Structural Reforms

The business environment for Imaging Solutions segment has become more challenging than initially anticipated because of the acceleration in the shrinkage of demand for color film and the slowdown in the growth of the digital camera market, which has been accompanied by more intense competition.

To respond effectively to these major changes, Fujifilm began to implement fundamental structural reforms in during the fiscal year ended March 31, 2006, principally in the Imaging Solutions business, and these were completed by the end of fiscal 2007, ended March 31, 2007.

Through these reforms, we have worked to create optimal business systems in the Imaging Solutions segment appropriate to the size of the market and are in the process of creating operating systems that will generate stable earnings into the future.

As demand for photographic color films declined rapidly, fixed costs for large-scale manufacturing facilities put pressure on profits. Therefore, we attempted to optimize production capacity on a worldwide level, which included the termination of some coating lines, and we also reduced the number of employees in various manufacturing divisions.

In sales divisions, we streamlined the workforce and rigorously cut selling expenses. We also minimized R&D investment in areas others than digital camera printing-related and thereby substantially reduced investment. Furthermore, in the photofinishing field, we consolidated photo-processing laboratories on a global level.

In the digital camera field, we have continued to strengthen our product lineup by introducing principally camera models differentiated by high sensitivity. We have also aimed to create a stable earnings structure by proceeding with a review and reform of our business implementation systems, including downsizing domestic production and establishing a mass-production systems in China.

These structural reforms entailed expenses related to fixed assets, including accelerated depreciation of manufacturing facilities, and expenses associated with streamlining the workforce, such as special retirement benefits. During the two years from April 1, 2005 to March 31, 2007, expenses amounted to ¥202.5 billion in total.

On the other hand, the benefits of the series of structural reforms we have been implementing are emerging. During fiscal 2007(ended March 31, 2007), we cut costs by more than ¥40.0 billion and are expecting amplified benefits in the form of further cost reductions of ¥55.0 billion during fiscal 2008(ended March 31, 2008). We shed just over 5,000 personnel by the end of March 2007.