Message from the President
Makoto Kaneko - President and Representative Director, Zuken
Gaining fresh opportunities from the current changes in conditions, by engaging in a process of personal transformation and searching for answers to difficult questions.
Current results have been affected by theviolent storm affecting the global economy
From around the middle of the fiscal year under review, the chaos in financial markets sparked off by the sub-prime loans problem in the United States and the financial crisis that followed in the wake of the collapse of Lehman Brothers suddenly spread all over the world, bringing about a major recession in the global economy. The very existence of all kinds of industries was called into question, and many companies were obliged to undergo restructuring. One consequence of this has been that the business results of many of Zuken’s customers have taken a turn for the worse and many are currently engaged in organizational reviews and reform.
Under these conditions, the Zuken group has been involved in the following efforts.
Electronic Design Automation (EDA)
- In the field of circuit board design systems, we have launched next-generation automatic wiring systems into the market.
- In order to open up new markets in the industrial machinery field, we have launched cabling and wiring design systems*1 aimed at rolling stock and industrial machinery that have already achieved extensive sales in Europe and North America into the Japanese market.
Product Lifecycle Management (PLM)
- We have launched project control systems for developing embedded software into the Japanese market.
- We have begun developing systems for the integrated control of all kinds of information on components required in the design, test production and mass production processes.
System on a Chip (SoC)
- We have entered into a business and capital alliance with Elmic Wescom Inc. (now Zuken Elmic Inc.),*2 with whom we are cooperating on the development of embedded software and the mutually supportive supply of products.
Global activities
- In Europe and North America we have been continuing to direct our efforts toward communications equipment and automobiles, in addition to which we are working on opening up new fields of industrial machinery and devices in new markets such as aircraft, rolling stock, medical equipment and FA devices.
- In Asia we have been concentrating on the sale of cabling and wiring design systems for rolling stock and industrial machinery. In China, we have significantly strengthened our system of support for local companies in addition to the already existing system of support for Japanese companies.
The consequence of this has been a major strengthening of our cabling and wiring design systems and of our business operations aimed at new markets in the United States. As regards our business activities in China, sales targeted at Chinese companies are now at almost the same level as those targeted at Japanese companies active in China, and we have thus managed to establish solid foundations for the full-scale promotion of business rooted in China. Products newly launched into the market have been positively assessed by many companies. However, the results of the launch of these products alone have not been adequate to make up for the fall in sales of EDA solutions and IT solutions during the fiscal year under review.
As a consequence, results were uniformly down on the same term last year, with sales for the term amounting to ¥19.847 billion (down by 9.9%), operating income amounted to ¥1.46 billion (down by 48.6%), and net income for the year came to ¥1.214 billion (down by 30.9%). In terms of individual product categories, the figures were ¥4.961 billion for EDA solutions centering on EDA (down by 22.2%), ¥4.71 billion forcircuit design and IC solution corresponding to EDA upstream design fields and the SoC field (down by 5.2%), and ¥3.069 billion for IT solutions centering on the field of PLM (down by 14.9%). Thanks to our ongoing efforts to provide appropriate solutions based on a paramount concern for the needs of our customers, client services centering on maintenance and consulting saw a slight increase to ¥7.087 billion (up by 0.9%).
Working as a partner to ensure the successof our customers’ monozukuri
Under economic conditions of unprecedented severity, everyone in the Zuken group is fully aware that it is up to us to change our business style in response to the efforts being made by our customers to reform monozukuri methods with aview to creating products that fully meet the needs of the new era. It is by no means an easy matter to engage in personal transformation. However, Zuken’s 30-year history has to some extent been a process of personal transformation. We need to ensure that the Zuken group is able to benefit as much as possible from the current changes occurring in the economic environment, and we need to push forward with further organizational strengthening through such transformation.
The reforms in monozukuri that our customers are striving to implement can be classified into two main directions. The first direction involves the pursuit of smaller size, faster speed and greater precision at levels far in excess of those maintained hitherto. This orientation is evident especially in the field of digital electrical appliances for use in the home. The second direction is all about building in high quality using cutting-edge three-dimensional functions as in the case, for example, of the wiring design for rolling stock and the design of industrial devices.
The transformation that the Zuken group needs to make involves, getting away from our past way of doing business that involved the uniform presentation of product features and striving to become a partner to our customers in assisting them to make a success of monozukuri operations. This we need to do by making ourselves familiar with the issues and concerns that our customers have, gaining a clear picture of their objectives, and providing them with the optimum solutions. The Zuken group has established a new slogan, “The Partner for Success,” in order to convey this stance with the utmost clarity, and we intend to engage in business on this basis in the future.
Aiming to become a high-earning companyand challenging the solution of difficult problems
The severe conditions in which the global economy is situated are likely to be maintained through to the next period. Many companies at the forefront of their respective industries are set to engage in various forms of monozukuri using Zuken products to provide their design infrastructure. Under these conditions, we believe that it is the mission of the Zuken group to assist manufacturers all over the world insolving the problems that confront them and achieving success. We intend therefore to carry out the following efforts which we hope will enable us to achieve sales of ¥20.5 billion, operating income of ¥1.0 billion, and current net income of ¥700 million.
- Introducing greater rigor and thoroughness into the accumulation of technical know-how, the effective use of human resources, and business efficiency by rebuilding our development and sales structure.
- Striving to reduce costs and to establish a management infrastructure capable of achieving profit in a difficult economic environment.
- Striving to expand the areas to which we are able to respond by expanding our solution functions.
- Striving to achieve profits and exploit new markets by enhancing our consulting capacity, sales capacity and capacity to propose effective solutions.
- Developing new products from a medium and long-term perspective by accurately ascertaining our customers’ wishes and market trends.
On this occasion I would like to appeal to everyone in the Zuken group to tackle with the utmost seriousness the difficult issues that our customers are presenting us with. Many of these issues cannot be solved using conventional systems and standard approaches, and I believe therefore that innovations set to open the door on a new era are likely to arise if we tackle our customers’ wishes head-on and are able to come up with appropriate solutions.
It goes without saying that to achieve this will entail having to surmount many difficult hurdles. But we are fortunate that the software technology of the Zuken group has evolved to an incomparably higher level than in the past. This means that we are now able to provide revolutionary systems for dealing with difficult problems. Furthermore, I believe that we need to create futuristic products that are scarcely imaginable at the present time. Such efforts on our part will enable the Zuken group to become a true partner in supporting the success of our customers and will help us to achieve our objective of becoming a highly profitable company.
As well as issuing stable dividends, we are acquiring treasury stock
The Zuken group considers that one of our most important managerial policies is to ensure that profits find their way back to shareholders, and our basic policy will continue to be to issue dividends in a stable manner. As well as strengthening and improving our managerial foundations and financial constitution, we are constantly considering the best ways in which to return profits to our shareholders while taking account of internal reserves to ensure that we have sufficient resources for engaging in business activities in the future, allwhile keeping a close watch on our results and the business environment.
In line with this policy, we decided to issue an annual dividend of ¥12 per share (interim dividend of ¥5, term-end dividend of ¥7) for the fiscal year under review, but we have decided on an annual dividend of ¥14 for the present term (interim dividend of ¥7, term-end dividend of ¥7). This means that the dividend payout ratio for the present term is 29.8%.The annual dividend for the next term is also set to be ¥14 pershare (¥7 for both interim and term-end dividends).
Since November last year we have been engaged in the acquisition of treasury stock and have been conducting capital policies expeditiously and making improvements in capital efficiency in accordance with changes in the business environment.
I hope that shareholders will wish to continue providing us with their understanding and support in the future.
Makoto Kaneko, President and Representative Director
September 2009
Notes:
*1 In the case of automobiles, rolling stock devices and industrial machinery, systems that enable the accurate and efficient wiring of several electrical units inside a device in a short space of time using wire harnesses.
*2 Outline of Zuken Elmic Inc.: (Elmic Wescom Inc. was renamed as Zuken Elmic Inc. on July 1, 2009.)
Location of head office: Yokohama City, Kanagawa Prefecture
Established: April 30, 1977
Capital: ¥1,202 million
Business: Development of middleware libraries that are important in the development of embedded systems, development of real-time operating
systems, development of software, development and sale of hardware, etc.