NSK - Investors/Financial information Annual Report 2005

Industrial Machinery Bearings

Demand driven by capital investment remained firm and sales in the aftermarket sector were strong in the Americas and Europe. Net sales increased by 5.4% year on year. Operating income also increased by 10.6% year on year. The operating income margin reached 11.3%, reflecting the improved capacity utilization resulting from volume growth, higher sales prices and the reduction of external procurement costs.

Market Environment and Performance for the Year Ended March 31, 2006
A regional analysis shows that sales to Japanese manufacturers of steel, machine tools, general industry and rail cars were strong. In the Americas, marketing efforts helped to boost orders for aftermarket products. However, sales to electrical machinery and general industry sectors declined because of a rise in the value of the Brazilian real, a shift in demand to other regions from the U.S.A., and other factors. In Europe, successful marketing efforts were reflected in strong aftermarket sales and healthy sales to electrical machinery manufacturers. In Asia, orders from electrical machinery and IT equipment manufacturers in ASEAN countries and South Korea declined, but orders from steel and machine tool manufacturers in China and South Korea rose.

These trends were reflected in the results for industrial machinery bearings. Net sales were 5.4% higher year on year at ¥195.6 billion. Increased orders resulted in improved capacity utilization, while a tight supply-demand environment allowed us to implement increases in sales prices. These positive factors, which also included a reduction in external procurement costs, largely offset increases in material costs, labor expenses, and selling, general and administrative expenses. As a result, operating income increased by 10.6% year on year to ¥22.1 billion, and operating income margin reached 11.3%.

Outlook and Priority Policies for the Year Ending March 31, 2007
Looking ahead at the business environment, we expect demand levels related to capital investment to remain high in the year ending March 31, 2007 in Japan. In China, investment on infrastructure is expected to grow, even though the outlook is somewhat unclear. A firm demand environment is also expected in the Americas and Europe. In these market environments, we will work to expand and enhance our activities in each region and industrial sector, and to secure orders as the basis for continuing growth. Specifically, in the aftermarket segment, we will develop new channels and focus on the expansion of sales in all regions by improving services for end-users including solution driven technical services, seminars for technical training such as “e-Learning”, and delivery. We expect the effective implementation of these policies to increase our sales of industrial machinery bearings by ¥9.4 billion, or 4.8%, year-on-year to ¥205.0 billion in the year ending March 2007. We are forecasting operating income to increase by ¥1.6 billion, or 7.2%, to ¥23.7 billion with operating income margin of 11.6%.

Driving Earnings Growth through Global Sales Expansion

Yukio Takebe
Head of Industrial Machinery Bearings
Division Headquarters

We supply an extensive range of bearings to meet the specific needs of users in a wide spectrum of industries. Key advantages for NSK include its broad line-up of products, ranging from the world’s smallest bearings up to super-large products, and the depth of its increasingly diverse and sophisticated technology. NSK has consistently led the Japanese industry in terms of market share and has contributed to the strengths of Japanese manufactured products, including their high performance, high quality and superior energy efficiency. Today NSK has gained a global reputation as a comprehensive manufacturer of bearings.

My most important mission is to make this business segment a driver of income by leading a major effort to expand global sales in a wide range of fields. We will achieve this goal by actively continuing to accept new challenges, including the challenge of consolidating our position as the world’s No.1 manufacturer of ball bearings. We also must expand our sales in the roller bearings category and establish a large-scale presence in the aftermarket sector. Finally, it is essential to strengthen our overseas activities, especially in emerging markets.

Technical Training through e-Learning
Enhanced Services for Users and Sales Agents

A program of technical training and education for end users and sales agency staff, which covers basic bearing technology and handling procedures, maintenance and management methods and other aspects, led to sustained growth in the market for industrial machinery bearings (especially in the aftermarket). NSK actively provides technical training in locations around the world. In 2005, more than 20,000 people had taken its courses. Historically, training was based on a classroom format, however, in order to provide instruction for every applicant in every part of the world, NSK introduced Internet-based e-Learning to allow users to access programs directly from their offices or homes.

To allow users to use NSK products optimally, NSK’s e- Learning covers topics from entry-level handling procedures to a bearing technology course, and has received high recognition in each country. Following the introduction of European language versions, we are launching a Chinese version. We are responding to customer needs through not only product sales, but also through global expansion of services.


Copyright 2000 - NSK Ltd. All rights reserved.		Term of use

Annual Report 2006