January 5, 2017

I would like to wish everyone a Happy New Year.

Last year started with the yen-USD currency rate at 120 yen but by August it was 100 yen. This environment of yen appreciation negatively impacted the earnings of not only our company, but of the entire Japanese export industry. Furthermore, consumer spending remained sluggish as overall the Japanese economy has to see full-fledged recovery. Overseas, with the impact of Britain’s decision to exit the EU, both expectations and concerns over Mr. Donald Trump being selected as the next president of the United States, and the threat to the very realization of the TPP, the future presents increasingly less transparency. We are facing a time in which we must be ever diligent.

The first half of the fiscal year was a severe market environment that resulted in a decrease in revenues and income compared to the previous year. This mainly was due to sudden yen appreciation and a drop in demand in the electronics business. However, operating income increased compared to original targets despite a decline in sales thanks to our success in improving productivity, and other measures. Our operating margin was 4.5%, which compared to the target 3.6%, indicates that we are maintaining and enhancing our ability to generate profits. During the second half of the year, we anticipate that conditions in our operating environment will remain severe due to a continuing lack of transparency with currency trends and demand trends among major customers. Our ability to generate profit will continue to be tested.
I would like every in-house company to work on the following initiatives. First, I would like the Power & Telecommunication Systems Company to respond rapidly to the firm global demand for optical fiber. In the energy business, I would like you position strengthening our EPC business in Myanmar and other emerging markets as a cornerstone of our growth strategy while also promoting further structural reforms for our domestic electrical wire business. In the Electronics Business Company, I ask that you rapidly ascertain customer needs, produce samples and establish mass production systems corresponding to models for next fiscal year, and strengthen quality control systems for our large-volume customers.
I would like the Automotive Products Company to achieve the successful launch of the LCC manufacturing sites, and advance business development targeting Chinese car manufacturers. At the same time, I would like you to position our response to the coming age of EV as a company-wide issue and collaborate with R&D unit and other in-house companies to make advancements in this area.

The four core strategies of the 2020 Mid-term Business Plan are 1) developing deeper ties with strategic customers, 2) speed up new business creation, 3) promote open innovation, and 4) implement management and business structural reforms. Specifically, developing deeper ties with strategic customers involves strengthening our EPC and service business transactions with major communications companies overseas. We are developing business in a way that enables us to accurately identify the value desired by customers and provide total solutions.
We also are offering SWR/WTC optical cables to core clients overseas. SWR/WTC are our newly developed thin, lightweight optical cables that are easy to install and easily adapted to suit customer needs.
In the area of business structural reforms, to secure stable income for the domestic electrical wire business, we have been advancing with the restructuring of VISCAS Corporation and business consolidation, including manufacturing for Fujikura Dia Cable. For management reforms, we have allocated significant authority to directors with managerial roles in order to speed up the decision-making process. Furthermore, we are in the process of enhancing a system to support management decisions by strengthening the supervisory functions of our board of directors. We also are implementing reforms to our human resources systems to order to reflect changes in our business environment and the labor environment in order to create an energetic and motivational work environment for our employees, our most important asset.
In the area of R&D, instead of focusing on detached domains, we will secure the superiority of “Tsunagu (connecting)" technology by strengthening three technology platforms – electrical wires and cables, optical, and electronic products. Furthermore, we will promote R&D aimed at expanding new business in the medical, industrial equipment, and automotive products segments. Furthermore, by developing deeper ties with strategic customers and promoting open innovation, we will identify social changes and customer needs ahead of our competitors to create the new technology and new products desired by our customers. In doing so, we further accelerate our ability to achieve powerful innovation.
Through the continued implementation of these strategies, achieving our goal of becoming a high profit company with an operating margin of 7.0% or higher by 2020 can go from being a dream to a reality. Let’s work as a team to make our dreams come true!
Let's transform ourselves, and bridge to the future! 2020 Mid-term
Let’s all work together to make this another healthy, successful year!