Mid-Term Management Plan

In May 2009 Amada had formulated and implemented the Mid-term Management Plan for FY2010, which was positioned as “the preparation period for next growth”. With the cease of this preparation period, we have once again drafted a Mid-term management plan for our next growth, specifically for FY2012 with the target of 230 billion yen in consolidated sales (up 69% from FY2009), and 26.6 billion yen in operating income.

The changing environment and our issues

In FY2009, Amada registered a loss for the first time in 7 periods, but we believe that we have hit the bottom and the performance will recover from here. However, the surrounding environment is changing significantly comparing with the past, and the issues we are facing are becoming more complex, from the profit performance being oppressed from high yen and higher material costs, and the paradigm shift of industrial structure and the power relations in the market.

Our basic policies for the Mid-term Management Plan

Based on these surrounding environments, we have summarized our basic policies for achieving our Mid-term Management Plan in following four dimensions.

First of all, for the financial dimension, we will lower the BEP that has risen to 170 billion yen with the expansion strategy down to 150 billion yen structure. Specifically, our targets are improving the efficiency of fixed costs through domestic marketing reform and management resource shift to the growth markets, and improving the profit ratio through optimum production/ optimum procurement and cost reduction & new product release.

Next is the product dimension for realizing the above target: the release of new products that matches the diversifying market needs is integral. We will strive to develop eco products that focus not only on productivity but also on energy-saving and environment. In addition, the low-priced middle-entry models with limited functions will be released in the emerging markets that have the potential for growth.

Next, our primary policy for the regional dimension is “shifting globally”. We will increase the overseas sales ratio that was around 50% in FY 2009 to 57% in FY2012. Aggressive investments will be made in marketing/ production infrastructure, particularly in the emerging markets that are the driver for growth, and target 60.3 billion yen in FY2012 sales (240% of FY2009). Also in the European market, our target is 73.3 billion yen in sales (up 64% from FY2009) through differentiated solutions such as software and robot systems.

Lastly from the business dimension, we need the second pillar next to “sheet-metal” in order for Amada to become a “comprehensive manufacturer of metal working machines”. Amada Machine Tool was established in October 2009 by integrating the cutting and machine tool divisions that were operating separately. This allowed us to make aggressive overseas developments, and expand business through M&A and business tie-ups. In the future, we plan to increase the FY2012 sales to 65 billion yen (260% of FY2009), by reinforcing the distribution network that utilizes leading trading firms, increasing the supply capacity and cost competitiveness, and by constructing the Toki Works (in Gifu Prefecture) that will be our business foundation.

Capital policies and investment plans

The new investments for the next 3 years for achieving the Mid-term management plan are planned at 25.3 billion yen. The 11.5 billion yen investments were made in FY2009, so this is the minimum level.

As for the dividend forecast, the FY2010 payout ratio is 96% for 10 yen annual dividend, but for FY2011 on, we hope to increase dividends even at 30% payout ratio.