Nachi-Fujikosi Corp. (Japan) reported fiscal 2003 financial results, for the period ended November 30, 2003.

Sales for the year were ¥145 billion (USD $1.37 billion), up 8% from 2002 and beating its own most recent forecast by ¥2.5 billion. But sales are still down from their 2001 peak of ¥147 billion.

Ordinary Income, however, grew in 2003 to ¥6 billion ($56.5 million), beating forecasts by more than ¥500 million and almost tripling 2002's income.

Nachi attributed the stronger sales and earnings to improved sales of functional components such as bearings, machine tools and hydraulic equipment. It did not comment on steel division performance.

In addition to its bearing manufacturing, Nachi is a leading producer of diversified precision industrial equipment and robotics. The company manufactures precision machinery, cutting tools, hydraulic equipment and systems, robotics, precision machine tools, and steel. For example, Nachi is the worldwide market share leader for both broaching machines and broach tooling, at 22% and 20%, respectively. The Nachi group is made up of 47 operating divisions worldwide, employing almost 5,700 people. Japan is home to 26 of those divisions.

In 2003, increased automobile and manufacturing by its OEM customers drove a strong improvement in Nachi bearing sales, aided by improved output from Nachi's U.S. facility. Into 2004, the company expects automotive production and sales by its Japanese OEM customers to continue growing. Sales to motorcycle manufacturers are also expected to continue strong in Asia.

Similarly, industrial equipment sales into Asia improved during 2003; a rapid increase in sales of hydraulic equipment destined for the Chinese market is also expected to continue.

In 2003, Nachi's sales inside Japan improved 6%, but sales in Asia -- especially China -- grew by more than 30%. Across all other world markets, overall sales grew by an average of 14%.

In its three-year plan, Nachi said it intends to increase its business outside Japan, focusing in particular on the Chinese automotive market. By 2006, sales outside Japan are expected to account for 40% of overall sales, up from 36% today. Overall, the sales target for 2006 is ¥156 billion, an increase of 7.6% over 2003.

To grow sales outside Japan, Nachi is budgeting ¥25 billion in plant and equipment expenditures over the next three years, particularly aimed at increasing production of automotive bearings and hydraulic systems for construction equipment.

In the meantime, ongoing cost-saving and infrastructure initiatives have succeeded in significantly reducing Nachi's breakeven sales volume. In early 2001, breakeven sales were ¥10 billion per month; today, breakeven sales across the corporation is down to ¥8.6 billion per month.


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