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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 2016.

Osamu Inoue President & COO

Business Results for FY 2016

When looking at the global economy of FY 2016, although a moderate recovery trend continued in general, the business climate remained unpredictable, mainly due to the increasing uncertainty triggered by the U.K.’s decision to withdraw from the E.U. and the inauguration of the new administration in the U.S., as well as due to concerns over the slowdown in the growth of emerging economies. At the same time, Japanese economy also came to a standstill, mainly because of sluggish consumer spending.

The business environment surrounding the Sumitomo Electric Group was severe. The demand for some products, such as automotive wiring harnesses, optical fiber cables, and optical and electronic devices, was steady especially outside Japan. However, we were considerably affected by the decline in demand for flexible printed circuits (FPCs) for mobile devices, the appreciation of the yen, and the decline in copper prices. Under these circumstances, our business results on a consolidated basis for FY 2016 were as follows: net sales of 2,814,483 million yen (previous fiscal year: 2,933,089 million yen, down 4.0%); operating income of 150,503 million yen (previous fiscal year: 143,476 million yen, up 4.9%); ordinary income of 173,872 million yen (previous fiscal year: 165,658 million yen, up 5.0%); and profit attributable to owners of the parent company of 107,562 million yen (previous fiscal year: 91,001 million yen, up 18.2%). Although net sales decreased from the previous fiscal year, each of the income items marked an increase from the previous fiscal year, as a result of our cost reduction efforts as well as development and sales expansion of new products.

In light of the business results mentioned above, the Sumitomo Electric Group will distribute an amount of 23 yen per share, which consists of an ordinary dividend of 21 yen per share, 3 yen up from the previous fiscal year, and a two-yen commemorative dividend celebrating our 120th anniversary. As a result, the dividend for FY 2016, including the interim dividend (17 yen, the same amount as the previous fiscal year), is 40 yen per share (38-yen ordinary dividend and two-yen commemorative dividend).

Issues to be Tackled

It is of concern that the global economy will become even more unstable, mainly due to the uncertainty of political measures to be implemented in Europe and the U.S., the risk of downturns in the emerging economies, political instability, and fluctuations in the financial and capital markets. Added to this is the Japanese economy, which is expected to continue to suffer sluggish consumer spending, and the future outlook remains 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 automobile-related business, we are aiming to become a global comprehensive components manufacturer. To this end, we will accelerate our development and sales expansion of durable, high-strength aluminum wiring harnesses, which will contribute to weight reduction in automobiles; high-voltage wiring harnesses for environment-friendly automobiles; and electronic equipment and high-speed communication connectors for the increasingly complicated and sophisticated electronic control systems in automobiles. Moreover, while striving to increase our share of markets targeting overseas customers, we will focus on further cost reductions. At the same time, Sumitomo Riko Co., Ltd. will take advantage of the production bases, sales channels, technologies, and other assets that the company has obtained by acquiring a foreign business in the field of vibration-proof rubber and hoses for automobiles, in order to expand sales on a global basis and continue to reinforce its business structure, thereby improving profitability.

In our infocommunications-related business, we will continue to surely catch steady overseas demand for optical fiber cables, 100 Gbps high-speed optical devices, and gallium nitride (GaN) devices for mobile base stations. In addition, we will make further efforts to expand the sales of ultra-low-loss optical fibers for submarine cables, ultra-high-fiber-count optical cables used in data centers, and intelligent transport systems. We will also continue to focus on the sales expansion of new products related to access network equipment, thereby aiming to further increase our profitability.

In our electronics-related business, we recorded sluggish business results in FY 2016 in the field of FPCs for mobile devices, mainly due to shrinking demand and intensified competition, as well as the delay in the launch of new products. However, while committing ourselves to thorough quality improvement, cost reduction, and sales expansion on a global scale, we will strengthen our profitability by leveraging the integrated capabilities of the Sumitomo Electric Group to develop new products with advanced features, such as increased high-definition, ultra-thinness, or high heat-resistance, and to grow our business in the in-car product market. 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 the environment and energy, last November, we concluded a long-term agreement with the Saudi Arabian national oil company, Saudi Arabian Oil Company regarding submarine power cables. In addition, this March, we agreed to cooperate with the German company Siemens for high voltage direct current transmission. Combining advanced technologies, such as the company’s converters and our high-voltage direct current power cables, we will provide optimized solutions for our customers, thereby accelerating sales expansion on a global scale. Moreover, we will continue to improve our profitability through cost reductions and reinforce our product quality. We will also continue to expand the sales of flat magnet wires for motors and porous metals for batteries used in environmentally friendly vehicles, and work in cooperation with Nissin Electric Co., Ltd. and Sumitomo Densetsu Co., Ltd., in order to expand the business related to renewable energy and smart grids.

In our business related to industrial materials, last September, we acquired the major U.S. sintered powder metal parts manufacturer Keystone. Through the acquisition, we strive to improve our presence in the sintered powder metal parts business in the U.S., and to win many more global business opportunities. For cemented carbide tools, we strive, more than ever before, to capture demand in the markets of emerging economies such as China, Taiwan, and India, and continue to reinforce our raw materials procurement system. In addition to the main automotive field, we accelerate our efforts to develop new products and expand sales in the fields of aircraft and precision processing, which are expected to grow in the future. Furthermore, we also commit ourselves to expansion of our global production system and sales in the fields of prestressed concrete steels and spring steel wires.

Regarding research and development, we will endeavor to create new businesses and products that are unique and excel in profitability. Specifically, we will accelerate our development and domestic and international demonstration experiment to commercialize redox flow batteries, concentrator photovoltaic systems, and power line communication equipment, with the aim of establishing a new electricity and energy infrastructure. We will also focus on the commercialization of superconducting products, magnesium alloy products, water treatment systems, silicon carbide (SiC) power semiconductor devices, and products for next-generation communication networks. From a long-term perspective, taking advantage of Sumitomo Electric Group’s specialties, we will commit ourselves to the development of new products that will answer socials needs, including advanced traffic safety systems and new materials with new functions. 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.

June 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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