Operating results for the fiscal year ended March 2009 saw a year-on-year drop in net sales, falling 45.1% to ¥125,693 million, due to the deconsolidation of the Wholesale Operation. However, net income for the same period rose 4.1% to ¥8,853 million, marking the 11 th consecutive year of earnings growth since the introduction of
consolidated settlement reporting. In today’s severe business environment, dubbed the “recession of the century,”
consumer preferences continued along a best-quality, low-cost trajectory. In such an environment, one of the major factors that enabled us to post an increase in net income was the effect of not merely concentrating our efforts on new products, but also engaging in marketing plans that aimed to vitalize existing product lines where the Group has a high market share. During the fiscal year ended March 31, 2009, we formulated marketing plans for 85 products,
and with in-house sales and marketing teams and retail stores working in three-way cooperation, we engaged in in-store sales promotion activities over a concentrated period in conjunction with a series of television commercials.
Given that the higher the market share of the product, the higher the contribution to income, this promotion resulted in a significant boost to consolidated operating results.
In addition, following the deconsolidation of the Wholesale Operation—the business on which the Company was founded—in January 2008, our operating income to net sales ratio soared from 8.1% in the previous year to 12.6%. This is a high level even in comparison with other companies in the same industry, but what was not reflected in financial charts and the like was the change witnessed in employee consciousness within the Group.
By moving to focus on our Consumer Products and Medical Devices Operations I feel that we have aroused a stronger consciousness than before in our employees to engage earnestly in efforts to enhance sales and product development capacity.

Through the deconsolidation of the Wholesale Operation, we have created a structure that is free to focus management resources on the Consumer Products and Medical Devices Operations, where we can capitalize on our corporate strengths. However, given the fact that we are currently in a significant transitional period, with issues of a declining birthrate, aging society, and changes in the values of customers appearing domestically, together with changes in the distribution environment, unless we pursue further transformation of our business, I believe that it will not be possible to achieve growth in the future.
The management policy for the fiscal year ending March 2010 is to “Aim for a Strong Kobayashi Pharmaceutical Group.” This statement incorporates the meaning that each and every employee will work hard to fulfill their designated mission or responsibilities, thus gaining consumer trust in our high product quality. This will in turn lead to increased corporate value and the creation of a sound, firm financial structure. As our management stance is to ensure that our aggressive business posture does not falter and continues to achieve growth in any business environment,
we will actively engage in investment that is required for growth. On the other hand, we have made our policy very clear that we will not under any circumstances engage in non-urgent or unnecessary investment, and we will realize efficient management by thorough implementation of cost, disposal, inventory and expenses reduction measures. In so doing, we will ensure profitability through the effective and efficient use of limited resources.

Formerly, our concept was that each in-house company, be it in sales, manufacturing or research and development, would demonstrate the highest level of performance according to its designated function, leading to growth for the entire Kobayashi Pharmaceutical Group. It is true that an in-house company system boosts expertise in each individual function, leading to the development and market launch of better products. However, it is also the case that when attempting brand renewal or working to reduce manufacturing costs it proved difficult to reconcile the business vectors of the in-house companies, thus making maximization of results difficult to achieve.
The recent corporate restructuring has seen organizational reform within product businesses aimed at clarification of business responsibility and speedier decision-making. The Health Care Division and Household Division, have both been placed under the Product Business Headquarters and a structure has been created whereby each business division takes responsibility for management and profitability of designated brands, from product development to sales. Marketing, research, development and technology development have been merged and by combining these
vectors towards attainment of Group management targets we have created a solid management base that will continue to generate income.