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President’s 2019 New Year’s Message

January 7, 2019

New Year’s greetings to everyone.

First, I wish to sincerely apologize for the cases of impropriety related to the quality control that occurred with some of our group’s products last year, which not only damaged the trust of our customers and society, but caused our group’s employees and your families worry and trouble.

I deeply regret that such incidents occurred in spite of our constant messaging on safety as the essence of corporate value and the importance of legal compliance and risk management. As we eliminate bad habits and reinforce our company’s ethics and quality control to help build new corporate value, and the entire Fujikura Group takes corrective action to make sure these incidents never happen again, we work on regaining the trust of our customers and stakeholders.

Last year, the Japanese economy continued to show improvement in corporate performance, employment, income and other areas, maintaining a mild recovery path. Overseas, U.S. President Donald Trump raised tariffs on and took other actions against Chinese products, making some believe his actions will not only correct trade imbalances, but change the existing global order. The possible ramifications of these moves are worrisome.

Business projections for final 2018

In the first half of the fiscal year, increased demand of the Electronics Business Company’s flexible printed circuits (FPC) for smartphones and the launching of new models by the Automotive Products Company raised revenue for the group as a whole. However, the end result was not positive, as the ratio of operating income to net sales decreased considerably by 1 percentage point from last year to 3.9% due to major cost increases in power transmission line construction in Bangladesh and reduced demand for optical connection components for data centers. For the whole fiscal year, we expect an operating profit ratio of 4.2%, thanks to progress in reviving our engineering, procurement and construction (EPC) business and in regenerating the Automotive Products Company’s business in Europe.

Tasks for each in-house company

The power business accelerate structural reform and rebuild its EPC business. The telecommunication business top priority is recouping our investment. However, the market environment has worsened. Therefore, differentiating our products and technologies is important. We respond rapidly to changing conditions.

The electronics business improve product yields to further increase profitability, and to make steady progress on preparing models for next fiscal year.

The automotive products business continue rebuilding its business in the European block. And, by working with our corporate R&D department and other In-house Companies, we increase its engagement in new energy vehicle (electric vehicles, EV) and non-electrostatic discharge (except for WH assembly) businesses.

Efforts aimed at meeting the goals of the 2020 Mid-term Business Plan

The average operating profit rate in the first half of the plan (fiscal 2016-18) was 4.7%. The following strategic responses are being taken to fill the gap between this and the Mid-term Business Plan’s goal of 7.0%.

  • In the telecommunications business, we are increasing our focus on developing and creating higher added-value to products that meet customers’ needs in different regions and applications. For SWR/WTC specifically, we developed a WTC for air blown construction method for the European market. We have also started supplying highly flame-resistant WTC and super densely packed WTC with 6,912 fibers/200µm, which will help increase profits.
  • In the electronics business, we are striving to improve yields and increase rates of return, such as by raising automation ratios using internet-of-things (IoT) and artificial intelligence (AI) technology.
  • In the automotive products business, we are trying to rebuild the earning power of our wire harness businesses in each block, and improve rates of return by strengthening our capabilities in non-EDS products and new energy vehicles (particularly EV) as the next mid-term period approaches.
  • We are trying to make the governance in the group more robust by strengthening risk management throughout the company, such as by reexamining how business risk is evaluated, and seeking a management style that avoids major losses.

These initiatives will take us step by step toward our goals.

Research and development

We are continuing to make progress in how we select and focus on R&D projects. We are concentrating development resources on projects that seem to offer promising business income, strengthening the technological foundations of existing businesses, developing innovative products, and rapidly creating new businesses by building new technological foundations.

While we have already commercialized fiber lasers, development continues on technologies that will differentiate our products to make them even more competitive. For extremely high frequency technology, we are developing basic technologies and products with the goal of reaching the market quickly, and are pouring resources into developing business models that maximize open innovation. In superconductivity, we are focusing on developing mass-production technology to reach the market in fiscal 2020. In other R&D projects, we are collaborating with outside institutes to make development more efficient and create distinctive, attractive products.

Let’s approach 2019 with an upbeat, healthy attitude, and do our best.