Fujifilm's Optimization of Business Structure in the Imaging Solutions Segment and Future Business Development Propelling New Growth Strategies: Addressing profitability in the Imaging Solutions segment through drastic future-oriented reforms

January 31, 2006


Fuji Photo Film Co., Ltd. (President & CEO: Shigetaka Komori; hereafter, Fujifilm) is implementing a full spectrum of policies and measures based on VISION75, a mid-term management plan formulated in February 2004 that articulates three fundamental strategies: "Building new growth strategy," "Implementing comprehensive structural reforms over all management levels," and "Enhancing consolidated management." Policies and measures include: actively investing in growing businesses such as the flat panel display materials business; conducting drastic reforms in R&D structure to create new businesses; establishing the Advanced Core Technology Laboratories that conduct the basic research; conducting M&As in order to expand the current business domain; shifting of Fuji Xerox production to China and renewing its domestic marketing system; and preparing to adopt a holding company structure. With these efforts, the Information Solutions and Document Solutions segments - which are two of its three main business segments - have posted fair performance results during the current fiscal year (ending March 2006).

However, the Imaging Solutions segment, which accounts for approximately 30 percent of Fujifilm's consolidated revenue, has faced rapidly intensifying competition due to reduced demand for color film and slowing growth in the digital camera market. The business plan for the fiscal year ending March 2006 incorporated the expected decline in profit and thus financial performance was very close to the goals set out in the plan until the 3rd quarter of the present fiscal year. However, an unfavorable market situation is projected to continue and further negative impact on profit is expected. Looking ahead at further changes in the market environment, Fujifilm has decided to implement measures which will reform the whole of the current structure including R&D, production and distribution. The Company has decided to implement the reforms intensively over a one-year period, spanning the second half of the fiscal year ending March 2006 and the first half of the fiscal year ending March 2007. To accomplish these structural reforms, Fujifilm will appropriate temporary expenditure of a total of 165 billion yen in the current and next fiscal year. As 80 billion yen out of 165 billion yen will be appropriated in the current fiscal year, the Company is revising its estimated performance projection downward for the current fiscal year. The structural reforms include the reduction of approximately 5,000 people from the Imaging Solutions segment.


Summary of Structural Reforms
1.Optimizing business systems for color film and other photosensitive materials
1)  Optimizing globally expanded production capacity of photosensitive materials while considering future market trends
-Reduce a part of production facilities for photosensitive materials
-Streamline personnel in accordance with above reforms
2)  Pursue exhaustive prioritization and efficiency in entire process from R&D to sales/distribution
-Reorganize R&D system prioritizing photographic prints
-Greatly reduce sales expenditure and consolidate laboratories and distribution
-Streamline personnel in accordance with above reforms
2.Structural reform of digital camera business
1)  Strengthen product lineups which contain distinctive features such as high-sensitivity
2)  Scale down domestic production system and establish mass production system in China
3)  Exhaustive reduction of expenditure and strengthen SCM to reduce total inventory



Impact on the consolidated operating results for the fiscal year ending March 2006
(Millions of yen)
Revenue Operating
Income
Income before
Income Taxes
Net Income
Previous forecast*(A) 2,700,000 170,000 164,000 85,000
Revised forecast (B) 2,650,000 75,000 73,000 20,000
Net (B-A) (50,000) (95,000) (91,000) (65,000)
Percentage (%) (1.9) (55.9) (55.5) (76.5)
Results for the fiscal year ended
March 2005
2,527,374 164,442 162,346 84,500
* Previous forecast was announced on October 31, 2005.



Photography is indispensable to humankind because of its ability to express the full spectrum of human emotions such as joy, sadness and love. Fujifilm believes that its mission is to preserve and nurture the culture of photography to meet the needs of our longtime customers. In order to sustain our photosensitive materials business, execution of the structural reforms is essential. Fujifilm will achieve drastic reduction in fixed costs and secure stable earnings for the Imaging Solutions segment in the fiscal year ending March 2008. Fujifilm intends to assert itself to continue to provide total imaging solutions from input to output by taking advantage of the merits of both analogue and digital imaging products and services. It will thus contribute to further development and expansion of the "culture of photography".

Fujifilm will fully utilize its cultivated resources including; its proprietary technologies in the field of chemicals, electronics, optics and software; financial strength; customer trust; brand value. At the same time, Fujifilm will further accelerate its effort to expand business with a particular focus on the areas of medical/life sciences; graphic arts; highly functional materials such as flat panel display materials, semiconductor materials and ink materials; and optical devices enhancing new investment in R&D and M&A.

Fujifilm places the present time as a period of its "Second Foundation" or redefinition, and will carry out the reforms on a company wide basis. Fujifilm is also at the final stage of developing its new growth strategies. Fujifilm aims at an operating profit of 200 billion yen for the fiscal year ending March 2008, and an operating profit of 280 to 300 billion yen for the fiscal year ending March 2011 by propelling new growth strategies.


FORWARD-LOOKING STATEMENTS
This document contains projections of performance and other projections, which are made based on judgments regarding currently available information and which encompass potential risks and uncertainties. Accordingly, please be aware that diverse factors may cause actual results to differ materially from projected results.



Media Contact:
Fuji Photo Film Co., Ltd.
Corporate Communications Division, Public Relations Division
Tel: 81-3-3406-2490
Fujifilm website:
Japanese :http://fujifilm.jp/
English :http://www.fujifilm.com/