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I am pleased to present here for our shareholders and investors a brief overview of the interim financial results of Kozo Keikaku Engineering Inc (KKE) for the fiscal year ending June 2008.
During the interim period under review, net sales remained virtually unchanged from the level of the previous interim period. However, we significantly improved operating income and ordinary income through initiatives such as reducing the number of unprofitable projects and sustaining our focus on operations with high added value. Consequently, we achieved profitability on an operating income basis for the first time since our establishment. However, interim net income remained virtually on a par with the level of the previous interim period, owing to the registration of an extraordinary expenses associated with the issue of earthquake resistance data falsification at a contractor, which we describe below.
We deeply apologize to all our shareholders for the problems caused in connection with the issue of earthquake resistance data falsification by a structural design contractor. The falsification came to light in October 2007.
Since the issue emerged, we have attached highest priority to cooperating in investigations conducted by the authorities and to responding quickly and sincerely to our customers. We project a total outlay of ¥228 million for this matter, which we will record as an extraordinary loss in this interim period.
This is an issue of inadequate subcontracting and quality control for structural designs, and we take it very seriously. We have already taken steps to ensure that there is no recurrence of any data falsification. Learning from this experience, all our employees are united in their resolve to ensure that we are a comprehensive engineering company that offers first-class customer satisfaction with first-class quality and technologies. Only in doing so can we create new corporate value.
Indexes such as orders received and the order backlog have been trending stronger in recent fiscal years, and this interim period under review is no exception. Based on their performance, we think we are well placed to achieve the full-term financial forecasts of net sales of ¥11,600 million, ordinary income of ¥1,200 million and net income of ¥660 million we announced at the beginning of this fiscal year, by sustaining our commitment to bolster the project management organization throughout the Company.
In the five years since I became president, KKE has focused on achieving a business recovery. That was our first phase. In the second phase starting this fiscal year, we will pursue sustained growth on the basis of intellectual technology. I believe that our ability to achieve this goal will rest largely on our drive to create added value as a professional engineering firm that trains its people as a source of growth and provides package solutions for customer and social problems. Fortunately, we are blessed with outstanding customers and partners, and many of our teams already have businesses underway that embody our name, “kozo keikaku” (“structural planning”).
We look forward to the continued support of our shareholders as we pursue our initiatives.
