Aim to be a Truly Global, Truly Excellent Company

I would like to take this occasion to express particular thanks for the support of our shareholders.

FY2011 Financial Results
 
The U.S. economy was in a gradual recovery mode during the fiscal year under review, while Europe’s financial uncertainties made for challenging conditions. The situation in China and other newly developing economies varied by country, but clouds have begun to gather over the region’s overall expansionary trend.     
 
Economic activity began to pick up in Japan in the aftermath of the March 11 2011 disaster. Concerns remained about the slowdown in Europe and the high value of the yen, but business conditions on the whole were recovering.
 
The Topcon Group views the current period of flux as an opportunity to make great strides. Mobilizing our collective strengths, we are challenging ourselves anew to achieve “profitable, sustainable growth.” And with “Reform & Enhancement” as our slogan, we are taking the measures needed to rapidly establish a stable revenue base and a sound financial structure, and to transform Topcon into an even more robust company that is less susceptible to the external environment. 
 
Moreover, the Topcon Group has determined that it is essential to work toward further strengthening in profitability and improving our financial health. This comes against a backdrop of deepening concerns about deteriorating business conditions caused by last year’s appreciation of the yen, and increasing uncertainty about the global economic outlook. This led to the decision to significantly scale down the Finetech Business and implement a voluntary retirement program.
 
(Group net sales)
Examining net sales versus the previous year, although the high yen affected the Positioning Business, it posted favorable results primarily in the United States and Japan. The Eye Care Business also performed well, particularly in Europe. Worsening was the Finetech Business, under the weight of sluggish market conditions, moves to scale down the segment and other developments. Overall Group net sales for FY2011 came to ¥98.834 billion, a decline of 3.5% YoY.
 
(Group income)
In spite of the decline in net sales, Group-wide business structure reforms drove down fixed costs and the cost of goods sold. As a result, operating income for the year was ¥2.08 billion (an improvement of ¥280 million YoY), while ordinary income was ¥467 million (down ¥141 million YoY). Net income worsened to ¥3.686 billion (down ¥2.397 billion YoY). This was the result of extraordinary losses related to the downsizing of the Finetech Business and our voluntary retirement plan.
 
(Operating income by business segment)
The Positioning Business expanded in the U.S. and Japan markets, despite being impacted by the strong yen. The segment’s net sales for the year were ¥52.656 billion, up 2.1% YoY. Operating income was buoyed by this sales advance, revenue enhancements resulting from lower fixed costs and other factors, finishing at ¥1.482 billion (up ¥1.352 billion YoY).
 
The strong yen also affected the Eye Care Business, although growth in European markets supported net sales of ¥32.598 billion, up 5.3% YoY. Operating income likewise benefited from net sales growth, higher revenues from lower fixed costs and other improvements, and was reported at ¥1.766 billion (up ¥1.459 billion YoY).
 
The Finetech Business was affected by sluggish sales of semiconductor and FPD-related products, the downsizing of the segment and other factors. As a result, net sales for the year were ¥13.579 billion, a decrease of 32.0% YoY. These lower sales led to an operating loss of ¥1.168 billion, a deterioration of ¥2.531 billion YoY.

FY 2012 Forecast

Though Europe is forecast to continue to experience sluggish conditions due to its debt dilemmas, the U.S. should remain in a firm (albeit gradual) recovery mode, with the emerging nations sustaining high growth levels despite slowing to some degree. Japan is expected to enjoy strong exports to the U.S. and the emerging economies, with demand fueled by the reconstruction work from last year’s huge earthquake disaster also emerging. Considering this, the forecast is that the world economy will continue to move forward in a general recovery mode. Yet, there are also fears that depending upon the progress made from here on, impact from the European debt crisis on other nations could worsen. This underscores the reality that the risk of global economic downturn remains high. Considering these factors, the Topcon Group forecasts a continued state of uncertainty on the immediate horizon for the business environment.
 
Against this backdrop, the Group will strive to successfully complete the business structure reform project commenced in fiscal 2010 over this year. This steady push effectively encompasses forceful promotion of the strategy to lower overall expenditure by reducing the cost of goods sold, the cutting of fixed costs and advancing other steps, steering the way to sweeping improvements in the strength of the Topcon business fiber.
 
Next, forecasts of consolidated financial results for the current fiscal year.  Net sales are projected to reach ¥108.0 billion (up 9.3% YoY), operating income ¥8.0 billion (up 284.5% YoY), ordinary income ¥6.8 billion (up ¥6.332 billion YoY) and net income ¥3.0 billion (up ¥6.686 billion YoY).

Realizing Profitable, Sustainable Growth

The Topcon Group will to improve profitability and cash flow by reducing fixed expenses and product cost at the fastest possible speed and thereby surpass the competition. We are also making a further strong push in our TM-1 (Time to Market No. 1) movement, under which we are undertaking to achieve “World Leading monozukuri,” that is, we are pursuing the monozukuri (superb manufacturing) where manufacturing industries have their roots, as we aim to become a truly global, truly excellent company possessing global competitive strength.
 
The Topcon Group considers coexistence with society to be one of its corporate principles. We will devote our energies to promoting CSR initiatives, including activities that foster consciousness about the environment and benefit society, and also work to advance the establishment of corporate governance mechanisms and compliance activities.
 
Every member of the Topcon Group wishes to ensure that our company is deserving of the trust of all stakeholders, beginning with our shareholders and investors, and that it is a business that consistently achieves profitable, sustainable growth. I respectfully ask for your further support and encouragement.