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- Greetings from the President
Greetings from the President
We are very grateful for your continuous support of the business activities of Sumitomo Metal Mining Co., Ltd.
Business Climate in FY2008 and Response
The global economy in FY2008 deteriorated rapidly in the second half of the year due to the financial crisis triggered in the United States and its repercussions on a worldwide scale. Likewise, the Japanese economy experienced a severe downturn as a result of the loss of momentum in exports that had underpinned the economy. There was also a downtrend in the international price of non-ferrous metals, which substantially affects Sumitomo Metal Mining's business performance.
To deal with the rapid changes in the business climate, we have been implementing the "comprehensive emergency management measures" which we put together in November 2008. Specifically, ongoing activities include promoting the careful selection of investments, creative efforts to cut commodity costs and construction expenses, more stringent management of repair costs and facility improvement campaigns at plants. Furthermore, in the non-ferrous metals business, production cutbacks were tackled by reducing production volume in consideration of demand trends and other such factors. In the electronics & advanced materials business, measures were taken including temporary shutdown in line with falling capacity utilization to deal with the plummeting demand. Efforts were made to minimize outgoing expenses and secure earnings based on these measures.
Business Results for FY2008
In FY2008, consolidated sales decreased approx. 30% year-on-year to 793.8 billion yen, due to the fall in sales volume and decrease in price especially for copper and nickel. Consolidated operating income plunged approx. 93% year-on-year to 10.5 billion yen, as a result of falling smelting margins, inventory impairment on the back of plummeting prices and the strong yen, the reduction in sales volume in each division, and other such factors. Consolidated ordinary profits also decreased to 32.6 billion yen, due to such factors as the profit squeeze at overseas mines accounted for by the equity method and the impact of the foreign exchange loss. Sales and profits had largely been as planned until the end of the first half of FY2008, but the rapid deterioration since September 2008 has led to an extremely harsh outcome.
Outlook for FY2009
Major countries around the world are currently implementing massive economic stimulus packages. Given that there are signs of progress in inventory adjustments in response to the plunge in demand, the economy seems to have more or less bottomed out for the time being. It should be noted, however, that the earnings forecast for FY2009 assumes an extremely tough business climate.
In our two core businesses, namely, the mineral resources & non-ferrous metals business and the electronics & advanced materials business, our top priority will be to realize business operations that maximize earnings and minimize costs, while rebuilding our growth strategies. Specifically, we will slash production costs, boost operating efficiency, narrow down investments and mining expenses to strategic projects, and promote "selection and concentration" with respect to unprofitable businesses and products.
Given such a business climate, the FY2009 budget has been calculated stringently on a company-wide scale and thus reduced in amount. However, no reductions have been made to research and development expenses. We will accelerate the pace of development by placing emphasis on releasing new products that would become mainstay items in the future and developing processes to bolster competitiveness. We believe it is also important for the research division and the production division to frequently communicate with each other in order to develop more production-oriented technologies.
Sumitomo Metal Mining's growth to date has in no way been underpinned solely by the business climate; it has also been built up by the efforts made by its employees and the cooperation of its shareholders and other stakeholders. The SMM Group will continue to make utmost efforts in expediting its "growth strategy" as it has in the past, in consideration of the economic conditions and the business climate. Based on our motto, "deeds, not words", we will fulfill our objectives in an effort to further boost our enterprise value.
We will also be mindful of executing management so that we can win shareholders' confidence and attain stable growth. We intend to proactively distribute information on projects as well as new products and technologies to familiarize shareholders more deeply with SMM.
We look forward to your continued support and understanding in regard to our activities.
President & Representative Director
