Happy New Year.
Last year in 2020, the COVID-19 pandemic raged from the beginning of the year and we have not seen the end of it yet. I extend my deepest sympathies to those who have contracted COVID-19 and pray for their early recovery. I would also like to express my sincere respect for healthcare and long-term nursing care providers on the frontlines who are contributing to the health and welfare of our citizens. I would like to express my gratitude to all of you once again. I pray that these conditions will soon come to an end.
Progress of Confirmation of Safety and Measures to Prevent Recurrence Regarding Cases of Impropriety Related to the Quality Control of a Portion of Our Products
On July 31 of last year, Fujikura made an external announcement of progress on measures to confirm safety and prevent recurrence of cases of impropriety related to quality control. We completed the vast majority of our response to customers since the initial external announcement at end of August 2018. We obtained the understanding of customers regarding the fact that there were no problems with products safety and function for nearly all of the products at issue. In the future, we intend to use the major errors repeated over the course of the past as lessons, take thorough ongoing steps to prevent recurrence of each types of error, and foster an organizational culture in which another act of impropriety in quality control will never occur again.
Fujikura Group business performance during the first half recorded a YoY decline in revenues due to the suspension of production by auto manufacturers under the impact of the COVID-19 pandemic. However, the benefits from business structural reforms in fiscal year 2020, cost reductions and “stay-at-home” demand for digital devices resulted in the YoY increase in operating income to 8.9 billion yen and operating income to net sales of 3.0%.
During the second half, a decline in domestic demand in energy business and continuing impact from the COVID-19 pandemic is expected, however, the benefits from business structural reform, increased sales of Spider Web Ribbon® (SWR®) / Wrapping Tube Cable® (WTC®), which is strategic products of the Telecommunication Business sub-company and AFL, capturing the potential demand expansion for FTTx installation in Europe and the United States and hyperscale data centers worldwide are forecast to result in 11.0 billion yen in operating income and operating income to net sales of 1.8% for the full year.
Fujikura posted the huge net loss in fiscal year ended March 31, 2020. Based on the judgment that the continuation of the 2020 Mid-term Business Plan, which ends in fiscal 2020, may further deteriorate our profit structure, we abandoned the Plan and formulated the "100-day Plan" to transform ourselves into a sustainable business entity.
Under the 100-day Plan, we will revise the business portfolio and business strategy according to the four categories of “Energy business”, “Telecommunication business”, “Flexible printed circuits (FPC)”, and “Wire harnesses (WH)”. In addition, we are going to carry out “Corporate structural reform”, “Reduction of fixed costs & Sale of assets” and “Management reform”.
While I have discussed the selection part of the selection and concentration process, we will pursue “Optical cable business expansion” project as the area in which we will undertake concentration. We will strengthen the optical fiber business as a driver of further growth armed with SWR®/WTC® which is one of our strengths.
Targeting the Next Growth Phase
Opportunities to contribute to society in areas of strength for Fujikura await in the growth phase following the operational turnaround phase. We are looking at areas where Fujikura can utilize its strengths, such as further expansion of the optical solution business, the mainstay of telecommunication systems technology, provision of solutions that use electronic component-related technology in the healthcare area, and FPCs, connectors, and other peripheral products that support sensor systems in automated driving.
Let’s Each Take a Half Step Forward
I will lead the operational turnaround with unflagging determination, but naturally cannot achieve this without the efforts of each and every one of you. First, recheck your current work and think about what work must be done now to achieve an operational turnaround. I believe that changes in the behavior of each individual will provide great strength in the current conditions in which Fujikura must achieve drastic transformation. If the people in the Fujikura Group each take a half step forward, that should provide tremendous strength. I ask each person to take a half step forward without fear of failure.