In the Southeast Asian market, which is led by China and Hong Kong, a shift from manually operated to computerized flat knitting machines with high productivity has accelerated behind the factors of an increase in production costs affected by surging labor costs. In China, all participants, including Shima Seiki, European manufacturers, and local Chinese companies that are in fierce competition to gain market share in the world's largest knitwear production base (which is expected to continue to grow and expand in the future) are required to further distinguish themselves from competitors in terms of product competitiveness, sales strategies and technical support and gain overwhelming market share in order to survive. In the Chinese and Hong Kong markets, where management of credit and accounts receivable together with the expansion of sales constitute key issues to secure growth in the future, the Company will strengthen its management system through the subsidiaries.

   Mechanization in knitwear production is lagging behind in the South Asian region including Bangladesh, although it is a key industry at the present time. The Company will build a strong sales structure to enhance its presence in these attractive markets as the China-plus-one.

The strengths of the WHOLEGARMENT^® flat knitting machine offered by Shima Seiki are advantages to the consumer such as wearer comfort, and production optimality in consumer countries associated with its low susceptibility to production and opportunity losses stemming from the ability to provide a quick response by manufacturing extra quantities of products. By providing not only the hardware but also unique and total planning, the higher added value, fashionability, and advantages derived from the consumer market-oriented production of WHOLEGARMENT^® have been widely recognized. In addition, WHOLEGARMENT^® has been highly praised for its global environmental friendliness.

   The Company endeavors to thoroughly deliver and expand sales of WHOLEGARMENT^® in the global market to reduce the high dependency on China and improve the sales structure through cooperation with design centers in Italy and the United States, technical support in China, and enhancement of coordination with MACH2^® WHOLEGARMENT^® flat knitting machines and SDS^®-ONE APEX design systems loaded with new features.

The Company has offered its design system, based on its traditional computer graphics technology, to the entire industry spectrum, from apparel to knitwear manufacturers, as a visual communication tool capable of integrating the apparel industry.

   A highly functional and economical design system of SDS^®-ONE APEX that enables processes, such as the three dimensional virtual production of samples, has been expected as a solution to realize market-oriented manufacturing of a wide variety of products in small quantities and quick responses in the apparel industry both in Japan and abroad. In the future, the Company intends to enhance sales of the system by vigorously promoting it as a system to achieve significant improvements in production efficiency together with computerized flat knitting machines.

The Company intends to further increase its earning power to attain more confidence in the global market. On the product level, the Company will undertake a review of factory costs from the development design stage by putting into action cost cutting projects organized across the Company, and implement further reductions in material purchasing and manufacturing costs. The Company will also concentrate on improving its profit margin by shifting its production toward items of high added value. Efforts will also be made to enhance cost competitiveness by further improving production efficiency and the efficiency improvement on indirect operation while reducing administrative expenses of the entire Group to continuously reinforce profitability.

   In the financial aspects, the Company strives to reduce its receivables turnover period through stronger accounts receivable management in order to reduce risks and improve operating cash flows, and also facilitate collecting receivables and curb cases in the delayed receipt of receivables. As for inventories, it strives to reduce and improve efficiency through its sales strategies and stronger coordination with flexible manufacturing systems.