In late May, we held a briefing session on our group's financial results for FY2021.

A financial results meeting is an opportunity for us to explain the financial figures and their background, and to answer questions from institutional investors and analysts of securities firms.

This time, since the corona pandemic was a little more contained, the event was held in a hybrid format, in which the Tokyo site was attended by small number of people, combined with a teleconference system.

It was good to see the stakeholders' real reactions because we were able to explain the project face to face.

Six people participated at the Tokyo site and 27 people participated through the teleconference.

Q&A

We answered the questions we received as follows (selected).

Q: Can't you recover all of the impact of the raw material price hike in FY21 in FY2022?

A: Although each customer (car manufacturer) has slightly different in financial result rules, if raw material prices continue to soar steadily in FY2022, it will be difficult to recover the cost within the period because the rules for price pass-on make it difficult to do so as the period straddles the end of the fiscal year.

On the contrary, if raw material prices are in a declining phase, profits will be generated.

On the other hand, there have been no rules regarding transportation costs.

We are working to negotiate container costs as early as possible within our company, and we will continue to negotiate with our customers as well.

Q: Carmakers are accelerating the shift to electrification, but how do you see such a trend with respect to opportunities for Sumitomo Riko to expand its sales?

Also, will you go for market share even at a low price, or will you focus on profit?

A: As I have talked about in the past, we have not changed our view that the shift to fully electric vehicles (BEVs) is not a negative for our group, but rather a good opportunity.

When our customers take on the challenge of new mobility, they also call on us because of the trust we have built up over our history.

In this respect, we have business relationships with all domestic car manufacturers as well as major overseas manufacturers, so we see this as a great opportunity.

In response to the question of whether to take market share or profitability, I will clearly state that we will take profitability.

Talks at Each Base

Since late May, I have been traveling to all of our bases nationwide to explain the materials and content I discussed at this financial results meeting to key personnel, with Chairman Matsui sharing the duty.

I also plan to talk to local executives when I travel overseas in the future.

In this context, regarding the points that investors have been focusing on: "How profitable is Sumitomo Riko 's structure in terms of its ability to generate profits?" and "Is Sumitomo Riko able to keep up with the trend toward electrification?”, I am explaining as follows;

・In FY 2021, we did not expect to achieve our profit forecast due to a delay in the timing of the reflection of selling prices of raw material price hikes, especially for steel products.

・However, even with our customers' unplanned production cutbacks at the end of the fiscal year, we were able to achieve our business profit thanks to everyone's efforts to reduce overhead costs and other costs, although we did fall short of the sales forecast announced in November.

However, due to the impact of the impairment loss recorded at our North American base, the figures listed underneath the operating income (such as profit before income taxes, profit for the year, profit attributable to owners of the parent company) were harsh, and I am keenly aware of my responsibility as a manager.

Following the previous fiscal year, the containment of the corona virus is not expected this fiscal year, and raw material prices and transportation costs are expected to remain high.

Actually, carmakers have again announced production cuts due to the lockdown in China caused by the re-expansion of the corona outbreak.

On the other hand, we expect to be busy in the second half of the year with recovery production expected.

In preparation for this, let us take advantage of our ability to respond to change, which has been developed over the past two years.

I hope that you will continue to pay close attention to safety and health and respond flexibly to changes.

To be honest, "change" is one of the toughest aspects.

However, if we do not change constantly, we will continue to decline.

Let's enjoy changing and growing as a whole Sumitomo Riko Group.

2022.06