Kenwood 2006 Annual Report Download - page 5

expected to be one of the most promising fields in the 21st century.
In fiscal 2003, the initial year of the first mid-term business plan,
the Company focused on “Production Innovation” to improve its
profitability and cash flows, while enhancing its consolidated
management system. As a result, the Company posted record net
income for two years running. In addition, the Company
strengthened its balance sheet by significantly reducing cumulative
loss and interest-bearing debt.
In fiscal 2004, the second year of the mid-term business plan, the
Company promoted the “New Financial Strategy,” which involves
the simultaneous execution of four measures: entirely eliminating
cumulative loss; redeeming half of the preferred stock through
public offering; terminating the repayment agreement through
refinancing; and substantially reducing interest-bearing debt. The
Company completed this unprecedented scheme (for Japan). This
accomplishment translated into a dramatic improvement in its
financial basis and capital structure. As a result, the Company was
able to achieve the goal of resuming dividend payments, one of the
four objectives set in the first mid-term business plan, one year
ahead of schedule.
In fiscal 2005, the final year of the first mid-term business plan,
the Company made efforts to redeem the remaining half of the
preferred stock, and completed the redemption of all preferred
stocks issued through a debt-for-equity swap to eliminate the
negative net worth by the end of August 2005. The Company
substantively accomplished its goals of, “ROE of 20%” and
“interest-bearing debt of 30 billion yen or less,” completely
reformed its financial base and capital structure, and managed to
put an end to a series of structural reforms that it had addressed
since fiscal 2002. We could complete the above-mentioned scheme
thanks to the understanding and support of every shareholder;
financial institutions as well as our customers. Taking this
opportunity, I would like to express my heartfelt gratitude to you.
The second mid-term business plan “Value Creation Plan”
efforts to enhance the corporate value by
promoting growth strategy and reforming profit
structure
Kenwood, which made a clean break with its negative past legacy
upon completion of its structural reforms, moved into a full-scale
growth stage and started new efforts in accordance with the second
mid-term business plan “Value Creation Plan,” which it formulated
in May 2005.
The purpose of this plan was to join the billion-dollar club at an
early stage by pursuing a strategy to enhance corporate value
toward new growth and increased profitability.
Concretely speaking, Kenwood will increase sales and profits in
the core businesses of Car Electronics Consumer (Audio) and
communications Equipment businesses, add a reformed profit
structure of growing Car Electronics OEM and Car Electronics
Consumer (Multimedia) businesses to them, promote structural
reform of the Home Electronics business by taking the spread of
digital media and the advance of digital and network environment
as a new business opportunity, and create a new “seamless sound
entertainment” that links home audio and car audio with digital
media.
To achieve the above-mentioned goal, we will further accelerate
our growth strategy through such measures as enhancing strategic
development in each business and strengthening marketing systems
in new markets, centering on the BRIC nations, as well as
fully-utilizing surplus funds as reinvestments in each business
including M&As.
Moreover we will actively strive to develop new businesses that
match our target “Mobile & Home Multimedia System” business
and create added value for the market.
Kenwood is cerebrating its 60th year in business in December 2006.
We sincerely express our gratitude for the longstanding support and
understanding of all the stakeholders including the shareholders,
investors, financial institutions, and customers. We will promote
more highly transparent management, try to enhance the corporate
value, and contribute to the public good through our business
operations. Your continued understanding and support would be
appreciated.
Kenwood Corporation 05 Annual Report 2006