I took up my post as president of Kurita Water Industries Ltd. on June 29, 2011, inheriting the business base created by my predecessors. I will work diligently to retain the trust and meet the expectations of our shareholders and other stakeholders. In doing so I will return to the Group's corporate philosophy: "study the properties of water, master them, and we will create an environment in which nature and man are in harmony."
The Great East Japan Earthquake that struck in March 2011 has had a serious impact on the Japanese economy. I offer my sincere condolences to the many people who have suffered in the disaster, and assure you that the Kurita Group is working together to help affected areas recover as quickly as possible.
Water is a limited resource for all of humanity. Contamination and shortages are affecting us on a global scale. The Kurita Group is dedicated to solving these issues in industrial and social contexts through water management - a vital mission in today's environment. In this way, all Kurita Group employees are working together toward the sustainable progress of society.
Kurita's Strategy for Growth Through Comprehensive Capability In a rapidly changing world, the Kurita Group has set its sights on becoming an advanced water and environmental management company. To this end, we are continuing to evolve and expand our products and services on a global scale.
Overview of the Fiscal Year Ended March 31, 2011 During the fiscal year ended March 31, 2011, Kurita's steady business performance in the face of a persistently adverse business environment demonstrated once again the comprehensive strength of the Group. The Company's consolidated order bookings were up 3.9% year on year to ¥181,951 million and net sales rose 1.5% to ¥181,234 million. Operating income climbed 2.9% to ¥27,131 million, and net income declined 0.9% to ¥17,138 million. Net income per share was substantially the same at ¥134.02 compared with ¥134.38 in the previous year.
During the fiscal year under review, the business environment in Japan began to improve, with operating rates at customers' factories gradually rising as exports increased and consumer spending recovered. However, capital expenditure has yet to recover fully, and the Japanese economy now faces even greater difficulties in overcoming the impact of the Great East Japan Earthquake.
On the other hand, the business environment overseas continues to see strong economic expansion, particularly in Asia.
Kurita itself suffered only minor damage to some of its facilities as a result of the earthquake. In terms of the impact on our business, some deliveries were affected in the Water Treatment Chemicals business as customers were obliged to halt their operations, while the Water Treatment Facilities business saw the stopping of some construction projects and delays in capital investments, which resulted in a slight dip in earnings for the fiscal year under review. The entire Kurita Group worked with customers in disaster-affected regions to assist their recovery, and to supply stricken areas with drinking water and financial assistance.
Status of Medium-term Management Plan Make Progress 2011 (MP-11) This year we saw positive results in promoting two key strategies in the medium-term management plan, Make Progress 2011 (MP-11).
The first of these strategies is "expanding and evolving the service business." Here, we have strengthened our customer proposal capabilities in the Water Treatment Chemicals business and seen a significant increase in earnings as a result. The second key strategy is "expanding global operations." This strategy has also proved successful with business results in Asia growing in line with our expectations.
These strategies have set Kurita on a path of working together as a Group to capture overseas economic growth while maintaining a stable, highly profitable management structure. We see our success this year as confirmation that this is the right way forward. Throughout the final year of MP-11, the fiscal year ending March 31, 2012, we will work swiftly to entrench these strategies even further. Our Vision - Our Mission The Kurita Group is evolving its service business with the goal of using water management to help customers to solve key challenges such as improving productivity and reducing environmental impact. These efforts are starting to bear fruit - we are already better at proposing comprehensive solutions for water and the environment.
These proposals seamlessly integrate elements from our Water Treatment Chemicals, Water Treatment Facilities, and maintenance service businesses.
Moreover, Kurita seeks to evolve water management to the next level using cutting-edge products, technologies and services. Our goal is to realize advanced management for providing customers with the required quality and volume of water, when and where they need it. One area where we are already achieving this is in our ultrapure water supply business. This business is helping to build on our already steady earnings base, and has become a supporting pillar for the management of the entire group.
However, the ultrapure water supply business is just the start. We aim to build on this success in all our businesses. This represents the full realization of our corporate vision of becoming an advanced water and environment management company, and is the real purpose behind our MP-11 strategy of evolving and expanding the service business. I believe it is a strategy that will maximize the inherent strengths of the Kurita Group's business portfolio.
Global Expansion Driven by Comprehensive Strength Overseas business expansion will play a critical part in Kurita's growth, and as such, we will tackle this task with even greater urgency. Most of our expansion has been in regions where high economic growth is expected, such as Asia and Brazil. However, the contribution to consolidated net sales from our overseas businesses was still only 15% in the fiscal year ended March 31, 2011. High economic growth is of course a powerful accelerator for our Water Treatment Chemicals business, which serves all types of industry. Furthermore, in emerging countries we can also expect industrial development to boost the need for water treatment systems for recycling water since it is a limited resource. Kurita can provide sophisticated solutions to meet these needs, leveraging its outstanding technologies and rich knowledge in wastewater reclamation and recycling. In China especially, remarkable growth and increasing sophistication of industry have led to an emerging demand for improved productivity and reduced environmental impact. This situation presents the Kurita Group with an important opportunity to harness the comprehensive strength that stems from its chemicals, facilities, and maintenance businesses to supply optimal solutions to customers, building partnerships with them as they grow.
Maximizing Shareholder Value In making returns to shareholders, our basic policy is to continue to deliver a stable dividend, while aiming to return profits to shareholders through dividend increases after considering business performance and reinvestment needs. Based on this policy, we have increased the annual dividend for the fiscal year ended March 31, 2011 by ¥2 from the previous year to ¥38. This makes the seventh consecutive year of increased dividends. Also in the fiscal year under review we conducted a share buyback, acquiring 1,988,400 shares of our own stock for ¥4,776 million to improve the capital efficiency and allow for a flexible capital policy. Going forward, we will consider various ways to return profits to shareholders, taking into account our capital funding requirements and cash on hand. In this way we hope to meet shareholders' expectations and uphold their trust.
Our first priority for use of cash is to allocate it to investments in growth sectors. We aim to set aside sufficient funds to ensure that we can respond quickly to business opportunities including alliances and M&As, as well as new projects in the capital-intensive ultrapure water supply business.
We will also consider using some funds for investments to reduce risk and further stabilize management. This follows a reexamination of our future risk management that was prompted by the recent earthquake, although Kurita fortunately sustained only minor damage.
I would like to thank all of our shareholders, investors, and other stakeholders for understanding our policies and ask for your continued support.
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