(Updated July 2011)

Highlights of FY2010 Operating Results

I would like to start my discussion by expressing my gratitude for your exceptional support extended to us.
During the fiscal year that ended on March 31, 2011, Japan's economy was bolstered primarily by the solid performance of the export-oriented sector, which benefited not only from the continuing robustness of the emerging Asian markets, but also from economic recoveries elsewhere including the United States, where monetary easing and other stimulus measures resulted in signs of economic turnaround. The second half of the fiscal year witnessed an improvement in the production output of semiconductor-related products especially for terrestrial digital TVs, whose demand jumped in anticipation of the scheduled shift to exclusively digital broadcasting. The growing penetration of smartphones, tablets and other next-generation devices also contributed to the increase in semiconductor-related output.

Our Group’s operating environment generally improved over the fiscal year under review. On the domestic front, our producer goods divisions enjoyed a gradual recovery throughout the fiscal year on the back of the export-led recovery of the overall economy. Our consumer goods divisions also posted higher sales especially of merchandise that successfully captured home renovation-related demand fueled by the residential Eco-Point incentive program of the government. Environmental products such as solar power generation equipment and EcoCute energy-efficient electric heat pumps, water heating and supply systems also did well. The scorching summer also contributed to higher sales of seasonal products. Overseas sales of producer goods remained healthy, driven primarily by demand from Asia, which remained on a strong growth track. In particular, exports of machine tools soared, as emerging manufacturers engaged in the production of electronic devices and precision mechanical devices successfully captured new, worldwide demand for electronic manufacturing services (EMS) and grew at an exponential pace.

As a result of the above, we posted consolidated net sales of \323,703 million (up 34.1% year on year). Our operating income, ordinary income and net income came in at \7,415 million (up 786.8%), \7,623 million (up 697.7%) and \4,363 million (up 894.6%), respectively.

Well-balanced operating base to secure consistent results

At its inception, Yamazen’s primary business domain was producer goods for Japanese corporate customers, who needed to augment their production capacities by machine tools, industrial equipment and other capital-intensive machinery to ensure growth. Now that manufacturing became increasingly borderless, Yamazen turned its eye to the United States, Europe and Asia early on and launched local subsidiaries there in an effort to expand sales on a global scale to meet capital investment needs of companies outside Japan.

This globalization strategy has allowed Yamazen to successfully capture ambitious capital investments of enterprises in emerging markets, whose economic recovery at a pace faster than developed economies helped Yamazen compensate for the declining demand in Japan, thus contributing to the overall stability of the producer goods divisions as a whole.

In a related move, Yamazen expanded and enhanced its durable consumer goods business, including household equipment and devices, in an attempt to provide a hedge against plant-related sales, which are subject to large cyclical fluctuations. Our conscious efforts to develop reasonably-priced consumer products underscored by ingenious ideas and to market them on an innovative promotional platform led to higher sales and shored up the overall business performance of the Company. The ability to maintain equilibrium in terms of operating results, that is, the ability to offset weak results of one division by the strong results of another, is a key element in Yamazen's strength.

VISTA-3S: Medium-term Business Plan with three strategies and 10 action focuse s

Yamazen carries out its business in line with the VISTA-3S Three-year Business plan, which is in force through the three-year period until March 31, 2013.

To effectively maneuver through the tides of globalization and changes in the industrial structure and to triumph in such changing times, it is imperative for us to build a strong base to withstand intensifying competition in Japan while gaining and setting in place a powerful managerial competency on a global scale to achieve symbiotic growth of overseas and Japanese operations.

For the delivery of higher quality, Yamazen as a trading firm specializing in producer goods, housing equipment/materials and consumer durables is determined to deliver solutions that are beyond the expectations of customers -- that is, solutions that bring delight and excitement to customers. Indeed, customer delight is our added value, and the delivery of customer delight is the very reason for our existence.

VISTA-3S seeks to elevate Yamazen’s corporate value, and we strive to achieve this by basing our business conduct on customers’ point of view and by thorough execution of our plans.
During the past fiscal year, we succeeded in meeting all of the targets set out in the Business Plan for Year 1, and we are determined to reach the targets for Year 2 and Year 3 of the Plan as well.

Attempts at Innovation  

For the fiscal year ending March 2012, Year 2 of VISTA-3S, the Business Plan calls for actions to transform various innovations conceived up until the previous fiscal year into concrete action.
Innovation for Yamazen means re-inventing manners in which we do business, and this re-invention entails the process of doing away with the obsolete methods, systems and organizational structures and replacing them with new ones in an effort to transform ourselves into a company worthy of the support extended by our partners and customers.

To be more specific, in a bid to strengthen collective organizational power, we are revamping our business structure and re-assigning business resources (humans, assets and funds) so that the strengths of individuals will be transformed into collective organizational advantages.

The first step we accomplished in Year 1 of the Plan (i.e. previous fiscal year) was the merger of the System Engineering Department with the International Operations Headquarters. We will embark on the second step this year by forming a new business division called Industrial Tools & Equipment Division, where the Industrial Systems Department and the Industrial Tools Department are to be merged together. The creation of the new division will facilitate our full-fledged overhaul of domestic operations for producer goods. By unifying the two departments, whose customer profiles and product lines are somewhat similar, and by effectively mobilizing the new 500-member strong team, the Company plans to establish stronger ties with customers and render better one-stop service while making greater inroads into new markets.

Management practice that rests on on-the-spot observations, comprehensive abilities necessary for effective personal interactions, and abilities to put ideas into action

To turn crises into opportunities amidst the incessant changes that surround us, it is critical for us to develop thoroughness in three areas.
The first area that requires thoroughness is on-the-spot observations at places of action. I have been a strong advocate of management by walking around (MBWA). I tell my staff over and over again the importance of “seeing it with your own eyes” by making frequent visits to places both inside and outside Yamazen. Candid opinions and feedback scooped up during such visits aid us in developing a correct understanding of realities and issues. I also believe that the most fundamental key to customer satisfaction can be found in workplaces where day-to-day work is carried out. They include manufacturing plants and shops where machines and systems we sold are in service, as well as retail floors where our products are sold. Nothing is more important than identifying customers’ needs at customers’ businesses locations or at the closest points you can get to customers.

The second area where thoroughness must prevail is compassion. I place the utmost importance on respecting people and contributing to their happiness, and my business credo strongly echoes this philosophy. An enterprise is indeed its people. In order for Yamazen to sustain its business as a trading firm and to produce results, the key to its success rests almost entirely on its human resources and their comprehensive abilities necessary for effective interactions with others.From time immemorial, business has been built only on person-to-person relationships, and compassion, which essentially means the ability to sense others’ feeling by putting oneself into others’ shoes, is very important in fostering relationships. Employees and officers with the ability to respond to customers’ needs and to work out solutions with customers with all sincerity and integrity are directly translated into Yamazen’s strength.

The third area where thoroughness must manifest itself is execution. As stated earlier, the fiscal year that began in April 2011 is positioned as the year of innovation. We plan to roll out a series of overhauls including organizational reform of an unprecedented scope. I believe that thorough execution of planned actions while remaining committed to their original aims will open the door to a new set of possibilities.
In the wake of the Great East Japan Earthquake, uncertainty looms over our operating environment. However, I am confident that we will overcome any adversities, as long as each member of Yamazen fully adheres to the principle of the on-the-spot observations, develops a broader perspective and acute senses, and plays an active role in company-wide concerted endeavors in providing a quick and timely response.
I thank you for your continued support.