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 2024.
Business Results for FY2024
With respect to the world economy during this fiscal year, in the U.S., the economy continued to perform well, supported by stable personal consumption; however, in Europe, economic stagnation continued despite recovery signs; further, in China, the pace of growth slowed due to the continued real estate slump and sluggish personal consumption. Regarding the Japanese economy, despite the impact of global price increases, it recovered moderately because capital expenditure increased, and employment and income conditions improved, backed by improved corporate profits.
With respect to the business circumstances of the Group, in the Automotive sector, demand for wiring harnesses remained steady, and in the Environment and Energy sector, demand for power cables and substation equipment, and further, in the Infocommunication sector, demand for data center-related products, expanded respectively. In this environment, in the consolidated financial settlement for this fiscal year, net sales increased from the preceding fiscal year to 4,679,789 million yen (preceding fiscal year: 4,402,814 million yen, +6.3%). With respect to income and profits, we worked to increase sales as well as to thoroughly improve productivity, reduce costs, and improve selling prices; as a result, operating income was 320,663 million yen (preceding fiscal year: 226,618 million yen, +41.5%), ordinary income was 309,496 million yen (preceding fiscal year: 215,341 million yen, +43.7%), and the profit attributable to owners of the parent was 193,771 million yen (preceding fiscal year: 149,723 million yen, +29.4%). In this way, each of these items increased from the preceding fiscal year and achieved new record highs. 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 9.3% (preceding fiscal year: 7.6%).
Key Issues Requiring
Attention
It is anticipated that there will be concerns regarding an accelerating slowdown in the global economy due to increased political and geopolitical risks such as the possibility for policy revisions, including additional tariffs imposed by the United States, to have a significant impact on overall economic activity, the prolonged Russian invasion of Ukraine, tensions in the Middle East, and the economic stagnation in Europe and China, and 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, we will work to further improve the basics of the manufacturing industry, “S” (Safety), “E” (Environment), “Q” (Quality), “C” (Cost), “D” (Delivery), and “D” (Development), And with respect to improvement of asset efficiency, for the improvement of ROIC, which we regard as an important index, we will further improve our efforts, such as by making reasonable inventory balance and balance of operating receivables and payables, implementing careful selection of capital expenditure projects, shifting to high-value-added items, and reducing cross-shareholdings. Particularly with respect to the urgent issue of additional tariffs imposed by the United States, we will take feasible countermeasures, such as optimizing our global production layout and reviewing our supply chain, and hold careful dialogues with our customers, as well as make efforts to minimize the impact on our business results. In addition, since the fiscal year 2025 is the final year of the “Mid-term Management Plan 2025”, we are promoting the growth strategies by the Group’s integrated capabilities and working to strengthen the management base, and we are pursuing the following strategies in each of our business segments.
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. Furthermore, we will make efforts to expand orders further, while taking advantage of the Group’s integrated capabilities, including those of Sumitomo Densetsu Co., Ltd.
In the Infocommunications segment, while further expansion of data center-related market due to rapid dissemination of generative AI is expected, we will focus on strengthening our production capacity for optical devices, optical wiring equipment, and optical cables, as well as developing new products that enable higher communication speeds 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 low-loss and large capacity optical fibers for submarine cables, multi-core fibers of which the Company is the first in the world to achieve mass production, highly efficient wireless devices for the fifth-generation mobile communication system (5G) and more advanced nextgeneration mobile communication system (Beyond 5G) base stations, and access network equipment that is increasingly adopting the new method, 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. Sumitomo Riko Company Limited will try to improve the profitability of the existing businesses in the field of automotive anti-vibration rubbers and hoses, and will work toward future business growth by focusing on developing new products for the next-generation mobility systems.
In the Electronics segment, we will accelerate marketing for FPC products that utilize fine circuit fabrication technology, CASE compatible products, and products for medical care, and development of new products with high frequency characteristics, and thoroughly reduce costs. With regard to heat-resistant, high-performance electric wires, which utilize irradiation cross-linking technology, lead wire for lithium-ion batteries (tab leads), 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 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, semiconductors, 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 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 to use a backcasting approach regarding social issues, advance and make processes more efficient, and strengthen open innovation and collaboration with outside entities. As specific initiatives, in order to develop the current businesses, we will work on themes such as reinforcement of power grids, stable supply of renewable energy, enabling large-capacity and low latency telecommunication networks, and electrification in mobility, which are key business areas of the Mid-term Management Plan, by utilizing close relationship with the Business Division and the Sales & Marketing Division and partnership relationships with customers. In addition, as our challenge to new themes, we have set “Earth,” “Life,” and “Human” as three dynamic value spheres, and for the sustainability of “Earth,” we will promote research on matters such as energy saving, renewable energy, and material recycling, and also promote research aimed at a safe and comfortable “Life” and expanding possibility of “Human.”
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 through consideration of global environmental issues such as climate change, respecting human rights, ensuring employee well-being and a healthy work environment, and fair and impartial trade with clients, as well as 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