|
 |
Financial Information:
Annual Report 2004
Precision Machinery and Parts
Akira Tanikawa
Head of Precision Machinery and Parts Division - Headquarters |
|
Sales of Precision Machinery and Parts
 |
1. Business Overview
Products
NSK’s Precision Machinery and Parts Division includes products
such as ball screws, linear guides, XY tables, and
Megatorque Motors. Our lineup also includes systemized products
such as our photofabrication equipment for liquid crystal
display (LCD) color filter production, which employs a combination
of the aforementioned products. Our main customers are
the general industrial machinery sector, especially manufacturers
of cutting-edge machinery such as machine tools and
industrial robots, and semiconductor and LCD manufacturers in
the electrical and IT industries. These two groups each account
for approximately 40% of this division’s sales.
Superior Ability to Differentiate
By integrating NSK’s tribology (friction control technology) and
mechatronics technologies, we have developed products that
boast extremely high levels of precision control and positioning.
We are able to draw upon strong synergies with our other business
divisions in the development of new applications. An
example is our commercialization of electric linear actuators,
which essentially are automotive components that integrate ball
screws. This is a distinct advantage that manufacturers specializing
in a single product area do not enjoy.
Industry Position
NSK holds the top share (approximately 25%) of the global ball
screw market. This product accounts for roughly one-third of
the Precision Machinery and Parts Division’s total sales. The
April 2003 acquisition of NTN Corp.’s general industrial ball
screw business further reinforced our No. 1 position. We also
maintain a top global position in mechatronics-related products
such as Megatorque Motors. In addition, we are expanding our
presence in the market for photofabrication machines for LCD
color filter production, where demand has increased sharply in
recent years.
2. Business Environment and Strategy
Business Environment
The business environment surrounding the Precision Machinery
and Parts Division first showed signs of recovery in the second
half of fiscal 2002, but demand started to pick up momentum
only in fiscal 2003. Production in the machine tool industry, one
of our main customers, expanded significantly during the year,
with machine tool orders in Japan recording a year-on-year
surge of 25.3%. In contrast to export-driven recoveries of the
past, the current recovery is experiencing strong internal
demand, which jumped by 28.3% in fiscal 2003. Supporting
this growth was the rapid recovery in domestic capital expenditures
brought about by the emergence of the new digital home
appliances industry, an area where Japan currently enjoys a
position of international predominance.
The protracted recession in Japan effectively suppressed
replacement purchases of domestic production equipment,
with the result that much existing machinery is old and outdated.
This suggests that once replacement demand for these
machine tools and robots is triggered, the demand cycle is likely
to last longer than past cycles. At the same time, a growing
number of companies in the electrical and IT industries are setting
record profits. Here also, much is owed to the recent surge
in the new industry of digital home appliances, as well as to
new investments in production innovations, such as productivity
improvements implemented in the computer chip manufacturing
processes. Global semiconductor production equipment
orders rose 2.8% year-on-year in fiscal 2003. Looking only at
the second half of the fiscal year, however, the year-on-year
increase was 54.7%, indicating that growth momentum may be
accelerating.
Sales by Industry
|
Sales by Region
(Sales are recognized by customers’ location) |
| |
 |
Business Strategy
In the Precision Machinery and Parts Division, we are carrying
out a coordinated strategy of “defense” and “offense.” We
have
implemented fast-paced business restructuring activities with
the aim of reinforcing our profit structure and lowering our
break-even point. Reinforcing the profit structure will enable us
to better respond to demand fluctuations caused by changes in
the external environment. At the same time, we are aggressively
cultivating new customers and reinforcing our development
and introduction of new products in order to diversify our customer
base and to ensure that we can respond to the ongoing
recovery.
1) Business restructuring activities
As part of our business restructuring, we spun off our precision
machinery and parts business as NSK Precision Co., Ltd., in
October 2002. In addition to accelerating the decision-making
process, this change has enabled us to convert fixed labor costs
to variable costs. In the area of variable costs, we
reduced procurement costs by approximately 30% during fiscal
2002 and fiscal 2003 by reducing the number of suppliers and
boosting overseas procurement from countries such as South
Korea and China. During the same two-year period, we were
also able to improve productivity by 35%.
2) Cultivating new customers
In the area of cultivating new customers, domestic sales to
industries excluding the general machinery industry and the
electrical and IT industries increased 10% year-on-year in fiscal
2003 as a result of our efforts to expand sales to industries that
are relatively immune to economic fluctuations, including automobiles,
glass, medical equipment, welfare, biotechnology,
environment, and safety. In addition, in the electrical and IT
industries we succeeded in attracting major new clients in
South Korea and Taiwan as well as Japan.
3) Strengthening development and marketing of new products
As part of our strategy to strengthen development and marketing
of new products, we set targets to increase the ratio of new
product sales to total sales to 20% for fiscal 2005 and to 30%
for fiscal 2007. In fiscal 2003, this ratio was 22%, up 4 percentage
points compared with the previous year, owing to the
receipt of large-scale orders for our photofabrication equipment
for LCD color filter production. We also developed a direct drive
(DD) motor capable of doubling torque output with no increase
in motor size. We expect sales of this product, which began in
April 2004, to reach ¥1.0 billion in fiscal 2004.
Sales by Production Region for FY2003
3. Review of Business Results for Fiscal
2003 and Overview, by Region
Review of Business Results
In fiscal 2003, total sales in this division surged 34.9% year-onyear,
supported by the recovery in our business environment
and by sales to new customers, as previously mentioned.
Higher revenue, combined with cost reductions stemming from
our business restructuring efforts, resulted in a dramatic recovery
in profits at the operating level, from the ¥6.3 billion operating
loss posted in fiscal 2002 to roughly zero. Because we
were still operating at a loss for the first half of the year, full-year
operating income ended at slightly below break-even.
Operating income for the second half alone, however, recovered
to ¥1.4 billion, for a 5.3% operating income margin. Sales
of ball screws and linear guides for machine tools, semiconductors
and LCD production equipment, and injection mold
machines improved. In addition, sales of products such as XY
tables to the semiconductor production equipment sector
began a rapid recovery from the second half of the year.
Overview, by Region
In the Asian region, where demand is growing, we reinforced
our sales system by increasing the number of technical staff at
sales bases, targeting in particular the machine tool industry in
China and the semiconductor and LCD production industries in
South Korea and Taiwan. As a result, sales in Asia increased
23.4% year-on-year to ¥7.9 billion. During the period, we commenced
a feasibility study, aiming to start local production of
precision machinery in China in fiscal 2005. In the Americas, we
boosted personnel numbers and expanded
our sales network in order to strengthen our sales system,
with primary customer targets being the medical equipment
and biotechnology industries. As a result, sales grew 6.3%
year-on-year to ¥5.1 billion. We also strengthened our production
system, focusing on ball screws.
4. Outlook for Fiscal 2004
The business environment surrounding this division has only
recently begun to recover, and we expect favorable conditions
to continue for the time being. Of particular note is the accelerated
growth in demand from the semiconductor production
equipment sector from the second half of fiscal 2003.
Accordingly, for fiscal 2004 we forecast a 33.8% year-on-year
sales growth to ¥63.0 billion for this division. In addition, we
expect the operating income margin to reach 11.1% in fiscal
2004. We see three main factors supporting this profit improvement:
increased sales, benefits derived from business restructuring
activities, and an improved product mix.
 |
|
