July 13 2011

Kawasaki has today published its annual report for the year ending March 31 2011. The report on the Motorcycle and Engine division reads:

Sales by the Motorcycle & Engine segment increased ¥31.3 billion from the previous year, to ¥234.4 billion. Key factors leading to this result were an increase in sales of motorcycles to North America, on a unit basis, paralleling progress in the liquidation of excess inventory, and brisk motorcycle sales expansion in emerging markets, especially Brazil and Southeast Asia.

With regard to profit and loss, although the segment failed to turn a profit against the backdrop of sharp yen appreciation, fixed cost reductions, and an increase in sales, the loss position was vastly improved, resulting in a decrease of ¥22.0 billion in operating loss from the previous fiscal year, to ¥4.9 billion.

Total worldwide unit sales of motorcycles, ATVs (all-terrain vehicles), utility vehicles, and personal watercraft were 471,000 units, an increase of 74,000 units from the previous fiscal year. By region, sales in Japan declined by 3,000 units to 14,000 units; sales in North America increased by 38,000 units to 118,000 units; sales in Europe fell by 5,000 units to 67,000 units; and sales in emerging countries and others were up 44,000 units to 272,000 units.

Analysis and Outlook
Since the collapse of Lehman Brothers in 2008, the Motorcycle & Engine Company has done its utmost to improve its business structure. Measures have been implemented to deal with rapidly shrinking market scale in the developed world, that is, North America and Europe, and the unprecedented surge in yen appreciation. In fiscal 2011, with markets still shrinking and the yen still strong, our company aggressively moved forward on reforming its earnings structure through further cost-cutting and fixed cost reductions. In the core motorcycle business, our company made headway in the liquidation of excess inventory in markets of the developed countries, especially in North America and Europe, and achieved higher sales on a unit basis in emerging markets, especially Brazil and Southeast Asia. Meanwhile, in the general-purpose gasoline engine business, the launch of new models underpinned an increase in sales on a unit basis, particularly in the United States. These events were integral steps on the road toward an improved business restructure and took the segment to a point just shy of turning a profit.

Business conditions are likely to remain challenging for the Motorcycle & Engine segment in fiscal 2012. However, the introduction of new models and the implementation of effective sales campaigns in markets of the developed countries, such as North America and Europe, should buoy sales of motorcycles, ATVs, utility vehicles, and personal watercraft to at least the fiscal 2011 level on a combined unit basis. The segment will also emphasize sales activities in emerging markets, such as Brazil, India, and Southeast Asia, while applying measures to further enhance the earnings structure, such as an improvement in the profit margin ratio based on progress in cost-cutting and proven results in reducing fixed costs. In addition, the segment will resourcefully pursue development of cutting edge technology from a forward-looking perspective that anticipates the necessary responses to tomorrow's environmental issues.

Through these activities, the Motorcycle & Engine Company will achieve a strong business platform for the future and, with the steadfast determination of everyone in our company, will work steadily toward our goal of returning to a solid profit position in fiscal 2012.