2007 may be marked as a year when the world economy started to show a sign of its decline after the several years’ steady growth due to the credit crisis which arose from the subprime mortgage issue in the second half of the year. Although the impact of the issue on the real economy was supposed to be marginal at first, its seriousness has been reassessed as a major concern of the world economy since a sign of the economic downturn such as a decrease in consumption and weakening labor market has been emerging. Now due to the turmoil in the financial markets and the volatility in raw material prices represented by crude oil, the world economic outlook is becoming increasingly uncertain.
Nonetheless, the western governments have quickly taken some fiscal and monetary measures to prevent further economic slowdown, thus it is hoped that the momentum of the growth will recover soon. Meanwhile, China, India and other emerging economies have been demonstrating their strong growth, while Asian region in general appear to grow steadily. Particularly in China, due to a great extent to the Beijing Olympic, domestic demand continues to increase and even after the event it is expected that the momentum will be maintained thanks to the increasing investment in infrastructure and further expansion of domestic consumption as the development across the country is further pursued in foreseeable future.
Under such circumstances, there has also been a sign of the decreasing demand identified in the consumer electronics industry since the 4th Quarter, particularly in the North American market. In this respect, the number of manufacturers who has a cautious view of the business environment in the coming months is increasing, notably finished goods manufacturers, while demand for digital equipments such as notebook PC, mobile phone is continuing to expand as both replacement demand in developed economies and new demand in emerging economies still appear strong.
Regarding the business in the 4th Quarter in 2007, our coils’ monthly order amount maintained the highest level and net sales recorded similar amount year-on-year to 17.035 billion yen, operating income increased by 116% year-on-year to 1.316 billion yen. Net income recorded 949 million yen owing to the sale profit of Inverter Unit Business. In consequence, the business results of fiscal year 2007 are as follows: net sales rose by10.6% year-on-year to 70.210 billion yen, operation income increased by 13% year-on-year to 4.712 billion yen and net income increased by 30.9% year-on-year to 2.855 billion yen. We have made steady improvement in operating income through smooth expansion of existing business, streamlining of unprofitable departments, improvement of productivity etc.
In addition, we have completed our structural reform plans (e.g. the sale of assets including our headquarter building and transfer of unprofitable business) which aimed to further strengthen the company base for the coming years as a result of the careful analysis of our businesses and assets which are not related to our core business. In consequence, we have almost achieved operating income ratio to 8.0% level in the 4th Quarter which would be the important attainment for the further improvement in profitability in the 2008 onwards.
1B7*, which we have engaged since 2003, has been concluded at the end of 2007 and various successful results have been achieved during the past 5 years. Although one of the quantitative targets, net sales 100 billion yen, was under achievement due to the review of Inverter Business etc., the net sales increased by 132% compared to the results in 2003 and the profitability has steadily improved including the achievement of EBITDA ratio 10% - thus we have surely built the solid foundation to be 100 billion yen enterprise with high profitability.
Our strategic approach to Automotive Business has brought its successful progress during 1B7. We have steadily expanded market area and business field through active marketing in Asia as well as acquiring VOGT. Automotive Business has become one of our 2 main strategic businesses together with the existing business for general consumer electronics market.
I would also like to address that through the 1B7 challenge, the mindset of directors and staff of Sumida Group has been changed so that they can feel more conscious and confident as being the member of the global enterprise and the leader of the industry which I believe to be the dynamic driving force for further growth of Sumida Group.
We plan to announce our new mid-term business plan after 1B7 in a short time. Being well aware of our role in the electronics industry which is facing drastic changes and expansion, we aim to further thrive by planning and carrying out careful and positive strategies more than ever in order to make all stakeholders feel satisfied with the company.
※Note: "1B7" is our midterm management plan from 2003 to 2007 aimed at achieving our target of 100 billion yen in net sales and an EBITDA ratio (the sum of earnings before taxes, interest expenses and depreciation and amortization) of 10%.
（CEO Message from‘Quarterly Report’of 4th quarter 2007)
