|
|||
| 1. Business Results (1) Consolidated Overview The operating environment for the fiscal year ended March 31, 2003 was as follows. The Japanese economy was characterized by mixed results. In the first half, the domestic economy experienced signs of a slow export-led recovery, with steady production, particularly toward Asia. In the second half, however, stock and commodity prices continued to deteriorate reflecting significant concern over the bad debt problem, leading to overall stagnant conditions. Despite efforts by the government to arrest this decline through such measures as the establishment of the Industrial Revitalization Corporation, relief from the prolonged deflation is not expected in the short term. From a global perspective, the fiscal year under review was one enveloped in geopolitical risk, highlighted by anxieties over the situation in Iraq. Growing concerns over corporate accounting and the collapse of the IT bubble were brought very much to the surface with successive large-scale corporate failures in the U.S. The U.S. government, however, was quick in implementing effective measures including the lowering of interest rates and the substantial reduction of taxes. As a result, the U.S. economy continued its recovery, driven by strong personal consumption and residential investment. In Europe, economic conditions remained weak as the euro appreciation impacted exports, and oil prices continued to rise. The Asian economies were generally robust, led by significant growth in China. Against the backdrop of an overall weak operating environment, the Company implemented a reorganization of business portfolios and reforms of its earnings structure by focusing on core businesses. As a result, net sales (total trading transactions) amounted to ¥4,619,072 million for the fiscal year ended March 31, 2003, a decrease of 15.5% compared with the previous fiscal year. By type of trade, exports fell 6.4%, while imports declined 13.7% compared with the previous fiscal year. Domestic sales and offshore transactions dropped 18.2% and 18.0%, respectively. Gross trading profit declined 20.0% to ¥212,607 million, mainly from the transfer of the steel products, LNG, and chemicals businesses to affiliates under the equity method in accordance with our alliance strategy, and the deterioration in the information industry category. Despite a stringent Companywide review of expenses and a year-on-year reduction in selling, general and administrative (SG&A) expenses of ¥39,219 million, operating income fell 28.3% to ¥35,462 million, battered by the decline in gross trading profit. The Company benefited from improvements in net interest expense and equity in gains of unconsolidated subsidiaries and affiliates. However, these gains were insufficient to offset declines in dividend income, and expenses caused by a dramatic depreciation in the Company's information industry category. As a result, recurring profit decreased 59.2% to ¥13,553 million. The Company recorded extraordinary gains of ¥19,255 million, including gains on transfer associated with the integration of its chemicals business and gain on the sale of securities in information industry businesses. On the other hand, net extraordinary losses of ¥91,658 million were posted, including ¥28,052 million in accelerated write down of investment securities in preparation for the Company's business integration with Nichimen Corporation, and an increase in provision for overseas doubtful receivables of ¥20,891 million. After accounting for the aforementioned, the Company posted a loss before income taxes of ¥78,104 million. After income taxes and minority interests in consolidated subsidiaries, the net loss amounted to ¥73,850 million for the fiscal year under review. Medium-Term Management Plan Nissho Iwai announced its "Medium-Term Management Plan 2005" in January 2002, covering the three-year period from April 2002 to March 2005. Thereafter, the Company announced its plans to integrate its business with Nichimen Corporation in January 2003. Following approval at an extraordinary general meeting of shareholders in February 2003, a joint holding company, Nissho Iwai - Nichimen Holdings Corporation was established in April 2003. Accordingly, the management plan has been replaced by the new holding company's business plan for the three-year period from April 2003 to March 2006. (2) Segment Information Machinery Sales in the machinery category fell 11.2% year on year to ¥998,394 million due to the drop in performance of our automotive assembly and distribution subsidiary in Latin America, which had contributed significantly in the previous fiscal year. Operating income dropped 15.6% to ¥6,114 million. Information Industry Sales in the information industry category slipped 8.1% to ¥265,327 million, and operating income declined 63.1% to ¥8,665 million. Performance was impacted by an overall weakness in domestic and global IT markets, particularly in the U.S., as seen by corporate cutbacks and postponement of IT-related investment. Metals On January 1, 2003, Nissho Iwai and Mistubishi Corporation established an independent joint-venture company, Metal One Corporation, the first step in the spin-off of their respective steel products businesses. This business reorganization by the Company produced a drop in sales in the metals category of 27.7% to ¥487,584 million. Operating income fell in this category by 28.6% to ¥2,986 million. Energy & Mineral Resources Sales in this category declined 21.2% to ¥900,055 million due to restructuring in the LNG business and a reduction in oil-related transactions in Japan. Operating income, on the other hand, jumped 43.6% to ¥5,706 million, reflecting efforts to curtail selling, general and administrative expenses. Foods & Consumer Products Sales in this category were slightly down compared with the previous fiscal year, falling 2.7% to ¥512,147 million, owing to a drop in market prices for marine products. Operating income edged down 4.3% to ¥4,109 million. Chemicals & Housing Materials Under the terms of a tie-up with Nichimen Corporation in this category, Nissho Iwai has transferred ownership of its consolidated subsidiaries, Nissho Iwai Chemical Corporation and Nissho Iwai Kagakuhin Co., Ltd. to Global Chemical Holdings, Inc., an equity method subsidiary jointly held by Nichimen and Nissho Iwai. As a result sales in this category fell 22.2% to ¥392,869 million, while operating income surged 53.2% to ¥6,827 million due to cuts in selling, general and administrative expenses. Construction & Urban Development A strong performance in the condominium business drove sales in this category to ¥174,884 million, an increase of 5.9% year on year. Operating income however dropped 36.3% to ¥3,584 million, owing to the transfer of profitable consolidated subsidiaries in the previous fiscal year to affiliates under the equity method. Overseas Subsidiaries Impacted by weak U.S. and European economies, our overseas subsidiaries, including Nissho Iwai American Corporation and Nissho Iwai Europe PLC, reported reduced revenues for the fiscal year under review. As a result, sales of this category fell 10.2% to ¥702,717 million. There was an overall operating loss in this category of ¥180 million. Other Businesses As part of Nissho Iwai's plan to spin off its steel products business, the steel-related business of the Company's domestic network of regional steel-related companies and branches were transferred to Metal One Corporation, a joint-venture company established with Mitsubishi Corporation, and an affiliate under the equity method. With these transfers, sales in this category declined 27.8% to ¥185,092 million. The exclusion from the scope of consolidation of certain unprofitable subsidiaries however, led to an increase in operating income of 178.6% to ¥2,928 million. 2. Financial Position (1) Consolidated Balance Sheet As part of the Company's policy to adopt a more selective and focused approach to its business activities, Nissho Iwai spun off its steel products business and converted its information industry subsidiaries to affiliates under the equity method. With these initiatives Nissho Iwai was able to reduce trade receivables and streamline inventories. Coupled with the sale of investment securities and the write-off of evaluation losses, the Company reduced the balance of its total assets to ¥2,104,259 million as of March 31, 2003, a drop of ¥853,319 million compared with the previous fiscal year-end. In line with the fall in assets, Nissho Iwai reduced interest-bearing debt by ¥480,713 million to ¥1,514,254 million. Accounting for the balance of cash, cash equivalents, and time deposits at the end of the fiscal year, net interest-bearing debt at year-end stood at ¥1,376,380 million, a decrease of ¥438,502 million. Shareholders' equity declined by ¥86,400 million to ¥20,328 million reflecting the loss incurred during the fiscal year under review as the Company began preparations for the business integration with Nichimen Corporation, an increase in foreign currency translation adjustments brought on by the appreciation of the yen, and the rise in unrealized losses on available-for-sale securities owing to sharp decline in stock prices. (2) Consolidated Cash Flows For the fiscal year ended March 31, 2003, net cash provided by operating activities totaled ¥110,094 million, net cash provided by investing activities was ¥128,518 million, and net cash used in financing activities was ¥262,345 million. The results reflect measures taken by the Company to streamline assets and use the funds raised to reduce interest-bearing debt. After accounting for the effect of exchange rate changes and changes to the scope of consolidation, total cash and cash equivalents as of the end of the fiscal year amounted to ¥117,116 million. |
|||
|
|||
| (3)
Subsequent Events Nissho Iwai - Nichimen Holdings Corporation ("NNHC"), parent company of Nissho Iwai Corporation resolved to increase its capital by ¥273 billion through an issue of ¥266 billion in preferred stock and ¥7 billion in common stock by allocation to third parties at a meeting of its Board of Directors held on April 25, 2003. The parent company also resolved to issue convertible bonds in the amount of ¥5 billion through the ¥50 billion capital-raising commitment facility established with Lehman Brothers. Nissho Iwai resolved to issue 652,683,000 shares of common stock to NNHC in return for the payment of ¥163.2 billion from the issue of preferred and common stock by way of third party allotment at a meeting of its Board of Directors on April 25, 2003. Through this equity finance, Nissho Iwai has taken steps to secure stable medium- to long-term funds for the purpose of establishing fresh investments and continuously streamlining assets, reinforcing financial strength, and improving its debt to equity ratio. |
|||
| |
| Consolidated Financial Statements Non-Consolidated Financial Statements Business Results and Financial Position |
| |
|