Happy New Year.
Looking back on 2021, economic growth was affected by the snarled supply chain, including for semiconductors, and the impacts of the protracted COVID-19 pandemic. Recently, however, we are starting to see signs of a recovery in consumption activities driven by the declining number of COVID-19 cases and easing of restrictions. Although uncertainty persists regarding the future outlook of COVID-19 in Japan given the worldwide spread of the Omicron variant, I hope that Japan’s economy can get back on track toward normal growth after normalizing the supply chain and boosting personal consumption after controlling infections.
Quality and Safety are Fundamental to Corporate Value
More than three years have passed since we announced our product quality issues on August 31, 2018. The Fujikura brand would not be able to recover a second time if another quality incident occurred at the Fujikura Group. I ask that you recognize that the risk of quality issues is always around us and take the time to understand that “quality compliance, including ensuring quality promised to customers, is the very essence of corporate value.”
Following the serious accident that occurred in April 2016, we have worked to achieve the medium-term target of reducing risks to a tolerable level centered on the fundamental safety of equipment. These activities will remain in place. Take the time now to fully recognize that “safety is a tenet of corporate value.”
Next, I would like to discuss our earnings forecast for FY2021. The Group’s management results for the first half included an operating income to net sales ratio of 5.7% and operating income of 18.6 billion yen, both over line with our initial forecast for the first half. This was driven by demand for data centers and FTTx in each country, which offset the impacts of the worldwide semiconductor shortage and reduced operations at some sites due to the COVID-19 pandemic.
In the second half, it appears that demand for data centers and FTTx along with “nesting” demand will remain firm, but the Automotive Products Business has been impacted by reduced automaker production due to the semiconductor shortage along with the spread of COVID-19 in Southeast Asia. As a result, for the full-year, we expect to see an operating income to net sales ratio of 4.7% and operating income of 30 billion yen.
Fujikura abandoned its 2020 Mid-term Management Plan following significant worsening in our financial results in FY2019, and then established the 100-day Plan of structural reforms focused on “strengthening governance” and “unreserved selection and concentration of existing businesses,” which we have been implementing. This 100-day Plan was established after repeated discussions by the Management Resource Efficiency Subcommittee headed by me. To date we have established 112 action items. As of the end of 2021, we had already completed or were shoring up plans to complete around 90% of these items.
In terms of “strengthening governance,” as one of our major initiatives, we pushed ahead with management reforms in April 2021. Efforts to speed up decision making while securing governance through changes in the management structure and organizational reforms had a positive impact on our financial results for the first half. In addition, I am carefully managing the company to ensure we do not fall into the same rut of capital investment, which was main cause of the abandoning of the previous Mid-term Management Plan. Going forward, we will share and utilize cases of past failures internally as lessons learned for the next growth phase to avoid the massive investments of the past.
In terms of “unreserved selection and concentration of existing businesses,” the former management team took responsibility in addressing the negative heritage of our past as the primary parties involved.
We have also worked to slim down head office functions following our operational rightsizing. These initiatives are expected to yield 14.5 billion yen at the end of FY2021 in fixed cost reduction effects for our turnaround. We will now aim to reach our remaining reduction targets before the end of this fiscal year.
Toward the Next Growth Phase
In the next growth phase we will be reborn as a “new Fujikura.” The “new Fujikura” will concentrate on its capabilities in growth businesses and aim for a “strong corporate structure” with effective governance. In other words, under the Group’s management philosophy of MVCV, we will transform into an organization that respects diversity, where everyone understands their own existential value and they provide high added value to work, and works with drive and passion in global business.
Now is the time to raise the banner of the “new Fujikura.” All of you need to rethink your approach to work and question whether your own work is producing added value that will benefit our transformation into the “new Fujikura.” Everyone must understand their own mission, offer momentum toward reform, and engage in work while “taking a half step forward.” This will lead to improvement of our corporate value.
Let's unite as one Fujikura Group to improve corporate value and remain a sustainable company.