P. 5 CONTENTS To Our Shareholders ············· 1 Overview of Group Companies ··· 10 Performance Highlights ·········· 3 Looking Internationally ·········· 11 Business Topics ···················· 5 Places Associated with Sumitomo ··· 13 CSR Initiatives ······················· 7 Corporate Profile / Stock Information ··· 14 General Manager Interview ··· 9 P. 5 Sumitomo Corporation Business Report SCThe 1st Half of 148th Newsletter to Shareholders April 1, 2015 through September 30, 2015 Stock Exchange Code: 8053 P. 7 To Our Shareholders To implement managerial reform and promote a growth strategy, and to outline a path toward the realization of “What We Aim to Be” President and CEO Kuniharu Nakamura Summary of Business Performance oversupply. Although the Japanese economy for the First Half of Fiscal 2015 stalled due to flat personal consumption and the impact of the slowdown in emerging economies on Consolidated net income ¥129.3 billion, the export and production fronts, appetite for capital expenditure recovered due to improvement achieving 56 percent of the annual forecast in corporate performance. During the period under review (the first half of In this environment, consolidated net income for fiscal 2015, i.e. April 1, 2015, through September the first half of fiscal 2015 amounted to ¥129.3 30, 2015), on the global economic front, although billion, achieving 56 percent of the annual forecast the United States was on a recovery track backed of ¥230.0 billion for fiscal 2015 set out in the by strong domestic demand, the Eurozone medium-term management plan, “Be the Best, Be economy remained sluggish despite signs of the One 2017” that began in April 2015. recovery due to quantitative monetary easing and In addition to one-off profits stemming from currency depreciation. Furthermore, the pace of asset replacements and business reorganization, economic growth slowed in China posing a steady growth continued in our “earnings pillars” considerable impact on surrounding countries in such as core businesses in Transportation & Asia, while Central and South America saw a delay Construction Systems segment and media-related in economic recovery as a result of stagnant domestic group companies, despite a downtrend in mineral resource prices and monetary tightening earnings of tubular products business and mineral stemming from high inflation. Prices in international resources businesses due to a drop in oil and commodity markets were weak overall due to mineral resources prices. 1 regarding basic profit and cash flow, with 50 yen per With regard to managerial reform, as the first step in Fiscal 2015 Business Performance Forecast share as the minimum amount of annual dividend improving the decision-making process, the and a consolidated payout ratio of 25% or more as Management Council has been positioned as the top Consolidated net income forecast of ¥230.0 billion our reference. As we initially announced, the annual decision-making body on business execution matters As regards the global economy, modest growth is dividend for fiscal year ending March 31, 2016 will from July 2015, therefore establishing a system under expected to continue in the U.S. and other developed be 50 yen per share (the annual dividend for the which decisions on important matters are made through economies but there is greater uncertainty about the previous term was 50 yen per share). Therefore, the more multifaceted discussions. At the same time, we future, including concerns about slowing growth in interim dividend for fiscal year ending March 31, have strengthened the supervisory functions of the some emerging economies and the possibility of a 2016 is 25 yen per share, half of the amount of Board of Directors for management execution as well. long-term decline in mineral resources prices. Looking planned annual dividend (the interim dividend for the Furthermore, in our risk management system, for at our business performance in this context, although previous term was 25 yen per share). large-scale and particularly important projects, we have we expect the difficult business climate for our established a process to deliberate at multiple stages tubular products business in North America and Annual dividend per share and different levels. Through this process, projects will mineral resources businesses to continue in the be discussed several times by the Loan and Investment :Year-end dividend (Yen) second half of the fiscal year, owing to the impact of :Interim dividend Committees at both the business unit level and the 60 falling oil and mineral resources prices, we expect that 50 company-wide level as well as in the course of our core businesses in Transportation & Construction 50 (forecast) examining and executing projects, thereby enable in 46 47 Systems; and Media, Network, and Lifestyle Related 45 25 25 depth discussions from various perspectives based on 21 24 (forecast) Goods & Services segments continue to show robust their business feasibility and strategic position within performance. Therefore, we have not revised our associated divisions. 30 annual forecast of 230.0 billion yen for consolidated As for promotion of a growth strategy, we are 25 net income in fiscal 2015. Because of the ongoing 23 25 25 carrying out growth strategies in each of the mainstay decline in oil and mineral resources prices, there is a 15 businesses, including the metal products, transportation, possibility that we may post impairment losses in and media businesses, while also focusing company- some projects for the second half of the fiscal year, 0 wide organizational collaboration on the three areas of The 145th year The 146th year The 147th year The 148th year depending on future changes to medium to long-term FY2012 FY2013 FY2014 FY2015 automobiles, infrastructure, and lifestyle and information price forecasts for relevant commodities and any services. Furthermore, we have identified high-potential revisions to business plans. industrial fields and regions, and are making efforts to discover, develop, and cultivate new businesses on a Dividend Policy Progress of Medium-Term Manage- company-wide basis. As a result, the Thilawa industrial park and the telecommunications business have been Sumitomo Corporation aims to increase dividends by ment Plan realized in Myanmar. achieving medium and long-term earnings growth We will push forward steadily with the managerial while adhering to its fundamental policy of paying Initiatives under “BBBO2017” reform and growth strategy set out in “BBBO2017,” and shareholders a stable dividend over the long term. Under the medium-term management plan outline a path toward the realization of “What We Aim During the “Be the Best, Be the One 2017,” the “BBBO2017,” our efforts are focused on implementation to Be.” We sincerely request the ongoing understanding, current medium-term management plan, we decide of managerial reform and promotion of a growth support and encouragement of all our shareholders. the dividend amount in view of the situations strategy. 2 Performance Highlights Changes in primary management indicators Gross Profit Consolidated Net Income or Loss Consolidated Net Income or Loss per Share ¥462.6 billion ¥129.3 billion ¥103.64 :First half :First half :First half ■ 920.0 ■ ■ ■ :Year-end 952.9 (forecast) ■ :Year-end ■ :Year-end 894.4 230.0 184.34 8 2 7. 0 232.5 (forecast) 223.1 185.92 178.59 (forecast) 433.8 450.3 462.6 129.4 129.3 396.5 116 . 6 103.54 93.25 103.64 (Billions of Yen) (Billions of Yen) (Yen) (38.4) (30.78) 0 0 0 (73.2) (58.64) The 145th year The 146th year The 147th year The 148th year The 145th year The 146th year The 147th year The 148th year The 145th year The 146th year The 147th year The 148th year FY2012 FY2013 FY2014 FY2015 FY2012 FY2013 FY2014 FY2015 FY2012 FY2013 FY2014 FY2015 Total Assets Shareholders' Equity Interest-Bearing Liabilities (Net) / Debt-Equity Ratio (Net) Interest-Bearing Liabilities (Net) Debt-Equity Ratio (Net) ¥8,612.6 billion ¥2,475.6 billion ¥3,390.6 billion 1.4 times 2,404.7 2,481.4 2,475.6 3 , 5 1 7. 5 3,390.6 8,668.7 9,021.4 8,612.6 3,123.5 7, 8 3 2 . 8 2,052.8 2,930.3 1.4 1.3 1.4 1.4 (Billions of Yen) (Billions of Yen) (Billions of Yen) (Times) 0 0 0 The 145th year The 146th year The 147th year The 148th year The 145th year The 146th year The 147th year The 148th year The 145th year The 146th year The 147th year The 148th year Mar. 31, 2013 Mar. 31, 2014 Mar. 31, 2015 Sep. 30, 2015 Mar. 31, 2013 Mar. 31, 2014 Mar. 31, 2015 Sep. 30, 2015 Mar. 31, 2013 Mar. 31, 2014 Mar. 31, 2015 Sep. 30, 2015 Glossary of terms Interest-bearing liabilities (net) Debt-Equity Ratio (net) Gross interest-bearing liabilities (bank borrowing, corporate bonds, commercial paper, etc.) that must be The value of interest-bearing liabilities (net) divided by shareholders’ equity; an indicator of repaid with interest, minus cash and cash equivalents. financial soundness. *In this publication, “consolidated net income or loss” corresponds to “profit or loss for the year attributable to owners of the parent” under IFRS and “shareholders’ equity” corresponds to “equity attributable to owners of the parent.” 3 Further details can be found on our website at: http://www.sumitomocorp.co.jp/english/ir/ Sumitomo Corporation IR Search Changes in primary management indicators Consolidated net income or loss by segment / Overview Be the Best, Be the One 2017 (Billions of yen) Overview Metal Products Business Unit 9.4 Posted profit of 9.4 billion yen, a decrease of 6.8 billion yen from the same period of the previous year. Although the operation of overseas steel service Theme centers showed stable performance, tubular products 26.6 business in North America decreased in earnings. To make group-wide efforts in overcoming issues and to outline a path Transportation & Construction Systems Business Unit Posted profit of 26.6 billion yen, up by 1.7 billion yen.