Targets and Issues to be Addressed
Business and other risks
The following are among the factors that can have an important influence on the judgment of investors. Note that the factors stated in this report that relate to the future are those that the Mori Seiki Group has made judgment on at the end of the term under review.
- 1. The economic conditions in key markets (Japan, the Americas, Europe and Asia)
- The percentage composition by region of the Mori Seiki Group's consolidated net sales for the term under review is 35.1% for Japan, 22.1% for the Americas, 29.5% for Europe, and 13.3% for Asia and Oceania. In cases where demand for Mori Seiki products and services decline due to deterioration of the economic trend in any of the regions where the Mori Seiki Group sells and provides its products and services, there is a possibility that the Group's business results may be adversely affected.
- 2. Sudden fluctuations in demand for investment in plant and equipment
- It is said that the machine tool industry is by nature easily influenced by the ups and downs of the economy, but the economies of emerging countries like those of Asia, the BRICs (Brazil, Russia, India and China) and central Europe are expanding. The machine tool markets in Japan, the Americas, and Asia and Oceania have also continued to experience stable growth over the medium and long term, but if for some reason, like the financial crisis that originated in the United States in the term under review, there is a drop in demand for investment in plant and equipment in all regions simultaneously, it is possible that the business results of the Mori Seiki Group will be adversely affected.
- 3. Significant changes in the exchange rate against the yen of the U.S. dollar, Euro, etc.
- The business activities, business results and financial status of the Mori Seiki Group have been adversely affected by fluctuations in exchange rates. Fluctuations in exchange rates have their effect on the values on conversion to Japanese yen of assets and liabilities arising out of the Mori Seiki Group's foreign currency denominated transactions. Fluctuations in exchange rates also affect the prices of products and services, and our sales figures, where the transactions are denominated in foreign currency. In order to reduce these effects, we are attempting to achieve a balance among the domestic and Asian transactions denominated in yen, American transactions denominated in U.S. dollars, and the European transactions denominated in euros. Regardless, it is possible that the activities, business results and financial status of the Mori Seiki Group will be adversely affected.
- 4. Significant changes in the cost of natural resources or raw materials
- If we have to face a situation where prices of raw materials have soared significantly in excess of expectations, the business results of the Mori Seiki Group may be adversely affected.
- 5. Security trade management
- Important changes in regulations and laws in many of the countries and regions in which Mori Seiki operates may have an effect on the business activities, business results and financial status of the Mori Seiki Group. The machine tools that constitute the core business of the Mori Seiki Group are classified as controlled freight under the laws and regulations relating to export in each country and are subject to control under the framework of international export management. If this control is strengthened due to changes in the international situation, it may have adverse effects on the business activities, business results and financial status of the Mori Seiki Group.
- (1) Mori Seiki's basic management policy
- As a machine tool manufacturer, the Mori Seiki Group ("the Group") has made "the supply of innovative, accurate and troublefree machines at competitive prices" the mainstay of its management policy, and looks forward to a "Global One" status in the fields of CNC lathes, machining centers, multi-axis machines and grinding machines.
- (2) Target performance indicators
- The Group purposes to become "Global One" company in the machine tool industry by building a solid corporate structure and responding quickly to the rapid changes in business environment and market trends. We believe that improving our profit margin is essential in achieving our pursuit. The Group's target is to achieve more than 10% of consolidated operating margin ratio constantly, and we strive to improve both corporate value and shareholder return.
- (3) Issues the company must address
- In order that we can achieve our sales targets without being greatly affected by changes in the environment for orders and exchange rate fluctuations, we are endeavoring to further strengthen our corporate constitution through our second mediumterm management plan "PQR555", which is being implemented over the three years from FY 2008 to FY 2010.