President's Message
The President presents an overview of Sumitomo Electric Group's business performance.
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 performance for the fiscal year 2025.
Business Results for FY2025
With respect to the world economy during this fiscal year, there remained uncertainties ahead, partly due to the impact of the U.S. tariff policy review on supply chains and rising geopolitical risks, including the U.S.–China conflict and the escalating tension in the Middle East; nevertheless, partly due to economic support underpinned by fiscal and monetary policies across countries and increased investment in technology-related fields such as generative AI, the economy generally remained resilient. Regarding the Japanese economy, despite price increases, partly because corporate capital expenditure increased, and employment and income conditions improved, the economy recovered moderately.
With respect to the business circumstances of the Group, in the Infocommunications sector, demand for products for data center-related markets significantly increased, while demand for wiring harnesses in the Automotive sector and for products such as power cables and substation equipment in the Environment and Energy sector remained steady. In this environment, in the consolidated financial settlement for this fiscal year, net sales increased from the preceding fiscal year to 5,110,171 million yen (preceding fiscal year: 4,679,789 million yen, +9.2%). With respect to income, in addition to increased sales, we worked to improve product mix, thoroughly improve productivity, reduce costs, and improve selling prices; as a result, operating income was 418,173 million yen (preceding fiscal year: 320,663 million yen, +30.4%) and ordinary income was 431,274 million yen (preceding fiscal year: 309,496 million yen, +39.3%), both of which exceeded the preceding fiscal year’s results and achieved new record highs. The profit attributable to owners of the parent was 369,508 million yen (preceding fiscal year: 193,771 million yen, +90.7%), which greatly exceeded the preceding fiscal year’s result, partly due to an extraordinary gain from the sale of shares of Sumitomo Densetsu Co., Ltd. We also made efforts to improve asset efficiency, such as reducing inventories and cross-shareholdings. As a result, ROIC (return on invested capital) before tax increased from the preceding fiscal year to 14.7% (preceding fiscal year: 9.3%).
Key Issues Requiring
Attention
Looking ahead, the global economy is expected to face disruptions in logistics and supply chains due to escalating tensions in the Middle East, as well as rising prices of raw materials and energy driven by soaring crude oil prices. Additionally, concerns persist regarding the U.S.’s review of its trade policies, the Chinese economic slowdown, etc., and it is anticipated that the business circumstances of the Group will continue to be unpredictable.
In these circumstances, aiming to realize the Group’s ideal vision of becoming a “Glorious Excellent Company”, the Group will work to improve our corporate values in a unified effort toward the realization of “living in safety and comfort on our green planet” set forth in the “Sumitomo Electric Group 2030 VISION,” our long-term vision, and conduct management based on the Multistakeholder Capitalism (“Goho Yoshi” (Five-Way-Win)), which means the steady return and distribution of positive outcomes to our stakeholders, i.e., “employees”, “customers”, “suppliers”, “communities”, and “shareholders/investors.”
Specifically, as the second step toward realizing our long-term vision, we have formulated “Mid-term Management Plan 2028,” which starts this fiscal year. In the three focus areas, “Digital and AI,” “Energy,” and “Mobility,” as well as their integrated fields, we will demonstrate the Group’s collective strength, accurately respond to global business environment trends, and capture demand related to green and digital fields, thereby aiming to achieve net sales of 6 trillion yen, operating profit of 600 billion yen, and ROIC before tax of 15% or higher in fiscal year 2028. Each business segment will advance the following initiatives accordingly.
In the Environment & Energy segment, with regard to power cables, we will make efforts to capture domestic demand for replacement of facilities, among other things, and in addition to that, expand orders for projects related to renewable energy, as well as cross-national and cross-regional interconnection lines, which contribute to the decarbonization, and focus on launching new bases in Europe, cost reductions, quality improvement, development of new products, and strengthening project management. With regard to rectangular magnet wires for motors used in electric vehicles, we will make improvements in profitability through the reduction of costs and proceed with developing next-generation products that respond to electric vehicles becoming high-voltage. In addition, we will strive to create further synergies with Nissin Electric Co., Ltd., and with regard to substation equipment, we will work to ensure that domestic demand for replacement of facilities is captured, strengthen production capacity, and increase the development of and proposals for environmentally friendly products. With regard to ion implanter and electron beam processing system, we will work to expand sales in Japan and overseas.
In the Infocommunications segment, while further expansion of data center-related markets due to rapid dissemination of generative AI is expected, we will focus on strengthening our production capacity for optical cables, optical wiring products such as optical connectors, optical devices, indium phosphide (InP) substrates, etc., as well as developing new products that achieve further higher-speed data transmission, lower latency, and lower power consumption, in order to ensure that these demands are captured, and make efforts to expand our business. In addition, we will continue and accelerate development and marketing of high-performance products that have environmentally-resistant performance including low power consumption, such as extra lowloss optical fibers for submarine optical cables, multi-core fibers of which the Company is the first in the world to achieve mass production, highly efficient wireless communication devices, and access network equipment that is increasingly adopting new methods, and we will make efforts to improve profitability by thorough reduction of costs.
In the Automotive segment, in order for the Company, as a “connecting” partner for mobility systems, to expand the “connected” business, we will work to further reduce costs and thoroughly improve asset efficiency and further expand sales of aluminum harnesses corresponding to the needs of weight reduction, as well as push evolution of conventional harnesses such as automation of production and expansion of new designs and new methods of production that will lead to cost reduction. In addition, the Group will also make efforts to create and expand sales of new products that capture the market of CASE, which is expected to expand in the future, such as high-voltage wiring harnesses for electric vehicles, and connectors for high-speed communication, by deepening collaboration within the Group and cooperation and partner relationships with customers. Moreover, we will work to create further synergies with Sumitomo Riko Company Limited, which was made a wholly owned subsidiary in February this year, and try to improve the profitability of the existing businesses in the field of automotive anti-vibration rubbers and hoses. In addition, we will work toward future business growth by focusing on developing new products for next-generation mobility systems.
In the Electronics segment, we will accelerate marketing for FPC products that utilize fine circuit fabrication technology and CASE-compatible products and development of new products with high frequency characteristics, and thoroughly reduce costs. With regard to heat-resistant, highperformance electric wires, which utilize irradiation cross-linking technology, heat shrink tubes, and porous separation membrane systems, we will strive to expand business by capturing various customer needs. In addition, we will strive to strengthen our collaboration with TECHNO ASSOCIE Co., Ltd.
In the Industrial Materials segment, with regard to cemented carbide products, we will surely capture the demand not only in the main automotive area but also in the areas of construction machines, agriculture machines, electronics, etc. by strengthening our global sales power and will proceed with new business development related to electric vehicles, aircrafts, semiconductors, renewable energy, etc. and will make efforts to expand our market share. In addition, we will work to strengthen our recycling capabilities aimed at stable procurement of tungsten raw materials. With regard to sintered products, we will aim to develop new products and further strengthen marketing for electric vehicles or non-automotive purposes and the cost competitiveness. With regard to prestressed concrete and precision spring steel wires, we will strive to improve profitability by strengthening global production and sales organization and developing new products.
In research and development activities, aiming to revitalize and accelerate research and development as one of the key driving forces to create an extensive range of technologies, we will work on advancing and improving efficiency of materials development and process development utilizing DX, as well as open innovation and collaboration with outside entities. Specifically, in order to develop the technologies of the current businesses, we will leverage partnership relationships with customers, by strengthening close collaboration with the Business Division and the Sales & Marketing Division, to address the three focus areas set forth in the Mid-term Management Plan. In the “Digital and AI” area, we will strive to make information transmission high-speed, large-capacity, compact, and energy-efficient; in the “Energy” area, we will strive to realize highly efficient long-distance power grids and large-capacity, low-loss power transmission systems; and in the “Mobility” area, we will strive to make the functionality of wire harnesses more advanced. Furthermore, as our challenge for new business areas, we will work on themes such as decarbonization-related technologies, circular economy-related technologies, and technologies related to quantum, semiconductors, and robotics.
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. 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 immoral business, we will make all efforts to ensure that all corporate activities are conducted fairly and honestly and can be trusted by society. In addition, based on the Sumitomo Spirit and the Sumitomo Electric Group Corporate Principles, we will strive to realize a sustainable society by considering global environmental issues such as climate change, respecting human rights, ensuring the well-being of, a healthy work environment for, and fair and appropriate treatment of employees, as well as fair and impartial trade with clients, and managing natural disasters, etc., which are issues related to sustainability.
We would like to ask you for your further understanding and support in the future.
Osamu Inoue
President & COO