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In plant engineering, we continued to post favorable sales of services
for direct-reduction plants, primarily in overseas markets. We also
recorded brisk sales of energy equipment, including packagings for
transporting nuclear spent fuel. Therefore, despite a decline in domestic
sales of chemical plants, engineering sales remained at the same level as
those of the previous fiscal year. Sales in our urban infrastructure
engineering, industrial machin- ery, and construction machinery operations
declined from the previous year, reflecting decreases in public-sector
investment and the sluggish domestic economy. In our factory automation
and robotics operations, despite a less-than-favorable market environment,
brisk sales of painting robots to overseas automakers supported growth in
sales. Sales of cutting tools also increased. However, total Machinery
Sector sales declined 2.8%, to 506.3 billion yen.
During the year under review, plant engineering orders increased thanks
to continued brisk demand for our engineering services for
direct-reduction plants in overseas markets as well as domestic orders for
large-scale chemical plants and public-sector investments in energy. We
recorded a sharp rise in orders in our urban infrastructure engineering
operations, reflecting an order for a large-scale, advanced transit system
and brisk orders in such new fields as refuse-derived fuel (RDF) plants,
aluminum dross treatment facilities, and soundproofing materials for
highways. In industrial machinery, despite a decline in orders for
crushing equipment, overall orders increased due to favorable demand for
tire and rubber processing machinery and for rotating machinery. We faced
a difficult environment in our efforts to secure orders for construction
machinery because of reductions in public-sector investment, a worsening
cash flow situation among users caused by a credit crunch accompanying
anxiety over Japan's financial system, and declining demand resulting from
the economic turmoil in Southeast Asia.
Our R&D activities were focused on the continuous operation of a
pilot plant to commercialize denitration equipment for tunnels. We also
commenced construction of a pilot plant for evaluating a new high-speed
production process for spunbond.
In the field of new ironmaking processes, we conducted test operations
of a demonstration plant for the FASTMET
Process, a direct-reduction process that uses pulverized coal and iron ore
fines as raw materials, as part of efforts to develop technologies for
fast and stable production of direct-reduced iron. We also made progress
with the development of a new direct reduction process for making molten
iron. In response to the growing awareness of various environmental
issues, other activities included concentrated efforts to develop a
next-generation fluidized-bed incinerator for treating urban refuse and
direct melting technology for shredder dust. We also introduced a number
of new machinery products, including the Emeraude series of oil-free screw
compressors, a semi-hermetic screw heat pump, and the Astrosandy
sand-making system, as well as developed and launched new types of
hydraulic excavators, cranes, and handling robots.
In capital investment, while considering the current difficult business
environment, we concentrated our investments on improving productivity and
strengthening our cost competitiveness.
Overseas, our direct reduction plant business contributed positively to
our results for the year under review. Midrex Direct Reduction
Corporation, a subsidiary in the United States that provides engineering
services for direct reduction plants, recorded a steady increase in income
against a background of robust demand for direct-reduced iron in the
United States. Also, a project in Venezuela producing direct-reduced iron
continued to perform favorably. In urban infrastructure engineering as
well, we stepped up our overseas activities and secured an order for a new
transportation system in Taiwan. In construction machinery, with
production bases in Japan, the United States, China, and Thailand, we have
established a production structure capable of responding to changes in
global demand. During the year under review, we recorded increases in
production of construction equipment on a unit basis in the United States
and China.
In the coming fiscal year, the difficult environment is expected to
continue due to the slump in the domestic economy and the economic turmoil
in Southeast Asia. Under these conditions, we will focus on strengthening
our marketing capabilities and cost competitiveness, developing new
products, and aggressively entering new markets as we work to maximize
orders.
We are also involved in the land development business, concentrating on
the development of company-owned land. Our activities in this business
include participation in the New City Center in Eastern Kobe Plan, a major
project related to the restoration of the area damaged by the Great
Hanshin Earthquake. In this project, we were involved in the construction
of the I.H.D. Center Building, which presently houses the WHO Centre for
Health Development in Kobe. The I.H.D. Center Building was completed in
March 1998 along with the opening of the New City Center. We are also
planning Maya Seaside Place, a new concept in residential living. In
addition, at O's Town, a development project in Akashi in which we are a
main participant, Mycal Akashi -- one of the largest commercial complexes
in Japan -- was opened in October 1997. Sales of condominiums in this
project have proceeded smoothly and all condominiums have been sold. Pia
Do, a large commercial complex built on company - owned land, was opened
in March 1998 in Hachinohe. We are presently planning to develop various
facilities in Pia Do, including movie theaters and
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