I would like to begin by extending a special thank you to all of our shareholders for your ongoing support of the business activities of Sumitomo Metal Mining Co., Ltd. (SMM)
In fiscal 2015 – the year ended March 31, 2016 – the world economy saw a slowdown in the pace of growth of the Chinese economy, and deteriorating economic conditions in resource producing countries.
With regards to non-ferrous metals, the price of copper and nickel fell drastically due to concerns over the slow down in the Chinese economy and uncertainties about the future. Copper saw a 20% year-on-year fall while nickel fell by 38% year-on-year, resulting in a considerably lower price compared to the previous year. Overall, the price of gold varied within a small range.
In the materials business, materials for electronic components for smartphones and materials for automotive batteries continued to perform well.
Against this backdrop, sales in this term fell 7% year-on-year to 855.4 billion yen due to factors including the drop in metal prices. Operating income also fell 53% to 59.7 billion yen due to factors including the fall in metal prices and the resulting aggregated total inventory valuation losses. Recurring loss was 12.8 billion yen due to the aforementioned factors combined with impairment losses at the Sierra Gorda S.C.M., exchange losses due to a rapid strengthening of the yen in the end of this term, and other such factors. Net loss attributable to owners of parent was 300 million yen.
The decision was made in 2009 to implement the project at Taganito HPAL Nickel Corporation (Philippines), and full operation was started in fiscal 2014, which was in the course of the 2012 3-year Business Plan. Production thus far has been and continues to be smooth. The decision was made in 2011 to participate in the Sierra Gorda Copper Mine (Chile), and while the mine has been in commercial production since July 2015, in addition to commercial production having been delayed, achievement of the targeted recovery rate is behind schedule and the price of metals has fallen, which has resulted in impairment losses being recorded.
While the strategy for securing interests in metal resources as stated in the long-term vision has made progress, improvement is still required in terms of performance.
In such circumstances, SMM reached an agreement with Freeport-McMoRan Inc. in February 2016 to increase SMM's 12% interest in the Morenci Copper Mine (USA) by an additional 13%, and the procedures for this were completed in May. The Morenci Copper Mine has a long history, and is in the world's highest class in terms of production volume. The mine operates stably, and we believe that it will henceforth become very important in terms of SMM's mineral resources business.
Against the backdrop of a business environment undergoing significant change, SMM unveiled the 2015 3-Year Business Plan in February this year. With regards to the mineral resources business and smelting and refining business, the long-term vision states a target of 300,000 metric tons of copper interests, 30 metric tons of gold interests, and a 150,000 metric ton production capacity for nickel, and progress has been made to expand interests as such since the 2009 3-Year Business Plan. This policy remains unchanged in the 15 3-Yr Plan.
The future of metal prices is currently unclear, but SMM aims to steadily obtain profit by sustaining and improving productivity in order to take full advantage of the strategy and increased investment implemented thus far. As well as proactively taking forward explorations focusing mainly on gold, the acquisition of existing mines shall also be considered to increase resource interests.
With regards to the materials business, a new battery materials production site was completed in March this year in the form of Sumiko Energy Materials Co., Ltd.'s Nahara Plant (Fukushima prefecture). Demand for materials for automotive batteries is expected to increase henceforth. It is also expected that demand for crystal materials for smartphones and other products in the information and communication field as such products become increasingly functional. As such, SMM shall increase production of battery materials and crystal materials in these growth areas.
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 stakeholders. The SMM Group will continue to make the utmost effort to implement its growth strategy as it has in the past, based on economic conditions and the business climate. Based on our motto, "deeds, not words," we will fulfill our objectives in an effort to further increase our corporate value.
We will actively distribute information relating to projects as well as new products and technologies in order to familiarize stakeholders more deeply with SMM and retain your trust.
We look forward to the continued support and understanding of stakeholders in these endeavors.
President & Representative Director