Review of Business Operations 

During the fiscal term under review, the Japanese economy has taken a turn for the better reflecting the effects of various measures in and out of the country. While the situation has remained harsh due to the sluggish investment in plant and equipment as well as deteriorating employment, the Tohoku earthquake which occurred in March left the prospects of the Japanese economy unpredictable.

Under such harsh circumstances, the Group achieved net sales of ￥94,842 million, a decrease of 3.8% from the previous year, securing the replacement orders for railway rolling stock, mainly the Series N700 Shinkansen trains. In terms of profits, the ordinary profit reached an all time high of ￥7,859 million or an increase of 5.1%. The net profit, on the other hand, recorded ￥3,703 million or a decrease of 2.2% as the extraordinary loss of ￥727 million was credited in the course of changes in the Retirement Benefit scheme.

The Outlook 

The Japanese economy is suffering a serious situation due to the direct damage from the Tohoku earthquake such as human and property losses accompanied by confusion in the supply chains of goods as well as the serious electricity shortage problem. Wide and long term influences are expected, therefore, over the Japanese economy as a whole.

 As for the Group Companies, there were no losses to personnel or damage to the production facilities. Although there has not been any serious influence over our operations, there are concerns that the manufacturing process may be delayed due to difficulties in the procurement of certain parts and raw materials, and there may occur the postponement of delivery times or cancellations as clients reconsider their plans of investment in capital and equipment. With these concerns, we expect that the situation surrounding our business will continue to be severe, although the tendency of the respective markets will vary among the divisions involved.

 In terms of railway rolling stock and other transportation equipment businesses, we received large orders for the exporting section from North America and Taiwan. It will be after the fiscal year 2012, however, that the sales are recorded. In the domestic market, although demands for railway rolling stock such as the Series N700 Shinkansen for JR Central are steady, the overall sales of railway rolling stock are expected to decrease, since the first replacement demands have been met. Along with our efforts in cost management and enhancement of profitability, we continuously aim to gain new contracts overseas targeting North American and Asian markets. NIPPON SHARYO U.S.A., INC., our nonconsolidated subsidiary, is constructing a railway rolling stock assembly plant in Illinois State, U.S.A., aiming for start-up in 2012. As its sales are expected to have an influence on our performance, we plan to include this company within the range of our connections from the period of March 2012.

In the transportation equipment and steel structure businesses, although there is a sign of recovery in replacement demand for certain products in the transportation equipment business, the situation surrounding orders is still harsh since the investment in capital and equipment in general shows a tendency to be suppressed. Setting our eyes on such a situation, we continue to make efforts to stimulate replacement demand through the proposals of products responding to market needs as well as in cost reduction through reviewing production processes. In the steel structure business, the decrease of orders for steel bridges is continuously expected. We will carry on our efforts though to secure orders for the construction of bridges as well as to reduce costs while promoting the repair and reinforcement work of existing bridges and developing related businesses such as steel structures.

In the construction equipment business, while domestic demand for products such as small pile driving rigs has shown a relatively steady movement, demand for large pile driving rigs is low-level. Considering such a situation, we continue to make efforts in active sales development by vigorously targeting overseas demand centering on other Asian countries as well as securing profit through our optimization and improvement in production efficiency in response to market changes.

In other businesses, we expect that the severe situation will continue in the engineering section as the investment in plant and equipment stays low-level. In the next term, however, we expect that sales will increase with orders from JR Central for related equipment for extending the Yamanashi Maglev Test Line. The Company will continue to make efforts to secure orders through strengthening our technological capability and the development of new products, as well as promoting proposals in sales activities for our customers.

The whole Company has taken part in reviewing its overall production system, centering on the railway rolling stock business, in order to realize a “strengthening of engineering capability” and an “improvement of productivity throughout the Group.” This effort has been completed at the domestic production bases and has shown effects in cost reduction through improved productivity.

At the same time, to win in the current unstable market situation where changes are rapid and the prospects remain uncertain, we will make further efforts to concentrate on regional and product targets which can provide us with more chances to win in the market while continuing to make efficient use of our management resources.

Further, the Company will strengthen its complementary and cooperative relationship with JR Central, our parent company, through promoting technical and personnel exchanges.

Our goal is to realize a synergy effect through strengthening the comprehensive technology of our railway rolling stock as well as our other related businesses. With continuous efforts, we aim at establishing bases for the sustainable development of our business.

Akira Nakagawa President and Chief Executive Officer