Sumitomo Electric Industries, Ltd. Business Report FY ended Mar. 2016
Financial Overview |
(in million JPY) |
| FY ended Mar. 31, 2016 | FY ended Mar. 31, 2015 | Rate of Change (%) | Factors | |
| Overall | ||||
| Sales | 2,933,089 | 2,822,811 | 3.9 | -Sales increased because of strong demand for automotive wire-harnesses and anti-vibration rubber, mainly outside Japan such as in the USA; and because of greater demand for flexible printed circuits (FPCs) for mobile phones. |
| Operating income | 143,476 | 134,457 | 6.7 | -Income increased due to favorable currency translation because of the weak yen, and due to effective cost-cutting initiatives, in spite of increased amortization and depreciation expenses (due to prior investments) and increased R&D expenses. |
| Ordinary income | 165,658 | 160,597 | 3.2 | |
| Profit for the year attributable to owners of the parent | 91,001 | 119,771 | (24.0) | -This year’s results compared to those of the previous year are significantly lower because in the last fiscal year the Company posted an extraordinary profit from the sale of stock it held in Sumitomo 3M (which is currently 3M Japan). |
| Automotive Business | ||||
| Sales | 1,541,985 | 1,488,214 | 3.6 | - Sales increased because of strong demand for automotive wire-harnesses and anti-vibration rubber, mainly outside Japan such as in the USA. Note: The results for both years include inter-segment sales and transfers. |
| Operating income | 88,654 | 89,252 | (0.7) | -Sales were lower because employee-retirement benefit expenses temporarily increased at some of the wire-harness subsidiaries as a result of the Bank of Japan’s implementing a negative-interest policy. |
R&D Activities
Lightweight aluminum wiring harnesses
-Sumitomo Wiring Systems, Ltd. (in Yokkaichi City, Mie Prefecture) aims to increase the sales of lightweight aluminum wiring harnesses to 10% of its entire harness sales by the fiscal year to end in March 2018 (FY 2017). The aluminum wiring harness offers an approximately 50% reduction in weight compared to wiring harness made of copper wires. The company began supplying its aluminum wiring harnesses to Toyota Motor Corporation in 2010. Initially, the aluminum wiring harnesses showed disadvantages in vibration resistance and corrosion resistance compared to copper-made products. The aluminum wiring harness now offers increased durability after many improvements have been made. The Company, the parent company of Sumitomo Wiring Systems, has also decided to increase the monthly production capacity of aluminum wires at its Thai plant to 300 tons, which is about five times the present capacity, by FY 2016. Sumitomo Wiring Systems will propose its product to manufacturers in Japan, the U.S. and Europe to achieve its sales target. (From an article in the Nikkan Jidosha Shimbun on November 25, 2014)
Power transistor
-The Company has developed a new power transistor it calls "V-groove metal oxide semiconductor field effect transistor (VMOSFET)." The transistor is made of silicon carbide (SiC) and has a proprietary structure. It has low on-state resistance characteristics because it utilizes a special plane orientation (0-33-8) for the channel that turns the electron flow on and off so as to form an oxide film interface with a low-defect structure. The low-defect characteristics of the transistor also result in high stability. The new transistor will be suitable for electric and hybrid vehicles, as well as solar power conditioners. (From a press release on June 4, 2015)
Contracts
-The gasoline engine version of the all-new Honda Shuttle compact wagon uses a high-performance capacitor system, which offers a 20 percent improvement in regenerative power efficiency. Charge-discharge controllers for the capacitors are provided by the Company. The vehicle's automatic engine stop-start system uses a dedicated lead-acid battery, which enables the capacitor system to provide all energy needed to power the rest of the vehicle's electrical systems. Such high performance was proved under JC08 testing. (From an article in the Nikkan Jidosha Shimbun on May 16, 2015)
Awards
| OEM | Name of Award | Details of Award |
| Toyota | Superior Award | - Sumitomo Electric Wiring Systems, which is under the umbrella of Sumitomo Electric Industries, won the award. |
| Nissan | Japan Regional Quality Award (Electric Category) | -The Company won the award, which is the second time for the Company. |
| FCA | Excellent Supplier of the Year Award (European Electronics and Electrical Component Segment) | -Sews Cabind, a subsidiary of the Company, won the award |
Change in Shareholding Ratio
-Toyota Motor Corporation (Toyota) announced that the Company, Aisin Seiki Co., Ltd. (Aisin), Denso Corporation (Denso) and Toyota have agreed to increase the capital and adjust the share-holding ratio of Advics, Co., Ltd. (Advics), a brake manufacturer in Kariya, Aichi Prefecture. In September 2016, Advics will issue new stocks of JPY 10.338 billion through third-party allocation with Aisin, Toyota, and Denso underwriting the sale. At the same time Sumitomo Electric will transfer a portion of its holdings to Denso. As a result, Aisin's stake in Advics will change from 55% to 51%, Denso's stake from 18% to 34%, and the Company's stake from 18% to 6%. Toyota's stake will remain unchanged at 9%. The increased capital will be used to strengthen Advics' business foundation. (From an article in the Nikkan Jidosha Shimbun on May 2, 2016)
R&D Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2016 | FY ended Mar. 31, 2015 | FY ended Mar. 31, 2014 | |
| Overall | 110,839 | 105,604 | 99,520 |
| -Automotive Business | 68,402 | 64,431 | 62,069 |
-The Company is planning to spend a total of JPY 110,000 million companywide for R&D expenses in the fiscal year ending in March 2017. It plans to spend JPY 68,000 million for the automotive segment. This is the same amount that the Company spent last year, which was the highest ever.
R&D Activities
Wire harnesses / In-vehicle electronic equipments
-R&D activities are mainly conducted at AutoNetworks Technologies, Ltd., which is jointly owned by the Company and Sumitomo Wiring Systems, Ltd. R&D activities are mainly focused on developing new products meeting safety, comfort and environmental needs.
-Wire harnesses:
- The Company is building harness architectures that can be mounted in next-generation vehicles' onboard systems, conducting R&D activities on elemental technologies needed to meet this need.
- Also, in order to reduce vehicle weight and be environmental friendly, the Company is developing lighter weight harnesses. It has succeeded in this area, developing and starting mass-production of harnesses using aluminum, which is lighter in weight than copper.
- Moreover, the Company is continuing its R&D activities on high-voltage harnesses, connectors, battery wiring modules and so on for the growing EV/HEV sector.
-In-vehicle electronics devices:
- The Company is now developing electronics devices such as PDs (power distributors) and next-generation in-vehicle LAN (Local Area Network) units in order to respond to the rapid advances taking place in IT. The Company is also launching systems with advanced features and/or networking capabilities.
- Development of technology that satisfies high safety standards and development of new products for next-generation vehicles.
- Production of cell gaskets, which are made of a rubber sealing-material for fuel-cell stacks mounted on fuel-cell vehicles; and continued development of technology to improve the material’s performance.
Capital Expenditure |
(in million JPY) |
| FY ended Mar. 31, 2016 | FY ended Mar. 31, 2015 | FY ended Mar. 31, 2014 | |
| Overall | 167,282 | 148,213 | 150,823 |
| -Automotive Business | 76,274 | 75,561 | 88,237 |
-Capital investment in the automotive business to increase and streamline production of wire-harnesses and anti-vibration rubber.
Planned capital investment (FY ending March 2017)
-JPY 200,000 million companywide
-JPY 87,000 million for automotive business
Outlook for FY ending Mar. 31, 2017 |
(in million JPY) |
| FY ending Mar. 31, 2017 (Forecast) |
FY ending Mar. 31, 2016 (Actual Results) |
Rate of Change (%) |
|
| Sales | 2,950,000 | 2,933,089 | 5.8 |
| -Automotive Business | 1,480,000 | 1,541,985 | (4.0) |
| Operating income | 160,000 | 143,476 | 11.5 |
| Ordinary income | 185,000 | 165,658 | 11.7 |
| Profit for the year attributable to owners of the parent | 100,000 | 91,001 | 9.9 |
-The Company plans to implement the following policies for the automotive business during the fiscal year ending Mar. 2017:
- Develop and increase sales of high voltage harnesses for Green Vehicles; and electric components for electronic control units/systems.
- Increase sales to non-Japanese OEMs and raise productivity worldwide.
- Maximize the synergy effects; grow the business; and increase sales and profits at Sumitomo Riko, which acquired business operations outside Japan.
>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income, etc.)
Mid-term Management Plan
-The financial targets for 17 VISION , the mid-term management plan that ends in the fiscal year ending March 2018, are as follows:
| (in billion JPY) |
| FY ending Mar. 31, 2017 (Forecast) |
FY ending Mar. 31, 2018 (Targeted by end of Mid-term Plan) |
|
| Sales | 29,500 | 3,300.0 |
| Operating income | 1,600 | 200.0 |
| Operating profit margin | 5.4% | more than 6.0% |
-The Company has revised its mid-term business plan called "Vision 2017", which covers up to FY 2017 that ends in March 2018. The Company has revised upward its financial targets, citing changing business environment and a weaker yen as the major reasons. New targets are set as follows: sales of JPY 3.3 trillion; operating profit of JPY 200 billion; and return on assets (ROA) of 9 percent or more. In addition, the Company has established a new goal to achieve return on equity (ROE) of 8 percent or more. In accordance with the plan, the Company's automotive division aims to serve as a comprehensive auto parts supplier in the global market. It is poised to increase its market share especially in the wire harness, connector, and anti-vibration rubber business, aiming to add more non-Japanese customers. The Company will also focus on increasing automotive electronics sales other than harnesses. (From an article in the Nikkan Jidosha Shimbun on May 27, 2015)
Automotive Business
-Vision: to become a comprehensive automotive parts supplier.
-The strategies for the revised quantitative objectives are provided below.
1) Increase the share of sales to non-Japanese OEMs
- Increase its market share of harnesses, connectors, and anti-vibration rubber
2) Speed up new product development
- Better respond to the need for weight reduction (aluminum harnesses, etc.) and more modularization
- Increase sales of electronics products (central gateways, etc.)