P. 1 5 CONTENTS To Our Shareholders ·············· 1 Overview of Group Companies ··· 10 Performance Highlights ········· 4 Looking Internationally ·········· 11 Business Topics ······················ 5 Places Associated with Sumitomo ··· 13 CSR Initiatives ························ 8 Corporate Profile / Stock Information ··· 14 General Manager Interview ··· 9 P. 7 Sumitomo Corporation Business Report SCNewsletter to Shareholders for the 148th Fiscal Year [April 1, 2015 through March 31, 2016] Stock Exchange Code: 8053 P. 9 P. 11 To Our Shareholders To further strengthen earning power and improve financial soundness, and to outline a path toward realization of “What We Aim to Be” President and CEO Kuniharu Nakamura Summary of Business Performance investment shows signs of recovery due to improved Fiscal 2016 Business Performance corporate performance. On the other hand, slowed Forecast for Fiscal 2015 growth of emerging economies, and the sluggish exports to Asia led production in the second half of Consolidated net income forecast of Consolidated net income ¥74.5 billion fiscal 2015 to remain stagnant. During fiscal 2015, the global economy reached only In this environment, non-mineral resources ¥130.0 billion moderate growth, with strong growth in developed businesses continued on uptrend in earnings led by As regards the global economy, modest growth is economies offset by more sluggish growth in strong performance of our core businesses, such as expected in the developed economies but there is emerging economies. Uncertainty about the future of media-related domestic group companies and leasing greater uncertainty about the future including the global economy grew stronger with the impact of business. However, the impact of drop in mineral concerns about the slowing growth of Chinese U.S. interest rate hikes and structural changes in the resources prices caused mineral resources economy, acceleration of capital outflow from Chinese economy. For international commodity businesses and tubular products business to some developing countries, and a possibility of a markets, oversupply and slowdown in growth of deteriorate, and a total of ¥195.1 billion of impairment long-term decline in mineral resources prices, which demand put greater downward pressure on prices. losses in mainly upstream mineral resources projects, might slow the recovery of Japanese economy. In Japan, the improved employment and income were posted. As a result, while it is most regrettable, Looking at our business performance, although environment as well as a substantial increase in consolidated net income amounted to ¥74.5 billion, our non-mineral resources businesses, such as foreign tourists supported consumption. Capital compared to our goal of ¥230.0 billion. Environment & Infrastructure and Media, Network, 1 The principal projects that posted impairment losses (in FY2015) projected to be ¥50 per share (interim dividend: ¥25, Amount of Impact year-end dividend: ¥25). on Consolidated Projects Project Outline Main Reason for Impairment Loss Net Income Annual dividend per share (billions of yen) Nickel mining and refining Nickel development and related Decline in the nickel prices and revision :Year-end dividend (77.0) : business in Madagascar business in Madagascar of the long-term business plan (Yen) Interim dividend Iron ore mining project in Investment in iron ore project in South Decline in the iron ore prices and 60 (18.3) 50 South Africa Africa revision of the long-term business plan 50 50 (forecast) Decline in demand resulting from drop 47 Global distributor of metal and tubular Edgen Group (18.1) in the oil prices and revision of the 45 25 25 25 products for energy industry 24 long-term business plan Iron ore mining operations and relevant Iron ore mining project in Decline in the iron ore prices and businesses in the Serra Azul region of (14.6) Brazil revision of the long-term business plan 30 the state of Minas Gerais in Brazil Copper and molybdenum Investment in and financing of the Decline in the copper prices and 25 25 25 (14.0) 23 mining business in Chile Sierra Gorda copper mine in Chile revision of the long-term business plan 15 Coal mining projects in Decline in the coal prices and revision Investments in coal mines in Australia (12.1) Australia of the long-term business plan Grain accumulation and investment in 0 Grain business in Australia grain storage and export terminal (11.4) Revision of the business plan The 146th year The 147th year The 148th year The 149th year operating business in Australia FY2013 FY2014 FY2015 FY2016 Others (29.5) Total amount (195.1) Progress of Medium-Term Manage- ment Plan Lifestyle Related Goods & Services are expected to shareholders a stable dividend over the long term. be strong, due to the impact of falling mineral During the “Be the Best, Be the One 2017 Under the medium-term management plan resources prices, our mineral resources businesses (BBBO2017),” the medium-term management plan “BBBO2017,” in light of various changes to the and tubular products business are expected to launched in April 2015, we decide the dividend environment surrounding the Sumitomo Corporation remain in a difficult business environment. In amount in view of the situations regarding basic profit and management issues, we came together to addition, we have anticipated approximately ¥20.0 and cash flow, with ¥50 per share as the minimum overcome these issues. Based on the theme of billion as costs for steadily executing asset amount of annual dividend and a consolidated payout outlining a path toward the realization of “What We replacements for structure improvements, and ratio of 25% or more as our reference. Aim to Be in 2019, Our Centennial Year,” we focused have set out our annual forecast of ¥130.0 billion Although the consolidated profits for fiscal 2015 on implementation of managerial reform and for consolidated net income in fiscal 2016. resulted ¥74.5 billion, the annual dividend for the promotion of a growth strategy. fiscal 2015 is projected to be ¥50 per share as With regard to managerial reform, we strove to Dividend Policy recently announced. (The annual dividend for the review the decision-making process and risk previous term was ¥50 per share.) The year-end management system, and responded to the Sumitomo Corporation aims to increase dividends by dividend is projected to be ¥25 per share since the corporate governance code. As for promotion of a achieving medium and long-term earnings growth interim dividend was ¥25 per share. growth strategy, we executed growth strategies in while adhering to its fundamental policy of paying The annual dividend forecast for the fiscal 2016 is each of the mainstay businesses in the metal 2 products, transportation systems and media Revision of quantitative targets business while focusing company-wide organizational collaboration in the areas of Profit targets automobiles, infrastructure, and lifestyle and FY/Period Initial plan Revised plan information services. In areas with high growth 2015 ¥230 billion ¥74.5 billion (actual) potential, such as energy-related business and Consolidated net income 2016 — ¥130 billion retail business in Asia, we undertook cross- 2017 ¥300 billion or more ¥220 billion or more organizational collaborations, and enhanced our Profit targets ROA 2017 3% or more 2.5% or more approaches for pursuing these as company-wide projects. Risk-adjusted return ratio 2017 10% or more 9.0% or more In finance, we aim to regain the balance ROE 2017 Around 10% Around 9.0% between core risk buffer and risk-adjusted assets (*) by the end of fiscal 2017. Cash-in / cash-out (3-year total of the period of “BBBO2017”) As the price slump of mineral resources has been Initial plan (announced in March 2015) Revised plan (announced this time) prolonged, the recovery of our mineral resources & Total +¥1.4 trillion Total ¥(1.4) trillion Total +¥1.7 trillion Total ¥(1.7) trillion energy businesses and tubular products business is Dividend ¥(200) billion Dividend ¥(200) billion expected to be delayed. We have modified our Basic Profit Cash Flow consolidated net income target for fiscal 2017 from Basic Profit Cash Flow +¥500 billion +¥700 billion ¥300.0 billion or more to ¥220.0 billion or more. In addition, in light of the downturn in business Depreciation New investment and replacement environment, we have modified the target to New investment and +¥300 billion Depreciation replacement ¥(1.0) trillion achieve a positive post-dividend free cash flow in +¥300 billion ¥(1.2) trillion 3-year total to positive free cash flow of ¥500.0 Asset replacement billion, and work to shrink interest-bearing liabilities Asset replacement +¥400 billion and improve asset efficiency by further progressing +¥900 billion Repayment of interest- asset replacements. bearing liabilities Although the business environment is expected ¥(500) billion to remain challenging, we will steadily execute Achieve the positive free cash flow (post-dividend) BBBO2017, simultaneously promote further * Basic Profit Cash Flow = Basic Profit – Share of profit (loss) of investments accounted for using the equity method + Dividend from investments strengthening of our earnings power and improving accounted for using the equity method Basic Profit = (Gross profit + Selling, general and administrative expenses (excluding provision for doubtful receivables) + Interest expense, net of interest financial soundness, and return to a growth track. income + Dividends) × (1-Tax rate) + Share of profit (loss) of investments accounted for using the equity method We sincerely request the ongoing understanding, support and encouragement of all our shareholders. (*) Ou r “core risk buffer” represents the sum of “common stock,” “additional paid-in capital,” “retained earnings” and “exchange difference on translating foreign operations” minus “treasury stock, at cost.” Our basic management policy is to keep risk-adjusted assets, which are our maximum possible losses, within our core risk buffer. 3 Performance Highlights Changes in primary management indicators Gross Profit Consolidated Net Income or Loss Consolidated Net Income or Loss per Share ¥894.1 billion ¥74.5 billion ¥59.73 894.4 952.9 894.1 8 2 7.