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Message from the President  189th period

Annual Business Report 189th period
April 1, 2017 through March 31, 2018

Review of Business Operations 

  During the fiscal term under review, the Japanese economy saw continuous improvements in
production, export, employment, etc. as a result of various economic policies and modest recovery of overseas business conditions.

  Under this business environment, our performance for this year showed an increase in sales of steel structures and construction equipment and a decrease in sales of railway rolling stock and transportation equipment, totaling 95,311 million, down 5.7% from the previous year. In terms of profits, in addition to we made provisions for profits from reversing the amount recorded for the large railway rolling stock project for the U.S.A., and the profit of construction equipment increased.


As a result, the operating profit was 7,266 million ( the operating loss in the previous year was 5,104 million) and the ordinary profit 7,315 million ( the ordinary loss in the previous year was 5,149 million). However, we recorded an extraordinary loss due to payment of the settlement money for the large railway rolling stock project for the U.S.A. Consequently, the net loss that belongs to the stockholders of the parent company was 8,271 million ( the net loss in the previous year was 5,124 million).

 

 

The Outlook 

Considering the decline in performance of recent years and the increasingly severe market environment, we will aim at genhancement of operation control structure and human resource developmenth and promote technology/product development by exerting collective  strengthh while ensuring a profit with gbusiness development where we can exert our advantages.h Concretely, we will enhance the operation control structure including the quality, cost, and process, focusing on our core business, namely the railway rolling stock business, and exert our advantages in our strong areas of various business fields by providing products and services that match customer needs. We will also increase our competitiveness by promoting reduction of costs and make efforts to secure stable receipt of orders with all our strength. In such approaches, we will contribute to improvement of the enterprise value of the entire Central Japan Railway Company (hereinafter called as "JR Central")
Group and promote development of our businesses with a closer cooperative relationship with the parent company.

 

In the railway rolling stock business, we will make efforts for differentiation with technology development and cost reduction with efficient production processes and continuously enhance our competitiveness for railway rolling stocks, mainly for high speed railways, expecting the continuous severe environment in terms of receiving orders. For projects with losses, we will work to improve by reviewing the project promotion system.

 

In the transportation equipment and steel structure business , the transportation equipment business is facing difficulties in winning orders. We will, however, continue to make efforts in developing products which promptly capture market trends, further reducing costs in order to secure orders, and develop new customers. Our efforts in the steel structure business will be focused on enhancing our ability to propose technological solutions that match customer needs and reducing costs in terms of orders of new bridges. As we continue to secure incoming orders, we will also develop our business in peripheral areas such as repair/maintenance projects. In the construction equipment business, we will capture business opportunities by maintaining and consolidating the production system to respond to
steadily growing domestic demands and responding to local needs in Asia and other overseas markets in a flexible manner.

 

In the engineering business, we will secure profits by proposing products that cater to market needs.
For the existence of events and situations which may raise significant doubt concerning the ongoing viability of our company, we have discussed the direction of project implementation concerning the large railway rolling stock project for the U.S.A. that has caused great losses until now.

 

As a result, it was decided that another railway car manufacturer would manufacture railway cars in the relevant project during the fiscal term under review to minimize the influence on the parties involved. Consequently, we negotiated with Sumitomo Corporation and Sumitomo Corporation of Americas (hereinafter, collectively referred to as gSumitomo Corporation Grouph) who were the direct contractors of the relevant project.

 

At the board meeting held on November 6, 2017,we decided to conclude a compromise agreement that specifies that we and NIPPON SHARYO MANUFACTURING, LLC should pay $328,942 thousand in total to the Sumitomo Group as settlement money and the relevant project should be eventually settled with the Sumitomo Group, and we concluded this agreement on the same day. As a result, we recorded a net loss of 8,271 million that belongs to the stockholders of the parent company during the fiscal term under review. For this,
there was no new loss expected concerning the relevant project in the future because of the payment of the settlement money mentioned above.

 

 In domestic business which is our main market, we recorded a profit stably. We will continuously make efforts to capture orders of railway cars and bridges, for which there are high-level orders on hand, and secure maximum sales in the brisk construction equipment business by utilizing production facilities of other businesses. At the same time, we will make efforts to enhance profitability by promoting further reduction of raw costs and expenses. The entire Group is working to improve performance for these measures.

 

As for funds, we make efforts to secure stable funds necessary for business activities and maintain mobility while maintaining sound financial balance. Concretely, we borrowed the funds to provide for payment of the settlement money described above from our parent company (Central Japan Railway Company) on November 30, 2017, and finished payment of the settlement money during the fiscal term under review.

 

In addition, we participate in the CMS (Cash Management System) operated by our parent company. With this, as for financial arrangements, we provide internal funds for necessary funds such as capital investment funds and working capital. For fund mobility, we can also flexibly raise funds necessary at the moment from CMS by strengthening cooperation with our parent company to secure funds that can sufficiently meet demands anticipated from the funding plan.

 

As we are taking measures to resolve issues and improve the situation , we consider that there is no critical uncertainty for any going concern.

 

President and Chief Executive Officer

 


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