Fujikura : 2017 President’s Message

January 5, 2017

Our 2020 Mid-term Business Plan Slogan -

Let's transform ourselves, and bridge to the future! 2020 Mid-term

As a customer value creating company, we will become a promising company with a future through both 'strong earning power' and 'power of strong metabolism'!

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 among major customers 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, and our ability to generate profit will continue to be tested. Regardless of scale, we will focus on profitability as we strive to maintain and improve our earning power.

To achieve further growth in FY2017, I would like employee 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. This includes responding to the transition towards costs being accounted based on the US$ and strengthening the earthquake resistance of our facilities. We also need to see solid initiatives aimed at achieving profitability for the fiber laser business. In the energy business, I would like you position strengthening our EPC business in emerging markets as a cornerstone of our growth strategy while also promoting further structural reforms for our domestic electrical wire business. We must maintain an objective awareness of maturing domestic markets and focus on realigning our position. 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. Furthermore, I would like you to clarify the roles of our domestic offices and continue advancing efforts to improve profitability.

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 want 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. At AFL, I would like you to continue focusing on FTTx network architecture and business for data centers. Ensure progress management for each business and aim for further growth. At Fujikura Dia Cable, I would like you to implement structural reforms and achieve further productivity improvements as you aim to maximize the synergy generated through consolidation and work rapidly to create a solid business structure.
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 by 2020 can go from being a dream to a reality. Let's work as a team to make our dreams come true!

Lastly, I would like to touch on health, safety, and risk management. It is with great sadness there have been numerous work-related accidents. To respond to these, we have established Fujikura Intrinsic Safety Measure Team to promote safety activities and are having various measures and activities implemented at each worksite. However, the most important response is for every employee to increase our individual safety awareness. Safety is the first priority in all things. Only through safety can we function as a company. I would like every employee to keep that in mind as you undertake your daily work activities.

Also fresh in our minds are the earthquakes that occurred last year in Kumamoto and Tottori. It was a painful reminder that we are living and operating a business in an earthquake-prone country. Since the Great Japan East Earthquake, we have worked continuously to prepare for disasters and have established our BCP/BCM but I would like to reinforce the importance of regular inspections and the continued need to strengthen our preparations.

Let's all work together to make this another healthy, successful year!