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President’s 2018 New Year’s Message

January 5, 2018

New Year’s greetings to everyone.

Last year, the Japanese economy continued on a mild recovery path, making gradual gains in both consumer spending and capital investment against a backdrop of improved corporate performance, employment and incomes. On the other hand, there were items of grave concern. North Korea repeatedly fired off ballistic missiles, posing a serious menace to Japan, while scandals involving quality control irregularities were exposed, casting doubt on Japan’s manufacturing prowess. Across the Pacific, U.S. President Donald Trump, who has touted “America First” policies since his inauguration one year ago, announced his nation’s withdrawal from the Trans-Pacific Partnership free trade agreement and the Paris Agreement on climate change, sending Japan and the rest of the world scrambling to deal with resulting confusion.

Business projections for fiscal 2017

Looking at our performance in the first half of the 2017 fiscal year, Fujikura’s in-house Automotive Products Company saw a steep decline in profits due to rising costs associated with a labor dispute at its Eastern European production hub. On the other hand, the Power & Telecommunication Systems Company showed outstanding performance thanks to robust demand for optical fibers and related products in the global market, while the Electronics Business Company succeeded in establishing a strong business model focused on large clients. Earnings from these companies more than supplemented the decline from the Automotive Products Company, pushing our profits higher than projected. In the April-September period, the ratio of operating income to net sales was 4.9 percent, compared with a projected 4.7 percent. Thus we were able to maintain or strengthen our earning power for the first half of the fiscal year.

Tasks for each in-house company

The Power and Telecommunication Systems Company builds up its production capacity for optical fibers, while promoting sales and increasing production of our strategic product—Wrapping Tube Cable with Spider Web Ribbons (SWR/WTC). The structural reform of our power business is mostly completed during the current fiscal year. In addition, we accelerate our moves to tap into future growth fields, such as overseas Engineering, Procurement and Construction (EPC) projects to further improve the ratio of operating income to net sales. The Electronics company lives up to the deep trust our clients have placed in our products by putting quality at the core of their operations while continuing to cut costs, so our core businesses can achieve further growth. The Automotive Products Company needs to address its steep deterioration in profitability, while reviewing and rebuilding its business foundation so it can return to growth.

Progress made in 2020 Mid-Term Business Plan

The first is the development of deeper ties with strategic customers. One example concerns our strategic product, SWR/WTC optical fiber cable.The SWR/WTC technology has allowed us to drastically increase the number of optical fibers installed in a cable core.This product not only offers a multiple-core, but also eases the burden associated with the installment of cables. These factors have helped deepen our clients’ trust in us.
The second point is the creation of new businesses. Fujikura Dia Cable has cultivated the market for “diagnostic services” that check on the state of cables installed in factories and buildings, while developing related products .Our WABE Package, a super-compact and highly dense base part inside a component, has found some customers in the medical field, a new business horizon for us.
Open innovation is my third point. To create new value and accelerate our reinvention, we are trying to innovate through collaboration with venture companies and other firms.
Fourth, I would like to talk about management reform and business structural reform. In June 2017, shareholders approved the transition of Fujikura into a company with an Audit and Supervisory Committee as stipulated by law to speed up management decision-making and strengthen monitoring and supervision. As part of management reform, greater authority was handed to executive directors to accelerate the decision-making process, while the number of outside directors was increased from one to four to beef up oversight functions. To increase management transparency, we have established advisory boards made up of mostly outside directors to review the appointment and compensation of board members. In addition, we have put a priority on establishing sounder corporate governance systems for all the group companies during the current mid-term period. In the second half of this fiscal year, we will begin creating frameworks, rules and mechanisms to help the entire Fujikura Group work coherently as if it were a single company, with the aim of achieving sustainable growth for many years to come. We are set to complete the structural reform during the 2020 mid-term period. As part of the reform, we established Fujikura Dia Cable, ended a joint venture with Viscas Corporation and completed the reform of the Power Business in fiscal 2016. In completing the reform program, we aim to transform our company into a powerful business entity.

Research and development

We have strengthened the three platforms that constitute Fujikura’s technological foundation—wire& cable, optical and electronic components. By making the best use of the manufacturing technology the company has nurtured for optical fibers in telecommunications, we have elevated our high-output fiber lasers for processing equipment to among the best in the world. We also developed a 5kW single-mode fiber laser that enables the kind of processing that is considered difficult with conventional lasers. We also developed a system that requires no electricity source or telecommunication functions, which combines a dye-sensitized solar cell with a wireless sensor system. The system is designed to contribute to the expansion of Internet of things (IoT) infrastructure. Furthermore, we are focusing on research and development of millimeter-wave technology as a fourth platform.

Thanks to the steady implementation of business measures, we are on track to achieve our goal for fiscal 2020 of the ratio of operating income to net sales of more than 7.0 percent. To achieve this, all 57,000 employees of the Fujikura group in 29 countries must work as a team toward a common goal. Fujikura will use its high earning power and ability to reinvent itself to create customer value Let us continue to work together in the coming year to create a promising company with future.

Let’s do our best in 2018, while keeping ourselves upbeat, healthy and resilient.