The external environment has become more uncertain and challenging

Our 3Q results fell short of our planned figures particularly with respect to profitability.
Our lower than expected operating profit is mainly attributable to high copper prices and a strong Japanese yen against the US dollar and the euro. We expect to see the recent drop in copper price made visible in our financial statements in 4Q as any change in copper price affects our business with a 2-3 month delay. However, we are prepared for high copper price in the future, as they cannot be ruled out.

During 3Q, we achieved sales of 13,705 billion yen slightly below our 2Q performance (2Q: 13,880 billion yen). This quarter has seen the consumer market struggle as continued economic uncertainty has resulted in our customers in the segment being more conservative with their own forecasts.

By end-user market, our sales performance was as follows: Automotive 7.1 billion yen (sales composition ratio of 52%) up 12% compared to the prior year, Consumer 4.1 billion yen (sales composition ratio of 30%) down 17% from the last year and Industrial 2.4 billion yen (sales composition ratio of 18%) down 1% from the same period a year ago. With this, automotive sector sales saw their first over-50% share in the total sales ever.

As I have mentioned in the past, our business performance is increasingly prominent in the automotive sector. In past months, growth has been driven predominantly by Germany, since the market in Japan hit an unexpected obstacle earlier this year. Although this quarter has seen the continuing recovery of the Japanese Automotive sector, the economic unrest in the Euro zone has created a growing sense of caution among European automakers with respect to demand in the coming quarters. We are using our success in the European automotive sector to increase our market share in the US and in Asia.

In the consumer segment, our performance has been affected by negative sentiments in the industry. Lower than expected 3Q demand, which is typically a good indicator of end-market demand in the 4Q, reflects weaker forecasts for the holiday (Christmas) season.

The challenges ahead Facing these challenges in the coming months, our focus is on a lean, efficient, market driven operation. Quick responsiveness to changes in market and operations which boast flexibility is our core strength that we are leveraging. These are key success factors in the uncertain months ahead of us.

Going forward, we are indeed grateful for the ongoing and steadfast support of all our valued shareholders.

Shigeyuki Yawata, CEO of Sumida Group