. As a result, we managed to secure revenues on a par with the previous fiscal year, and to steadily increase our profits as well.
In fact, looking at our domestic figures alone, besides the downward trend in sales of agricultural machinery and of products serving demand from the public sector, there was also a decrease in revenues due to the earthquake, and our revenues were lower than the previous fiscal year. Nevertheless, as the economic recovery continued to gain ground in North America and Europe, our revenues showed solid growth. Also, despite the leveling-off in the speed of growth in sales of agricultural machinery due to, among other things, the effect of the unseasonable weather in Asia outside Japan, we continued to record a year-on-year upward trend in our revenues.
Consequently, revenues increased ¥3.0 billion (0.3%), to ¥933.7 billion from the prior year. Operating income increased ¥16.4 billion (23.5%), to ¥86.1 billion from the prior year due to an increase in overseas revenues in Farm & Industrial Machinery segment and company-wide cost reduction. Income before income taxes and equity in net income of affiliated companies increased ¥17.8 billion (24.2%), to ¥91.3 billion due to an increase in operating income and other income. Net income attributable to KUBOTA Corporation was ¥54.8 billion, ¥12.5 billion (29.5%) higher than the prior year.
Initiatives to be tackled by the KUBOTA Group
We will adhere to our basic management policies, and consolidate our strengths in research and development (R&D) and manufacturing.
Going forward, the KUBOTA Group will continue to adhere to the basic management policies it has followed to date. One of these is “management emphasizing the front-line of business with focus on technology and manufacturing capabilities.” Strengths in R&D and manufacturing are the core strengths of the manufacturing business, and as we forge ahead with globalization, it is essential that we consolidate these two strengths in order to overcome strong competition and achieve growth in the medium to long term.
Besides focusing its R&D efforts even more tightly on the important themes from a medium- to long-term stand point, KUBOTA has started forging ahead with strategic planning aimed at strengthening our manufacturing with a global perspective. Going forward, we will work harder than ever to identify the fields of technological development we need to focus on, and to acquire advanced technologies. By enhancing the organizational structures that enable us to further improve our product quality and production engineering, we will strive to accumulate manufacturing techniques and proficiency that will keep us ahead of our competitors.
Further enhancement of the CSR management that underpins our operational expansion and development.
Another basic management policy I would like to mention here is “enhancement of CSR management.” To ensure that KUBOTA continues to grow and develop, we need to make every effort to ensure that our management is profoundly considerate of the development of society and conservation of the global environment: in other words, we need to enhance our CSR management further. Here is what CSR management means to me: instead of taking CSR as a starting point, we start out by striving to be company that serves people, and we aim to develop that company’ s business within a sustainable cycle. Doing this consistently will ensure that we grow as a company, and lead us toward performing our social responsibility.
CSR management, whether it be in Japan or overseas, is the fundamental mind-set essential to the expansion and development of any business. This mind-set must permeate every area of management.
Until now, KUBOTA has developed its CSR management with a focus on contributing to the conservation of the earth’s environment, promoting diversity management and strengthening our internal control system. In the future, as well as continuing these themes, we are also going to tackle the new challenge of providing relief for the victims of the Great East Japan Earthquake and assisting recovery in the stricken areas.
Aiming for globalization as befits a company whose business activities are indispensable to all mankind.
Upholding the basic policies outlined above, the KUBOTA Group will forge ahead with further globalization. Overseas revenues now make up roughly half our total revenues, and if KUBOTA is to achieve further growth, we cannot avoid this hurdle. We aim to promote globalization not just in sales, but in production, R&D, allocation of management resources, business management systems and all other aspects of our business, thus transforming ourselves from an export-oriented company to a global one.
Kubota is a company engaged in operations indispensable to all human beings on our planet: food, water and the environment. If we look at it this way, then there can never be a bad time for our business, because there will always be some level of need for these things on planet earth. However, in order to expand our business on to a global scale, it will, of course, become increasingly important that we enlist the cooperation of people in many different locations. Bearing this firmly in mind, we are going to start by adapting our working style to suit each location. Then, accurately identifying the new markets and new business potential revealed to us through this process of adaptation, we will plan our global roll-out in a way that is quintessentially KUBOTA.
2011 is going to be “year zero” in KUBOTA’s reincarnation as a genuinely global company.
To be precise, we are going to speed up the expansion of our overseas production, the overseas localization of our R&D, promotion of locally-hired persons, and other processes. At the same time, we will press ahead with the creation of an organizational framework for globalizing management resources – people, goods or facilities, and capital – and for investing the collective management resources of our whole group in our operations in each country and region, in a timely manner.
Rather than localizing all aspects of our operations, we will focus on product quality, which is the mainstay of our management. Enlarging our production engineering divisions in Japan, and our other manufacturing-related organizational structures, we will seek to introduce globally-unified superlative manufacturing methods, and then roll these methods out on a global basis. That way, no matter where in the world they are produced, our products will be trusted because they bear the KUBOTA name. The “Made by KUBOTA” label will have real value.
Although our overseas revenues ratio has increased dramatically, KUBOTA is still inclined to transplant its Japanese systems overseas and attempt to apply them, as-is, to its local operations. If we are aiming to achieve truly global management, we must cease to accord Japan special status, and start seeing it as oneof our principal markets. We are now going to look carefully at which systems should only be used in Japan, and which should be implemented overseas. Having resolved to bring about a radical transformation in KUBOTA’ s management, we are going to forge ahead with reforms. This will bring us solid results: later, when we look back on 2011, we will see it as the “year zero of KUBOTA’ s globalization.”
Our efforts towards building new businesses that will support the next-generation KUBOTA are also making steady progress.
“The enhancement of activities for future business expansion” has also become an important management task. In the past, KUBOTA’ s overseas business expansion relied on horizontal roll-outs, whereby we adapted existing businesses and products to new overseas markets. Going forward, however, we will be required to plan new, innovative business roll-outs, mainly in the fields of food, water and the environment.
In our farm and industrial machinery related business, for example, in addition to our existing rice-farming agricultural machinery, KUBOTA plans to create a broader range of agricultural machinery, aiming to contribute to food production on a global scale as a comprehensive manufacturer of agricultural machinery.
In our water and environment related business, too, KUBOTA is ramping up the scale of our roll-outs in Asia outside Japan, where markets are promising. To give a couple of examples, in 2010 we set up a Chinese subsidiary of our pump business, and Water & Environment Innovative Research Laboratory to meet needs in emerging nations and elsewhere. In 2011, we also established two Chinese subsidiaries in our water treatment business.
Our efforts will continue in the future. Making use of business experience in Japan, we will be devoting efforts to local marketing and business development, and nurturing new growing businesses that will support KUBOTA in the medium to long term.
Directing our energies towards dealing with the aftermath of the Great East Japan Earthquake will be an important task in terms of implementing CSR management.
Furthermore, mounting an appropriate response to the unparalleled damage wrought by the Great East Japan Earthquake will be one of our most important management tasks this fiscal year.
Immediately after the earthquake, KUBOTA launched its own Countermeasures Headquarters for Reconstruction Assistance and went ahead with providing support to victims of the disaster. Our initiatives were many and various, ranging from monetary donations, donation of 20 items of small-sized construction machinery, to using rice and vegetables from Fukushima at the canteens of our business sites, hiring high school graduates from among the people affected by the disaster, helping to restore lifeline services using our ductile iron pipes, pumps and valves, and providing support for rice-planting. Going forward, we will be rolling out these measures on a continuing basis. At the same time, we will sustain our production capacity in order to supply the products that are necessary for the reconstruction of the disaster areas.
Although the world economy is heading towards recovery, various uncertainties remain, and the situation continues to be unstable. Moreover, the Great East Japan Earthquake has imparted a severe shock to the Japanese economy, and had a major impact on companies’ production and sales activities.
The recovery of the Japanese economy is likely to face all sorts of obstacles in the future, and the business conditions surrounding KUBOTA will continue to be unpredictable and harsh. In such circumstances, by steadfastly pursuing the endeavors listed above, KUBOTA aims to achieve long-term growth and development, and to increase its corporate value. We hope to continue receiving your valued support.