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 2022.
Business Results for FY2022
With respect to the world economy, in the U.S., despite the impact of rising prices and credit squeezes, a modest recovery of the economy continued, supported by stable personal consumption and favorable employment conditions; however, in China, the urban blockages and restrictions on activity following the spread of COVID-19 placed downward pressure on the economy; further, in Europe, the economy gradually slowed down toward the end of this fiscal year due to rising prices for energy and other commodities, caused by the situation in Ukraine, and the tight monetary policies. With respect to the Japanese economy, gradually, socioeconomic activities returned to normal, and it recovered moderately, but it continued to lack strength due in part to sharp fluctuations in the exchange rate and rising prices.
The business circumstances of the Group were challenging due to soaring material and energy prices, in addition to a decrease in the production of automobiles caused by reasons such as urban blockages in China and a supply shortage of semiconductors and other components. In this environment, in the consolidated financial settlement for this fiscal year, net sales increased from the preceding fiscal year to 4,005,561 million yen
(preceding fiscal year: 3,367,863 million yen, +18.9 %) and exceeded 4 trillion yen for the first time, thanks to efforts to expand the sale of wiring harnesses, power cables, cemented carbide tools, and other commodities, as well as the depreciation of the Japanese yen. With respect to income and profits, we worked to thoroughly reduce costs and improve selling prices; as a result, operating income was 177,443 million yen (preceding fiscal year: 122,195 million yen, +45.2 %), ordinary income was 173,348 million yen (preceding fiscal year: 138,160 million yen, +25.5 %), and the profit attributable to owners of the parent was 112,654 million yen (preceding fiscal year: 96,306 million yen, +17.0 %). In this way, each of these items increased from the preceding fiscal year.
Key Issues Requiring Attention
It is anticipated that there will be concerns regarding political and geopolitical risks, such as confrontation between the United States and China and the situation in Ukraine and economic downturn due to global rising prices and credit squeezes, and that the business circumstances of the Company will continue to be unpredictable.
In these circumstances, the Group will work to improve our corporate values in a unified effort, while aiming for mutual prosperity with our stakeholders, 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 strive to improve the basics of the manufacturing industry, “S” (Safety), “E” (Environment), “Q” (Quality), “C” (Cost), “D” (Delivery), and “D” (Development), aiming to become a “Glorious Excellent Company.” In our efforts to improve capital efficiency, for the improvement of ROIC, which we regard as an important index, we will make efforts towards reasonable inventory balance and balance of operating receivables and payables, and to implement careful selection of capital expenditure projects, and we will further improve our efforts, such as by shifting to highly-profitable items and reflecting rising material prices in our selling prices. In addition, we are pursuing the following strategies in each of our business segments in order to achieve the new medium-term management plan, which will start in this fiscal year as the milestone toward the realization of our long-term vision.
In the Automotive segment, while it is expected that the supply shortage of semiconductors and other components will be gradually cured and the automobile production will recover, we will work to further reduce costs and thoroughly improve asset efficiency and will proceed with enhancing corporate structure. In addition, the Group will create and expand sales of new products that capture the rapidly expanding market of CASE∗ such as high-voltage wiring harnesses for electric vehicles, and connectors for high-speed communication, by further expanding sales of aluminum harnesses corresponding to the needs of weight reduction, pushing 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, and enhancing collaboration within the Group and partner relationships and cooperation with customers. Sumitomo Riko Company Limited will strive to recover profitability by deepening global support, integrating and concentrating business sites inside and outside of Japan, and reducing costs, in the field of automotive anti-vibration rubbers and hoses, and it is also focusing on developing new products for the next-generation vehicles.
In the Infocommunications segment, although temporary demand stagnation due to inventory adjustments by customers, among other things, has been observed, since communication data amount has increased due to the expansion of the market for cloud services and the dissemination of the fifth- generation mobile communications system (5G), and amount of power consumed has increased in conjunction with that, we will accelerate development and marketing of products related to data centers, such as optical cables, optical wiring equipment, and optical devices, and high-performance products that meet market needs including high speed, large capacity, and low power consumption, such as extra low-loss and large capacity optical fibers for submarine cables, highly efficient electronic devices for 5G base stations, and network access equipment that enables high-speed and large capacity communications. In addition, we will strive to thoroughly reduce costs and make efforts to improve profitability.
In the Electronics segment, with regard to FPCs, we will strive to market high-performance products that utilize fine circuit fabrication technology, thoroughly reduce costs, and increase performance, and we will accelerate marketing for automobiles and medical care and development of new products with high frequency characteristics. With regard to leads (tab leads) for battery terminals of electric vehicles, wires for electric parking brakes, and heat shrink tubes, which utilize irradiation cross-linking technology, and porous water-treatment membrane systems that utilize fluorine resin processing technology, we will strive to expand business by capturing various customer needs. In addition, we will strive to create further synergies with TECHNO ASSOCIE Co., Ltd., which we made our wholly-owned subsidiary in May 2023.
In the Environment & Energy segment, with regard to power cables, we will make efforts to capture domestic demand for replacement of facilities, and in addition to that, expand orders for projects related to renewable energy, such as cross-national and cross-regional interconnection lines, for which demand is globally expanding in the direction of realizing a decarbonized society, and focus on strengthening production capacity, cost reductions, quality improvement, development of new products, and strengthening project management. With regard to flat 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. Furthermore, we will strive to create further synergies with Nissin Electric Co., Ltd., which we made our wholly-owned subsidiary in May 2023, and make efforts to expand orders further, while taking advantage of the Group’s integrated capabilities, including those of Sumitomo Densetsu Co., Ltd.
In the Industrial Materials segment, with regard to cemented carbide tools, 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, renewable energy, etc. and will make efforts to expand our market share. With regard to sintered powder metal parts, we will aim to develop new products and further strengthen marketing for electric vehicles 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, we will make efforts to create new businesses and products that are original and excel in profitability. We will focus on new businesses, such as redox flow batteries, high- temperature superconducting products, and SiC (silicon carbide) power semiconductor devices. As next-generation products that support the current five business segments, we will focus on developing new products in response to society’s needs, including a post-5G and next generation mobile communications system; transmission equipment, devices, optical fibers, and electronic products, which are used for data centers, optical submarine communications, etc.; and materials for power cables, as well as materials for automobiles and industries that contribute to a reduction in the environmental burden, and we will do so by proactively utilizing outside knowledge through collaboration with academia, industry, and government. In addition, we will work toward production innovation by utilizing AI and IoT at manufacturing sites, and further strengthen collaboration with the Business Division and the Sales & Marketing Division, and will revitalize and accelerate research and development activities further.
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, we consider that the Sumitomo Spirit and the Sumitomo Electric Group Corporate Principles share common core values with the SDGs (Sustainable Development Goals). We will strive to realize a sustainable society.
We would like to ask you for your further understanding and support in the future.
President & COO