Mid-Term Management Plan

In May 2010 Amada had formulated the Mid-term Management Plan for accomplishing 230 billion yen in sales and 26.6 billion yen in operating profits in FY2012. This year, we have revised the currency exchange rate used in this plan, and also revised a portion of the numeric targets in reaction to the Tohoku earthquake in Japan.

Furthermore, as a result of the ongoing strategic investments, we have drafted a new plan for FY2013 with a target of 250 billion yen in sales and 31 billion yen in operating profits. Meanwhile, the four pillars of the Mid-term Management Plan basic policy will be succeeded in principle (Financial, Local, Products, and Business).

The changing environment and our issues

In FY2009, Amada registered a loss for the first time in 7 periods, but the business performance took an upturn with this as the bottom and returned to profitability in FY2010 as a result of our rationalization measures. However, the surrounding environment has changed considerably since then; strong yen and high material costs are putting pressure on corporate profits, and the issues we face are becoming more complex with paradigm shifts in industry structure and competitive landscape.

Basic policies for the Mid-term Management Plan

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

First for the financial dimension, we were able to lower the BEP that has risen to 173 billion yen in FY 2009, down to 150 billion yen. This is partly due to improved factory operation ratio from recovered demands, but it is also the results of improved fixed cost efficiency through domestic marketing reform, reduced costs as a result of optimum production/ optimum procurement, and improved profit ratio with the launch of new products. More investments will be made in R&D and in emerging markets, but we will continue with the streamlining of fixed costs.

Next is the product dimension: the launch of new products that match the diversifying market needs is integral part of the Management Plan. We will endeavor to develop eco products that focus not only on productivity but also on energy-saving and the environment, and release low-priced entry models with limited functions in the emerging markets that have the potential for growth,.

In 2010, Amada became the first machine manufacturer to develop a fiber laser oscillator with the new generation laser technology, and has launched laser products with our own oscillator in 2011. In addition to significantly improved speed compared to the conventional CO2 lasers, the fiber laser machines can cut down on running costs and CO2 emission by a large margin; it is a great product from both aspects of productivity and environmental friendliness. The fiber laser can also cut reflective materials - copper, titanium, and brass – that used to be very difficult, and this expands the processing range, and will allow us to develop new markets.

Next, our primary policy for the regional dimension is "shifting globally". We will increase the overseas sales ratio from around 50% in FY2009 to 60% in FY2013. Aggressive investments in marketing/ production infrastructure will be made particularly in the emerging markets that are the driver for growth, targeting at 50% of overseas sales. Also in the European market, we will strive to improve market share further through differentiated solution businesses such as software and robot systems.

Lastly from the business dimension, a second pillar next to “sheet-metal” is essential in order for Amada to become a “comprehensive manufacturer of metal working machines”. Amada Machine Tool was established in 2009 by integrating the cutting and machine tool segments that were operating separately. This allowed us to make aggressive overseas developments, and expand business through M&A and business tie-ups. In the years ahead, we plan to strengthen the distribution network by utilizing leading distributors, increase the supply capacity and cost competitiveness through local production, and establish the Toki Works (in Gifu Prefecture) as our new business foundation. This will facilitate the growth of the cutting/ machine tool segment into our second pillar.

Capital policies and investment plans

The new investments for achieving the Mid-term management plan are planned at 40 billion yen for the next 3 years. Investments in the overseas markets will particularly be emphasized to realize the growth strategy in the emerging markets.

Lastly, our dividend policy- as we expect to see a major rise in FY2011 profit, Amada is planning to increase the total annual dividend to 12 yen per share. After FY2012, we will strive to accomplish the profit level that can increase dividends even at a 30% payout ratio.

[ Note ] This Management Plan was drafted based on the economic conditions and other circumstances of May 2011. It is subject to change under various factors.