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To Our Stakeholders
Thank you very much for always showing your positive and favorable interest in our company.
I would like to express our deepest condolences to the families of those who lost their lives in the Great East Japan Earthquake of March 11th, this year, and our sincere sympathies to all who have been affected by the disaster.The sorrow that a lot of people have been victimized by the massive earthquake measuring magnitude nine, the resultant tsunami and the nuclear crisis is beyond description. Feeling our unlimited sympathy with the sufferers, each person of our EKK Group has been thinking of what we can do as a company in order to help overcome the unprecedented hardship and bring a bright future full of dreams as well as happy life back to them.
Given the above, we have donated a total of 40 million yen as condolence money, sending 5 million yen to each reconstruction headquarters of the affected Ibaraki, Iwate, Fukushima and Miyagi prefectures, and 20 million yen to the Japanese Red Cross Society.
In addition, we havedecided to prioritize orders for our products to be used for the reconstruction, and also with the tight electric power circumstances in mind we are implementing group-wide measures to cut electricity at each profit center.
Business Overview for the 1st Quarter 2011
During this 1stquarter of 2011 (from April 1 to June 30, 2011), business conditions were affected by a number of uncertainties, including stagnation of business activities and electricity supply shortage due to the Great East Japan Earthquake at home, and worsening fiscal instability in some European countries and the further appreciation of the yen overseas.
With regards to the EKK Group’s business environment, the stagnation of production activities due to the disaster was feared in the automotive industry, but its impact on the industry was kept to a minimum, and the early resumption of the supply chain helps the industry show a sign of recovery of the business. The demand from manufacturers of automobiles, construction machinery and general industrial machinery in emerging countries remained stable, contributing to an increase in sales, but rising material costs and currency movement toward a rise in the value of the yen put pressure on income.
Consequently, at the consolidated level, we recorded net sales of 23,235 million yen (6.6% up from the same term of the previous year). Consolidated operating income was 1,823 million yen (23.0% down from the same term of the previous year), consolidated ordinary income was 2,087 million yen (2.7% up from the same term of the previous year) and consolidated net income was 902 million yen (14.0% down from the same term of the previous year). The results mean the sales increased but the profits decreased compared with the same term of the previous year. This resulted mainly from changes in our product portfolio for the automotive and construction machinery industry and also an increase in material costs. In order to improve the situation, we will make our continuous efforts to cut cost and improve productivity.
Tackle squarely the electricity issues that are now in unprecedented peril
Our company supplies to a lot of nuclear power stations in Japan important safety products such as main steam isolation valves that are automatically shut down in case of nuclear reactor emergency and mechanical seals for remaining heat removal pumps. Eagle Service Co., Ltd., our subsidiary, provides them with regular maintenance work as its main business.
We will continue to supply the above mentioned products to contribute to cutting CO2 emission and meet domestic electricity demand, and will contribute to the development of safe and stable nuclear power generation, which we believe is our mission.
In the history of the earth lasting up to date for some billion years, this earthquake was so devastating that the same kind has never been on record,wasn’t it?
The development of a system that can shut down reactors in case of various serious disasters including the land breakup, swell, submersion and even giant meteorite impact is a theme supporting the basis of future nuclear energy utilization. With this in mind, our company will make efforts to contribute to the nuclear power generation.
Various alternative energy resources replacing nuclear have been studied at home and abroad. We think that the most practical method in volcanic country Japan is geothermal power generation. Since our products and technology are used for various equipment at geothermalpower generation plants, we will step up efforts to study this field.
Business development
Our company has grown into a global mid-sized company with a total sales of 100 billion yen, a total workforce of 5,000 (2,000 Japanese) and 102 affiliated companies in 43 countries including 41 consolidated subsidiaries in 17 countries.
Mechanical seals, our main products, also referred to as sealing devices, are indispensable parts for rotating equipment such as pumps and compressors. We have been supplying them to various industries worldwide including refineries, petrochemical, steel, pulp & paper, food, pharmaceutical and above-mentioned power generation in alliance with a Germany-based Burgmann Industries GmbH & Co., KG.
Our mechanical seals and special valves are used worldwide in a vast spectrum of mobility systems (transport equipment) on the land, seas and in the skies, including automobiles, motorcycles, construction machinery, ships, aircraft and helicopters.
Although there are some concerns that may affect our business such as exchange rate movement that is not likely to recover and financial instability in the US and European countries, we think that the planned figures for the full year will almost be achieved considering the reconstruction from the disaster and continued large demand in emerging economies.
As for the 2nd quarter and thereafter, we will improve our business capabilities on a global scale by implementing the new 3 year management plan in a steady fashion, and will aim to be an excellent and strong company in which all the stakeholders can take pride.
The definition of “a good company” varies. I define it as a company whose businesses bring happiness to all stakeholders that are affected by our businesses either directly or indirectly. Therefore, it’s important for us to fulfill our missions and responsibilities for our stakeholders, which I believe leads to the enhancement of our corporate value. For this purpose, we always keep in mind “We should not pursue a short-term gain at the sacrifice of long-term gains.”
We look forward to your candid opinions and comments.
Tetsuji Tsuru
Representative Director and President
August,2011