Annual Report 2004 [PDF/1.1MB]

PRESIDENT'S
MESSAGE
BUSINESS ENVIRONMENT
During the year ended March 2004, a steady economic recovery
continued in the United States. Stimulated by substantial
tax cuts and the maintenance of loose monetary
policy conditions, internal demand factors such as consumer
spending and capital investment led growth. Asian countries,
notably NIES economies, suffered a short-lived slowdown
in the first half of the year due to the SARS outbreak,
but later staged a general recovery as the expansion of the
U.S. economy and other factors helped to drive up exports.
Surging consumer spending and strong levels of investment,
led by overseas investors, resulted in particularly strong expansion
in China, which maintained high GDP growth.
In Japan, although there were few signs of any pickup in
growth in consumer spending, exports expanded briskly as
other economies recovered and capital investment reversed
course amid higher corporate profits. A gradual recovery became
more entrenched.
In the steel industry, which represents the major portion of
Kawasho's business, growth in domestic steel demand was
buoyant in the construction machinery, shipbuilding and automotive
sectors, but remained sluggish elsewhere as a result
of the impact of lower public-works spending on construction.
Strong growth in exports to China and other parts
of Asia helped to offset these trends. As in the previous
year, prices continued to recover across many segments of
the domestic steel market.
RESULTS
Hiroo Naruki
President & CEO
Kawasho Corporation
Our consolidated net sales rose 2.0% to 1,179.4 billion. By
operating segment, strong growth in exports to China and
South Korea and the consolidation of construction materials
subsidiaries contributed to a year-on-year increase in sales
of 6.5% to 769.9 billion in the steel segment. Sales of raw
materials, chemicals and fuels grew 4.2% to 198.5 billion
amid increased revenues from steel raw materials as a result
of higher demand. Sales of foodstuffs and general materials
declined 4.0% to 84.8 billion as we continued to pursue
our strategy of greater business selectivity in terms of
products handled. In the machinery, aerospace and electronics
business, lower revenues in the shipping and general
machinery sectors offset higher trading volumes in the electronics
sector, leading to a 12.1% drop in sales to 98.1 billion.
Sales in the construction and other sector fell 35.3% to
27.8 billion, due mainly to the disposal of auto leasing operations
in the previous fiscal year and to a fall in construction
project revenues.
Gross profit increased by 672 million to 59,738 million.
Operating income totaled 14,453 million, a year-on-year in-
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