Fujikura Ltd. ANNUAL REPORT 2012 “Tsunagu” Technologies
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Fujikura Ltd. ANNUAL REPORT 2012 “Tsunagu” Technologies Fujikura Ltd. was established as an electrical wiring company in 1885, when the founder Zenpachi Fujikura overcame the difficulties inherent in wiring by insulating the wires with silk and cotton windings for use in electrical generators—cutting-edge technology at the time. Since then, the Company has always stayed ahead of the times with “Tsunagu“ (connection) technologies, developed through the manufacture of electric wires and cables with the aim of contributing to the advancement of society. Fujikura continues to deliver highly reliable products to the telecommunications, electronics, automotive and energy fields through its numerous advanced technologies. In 2005, the Company’s 120th anniversary, we declared our intent to start anew with the beginning of the “Third 60 Years of Leadership.” We stated our mission to contribute to the creation of a richer society and to create value for customers through reforms to our corporate culture, based on our new “Mission, Vision, Core Values” (MVCV). Now, with our basic management policy centered on profitability, the Fujikura Group is proceeding with its “Focus & Deep” strategy that reinforces craftsmanship in monozukuri (manufacturing), and research as the source of its metabolism, and ensuring that every person in the Fujikura Group works as one to realize the Group’s mission—to create customer value while contributing to society. Special Feature A Message Progress of the 2015 Mid-Term Business Plan from the President & CEO P.2 P.5 P.6 P.7 8 Impact of Floods on 19 Financial Highlights 48 Global Network Fujikura Production in Thailand 21 Management’s Discussion and 49 Main Consolidated Subsidiaries, 9 Fujikura at a Glance Analysis of Financial Position and Investor Information 10 Telecommunications Operating Results 11 Electronics & Auto 22 Consolidated Balance Sheets 12 Metal Cable & Systems 24 Consolidated Statements of Income 13 Real Estate 25 Consolidated Statements of Comprehensive Income Forward-Looking Statements 14 At the Forefront of R&D 26 Consolidated Statements of Changes This Annual Report contains future estimates, in Net Assets targets, plans and strategies by the Company and 16 Corporate Governance Fujikura Group. They are based on judgments 28 Consolidated Statements of Cash 18 Directors, Corporate Auditors and made using information available at the time of Flows writing. For various reasons, actual results may Executive Officers differ substantially from these estimates. Fujikura 29 Notes to the Consolidated Financial disclaims any obligation to update or publicly Statements announce any revisions to these forward-looking 47 Independent Auditor’s Report statements to reflect future events, conditions or circumstances. 1 Fujikura Annual Report 2012 A Message from the President & CEO “Tsunagu” A Message from the President & CEO The damage caused by natural disasters both in Japan and in Thailand, reductions in capital expenditures in electric power, a decrease in vehicle production due to the disruption in the supply chain, and the appreciation of the yen, all had a significant impact on the Telecommunications and Electronics & Auto segments in fiscal year 2011. Yoichi Nagahama President & CEO escalation of regional conflicts and fiercer Please review and competition with companies in emerging What is the current status of Q. summarize FY2011. Q. restoration after the flood countries, Thailand’s worst flooding in damage in Thailand? A. First, let us look at the business more than 50 years, that occurred in environment surrounding the Fujikura early October 2011, forced many of the A. Our electronics business, which Group in the fiscal year under review. electronics business’s production facilities suffered substantial damage and losses In the domestic environment, the Great in Thailand to suspend operations due to due to the devastating floods in Thailand, East Japan Earthquake that struck Japan’s the inundation of plants by flood water, is an important division of the Fujikura Tohoku region on March 11, 2011 caused and drastically reduced revenues and Group. Therefore, it is essential for great damage to production facilities income in the electronics business in the the Fujikura Group to rebuild the of the Fujikura Group. In addition, the second half of FY2011. electronics business. Currently, Fujikura downturn in domestic demand, caused by Electronics (Thailand) Ltd. (FETL) and a reduction in capital expenditure in the Accordingly, the Fujikura Group’s our other affected subsidiaries are on area of electric power and a decrease in consolidated business results for FY2011 track to such recovery. As part of our vehicle production by auto makers due to were as follows: net sales were ¥509 recovery measures, with the clear aim the disruption of the supply chain in the billion, income from operations was of avoiding future flood damage, we first half of FY2011, and the appreciation ¥13.3 billion, ordinary income was ¥9.1 took several options, including installation of the yen against foreign currencies for billion, and net loss was ¥6.2 billion, of flood walls around plant sites, and the full year of FY2011, had a significant after including one-time items such as the full implementation of “second- impact mainly on the Telecommunications insurance proceeds of ¥15.4 billion and floor production” at production sites and Electronics & Auto segments in terms casualty loss in Thailand of ¥23.4 billion. where flood walls are difficult to build. of revenues and income. In the overseas Regarding flexible printed circuits (FPCs), environment, apart from factors such one of our flagship products, we are as the financial crisis in Europe and the rushing to build a new plant in Kabinburi Fujikura Annual Report 2012 2 Industrial Zone, a high-lying area with low risk of flooding in terms of business Please comment on the Please give an overview of Q. progress made with the 2015 Q. business performance in continuity plan (BCP) requirements. We Mid-Term Business Plan. FY2011 and future challenges expect FPC production to be fully restored and measures. to its previous scale in late FY2012 when To accomplish the goals set, we the construction of the new plant is willA. accelerate our “global strategy” in Telecommunications Segment completed. In addition, we established Telecommunications and Electronics & ThisA. business segment recorded Fujikura Electronics Vietnam Ltd. (FEVL) in Auto, and will also promote the “new decreases both in sales and income Vietnam as a risk diversification measure business strategy” to develop and explore in FY2011, due to the appreciation recognizing that our production bases businesses in new areas. We have three of the yen against foreign currencies, were too concentrated only in Thailand, business domains as part of the new intensifying competition in the Japanese and we commenced commercial business strategy. First, we will develop market and impact of the Great East production in January 2012. In terms of businesses in the environment & energy Japan Earthquake. We expect the tough production capacity in the connector domain. We set up a Superconductor business environment to continue in business that was also affected, together Business Development Department with FY2012. To address such a business with the production capacity at DDK a view toward developing an yttrium- environment while improving our (Shanghai) Co., Ltd. (DSL) located in based oxide superconducting wire with profitability—by promoting “Focus & Shanghai, China, and others, we are high superconductivity for practical Deep” in domestic businesses—we going to return to the level achieved applications. Second, in the cloud are going to accelerate global business before the disaster by July 2012. communications domain, we will acquire expansion and carry out overseas Nistica Inc. in the United States, with the infrastructure business with a strong aim of expanding our presence in the data focus on manufacturing optical fiber center market and enhancing our optical preforms, optical fiber cables and Will you need to revise the switch business. Third, in the medical optical components in China, already Q. 2015 Mid-Term Business Plan care/nursing/health care domain, we are commenced in FY2011 because of flood damage to the production bases in aiming to expand our medical equipment Thailand? business. Specifically, we will develop a Metal Cable & Systems Segment fine-diameter endoscope with This business segment achieved revenue The Group will firmly maintain the higher operability (optical fiber, growth in FY2011 thanks to good 6.5%A. or higher operating income margin complementary metal oxide performance in the optical ground wire set out in the 2015 Mid-Term Business semiconductor [C-MOS] sensor modules) (OPGW) business in the United States Plan. However, the business plan for the in order to expand into new business and growing demand in the Japanese electronics business division damaged by fields, such as that of ophthalmic and construction market. In addition, the the flood will be reformulated within the biliary endoscopes. successful turnaround was achieved first half of this fiscal year. primarily thanks to our cost reduction Net Sales and Operating Income Net Sales by Segment (Billions of yen) (Billions of yen) 800 11.4 7.5 700 600 573.6 FY2010 112.3 195.1 195.4 503.5 521.8 509.0 500.0 500 10.9 8.0 400 300 FY2011 106.0 182.1 201.9 200 100 0.2 17.9 16.8 13.3 13.0 0 FY2008 FY2009 FY2010 FY2011 FY2012 Telecommunications Electronics & Auto Metal Cable & Systems Actual Projected Net Sales Operating Income Real Estate Others 3 Fujikura Annual Report 2012 A Message from the President & CEO efforts in manufacturing, logistics, and strategies, in particular, a new plant in sales. While the domestic market is Paraguay that commenced operations expected to remain tough in FY2012, in in November 2011, a second production order to improve profitability, we aim at base in Morocco that will commence an effective restructuring of the business operations in July 2012, and a production structure as defined in the 2015 Mid-Term base in China that will commence Business Plan, as well as to implement operations in July 2012.