CEO Message

Building a Corporate Constitution that is Capable of Generating a Steady Profit Stream through a Two-Year Process of Structural Reforms

Emerging countries including those throughout the Asia region continue to exhibit economic growth. Business conditions in the United States are showing signs of a modest recovery due largely to improved consumption and employment. Europe is witnessing an overall positive turnaround despite continued weakness in certain regions. Turning to the domestic economy, Japan remains shrouded in a cloud of uncertainty. Despite this uncertainty, which is mainly attributable to the yen's appreciation, the sharp surge in raw material prices and the Great East Japan Earthquake that occurred in March 2011, there are expectations of a recovery from the summer through to autumn.

Under these circumstances, the Fujifilm Group ("the Group") has undertaken over a two-year period to build a robust corporate constitution that is able to steadily generate profit while sustaining growth even when facing harsh business environments. In specific terms, we have adhered strictly to a process of structural reforms and resolutely executed measures to reduce costs and expenses throughout the entire Group and in all businesses, without excluding any business fields from the scope of these measures.

As a result of these endeavors, FUJIFILM Holdings Corporation ("Fujifilm" or "the Company") recorded consolidated revenue of ¥2,217.1 billion for the fiscal year ended March 31, 2011. This represented a 1.6% increase compared with the previous fiscal year and a 4.8% year-on-year improvement after excluding the impact of foreign exchange fluctuations. While appreciation in the value of the yen had the effect of reducing revenue by ¥68.9 billion, the ¥35.4 billion increase in consolidated revenue reflected the release of new products and successful efforts to promote sales in response to growth in emerging countries' markets. Operating income before restructuring and other charges was negatively impacted by such factors as the strong yen, a surge in raw material prices and a decline in sales attributable to the Great East Japan Earthquake. This was more than offset by the upswing in sales, the implementation of structural reforms as well as cost reduction measures. Accordingly, operating income before restructuring and other charges jumped 65.4% compared with the previous fiscal year to \168.1 billion. Using the same exchange rates and raw materials prices when the Group last reported record high earnings in the fiscal year ended March 31, 2008, results in the fiscal year ended March 31, 2011 were at the same level. On this basis, the Fujifilm Group has in substantive terms achieved a historic high in operating income. Progressive improvement in the Group's corporate constitution supported an increase in the ratio of operating income before restructuring and other charges to consolidated revenue to 7.6%. Restructuring and other charges in the fiscal year under review amounted to ¥31.7 billion. As a result, operating income before restructuring and other charges totaled ¥136.4 billion.

Focusing on Expanding Sales by Bolstering Activities in Priority Business Fields and Increasing Market Share in Emerging Countries

Over the past two years, we have undertaken wide-ranging structural reforms aimed at building a corporate constitution that is able to steadily generate profits. In addition to achieving objectives established at the beginning of the period, the fruits of our efforts can be seen in the substantial improvement in operating results. Looking ahead, we will focus on expanding sales. To this end, we will resolutely pursue growth strategies on the world stage including newly emerging markets from fiscal 2012.

A major pillar of our growth strategies entails bolstering activities in priority business fields. We will selectively allocate management resources across six priority business fields that allow us to differentiate our products using proprietary technologies. Each field is further characterized by its significant scale and growth potential, and represents a market in which we maintain competitive advantage. In specific terms, we have identified medical systems/life sciences, graphic arts, document solutions, optical devices, highly functional materials and digital imaging as our drivers of future growth. We are committed to strengthening our lineup of high-quality products that boast superior cost performance and accommodate market needs, and to secure a leading position in each of the developed and emerging countries in which we operate.

Complementing this commitment, we will work diligently to expand sales in emerging countries, distinguished by their outstanding growth, as well as markets in which our share is low. In order to establish a firm presence and acceptance of the FUJIFILM brand, while at the same time expanding market share, we will adopt a focused approach to the allocation of management resources including personnel, deliver products with a quality and features that best fit the requirements of each region at an affordable price and reinforce our sales network.

In addition, we recognize that new businesses are essential to growth. The scale of the photographic film market has rapidly contracted by more than 90% over the ten years since hitting its peak in 2000. We have continued to drastically transform our business structure by creating new businesses. Harnessing the strengths of our technological prowess, we plan to release a constant stream of high value-added products in fields that can be expected to experience significant growth including organic light emitting displays and solar cells.

In the Aftermath of Disaster, it is Imperative that We Return to Our Roots to Fulfill Our Role in Service to Society

We have received numerous inquiries from shareholders and investors about the impact on the Company of the Great East Japan Earthquake that occurred in March.

There were no injuries to Group employees as a result of the earthquake. We did, however, incur equipment damage at certain manufacturing facilities while confronting difficulties in the procurement of components. Every effort was made to ensure a prompt resumption of full-scale operations. Together with the shift to backup facilities, the impact on manufacturing activities was held to a minimum. Utilizing internal electric generators installed at each of our plants, we are overcoming subsequent shortages in the supply of electric power. We have also been quick to implement countermeasures with respect to the procurement of components and raw materials.

On a personal note, I am convinced that recent events provide the opportunity to again clarify the Fujifilm Group's role in society. Of equal importance is the need for us to fulfill our role in the global community, namely to consistently deliver value through our products and services irrespective of our surrounding environment. To the very best of our abilities, we will work toward growth hand-in-hand with all stakeholders. Our goal is to provide the underlying strength and platform required for renewed economic growth in Japan.