The global economy during the consolidated fiscal year under review generally staged a gradual recovery, supported by a rapid economic turnaround in emerging countries such as China and India, and a retreat of the financial crisis, despite lingering concerns over a double-dip recession and the asset bubble.
In Japan, as political and economic uncertainty persisted, domestic demand - except in areas benefiting from fiscal stimulus - saw sluggish growth due to intensifying price competition in diverse industries, stemming from a rising supply demand gap and increasing consumer preference for cheaper products. From around the beginning of the fourth quarter, however, a number of industries, including semiconductor-related, showed signs of a recovery trend owing to expanding external demand.
Looking at conditions in the Group’s key markets, for vehicles, while the market structure was changing significantly as China in 2009 looked set to become the world’s largest automotive market in terms of number of vehicles sold, competition accelerated over the development and sales of eco-friendly hybrid and electric vehicles, and low-end models, partly due to entries of newcomers from other industries. In the market for semiconductor manufacturing and inspection systems, given the recovery in demand for semiconductors used in notebook PCs, smart phones, and automobile-related products, some semiconductor manufacturers, particularly in Taiwan, resumed making capital investments and achieved a marked recovery in sales. In the cellular phone market, as demand was expected to reverse from the negative growth of the previous year, major global manufacturers were staging serious competition in all types of phones; from low-end to high-end multifunctional.
In this climate, the Group conducted swift and steady implementation of measures in the Companywide Profit Structure Reform Plan set out in the previous fiscal year and nearly completed the execution by the end of July 2009. As a result, though operating loss was suffered in the first quarter (April-June 2009), the second quarter (July-September) onward showed success in drastic streamlining of the fixed cost structure, and posted significant operating income, partly due to a recovery in sales. Based on this streamlining, the Group since last October has been at work on new management goals under the reformulated companywide growth strategies for achieving renewed growth.
As a result of these developments, consolidated sales for the fiscal year under review fell 5.6% year on year to ¥26,025 million. Consolidated operating income, however, posted a significant profit of ¥1,227 million, up ¥2,416 million year on year, reflecting a substantial improvement in the sales cost ratio derived from the innovative fixed cost structure and a marked decrease in selling and general administrative expenses.
Consolidated ordinary income stood at ¥1,051 million, a ¥2,177 million year-on-year increase, despite increases in interest payable on long-term loans and in foreign exchange losses associated with yen appreciation.
Consolidated net income increased to ¥820 million, up ¥4,424 million year on year, primarily due to posting extraordinary gains, including the reversal of an allowance for doubtful accounts and a decrease in tax expenses stemming from a revision of deferred tax asset collectability owing to improved business results. This came despite posting extraordinary losses, including loss on retirement of noncurrent assets and business structure improvement expenses.

Vehicle Communication Equipment

In vehicle communications equipment, our major market in this sector, we concentrated on eco-friendly vehicles, such as hybrids, which received preferential measures under the Japanese government’s policies; though demand was supported by governmental purchasing incentives, including stimulants for replacement demand such as tax deductions and subsidies.
Given the circumstances, sales of micro-antennas for hybrid vehicles for the U.S. market remained strong, serving as the driving force for sales recovery. Sales of on-vehicle ETC antennas continued to achieve high-level up to the middle of fiscal year thanks to lowered tolls in some highways. However, it dropped drastically from the third quarter of the fiscal year under review, reflecting a policy of free expressway tolls to be adopted by the new government.
As a result, consolidated sales in this sector stood at ¥16,301 million, a slight decrease of 1.2% year on year.
We will adapt the Group to Japanese-affiliated automotive makers who are striving to expand sales in emerging countries, shift our main emphasis toward world trends of producing and selling eco-friendly vehicles such as hybrids and EVs, and engage in product development and sales activities.
In addition, we will promote system related businesses that meets the growing demand for domestic and overseas traffic infrastructure centering on an road to vehicle communication system, starting with tollgate antenna for ETC.

Circuit Testing Connector

In semiconductor manufacturing and inspection systems, our major market in this sector, though demand for semiconductors remained sluggish until the middle of the fiscal year, sales took a sharp upturn in the third quarter, reflecting recovery of demand in China and other emerging countries. Demand also remained strong in the fourth quarter.
Given the circumstances, demand for the Group’s mainstay BGA sockets for IC inspections, which had exhibited a small recovery up until January 2010, began in mid-February to grow substantially, together with demand for other products such as ICU unit rings. As a result, however, full-year consolidated sales in this sector fell 5.6% year on year to ¥4,174 million.
We are committed to holding and expanding our share in the post-process inspection field by accessing new customers and supporting next-generation semiconductors, as well as making this sector a full-fledged business and boosting our share by achieving swift product development through pre-process inspection and sales promotion activities.

Personal Communication Equipment

For fiscal 2009, cellular phones, our major market in this sector, exhibited negative growth over the previous fiscal year; but market growth is expected to turn positive in 2010. Meanwhile, competition in the market has been intensifying partly due to an ongoing oligopoly by world leading makers and entries by PC makers.
Given the circumstances, fine connectors operations, in which fine spring connectors are the core product, strove for sales promotion directed at, for example, POS makers other than cellular phone manufacturers in order to grow out of its “mono-structural” operations. Sales, however, continued to lag due to decreased orders received, which resulted from a decline in sales of cellular phones using our connectors.
Sales of antennas for cellular phones made only marginal progress over the precious fiscal year despite our aggressive efforts to sell cellular main internal antennas.
Sales in Medical device (MD) business, which are included in this sector, increased over the previous fiscal year, owing to promotional efforts to sell our main products in this sector - such as marker rings and coils for guide wire that incorporate our fine precision processing technology - primarily to domestic catheter makers.
Consolidated sales from this sector resultantly were ¥5,550 million, down 16.3% year on year.
Our fine connector operation will substantially transform its structure along with continuous expansion of business for areas other than cellular phones. Operation of antennas for cellular phones will work to deepen and expand trade with overseas major customers by consolidating the system that responds promptly to their sales and technology needs. Our MD operation will strengthen technological development and manufacture systems to extend the business scope from component processing to modularization and high-function module development. Along with aggressive efforts to promote main and strategic products in Japan and to tap sales channels in overseas markets, we are striving to build a base to enable the MD operation to grow into our major business.