The business environment surrounding the Nabtesco Group sustained improvement as investment by the domestic railway industry in the production of new railway vehicles became buoyant, the civil aircraft industry recovered, and demand from the construction machine industry strengthened. Under these circumstances, the Nabtesco Group, in the second year of its Medium-Term Management Strategy, accelerated its efforts to exploit markets both at home and abroad, and aggressively launched new products in the year, in a bid to achieve goals set under the strategy. Specifically, the export of products to China was robust in connection with new inter-city railroad project, while we received a large-scale order for flight control systems used for civil passenger aircraft. In the field of the hydraulic equipment business, we were able to expand sales of drive units for wind turbines, a new business for the group.

In the year under review, the Nabtesco Group strived to enhance its productivity by improving assembly lines at plants, including the Tsu Plant. The group also tried to curtail production costs mainly by boosting material and parts procurement overseas. Consequently, Nabtesco’s consolidated sales for the fiscal year ended in March 2007 increased by 9.5% from the previous year to ¥161.4 billion, consolidated pretax income by 16.5% to ¥16.8 billion, and consolidated net income by 19.1%, to 9.7 billion.

During the fiscal year ended March 2007, the second year of the three-year Medium-Term Management Strategy, we were able to achieve sales of ¥155 billion and net income of ¥9.5 billion―business goals set under the Medium-Term Management Strategy―one year ahead of schedule. However, there is room for further improvement in efficient fund use, such as inventory turnover, accounts receivable and lead time, and the creation of new products. Thus we recognize that we are still half way from achieving the goals we set in these areas under the Long-Term Vision through the fiscal year ending March 2015. In addition to expanding sales and income, we should do our utmost to enhance business efficiency, including increasing productivity and realizing more efficient use of funds.

Our company’s major strength is its securing of excellent companies in various industries as clients. By taking advantage of this strength, absent among many other companies, we will try to enhance the profitability of our existing business operations, increase fund-use efficiency, and invest surplus funds in next-generation development projects. We are convinced that this way of conducting business is “the right direction” toward achieving the goals set under our Long-Term Vision. Challenges facing our company in setting us in that direction include having all our employees recognize our shared business goals, and enhancing our ability to implement set goals. We will make efforts to deepen communication between employees, including having the idea of compliance disseminated among them, and will try to achieve higher stages of results without feeling unduly optimistic over recent strong business performance. By enhancing business efficiency and overall earnings further, we will strive to further raise our corporate value and return part of our earnings to shareholders.

The business environment surrounding the Nabtesco Group is expected to move relatively favorably, given recovering plant and equipment investment by the automobile industry―a major user of industrial robots―steady demand from domestic railway operators for the replacement of railroad vehicles, and an expected firmness in demand from construction machinery manufacturers both at home and abroad. Against the background of the favorable business environment, we will try to exploit new domestic and overseas markets and launch new products, in a bid to achieve our goals set under the Medium-Term Management Strategy, as the fiscal year ending March 2008 marks the final year of our three-year strategy.

In addition, we will strive to develop high value-added products aimed at further strengthening our earnings, build an optimal production system, promote reform for higher productivity, and step up efforts for human resources development. We will also accelerate efforts to reinforce our overall corporate standing, which will become the foundation for achieving our Long-Term Vision.