|Now, I want to discuss our business performance projections for the current year.
Timed with the recent announcement of our new business alliance, we carried out revisions in our performance projections for the fiscal year ending March 31 2006, both for the first half and for the full year.
This May, based on the conditions at hand, we replaced our existed mid-term business plan, known as Fuji Dynamic Revolution-1, or “FDR-1,” with the “Revised FDR-1.” Explanations were presented of our comprehensive streamlining plan, focused on cost cutting and other pivotal measures, as well as our performance projections for the current fiscal year.
Compared to the forecasts made in May with respect to foreign exchange, the first half saw a shift toward a weaker yen at an average of 109 yen to the U.S. dollar, originally projected at 105 yen. In addition to this, total cost reduction activities of the TSR, or Total-Cost Structure Revolution, as outlined in the Revised FDR-1, are making steady progress. Specifically, major steps have been taken to improve R&D expense efficiency, while slashing costs. Furthermore, accelerated introduction of the second half year of our manufacturing cost reduction plan and other such efforts have cut costs above and beyond the goals targeted in the plan.
Domestic sales, meanwhile, continue to face harsh conditions, leading to a deterioration of sales volume and mixture. However, we managed to compensate for this by cutting costs, which has led to upward revisions in operating income, ordinary income and net income alike.
Next, I would like to talk about our projections for the current full year, including the second half. First, for the foreign exchange rate in the second half, we are predicting 105 yen to the U.S. dollar.
For domestic sales, we are taking a particularly stern look at our passenger minicar sales plan. This reflects the efforts to restructure our sales system in preparation for the launch of new models in the coming fiscal year, paving the way for the next generation of vehicles. We therefore set defensive parameters for our plan, projecting a deterioration of sales volume and mixture.
Factoring in increased sales overseas, we are projecting sales growth of 10 billion yen. On the other hand, there is also a need to consider the impact of the sharp rise in crude oil prices. This has prompted a downward revision for the second half, in real terms, for the three key categories of operating, ordinary and net income.
As the combined result of these factors, when projecting our performance for the full year, the impact of the upward revision in the first half will be felt. The prediction, therefore, is that operating income and ordinary income will rise slightly above our start-of-the-year projections. For net income, however, we therefore project a downward revision of three billion yen because of the extraordinary losses from jointly developed models which will accompany the dissolving of our alliance with GM and other negative factors.