Business Conditions
FY 2008 was a year in which the environment changed substantially. In the first half of FY 2008, we achieved favorable levels of orders and sales that continued from FY 2007. However, in the second half, as a result of the effects of the financial crisis that originated in the United States, there was a sharp decrease in orders worldwide. There was a dramatic collapse, with Mori Seiki recording a value of received orders that was 75% down in January, 2009. Many machine tools that had been ordered were cancelled. Under these circumstances Mori Seiki aimed at increasing its share of orders, established overseas subsidiaries in Canada (Ontario) and Malaysia (Kuala Lumpur) where the underlying trend is for expansion in demand of machine tools, while also opening new Technical Centers in Germany (Chemnitz) and Austria (Vienna).
Mori Seiki has developed new products to meet expanding demand for large, high-productivity machine tools in the fields of resources, electricity generation from wind power, aircrafts, and railroads. We have developed the NT6600 DCG, a high-precision, high-efficiency integrated mill turn center that is capable of dealing with long, large-diameter parts, and the MV-1003L, a vertical machining center. We have also implemented a full model change with the NH6300 DCG Ⅱ and NH8000 DCG Ⅱ medium-sized and large horizontal machining centers.
We are cautiously optimistic about the economy, as recently received orders indicate that things are leveling out. We expect that the economic policies adopted in each country will improve the investment climate for companies, and Mori Seiki is prepared to respond quickly to the upcoming recovery of orders.
Under these conditions, our consolidated net sales were 157,203 million yen (22.3% down from the previous term), and the consolidated operating income was 5,922 million yen (81.1% down from the previous term).
Currently, Mori Seiki is aiming to establish leadership in the global machine tool market with GILDEMEISTER AG (of Germany), and the companies have agreed on business and capital collaboration with the focus on mutual cooperation.
Geographically, Mori Seiki has its strength in Japan and the United States, and on the product front it has its strength in multi-axis machines, machining centers and lathes. We are also manufacturing key components of machine tools such as spindles, motors and ball screws in-house, and we are distinguished by the vertical integration of products. On the other hand, geographically GILDEMEISTER AG has a high share of the business in Europe, and on the product front it stands out with its 5-axis machining centers, large machining centers and low-budget machines. So we can expect a good complementary relationship between the two companies both in terms of expansion of geographic area and products. And by melding the two companies' technical prowess and strong sales networks, we will make progress with development of favorable business on a global scale. In this way the Mori Seiki Group is actively implementing a strategy toward medium and long-term growth by expanding its global business and strengthening research and development.
The trends and business results for each segment, classified by location, are as follows:
In Japan, demand for aircraft and construction machinery industries had been strong in the first half of the year. However, orders for automobile and construction machinery industries had been decreased since October, 2008. Sales were 78,036 million yen ($794,421 thousand) decreased by 23.8% compared with the previous fiscal year.
In the Americas, demands for aircraft, energy, medical equipments, and construction machinery industries had been in a good condition in the first half of the year. However, orders had been decreased since October, 2008 affected by the decline of capital investment due to the economical slowdown. Sales were 29,977 million yen ($305,171 thousand) decreased by 19.3% compared with the previous fiscal year.
In Europe, demand for mainly aircraft industry had been brisk in the first half of the year. However, capital investment had been dull since October, 2008 due to extremely declined factory operating rate in automobile industry in Germany, France, Spain, and central Europe. In addition, demand for agricultural machinery, construction machinery and oil hydraulic industries had been in a slowdown. Sales were 45,451 million yen ($462,700 thousand) decreased by 22.4% compared with the previous fiscal year.
In Asia and Oceania, demand for natural resource, automobile and construction machinery industries had been decreased due to the appreciation of the yen. Capital investment had been decreased in the southern part of China where many exportoriented companies are located in. Sales were 3,739 million yen ($38,064 thousand) decreased by 10.2% compared with the previous fiscal year.