Nikon Corporation announced on November 8, 2016 our decision to conduct a fundamental group-wide restructuring in order to enhance our ability to generate profits and create value. Here I would like to share the details.
We announced the "Medium Term Management Plan Update" in May 2015. It aimed at our becoming a company capable of sustaining value creation by rebuilding Nikon's portfolio of 6 businesses, consisting of 3 existing businesses: Semiconductor Lithography, FPD Lithography and Imaging Products and 3 growth businesses: Microscope Solutions, Industrial Metrology and Medical. This plan was fixed for 3 years and positioned in the period between the fiscal year ended March 31, 2016 and the fiscal year ending March 31, 2018 to focus on strengthening existing businesses and investing in growth businesses. The target of the plan was to achieve net sales of ¥990 billion and operating income of ¥65 billion in the fiscal year ending March 31, 2018.
However, Nikon has not achieved the goal of stable profits for existing businesses as the Semiconductor Lithography Business has not achieved break-even and the Imaging Products Business faced a shrinking market and adverse foreign exchange impact. Furthermore, growth businesses are expanding but not to the extent initially expected.
Due to these circumstances, Nikon is reassessing the facts used in the "Medium Term Management Plan Update," including the business environment and assumptions/methodology underlying target setting. Nikon has decided to discontinue the current medium term management plan and launch a company-wide restructuring plan while financially strong, as proceeding with the current plans which are misaligned with the business environment could undermine the ability to generate profits.
By the fiscal year ending March 31, 2019, the Nikon group will complete a fundamental restructuring to improve profitability and value creation, in addition to shifting from a strategy pursuing revenue growth to one pursuing profit enhancement. Then, we will decide on a new medium term management plan starting the fiscal year ending March 31, 2020, which states our growth strategies.
The objectives of this restructuring plan are enhancing our ability to generate profits and rewiring our management DNA to increase value creation. We will prioritize restructuring of our core businesses - the Semiconductor Lithography and Imaging Products, as well as HQ function. The main goals and initiatives of the restructuring are as follows:
(1) Goals of restructuring and basic principles
Company-wide transformation to improve value creation and make a strategic pivot from focus on revenue growth to profitability in addition to the following basic initiatives:
- Create a company-wide focus on high value-added businesses to improve profitability
- Optimize manufacturing, sales and R&D structure on a global basis
- Streamline HQ function to match scale of our restructured businesses
Simultaneously we will pursue changes in management DNA and structure to support the basic initiatives and sustain their effectiveness, through promoting the 3 following points:
- Shift to portfolio-based management
- Implement targets linked to shareholder value
- Enhance governance structure
(2) Summary of Restructuring
- 1.Reassess the strategy of the Semiconductor Lithography and Imaging Products businesses
- 2.Optimize manufacturing, sales and R&D structure on a global basis
- 3.Optimize organization and headcount including HQ function
This restructuring plan is not aimed at achieving short-term performance recovery; it is designed so that the Nikon Group can sustain itself not just over the next 5 or 10 years but way beyond. The changes are vital to carry out Nikon's intention to be a company that fulfills the needs of society and our customers by using our opto-electronics and precision technologies, as well as being a place where our employees can work with a sense of pride and feeling rewarded. As the leader of the company, I am determined to accomplish this restructuring with all my strength and all my soul.
I ask stakeholders to kindly understand the objectives of the restructuring plan and hope for their ongoing support.