Annual Report 2008

ANNUAL REPORT 2008We have completed our structural reforms.We are now steadily moving toward thenext stage in our growth.Sales and Profit Trends of the KHI GroupYears ending March 31Net sales (right scale)Operating income (left scale)Recurring profit (left scale)(Billions of yen)1201008060(Billions of yen)2,0001,5001,000such as the decline in the value of the U.S. dollarand the increase in raw material prices. The net salesand profit of the KHI Group have risen steadily sincefiscal 2005, but there is a strong possibility that thisyear, fiscal 2009, we may reach a temporary plateauin performance. Accordingly, we are working hardto cut material costs and outsource expenses,increase the percentage of costs denominated inU.S. dollars, and reduce fixed costs. Despite this,however, it is our judgment that even now the KHIGroup as a whole is still on the medium-to-longterm growth trend set under the Global K plan.(Billions of yen)402002005actual2006actual2007actual2008actual2009projection2011projectionNet sales ¥1,241.6 ¥1,322.5 ¥1,438.6 ¥1,501.1 ¥1,460.0 ¥1,560.0Operating income 24.7 41.8 69.1 76.9 55.0 100.0Recurring profit 21.0 30.9 49.1 64.0 55.0 90.05000At present, we are conducting an interim reviewof Global K, as we scheduled when we initiallylaunched the plan. Our appraisal is that, even now,provided the yen remains at ¥105 to the U.S. dollar,we are still on track to meet our profit targets forfiscal 2011. Those are ¥100 billion in operatingincome and ¥90 billion in recurring profit. In fiscal2007 and fiscal 2008, the first two years underGlobal K, we completed the KHI Group’s structuralreforms, and we have entered a new stage whenwe will make major strides forward toward our goalof becoming “a highly profitable global enterprise.”Ratio of recurringprofit* to net sales1.7% 2.3% 3.4% 4.3% 3.8% 5.8%Before-tax ROIC 4.8% 5.1% 8.7% 11.2% 9.4% 14.0%Foreign exchange rate** ¥108/US$ ¥112/US$ ¥117/US$ ¥115/US$ ¥100/US$ ¥105/US$* Recurring profit: See page 3.**Exchange rates are calculated on a sales weighted average basis.7