Operations Review for the March 2011 Term

During the first half of the current consolidated fiscal year (April 1, 2010 to March 31, 2011), the overall Japanese economy showed signs of recovery as corporate earnings started to improve, backed by growth in exports and domestic demand, and capital investments continued to recover after hitting the bottom. During the second half, however, exports slowed down due to the ongoing appreciation of the yen and the effects of government policy weakened because of the termination of the eco-car subsidy system and other factors, decelerating the recovery of the Japanese economy. In addition, due to the Great East Japan Earthquake that occurred on March 11, 2011, toward the end of the current fiscal year, the future of the Japanese economy became even more uncertain. With regard to the world economy, on the other hand, the economies of China and other Asian countries continued to be strong although the recovery pace slightly slowed down, and the American and European economies also continued to recover on the whole, albeit gradually. Nevertheless, the world economy is in an unpredictable situation due in part to the soaring crude oil prices attributable to the political instability in the Middle East and Northern Africa.

In this economic situation, the electronic components and electronic chemicals businesses of the TAMURA Group saw some market segments, such as products related to automotive equipment, enter a phase of adjustment. However, mainly in Asia and other regions that performed well, sales continued to be strong in areas that the Group focused on, such as products related to digital equipment, home appliances, housing, industrial machinery, and energy. However, products related to equipment, such as broadcasting apparatuses for the domestic market, as well as those related to LED products continued to face difficulties, resulting in poor sales. Furthermore, the prices of raw materials, such as copper, iron, tin, and silver, remained high, pushing up the overall costs. Moreover, manufacturers continued to face a harsh market environment as typified by the continued high yen value in the foreign exchange market.

Due to the effects of the Great East Japan Earthquake as well as the subsequent aftershocks, rolling blackouts, and other adversities, operations of the TAMURA Group's manufacturing and development bases in the Tohoku and Kanto regions were temporarily suspended, but thanks to the warm support and various forms of assistance extended by the parties concerned, in addition to the Group's united efforts to return operations to normalcy, all these bases have resumed operations, although there are still some restrictions in the operations. As a result, the effects of the earthquake and its aftermath on the Group's financial results during the current consolidated fiscal year were limited.

In such a business environment, sales of the TAMURA Group for the current consolidated fiscal year amounted to ¥73.289 billion, a 15.3% increase compared to the previous year. Despite rising costs due to rapid environmental changes, operating income improved substantially to ¥1.861 billion, approximately eight times as high as a year earlier, because structural reforms and value analysis (VA) activities initiated in the previous year, initiatives for increasing productivity, and other efforts began to yield satisfactory results. However, the Group recorded an exchange loss of ¥1.229 billion as part of non-operating expenses, primarily because of sharp fluctuations in the exchange rate, and due to this and other factors, ordinary income remained at ¥353 million (compared to an ordinary loss of ¥303 million in the previous year). The Group managed to return to profitability although its net income for the current year was small at ¥125 million (compared to a net loss of ¥2.332 billion in the previous year).