Message from the President Nov.2008

a monthly magazine for our employee Nov.2008

Now’s the Time to Persevere; Transform Challenges into Opportunities

On September 30, Meitec made a downward revision to the Group’s earnings forecast. Despite increasingly clear signs of an economic slowdown, the utilization rates at Meitec and Meitec Fielders , one of the most important business indicators for the two companies, remains high thanks to the recognition and trust our front-line engineers have received from client companies. The volume of new orders also remains virtually the same as last year. However, we revised the forecast downward mainly because of a sharper than expected drop in utilization hours. Other reasons behind the downward revision included the longer time required to place bridge engineers and the fewer placements than a year ago of general temporary staffing business at Meitec Cast.

On the other hand, the slowing economy has already begun to seriously affect the temporary job placement and outsourcing industries in general. Most job placement companies for general workers, the business of Meitec Cast, are reporting lower sales and profit than a year earlier. Manufacturing orders outsourced from manufacturing companies are reported to have plunged by more than 20% year on year. One may say that the Meitec Group is carrying on with its business with perseverance, in the face of these conditions.

Looking ahead, here are two points that must be kept in mind.

1.The temporary engineering staff business often involves participation in longer-term projects of client companies.

2.The Meitec brand is widely recognized.

Point 1 means that engineers in the Meitec Group, who are assigned chiefly to development projects, are often involved in the type of work whose effects only become apparent after two or three years (the longer term), rather than the kind of work whose results are reflected in the current term (the short term). It’s natural for client companies to implement stricter cost controls in the harsher business environment. Client companies have learned, however, that curbing investments in the development of new products or technologies may initially provide short-term benefits but will be harmful in the longer term; they learned this lesson through experience following the bursting of Japan’s bubble economy. We must keep in mind that client companies are carrying out such investment now, when they feel the pressure to slash costs. At the same time, it’s our firm mission to meet their expectations.

Point 2 refers to the fact that client companies are selecting reliable partners in the light of their corporate social responsibility. In other words, when companies seek to reduce costs, they decide which company’s contract to terminate first in terms of the trustworthiness of their business partners. In addition to the stable utilization rate at Meitec, Meitec Fielders performed well in the first half of this fiscal year and reported an increase in sales of around 5%. We believe that this favorable result reflects in part the trust the Meitec Group has won from client companies.

Although we expect the global economy to slow further in the coming months, we don’t believe that Japanese manufacturers will implement cost-cutting measures simultaneously, as they did in the past. Some client companies, however, may be forced to temporarily suspend investment in development, while seeking ways to achieve growth potential in the medium to long term. On the other hand, at this time, some client companies with solid financial grounding and corporate strength are stepping up their investments in technological development, in the belief that they can boost their competitive advantage when their competitors are cutting back on such spending amid the economic slowdown. Some companies that manufacture products mainly for the North American market are pouring efforts into changing specifications quickly to cater to emerging countries. The higher price of crude oil in recent years is forcing companies to stress technological development in the field of energy-saving and alternative energy. The same goes for technological development designed to reduce adverse effects on the environment. Consequently, even though an ongoing contract with one department of a client company may be terminated, new demand could be emerging at another department of the same company.

Now’s the time for the Meitec Group, as well as for our client companies, to persevere. It’s imperative to not halt efforts aimed at increasing the number of new engineers in the Meitec Group and thereby achieve growth in the medium to long term. As far as our corporate strength permits, we intend to continue pushing ahead with such efforts. By overcoming difficulties with the input of each employee and our established brand power, we aim to transform challenges into opportunities for the Meitec Group as a whole.

November, 2008