To Our Shareholders

Medium-term Goal

  • Committed to customer satisfaction through global enterprise

Strategic Orientation

  • Quality is No.1
  • World-class cost competitiveness
  • The best technology to boost our product competitiveness
  • Personnel and a corporate culture that support a global corporation

Behavioral Guideline

  • A thorough system of reporting, communicating, and consulting
  • Speed, Challenge, and Straight-forward Action
  • Improving our skills, boosting motivation levels, and
    upholding ethical integrity
  • Elimination of waste of materials, funds, and human resources

Review of Fiscal 2009

I would like to express my thanks for your continued encouragement and support over the years.

We are pleased to present this summary of our consolidated results of the 101st term (from April 1, 2008 to March 31, 2009) as follows.

The economic situation facing the Showa Group (hereinafter, "the Group") during the fiscal year rapidly became more challenging in
the United States due to the global economic downturn triggered by financial crisis. Moreover, the economies of Europe and Japan retreated even further than their bearish standing, and slowing economic trends in Asia rapidly worsened. Overall, the situation has become critical and marked by worldwide economic uncertainty.

In the automobile industry where the Group belongs, sales decreased especially for the commercial vehicle category in the United States, and also sales in Europe fell short of the previous fiscal year, particularly for the passenger vehicle category.On the other hand, in Asia, though production of automobiles declined, our sales rose slightly year on year, although in Japan results fell short of the previous fiscal year in production, sales, and exports. On the whole, the situation has become extremely severe for this industry due to the sudden demand crunch.

Under these formidable conditions, the Group has endeavored to "Achieve World Class Quality and Technology" with global measures to enhance managementand improve our company well-being.

We recognize the crisis that faces us as embodied in the sudden decline in automobile demand with the worldwide economic downturn, and we have been conducting emergency measures to strengthen productivity and improve profitability while minimizing drags on profit.

As a result, consolidated net sales for the fiscal year decreased to ¥271,510 million, down 4.2% year on year, due to lower automobile demand around the world and an unfavorable exchange rate.

Regarding profits, because of rising material costs, an unfavorable exchange rate, increased production and rising costs for supporting new model vehicles in the first half, and because of decreased production in the second half, consolidated operating profit dropped to ¥2,409 million, down 82.4% year on year. Consolidated ordinary loss was ¥1,137 million (compared to a consolidated ordinary profit of ¥14,254 million the previous year) and the net loss for the period was ¥1,169 million (compared to a net profit of ¥6,597 million the previous year), mainly due to the fact that deferred tax assets were exhausted and an amount was posted under income taxes-deferred.

Taking business performance during the period into consideration, Showa chose to set the year-end dividend at ¥7 per share. As a result, the dividend for the fiscal year totaled ¥21 per share including the interim dividend of ¥14.

Outlook for Fiscal 2010

The future outlook calls for even more challenging economic conditions in the United States, Europe and Japan, with concerns about a prolonged downturn of the global economy and no sign of recovery in sight. In Asia we are concerned that an already slowing economic climate may be pulled by the global economy toward recession. In the automotive industry, the market is expected to continue growing in some regions such as China, but recovery of automobile demand is uncertain for the United States, Europe and Japan due to the recession that started with the US financial crisis.

To survive these harsh conditions, the Group, following the motto of "Be Selective and Focused with Speed," will focus our limited management resources into essential areas with timely managerial decision-making and we will work to improve our profits and profit-making structure, recognizing how urgent this is. Also, the Group as a whole will make a concentrated effort to restructure our production bases for the future to build high-efficiency lines that respond flexibly to production increases and decreases as well as to strengthen production performance. Our hope is that our shareholders will continue in their enduring support over the years to come.

We look forward to the continued invaluable support and guidance of all shareholders in the years to come.