Annual Report 2007 - Komatsu

Financial Review
Results of Operations
(1) General
Consolidated business results of Komatsu Ltd. (“Company”)
and consolidated subsidiaries (together “Komatsu”) for the fiscal
year ended March 31, 2007 continued to renew the recordhigh
figures in both net sales and profits, registering the fifth
consecutive year of improvements in the two figures.
Results for the Year
Increase
Sales 1,893.3 billion yen 17.4%
Operating income (*1) 244.7 billion yen 49.8%
Income from continuing operations
before income taxes, minority
interests and equity in earnings of
affiliated companies (*2) 236.4 billion yen 51.8%
Income from discontinued
operations (*3) 11.3 billion yen 120.9%
Net income 164.6 billion yen 44.1%
Note *1: Starting from the current year, Komatsu changed its form of consolidated
statement of income from single- to multiple-step. To ensure accurate
comparison of the change from the amounts of the previous year, the
percentage was obtained after reclassifying the previously reported
amounts.
Note *2: On October 18, 2006, the Company sold 51.0% of the shares of Komatsu
Electronic Metals Co., Ltd. (“KEM”, currently SUMCO TECHXIV
CORPORATION) to SUMCO CORPORATION. Prior to this disposition, the
Company held a 61.9% equity interest. Accordingly, KEM and its
subsidiaries are no longer consolidated in Komatsu’s results. On January 30,
2007, the Company’s signed a definitive agreement to sell the outdoor
power equipment (OPE) business of Komatsu Zenoah Co. to a Japanese
subsidiary of Husqvarna AB of Sweden. Accordingly, the OPE business of
Komatsu Zenoah Co. and its subsidiaries engaging in the OPE business are
no longer consolidated in Komatsu’s results. The concerned sale was
completed on April 2, 2007. In accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets,” operating results after deducting those of
such business are defined as continuing operations and those income
before income taxes are presented as “income from continuing operations
before income taxes, minority interests and equity earnings of affiliated
companies” in the consolidated statements of income.
Note *3: In accordance with SFAS No. 144, gain on sale of KEM’s shares and
operating results, less applicable income taxes, related to KEM and its
subsidiaries as well as the operating results, less applicable income taxes of
the OPE business of Komatsu Zenoah Co. and its OPE business subsidiaries
are presented as one line, “income from discontinued operations less
applicable income taxes, minority interests and equity in earnings of
affiliated companies” in the consolidated statements of income.
Consolidated net sales increased 17.4% over the previous
year, to ¥1,893,343 million (US$16,045 million, at US$1=¥118).
In the construction and mining equipment segment, Komatsu
continued to increase sales for the year by effectively capitalizing
on expanded market demand resulting from buoyant developments
of commodities and infrastructure around the world.
In the industrial machinery, vehicles and others segment,
Komatsu recorded good performance and advanced sales.
Sales of the electronics segment declined from the previous
year, as primarily affected by the sales of the polycrystalline
business which was executed in the previous year.
Operating income advanced to ¥244,741 million (US$2,074
million), and operating income ratio improved by 2.8 percentage
points to 12.9%. Profits further improved due not only to
expanded sales, centering on construction and mining equipment,
but also to the realization of prices for construction
equipment both in Japan and abroad. Income from continuing
operations before income taxes, minority interests and equity in
earnings of affiliated companies reached ¥236,491million
(US$2,004 million), reflecting a substantial increase in operating
profit. Net income for the year, the sum of income from continuing
and discontinued operations, totaled ¥164,638 million
(US$1,395 million).
(2) Impact of Foreign Exchange Rate
In comparison to the previous year, Japanese yen was weak
against both US dollar and Euro during the current year. Due to
such currency fluctuations, segment profit in the construction
Return on Net Sales
%
R&D Expenses as a
Percentage of Net Sales
%
Capital Investment as a
Percentage of Net Sales
%
Shareholders’ Equity Ratio
%
10
5
12
50
40
30
20
10
8
6
4
2
4
3
2
1
10
8
6
4
2
0
2003 2004 2005 2006 2007
0
2003 2004 2005 2006 2007
0
2003 2004 2005 2006 2007
0
2003 2004 2005 2006 2007
38 Annual Report 2007