November 17, 2011,16:22 +0900(JST) Safe Environment, Product Quality, and Clerical Work Quality Conventions

At the outset of the second half of this fiscal year, the Sumitomo Electric Group held a Group-wide conference to report on the safe environment, product quality and clerical work quality improvement activities implemented in the first half and action policies and priority issues to be tackled during the second half. In each of the above areas, continuous efforts based on the PDCA (Plan-Do-Check-Act) cycle are required to ensure steady improvement. Presenters reported on improvements they had continuously achieved by setting up different subjects in succession and developing and implementing innovative plans.

As for environmental activities, Quality Assurance Group Manager Lee of SEI Electronics Materials, Ltd., one of our Group companies in Taiwan, gave lively presentation on how they achieved zero emissions of waste.
There was also a report on aluminum wiring harness as an example of Sumitomo Electric’s environmentally friendly products, or “Eco-products.” This lightweight wiring harness has been adopted for use in Toyota Motor Corporation’s Ractis and Vitz cars. Since this product contributes to reducing vehicle weight, we expect to see wider adoption for automobiles.
This summer’s key phrase was “energy savings.” All of us in the Sumitomo Electric Group successfully cut power usage by 20% to 30%, far exceeding the target. This was largely due to the introduction of power generators, as well as the generous cooperation of all staff members, such as rotating days off, shifting working hours and frequently turning off air-conditioners. This winter again, I ask for your continued energy saving efforts to meet the target by all means.

Participation of all members, the key to achieving the above-mentioned improvement activities, depends on the zeal of the managers and supervisors of respective groups, companies and plants. Among other things, safety activities must be promoted with verve and zest under the slogan, “Safety comes first.” In the question-and-answer session, I became rather sharp-tongued because I am fully aware that occupational accidents could risk people’s lives or health.

“Do supervisors observe their work sites by visiting there in person every day?”
“I understand staff members are trying hard, but I don’t sense the zeal of plant managers and what they’re actually doing.”
“Given the over 100 years of Sumitomo Electric’s history, we surely faced similar problems in the past, but you sound like the problem is brand new. Haven’t you learned lessons from your predecessors?”

While ensuring employee safety is essential for business operations, the essence of a manufacturing company lies in quality control. The Sumitomo Electric Group offers an extensive lineup of products, ranging from electric wiring to components and tools, all of which differ in raw materials, shape, size and manufacturing method. Quality activities vary according to product category, which makes it difficult to manage quality. Nevertheless, respective groups reported the positive results of their quality control activities that they had strenuously implemented on a daily basis. I was particularly impressed by the report on ten years of “Pika Pika” activities or the Shining Clean Campaign for automotive wiring harness manufacturing. The report was perfect in terms of content and presentation skills. This comprehensive quality management program has greatly helped the Group company offer products of the same, best quality worldwide, achieving 25% share of the global automotive wiring harness market. Their experience is a real-life example of the saying, “Perseverance leads to success.”

I hope to see further development of these safety and quality activities. I also hope that the management of Group-wide organizations will selectively incorporate respective groups’ best practices into their activities to achieve substantial improvements.

November 15, 2011,09:24 +0900(JST) Business Results for the Second Quarter of FY 2011

On October 28, we announced Sumitomo Electric's business results for the second quarter of FY 2011. During the first half of FY 2011, due to the devastating impact of the March 11 disaster, demand plummeted in the first quarter, but it recovered rapidly in and after the summer mainly in the automobile and industrial material sectors, thanks to the faster-than-expected restoration of the supply chains.

On a Group-wide basis, our all-out effort for post-disaster recovery, production and sales expansion making full use of our global operation, and constitutional reinforcement that we had been working on for some time bore fruit. As a result, our sales were 956.8 billion yen, operating income 23.8 billion yen, ordinary income 35.6 billion yen, and net income 19.1 billion yen. Both sales and income were below the previous year's figures, but we managed to attain the estimates officially announced at the beginning of the fiscal year. The dividend was retained at the same as last year: 9 yen per share as interim dividend and 19 yen per share as annual dividend, as projected at the beginning of the year.

As for the rest of the fiscal year, we decided to maintain the year-long forecast figures – 2 trillion yen for sales, 100 billion yen for operating income, 115 billion yen for ordinary income, and 65 billion yen for net income – so as to keep motivating ourselves to meet our stakeholders' expectations.

The present business environment is in an extremely challenging situation accentuated by the serious European public debt issue, the global economic slowdown, inflation in China and other newly emerging economies, and, for us in Japan, the immense task of post-disaster recovery despite the handicaps of the deflationary trend and strong yen. Uncertainties for the future and fear of a major worldwide economic crisis seem to be growing by the minute. Moreover, the prolonged flooding in Thailand, a major industrial center in ASEAN, and its expanding damage are also causes of great concern.

Advanced globalization has intensified the political, economic and social ties among countries and regions in the world. It is becoming increasingly important to have the insight and the network that can signal how one local event in the immediate present is likely to develop and affect the rest of the world in the long run. In view of this, in early November I sent a message to the Group heads asking them to implement foresighted management and risk control from a multifaceted perspective; promote diversity; reinforce SEQCDD (safety, environment, quality, cost, delivery and research & development), monozukuri (manufacturing) capabilities, and R&D; and demonstrate full commitment to compliance.

At the time of the Lehman Brothers collapse, we also underwent a truly challenging period, with demand plunging in all our business sectors. Drawing on the experience of overcoming that hardship and maintaining and reinforcing our lean but solid corporate constitution by improving the SEQCDD and other aspects of our business activities, we are going to capture demand from post-disaster restoration and in newly emerging economies, and further increase sales in our successful sectors through our Group-wide efforts. Your continued support and encouragement will be most appreciated in this process.

November 1, 2011,15:50 +0900(JST) Expectations for R&D

Recently, I attended meetings held at the Yokohama and Osaka Works, where our R&D personnel reported on their activities and achievements. Since a manufacturing company's future largely depends on R&D, I always look forward to these meetings. The presentations were on promising new products and technologies relating to secondary batteries, smart grid, and the aqua business.

Japan's – and the world's – energy policy is currently at a major turning point, especially following the March 11th earthquake and tsunami and the resultant nuclear power plant crisis. Under such circumstances, secondary batteries are becoming increasingly important for more efficient energy use and promotion of renewable energy sources.

Visiting an R&D facilityIn June, Osaka Works started a verification experiment of a micro smart-grid system made up of solar and wind power generators and secondary batteries linked via direct-current cables. The system intelligently manages and controls electric power supply and demand, enabling efficient use of otherwise unstable renewable energy. The Company has already received numerous inquiries about this system. Many people are particularly interested in concentrating photovoltaics (CPV) in this system. We estimate that there will be great demand for the system in Japan, a country surrounded by the sea with numerous isolated small islands.

As the business world undergoes a paradigm shift, we must put our Group-wide resources and abilities together to stay ahead and win in the global R&D race. Our R&D, Sales, Production and Corporate Staff Groups must work together to decide how best to commercialize the fruits of R&D efforts in what business models. This is why many people attended the meetings, including Group company representatives. We are determined to work in good spirits and solid cooperation toward our goals.

R&D results can make or break a company's future, which is why we attach so much importance to R&D. In view of this, on October 1, Sumitomo Electric reorganized its R&D Group with personnel changes. As a result, a new R&D General Managing Unit has been established, integrating the existing Materials and Process Technology R&D Unit and Information and Communications Technology R&D Unit, with the aim of accelerating development processes and enhancing research planning in new fields. I hope that this new move will lead to more attractive new products, technologies, systems and business models.

SUMITOMO ELECTRIC President CEO Masayoshi Matsumoto

Born in 1944 in Hyogo Prefecture, Masayoshi Matsumoto joined Sumitomo Electric in 1967. After serving as General Manager of Chubu District Office, Managing Director and Senior Managing Director, he assumed office of President and CEO in June 2004.

His leisure activities include jogging, reading and art appreciation. Also a seasoned athlete, he played baseball in junior high school and practiced judo in senior high school. In university, he threw the javelin competitively and participated in all-Japan inter-university competitions.

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