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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 the first half of FY2018.

Osamu Inoue President & COO

Business Results for the First Half of FY2018

Despite a spate of natural disasters expected to serve as negative factors, the Japanese economy remained steady for the first half of this fiscal year, against the background of improvements in corporate performance, employment and incomes. The global economy on the whole also continued its moderate expansion. However, signs suggesting a growth slowdown were observed in China, and the currencies of emerging markets depreciated, meaning an increase in the number of factors contributing to global instability.

Regarding the business environment for the Sumitomo Electric Group, the demand for automotive wiring harnesses was brisk especially overseas such as in China. In addition, the demand for cemented carbide tools, power cables and some other products grew steadily. In this environment, the consolidated business results for the first half of this fiscal year saw an increase in net sales to 1,528,360 million yen (up 4.7% from 1,459,217 million yen in the corresponding period of the previous year). On the other hand, both operating income and ordinary income decreased to 64,286 million yen (down 2.2% from 65,708 million yen in the previous year), and 73,760 million yen (down 1.7% from 75,034 million yen in the previous year). This is because, while promoting marketing and thorough cost reduction, we increased research and development expenses to prepare for the future. Meanwhile, profit attributable to owners of the parent increased to 47,987 million yen (up 13.0% from 42,448 million yen in the previous year), partly because of a decrease in income taxes.

As we announced at the beginning of the year, the interim dividend is 24 yen per share, up 3 yen from the previous year.

Key Issues Requiring Attention

Although it is expected that the global economy will continue its moderate recovery, there is also concern that the economic downward risk will increase, largely due to a prolonged trade conflict between the U.S. and China, destabilization of the emerging markets and an increase in political and geopolitical uncertainty. Affected by these factors, the outlook for the Japanese economy will remain unclear.

In these circumstances, while promoting our business operations based on the Sumitomo Spirit and the Sumitomo Electric Group Corporate Principles, we will strive to further evolve SEQCDD (safety, environment, quality, cost, delivery and research & development). This fiscal year, we have launched the mid-term management plan VISION 2022 toward becoming a Glorious Excellent Company based on the concept of “Contributing to a better society by leveraging our expertise in connectivity and transmission technologies through concerted efforts of the entire group.” The plan sets forth the numerical targets to be achieved by FY2022 as follows - net sales: 3.6 trillion yen; operating income: 230 billion yen; ROIC: at least 9%; and ROE: at least 8%. In each business segment, we will proceed with the following measures.

In the automotive segment, in striving to be a mega supplier centering on wiring harnesses, we will accelerate our development and marketing of high-voltage wiring harnesses and other products designed for electric vehicles, high-strength aluminum wiring harnesses that are light and excel in durability, and electronic components and high-speed communications connectors corresponding to the electrifications of automobiles. In addition, while aiming to increase our market share among overseas customers, we will also accelerate our development of new products in anticipation of widespread use of electric vehicles, autonomous driving and connected cars, thereby further expanding our business. At the same time, Sumitomo Riko Company Ltd. will work on the development of new products for next-generation vehicles, while striving to expand sales on a global basis in the field of automotive anti-vibration rubbers and hoses and further reinforcing its corporate structure.

In the infocommunications segment, we will focus on responding to an increase in demand for optical fibers and next-generation optical/electronic devices, arising from a growth in communication volume as a result of expansion of video streaming services and cloud computing, as well as from the development of a fifth-generation mobile communications system. We will also proceed further with the marketing of extra-low loss fibers for submarine cables, ultra-high-fiber-count optical fiber cables, and other products for data centers. In addition, we will also focus on marketing new access network equipment and reinforcing our cost competitiveness, thereby further enhancing our profitability.

In the electronics segment, while reviewing the global production system of flexible printed circuits (FPCs) for mobile devices, we will continue to focus on cost reduction through productivity improvement. At the same time, we will promote development and marketing of new products that will accommodate customers’ needs for high precision, thinness and heat resistance, thereby further enhancing our profitability. In addition, we will also strive to increase our product development capabilities and production capacity in the fields of electronic wires and irradiation tubes to satisfy an extensive range of needs.

In the environment and energy segment, we will strengthen the manufacturing system of power cables, and further proceed with cost reduction and quality improvement. We will also endeavor to improve profitability by winning more orders for overseas large-scale power cable projects, as well as by surely seizing domestic demand generated by the necessity to replace existing equipment. Furthermore, we will continue expanding the marketing of flat magnet wires for motors used in electric vehicles, porous metals for batteries and other products. While taking advantage of the Group’s integrated capabilities including Nissin Electric Co., Ltd. and Sumitomo Densetsu Co., Ltd., we will also focus on expanding business related to renewable energy and smart grids.

In the industrial materials segment, while boosting our production capacity in the field of cemented carbide tools, we will promote marketing not only in the main automotive field but also in the fields of industrial machinery, construction machinery and electronics, and strengthen development and marketing of new products for processing difficult-to-cut materials in the fields of aircraft and energy. In addition, we will further strengthen the global supply system for sintered components, and continue to focus on the expansion of the production system and marketing for tensioning materials for prestressed concrete and precision spring steel wires.

In research and development activities, we will make efforts to create new businesses and products that are original and excel in profitability. This includes the acceleration of developing redox flow batteries, concentrator photovoltaic systems, and Power Line Communication applications, with the aim of establishing a new electricity/energy infrastructure, and the commercialization of superconducting products, magnesium alloy products, water-treatment systems, devices for next-generation communication network, and large-capacity data transmission cables. Taking a long-term perspective, we will leverage the Group’s strengths to develop new products in response to society’s needs, including advanced traffic safety systems and searching for new materials with new functions.

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.

We would like to ask our shareholders for your continued support and understanding.

November 2018

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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