|Highlights of the Year: Thriving
in an Uncertain Environment
The year ended March 31, 2003, was an excellent year for DENSO. Although net sales
dipped 2.8% to ¥2,333 billion, due to the irregular 15-month reporting period
at overseas subsidiaries and affiliates in the previous fiscal year, net sales
rose 6.9% excluding this effect. We also posted net income of ¥111 billion.
On a comparable 12-month basis, net income was 56.8% or ¥40.2 billion higher.
These results were achieved in a varied and uncertain
operating environment: while demand in our home market was flat, an increase in
car exports, particularly to North America, boosted domestic car production. And
despite global geopolitical instability, which dragged down overall car sales
in both the United States and Europe, we expanded sales of components to automakers
in these markets. These were the primary factors behind our higher sales.
The increase in sales, a relentless drive to develop the
most technologically advanced and cost-competitive components, and an ongoing
program of corporate restructuring, were the main factors behind our improved
bottom-line profitability. Even after excluding nonrecurring extraordinary items,
we still achieved an impressive 20.2% increase in net income on a comparable 12-month
Returning profits to shareholders remains a high priority
for DENSO. And the year under review was no exception. We repurchased 40 million
shares of treasury stock to boost capital efficiency and maximize value for shareholders,
while ROE improved to 7.9%, or 6.3% after excluding the impact of the above-mentioned
extraordinary items. We also announced an annual dividend of ¥20 per share,
an increase of ¥2 per share on the previous period.
|DENSO Vision 2005:
Into the Final Stretch
| We are now into the last stage of DENSO Vision 2005, our long-term management
initiative announced in January 1997. With the completion date fast approaching,
we formulated a three-year medium-term plan in the fall of 2002, replete with
measures to guide us to our final objectives of net sales of ¥2.5 trillion
and ROE of 8%.
In order to reach our top-line
target, we are working to increase sales to automakers overseas, wherever they
choose to operate. Strengthening our presence in new growth markets such as China
and the ASEAN* region will also be key to growing sales. We believe we are making
good advances in all these areas. To attain our goal of ROE of 8%, we are working
to find additional cost savings, increase returns on investments in new automotive
fields, and improve the profitability of our European operations. These steps
go hand-in-hand with efforts to streamline our capital structure through an ongoing
share buyback program, and initiatives to improve asset turnover by optimizing
Based on this approach, we are confident
of achieving the goals in DENSO Vision 2005. Therefore, we are now looking further
into the future to ensure that we continue to deliver sustainable growth over
the long term.
* Association of Southeast Asian Nations
|Achieving Sustainable Growth: Staying
True to the Basics
|With automakers under intense pressure to become more competitive, the goalposts
for DENSO are constantly being moved. A round of mega-mergers and business tie-ups
in the auto industry has also thrown up new challenges for automotive component
suppliers, as automakers develop common platforms to reduce sourcing costs and
shorten development cycles. At DENSO, we must respond to these fundamental shifts
and rolling demands from automakers for the global supply of lower-priced, higher-quality,
more functional components. Overcoming these challenges will not be easy.
But underpinned by our unshakeable commitment to "Quality First,"
we are confident we can rapidly develop and supply more cost-competitive, high
value-added products that anticipate the needs of automakers and society.
To some people, the idea that quality can be improved
while paring back costs may seem contradictory. Not at DENSO. In fact we believe
that we can translate cost savings into higher quality and enhanced functionality
by using our renowned technological and mono-zukuri* capabilities. Continuing
to build an optimal global supply network, will also be vital to quickly take
advantage of business opportunities and efficiently provide customers with competitively
priced, high-quality components anywhere in the world.
course, realizing sustainable long-term growth is not something that is achieved
overnight, but we believe our track record shows we have the ability and the fundamentals
in place to deliver.
* The art of making (zukuri)
|Automotive Technologies: A Reservoir of Expertise
|Our R&D efforts are focused on three strategic areas: the environment,
safety, and information and communications.
In the environmental field, our technologies and products are already having
a positive impact on reducing the car's footprint on the environment. In the year
under review, these included the world's first non-fluorocarbon air conditioner
using carbon dioxide (CO2) as the refrigerant, an integral
component of Toyota Motor Corporation's fuel cell hybrid vehicle (FCHV). Our diesel
common rail system was also chosen by Mazda Motor Corporation for its MPV and
Mazda 6 models, now on sale in Europe. These systems achieve world-leading standards
in reducing exhaust gas emissions, and also comfortably clear the EURO 4 emission
regulations that come into force in 2005.
In safety, we worked closely with Toyota to develop the
world's first pre-crash safety system that automatically tightens passenger seatbelts
in the instant before a collision. And we achieved another pioneering first with
the development of an electronic control unit (ECU) for an adaptive front lighting
system (AFS). This new system realizes significant improvements in visibility
for nighttime cornering.
In the information and communications field, we have been
channeling our resources into car navigation and data communication technologies.
This has paid off, with a four-fold increase in our production of car navigation
systems over the last four years and the successful development of a data communications
module for Toyota's G-BOOK telematics system. We believe our considerable expertise
in this field will hold us in good stead as navigation systems evolve into advanced
information terminals providing a vast array of data services for car users.
For more than 50 years, DENSO has worked to create
a pool of expertise in core automotive technology fields. Maintaining and broadening
this vital resource is now more important than ever, as global trends show that
the lines between technological fields are blurring and new products are increasingly
the result of interdisciplinary development. For DENSO, this represents a real
our proven success in adapting technologies to new
applications, and our expertise in a wide range of fields, means we are ideally
positioned to develop an entirely new generation of products that transcend traditional
This, we believe, together with our commitment to"Quality First,"
represents another strength that sets us apart from our peers.
|DENSO: A Company to Rely On
| In an increasingly unpredictable world, characterized by seismic shifts in
operating environments and breathtaking technological innovation, companies like
DENSO are few and far betweenwe have shown time and again that we can stay
the course and deliver stable growth, no matter what changes have occurred. And
importantly, we have achieved this organically, based on our ability to supply
automakers with a steady stream of highly reliable products. As a result, we have
been able to provide shareholders with a stable return on their investment.
Finally, I am greatly honored to have been appointed DENSO's
new president and CEO. I am wholly committed to leading your company to further
success as we take on the challenges of a new era in the automotive industry.
I ask you to join us as we open an exciting new chapter in DENSO's corporate history.
KOICHI FUKAYA President and CEO