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President's Message

To Our Shareholders

On behalf of the Sumitomo Electric Group, I would like to express our sincere appreciation for your daily, generous support of us.
I would like to report on our group’s business results for FY 2017.

Osamu Inoue President & COO

Business Results for FY 2017

When looking at the global economy in the first half of this fiscal year, although moderate recovery continued in general, future prospects became even more obscure, mainly due to increasing uncertainty about policies to be implemented in Europe and the U.S., slower economic growth in emerging markets, and the rise in geopolitical risks. At the same time, the Japanese economy, despite improvement in consumer spending and capital investments, also remained sluggish.

Regarding the business environment surrounding the Sumitomo Electric Group, the demand for wiring harnesses and vibration-proof rubber for automobiles was brisk, especially overseas such as in China. The demand for cemented carbide tools, optical fiber cables, and other products also grew. In this business environment, our business results for the first half of this fiscal year on a consolidated basis are as follows: net sales of 1,459,217 million yen (up 1,312,107 million yen, or 11.2%, year on year); operating income of 65,708 million yen (up 47,061 million yen, or 39.6%, year on year); ordinary income of 75,034 million yen (up 61,158 million yen, or 22.7%, year on year); and profit attributable to owners of the parent of 42,448 million yen (up 38,856 million yen, or 9.2%, year on year). We thus marked an increase in each category, including operating income, which grew mainly due to the rise in demand and our cost reduction efforts in flexible print circuits (FPCs) for mobile devices.

As we announced at the beginning of the year, the interim dividend is 21 yen per share, up 4 yen from the same period the previous year.

Issues to Be Tackled

Although the global economy is currently enjoying moderate economic recovery, there is concern that the risk of downturns will increase, mainly because of the aforementioned political and economic uncertainties as well as geopolitical risks and fluctuations in the financial and capital markets. Affected by these factors, the outlook for the Japanese economy is also expected to remain obscure.

In this situation, centering on the Sumitomo Spirit and the Sumitomo Electric Group Corporate Principles, the Group will continue to strive to further evolve its efforts regarding SEQCDD (safety, environment, quality, cost, delivery, and research and development). While doing so, we will implement the following measures in each business segment in FY 2017, the final fiscal year of the mid-term management plan Vision 2017, in order to accomplish our targets.

In our automotive-related business, we aim to be a global comprehensive components manufacturer. To this end, by leveraging the integrated capabilities of the Sumitomo Electric Group in this age of innovation of automobile technologies, we will accelerate our development and sales expansion of high-voltage wiring harnesses and battery-related products for environment-friendly automobiles; durable, high-strength aluminum wiring harnesses for lightweight automobiles; and electronic equipment and high-speed communication connectors for the increasingly complicated and sophisticated electronic control systems in automobiles. Moreover, we will focus on further cost reductions, striving to augment our share of markets targeting customers outside Japan. At the same time, Sumitomo Riko Co., Ltd. will take advantage of its global sales channels and development bases in order to expand sales, especially in the field of vibration-proof rubber and hoses for automobiles, while reinforcing its environmental technologies.

In our infocommunications-related business, we will continue capturing demand on a global basis for optical fiber cables, 100 Gbps high-speed optical devices, and gallium nitride (GaN) devices for mobile base stations. In particular, we will make further efforts to develop and to expand sales of ultra-low-loss optical fibers for submarine cables; various products used in data centers, such as ultra-high-fiber-count optical fiber cables; optical and electronic device products for next-generation mobile communications; and intelligent transport systems. We will also continue focusing on expanding sales of new products related to access networks, while reinforcing our cost competitiveness for these products, with the aim of further increasing our profitability.

In our electronics-related business, we will continue to commit ourselves to thorough quality improvement, cost reduction, and sales expansion in the field of FPCs for mobile devices. At the same time, taking advantage of the collective strength of the Sumitomo Electric Group, we will develop new products with even higher definition, ultra-thinness, and increased heat resistance, and grow our business in the in-car product market, thereby further improving profitability. Furthermore, in the field of electronic wires and irradiated tubes, we will also accelerate our efforts on a global scale to reinforce production and expand sales.

In our business related to environment and energy, we will strengthen our production system for power cables, and make further efforts in cost reduction and quality improvement. In addition, we will strive to obtain many more orders from abroad for high-voltage direct current power cables, and surely seize domestic demand generated by the necessity to replace power cables, thereby again improving our profitability. We will also continue to expand sales of flat magnet wires for motors and porous metals for batteries used in environment-friendly vehicles, and cooperate with Nissin Electric Co., Ltd. and Sumitomo Densetsu Co., Ltd. to expand our business related to renewable energy and smart grids.

In our business related to industrial materials, not only will we continue responding to the brisk demand for cemented carbide tools in Japan, Europe and the U.S., but will also strive, more than ever before, to capture demand for these tools in the markets of emerging economies such as China, Taiwan, and India. In addition, we will accelerate our efforts to develop new products for processing hard-to-cut materials and expand their sales not only in the main automotive field, but also in the fields of aircraft and energy. Moreover, for sintered powder metal parts, we will demonstrate business synergy in cooperation with the US subsidiary that we acquired last year, and strengthen our supply system both at home and abroad. For tensioning materials for prestressed concrete, as indicated by our launch of operations at the new plant in Texas this June, we will also commit ourselves to expanding our global production system and sales.

Regarding research and development, we endeavor to create new businesses and products that are original and with excellent profitability potential. Specifically, we will accelerate our development and demonstration experiments to realize early commercialization of redox flow batteries, concentrator photovoltaic systems and energy management systems, with the aim of establishing a new electricity and energy infrastructure. We will also focus on commercializing superconducting products, magnesium alloy products, water-treatment systems, silicon carbide (SiC) power semiconductor devices, and products for next-generation communications networks. From a long-term perspective, we will reinforce our structure to develop in-car equipment for self-driving and electric vehicles, and explore new materials with new functions. We commit ourselves to developing new products that take advantage of Sumitomo Electric Group’s characteristics in responding to society’s needs. We will also work proactively on production innovation by utilizing AI and IoT at manufacturing sites, as well as on countermeasures for cyber security.

Ultimately, we believe that compliance with laws and regulations and maintaining corporate ethics constitute the foundation of the Company’s management, and that they are the absolute basis to continue and develop as a corporation. In particularly, we consider compliance with competition laws as our most important task, and since the establishment of a set of rules and regulations to ensure compliance with competition laws in June 2010, we have worked to strengthen our competition law compliance as an entire group. From now on, under the principles of the Sumitomo Spirit, which values doing your sincere best, not only in business but also in every aspect of your life, placing importance on integrity and not acting rashly or carelessly in pursuit of easy gains., we will make all efforts to ensure that all corporate activities are conducted fairly and honestly and can be trusted by society.

On April 1, 2017, we celebrated our 120th anniversary, thanks to your warm support and understanding. We would like to take this opportunity to express our sincere appreciation. We will continue to make every effort to realize sustainable growth and enhance our corporate value. In this regard, we would like to ask for your further support and guidance.

November 2017

Osamu Inoue President & CEO

Osamu Inoue
President & COO

Osamu Inoue writes about various daily events and happenings on his blog. To view the blog, click here: "President's Blog"
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