CEO Message

We would like to begin this message by expressing gratitude to our shareholders and investors for their ongoing support.

During the consolidated fiscal year ended March 31, 2010 (the period from April 1, 2009 to March 31, 2010), global economic conditions experienced a moderate improvement in high-income economies including Japan, the United States and Europe, while emerging countries, including China, served as the engine for the recovery from the global economic downturn. Nonetheless, international economic conditions remained uncertain, with negative factors such as surplus employment and excess production that had yet to be eliminated in developed countries, rising prices of raw materials such as crude oils and steel products, and fiscal deficits in Southern European countries.

The material handling and logistics industry also faced a difficult business environment, as profit margins on orders deteriorated in the face of tougher competition and the emergence of rivals in Asia, in addition to reduced capital spending in the industrial arena.

In this operating environment, the Daifuku Group received orders of 133,211 million yen, a decrease of 37.2% from the previous fiscal year, and posted net sales of 154,208 million yen, down 36.3%, the result of a substantial decline in orders and sales in the mainstay logistics systems segment. The large drop in orders was partly attributable to the posting in the first quarter of the previous fiscal year of an order backlog (approximately 18.5 billion yen) of Jervis B. Webb Company in the United States—which the Company acquired at the end of 2007—as at the end of the fiscal year ended December 31, 2007.

With respect to profits, operating income came to 80 million yen, a fall of 99.5% year on year, reflecting the positing of an operating loss in the electronics segment, in addition to deteriorating factory operation levels, given lower net sales and orders, as well as weaker profitability on rising competition despite Group initiatives such as extensive cost cutting, comprehensive project management, and load adjustment among factories taking advantage of the consolidation of production bases into Shiga Works in Japan. The ordinary loss amounted to 135 million yen, a fall of 15,018 million yen in ordinary income from the previous fiscal year, mainly reflecting the posting of interest expenses and foreign exchange losses. The Group recorded net income of 1,018 million yen, a decline of 87.0%, which was affected by the addition of Osaka Machinery Works Co., Ltd.; the entity became a wholly owned subsidiary of the Company, and a fall in deferred income taxes.

Looking at the quarterly trend, orders were improving with their first quarter trough, and orders in the fourth quarter (January to March 2010) increased a substantial 67.6% year on year, to 46,390 million yen. Net sales showed a similar trend and reached 48,022 million yen, down 18.0% year on year, in the fourth quarter, thanks to the contribution of applying the Accounting Standard for Construction Contracts (the percentage of completion method) to sales.

We respectfully ask our shareholders and investors for their continued support.