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Annual Reports
AIA, Inc.
Yamato Transport Annual Report
In Japan, the gaijin "porisher" does a lot more than simply polish text. He or she reviews and refines the raw translation of the original Japanese, making sure that all of the concepts and terms are accessible to Western readers. Often the polisher's job is as much political as editorial, as Japanese clients may push for a direct translation at the expense of crisp English. The best polishers balance both demands and create sturdy prose that remains true to the original text.
Message from the President
Fiscal 1985 was an historic year for Yamato Transport. While earnings and revenues grew to record levels, a more important event occurred at the start of the year, in April. That month marked the beginning of our second three-year program, an intensive capital improvement effort that will reinforce our leadership position in the overnight package delivery industry.
Yamato Transport now holds 39.3% of this market -- a remarkable achievement, considering that our share in 1976, the year we inaugurated parcel services, was a mere 0.7%. During the year ended March 31, 1985, we delivered more than 151 million parcels to homes and businesses throughout Japan, more than twice as many as our nearest competitor.
At present we have more than 129,000 agents, primarily small retailers, who receive packages for shipment to all parts of the nation. These outlets, which are conveniently accessible to 97.9% of the Japanese people, are supported by an extensive nationwide distribution network: our trucks service 94.9% of the total land area of Japan. And the percentage of consigned parcels delivered overnight is now a superb 84.2%.
These statistics are impressive, and we can be proud of what we have accomplished in a few short years -- but we cannot afford to become complacent. The Japanese package forwarding industry is extremely competitive. Besides our four major rivals, there are a large number of smaller operators, all eager to capture market share.
In this difficult environment, we must provide superior service to maintain our number one ranking. Thus, we now offer pickup and delivery twice daily in all of our major markets. Our on-line computer system is the best in the industry, far outdistancing those of our competitors. And our distribution system, which is the cornerstone of our success, is undergoing a major transformation through our second three-year program. We are rapidly expanding our nationwide network of bases, centers, and depots, as well as allocating substantial resources to upgrade our vehicle fleet.
The following figures demonstrate the extent of our commitment. In fiscal 1985, we invested Y20,735 million (US$82.3 million) to upgrade our capital plant, 44.5% above last year's level. Our efforts centered on acquiring acreage for new facilities, and thus outlays for land amounted to Y10,169 million (US$40.4 million) or nearly half of the total. Investment in buildings was Y4,160 million (US$16.5 million), and for vehicles, Y4,541 million (US$18.0 million). The issuance of Y15,000 million and US$40 million in convertible bonds in February 1985 provided substantial funds for building new plant on the acreage we acquired during the fiscal year.
Quite simply, we think our second three-year plan will establish Yamato as the premier parcel forwarding company: that when businesses and consumers in Japan require package delivery, one name will come to mind -- Yamato Transport.
Recent Results
Our emphasis on building for the future has not impaired our day-to-day operations. As we undertake a major renovation of our physical plant, we must maintain the loyalty of our customers and continue to build market share and new business relationships. We also have not forgotten that a significant portion of our revenue -- 17.2% in fiscal 1985 -- derives from non-motor carrier services, including marine and air forwarding operations.
Accordingly, we are pleased to report that revenues for the fiscal year ended March 31, 1985, rose 21.4% to Y162,825 million (US$646.1 million). This sharp increase reflects improvements in our distribution network and in customer service, as well as the introduction of new and enhanced products and services, like golf club and ski delivery, and household moving.
On the surface, growth in net income, at 3.3% to Y2,209 million (US$8,768 thousand), appears lackluster. However, this comparatively small advance is primarily attributable to the Company's capital improvement program, with depreciation charges rising 32.8% to Y6,743 million (US$26.8 million). Against this background, results for the year were indeed quite good.
The performance of the parcel service segment, which accounted for more than two thirds of our revenue, was a major factor in the year's success. Sales revenue grew 34.3%, primarily as a result of extending the Company's distribution system to isolated regions of Japan that had been underserviced. In addition, our international parcel service business, begun in fiscal 1984, grew nearly fourfold.
Net sales of other regular route common carriage, a segment whose operations closely parallel those of parcel services, fell 7.9% because some of its operations were transferred to the parcel service category. Revenue from dedicated contract services fell a slight 1.4%.
Air-freight forwarding revenue rose about 9.7%, despite harsh competition within the industry. We also managed to eke out a modest increase in gross tonnage.
Revenue from marine service operations rose substantially because of growth of container shipments to Southeast Asia. Yamato Transport is also a major transporter of art works for public exhibitions. Besides the substantial revenue these activities provide, it is, of course, a source of pride to us that we have been entrusted with so many of the world's art and archaeological treasures, ranging from dinosaur bones to Picassos. This responsibility sets a standard of care and professionalism for our entire organization.
Prospects
We are confident about the future of Yamato Transport. In a severely competitive environment, we must continue to give the customer outstanding service. Our second three-year capital improvement program will position us well to achieve this objective and provide for long-term earnings growth. We would like to thank our shareholders and customers for your continued loyalty and support.
Masao Ogura
President
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