Sumitomo Electric Industries : Year Ended March 31, 2022

Consolidated Financial Statements

Year ended March 31, 2022

Five-Year Financial Data and Indexes

SUMITOMO ELECTRIC INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

			Millions of yen				Thousands of
						U.S. dollars
	FY2021	FY2020	FY2019*7	FY2018	FY2017*6		FY2021
For the years ended Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2018		Mar. 31, 2022

For the Year:

Net sales

Cost of sales

Selling, general and administrative expenses

Operating income

Profit before income taxes

Profit attributable to owners of the parent

Capital expenditures*1 Depreciation and amortization R&D expenses

At Year-End:

Total assets

Total interest-bearing liabilities Total net assets*2

Per Share Data:

Profit attributable to owners of the parent*3:

Basic

Diluted Cash dividends Owner's equity*4

Weighted average number of shares outstanding (in thousands)

Number of employees (at year-

end)

Average number of temporary employees

Financial Indexes:

Operating income / net sales (%) Profit attributable to owners

of the parent / net sales (%) Operating income / invested

assets*5 (ROIC) (%)

Return on owner's equity (%) Owner's equity ratio (%) Current ratio (times)

R&D expenses / net sales (%)

¥3,367,863 ¥2,918,580 ¥3,107,027	¥3,177,985 ¥3,082,247	$27,517,469
2,793,919	2,387,237	2,553,902	2,593,363	2,507,434	22,828,001
451,749	417,417	425,909	418,362	401,674	3,691,061
122,195	113,926	127,216	166,260	173,139	998,407
159,921	110,340	133,198	181,388	193,337	1,306,651
96,306	56,344	72,720	118,063	120,328	786,878
189,719	172,246	208,834	190,314	171,110	1,550,118
180,508	168,040	163,581	148,916	146,098	1,474,859
123,060	118,820	125,449	129,627	117,735	1,005,474
3,807,390	3,381,914	3,100,260	3,053,263	2,999,903	31,108,669
859,794	685,087	636,262	540,745	492,567	7,025,035
2,052,938	1,892,506	1,766,647	1,776,313	1,764,086	16,773,740
		Yen				U.S. dollars
FY2021	FY2020	FY2019*7	FY2018	FY2017*6		FY2021
¥ 123.49	¥ 72.25	¥ 93.24	¥ 151.38	¥ 154.29	$ 1.009
－	－	－	－	152.88		－
50.00	32.00	40.00	48.00	46.00	0.409
2,269.31	2,088.51	1,946.93	1,988.58	1,973.95	18.542
779,884	779,893	779,893	779,897	779,888
281,075	286,784	283,910	272,796	255,133
(48,275)	(38,227)	(37,065)	(40,134)	(38,136)
3.6	3.9	4.1	5.2	5.6
2.9	1.9	2.3	3.7	3.9
4.5	4.6	5.4	7.3	7.9
5.7	3.6	4.7	7.6	8.1
46.5	48.2	49.0	50.8	51.3
1.6	1.7	1.7	1.7	1.7
3.7	4.1	4.0	4.1	3.8

Note: All dollar figures herein refer to U.S. currency. Yen amounts have been translated, for convenience only, at the rate of ¥122.39 to U.S. $1.00, the approximate exchange rate prevailing on March 31, 2022.

*1 Capital expenditures are recorded as property, plant and equipment.

*2 See Note 9.

*3 From the year ended March 31, 2019 to the year ended March 31, 2022, there were no potentially dilutive common shares.

*4 Owner's equity is the sum of total shareholders' equity and total accumulated other comprehensive income.

*5 Invested assets = total assets - interest-free liabilities

*6 The "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018) has been adopted from the beginning of the fiscal year ended March 31, 2019. The financial data and indexes for the year ended March 31, 2018 have been adjusted retrospectively to conform to this accounting standard.

*7 The U.S. consolidated subsidiaries have adopted IFRS to replace U.S. GAAP from the beginning of the fiscal year ended March 31, 2021. The financial data and indexes for the year ended March 31, 2020 have been adjusted retrospectively to reflect the changes in accounting policy.

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Management's Discussion and Analysis

Business Conditions in FY2021

With respect to the world economy, the economy in various regions, including Japan, Europe, America, and other Asian countries, recovered moderately with the widespread use of vaccines against COVID-19 during this fiscal year. However, due to the expansion of people infected with variant strains of the virus, measures to restrict economic activity were taken intermittently in various countries. In addition, the global semiconductor supply shortage, soaring material prices, and logistics stagnation have become more serious. Moreover, since February this year, the situation in Ukraine has been tense. Due to such factors mentioned above, the outlook has continued to be uncertain.

Review of Operations in FY2021

The business circumstances of the Sumitomo Electric Group, were challenging due to soaring material prices, logistics cost increases mainly caused by container shortages and harbor congestion, in addition to a decrease in the production of automobiles caused by a shortage of semiconductors and other components. In this environment, we worked to thoroughly reduce costs and maintain our supply chain.

As a result, regarding the consolidated financial results for this fiscal year, net sales were ¥3,367,863 million (preceding fiscal year: ¥2,918,580 million; +15.4%). Operating income was ¥122,195 million (preceding fiscal year: ¥113,926 million; +7.3%), with an operating margin of 3.6% (preceding fiscal year: 3.9%; -0.3 percentage points).

Profit attributable to owners of the parent was ¥96,306 million (preceding fiscal year: ¥56,344 million; +70.9%). In this way, income and profits increased from the preceding fiscal year, on which the impact of COVID-19 was enormous.

Segment Information

Automotive:

Due to an increase in the price of copper and the effect of depreciation of the yen, net sales increased by ¥152,153 million (9.5% compared with the preceding fiscal year) to ¥1,754,195 million. Operating income decreased by ¥35,934 million to ¥12,264 million due to soaring material prices and a significant increase in logistics cost caused by global logistics confusion, and also due to a decline in production efficiency caused by a succession of decreases in the production of automobiles resulting from a short supply of semiconductors and other factors. The operating income margin fell by 2.3 percentage points to 0.7%.

Infocommunications:

Net sales increased by ¥14,574 million (6.5% compared with the preceding fiscal year) to ¥239,150 million as a result of expanding sales of products such as optical wiring equipment for data centers, optical fibers for submarine cables, and access network equipment. Operating income decreased by ¥945 million to ¥23,398 million due to a decline in profitability associated with changes in the composition of product classes of optical/electronic devices. The operating income margin fell by 1.0 percentage points to 9.8%.

Electronics:

Net sales increased by ¥39,891 million (15.8% compared with the preceding fiscal year) to ¥292,509 million as a result of an increase in sales by TECHNO ASSOCIE Co., Ltd., in addition to capturing demands for electronic wire products and irradiation tubes. Operating income increased by ¥9,778 million to ¥19,825 million, mainly due to the improvement of profitability associated with an increase in sales of high-performance products of FPCs (flexible printed circuits) for mobile devices. The operating income margin improved by 2.8 percentage points to 6.8%.

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Environment and Energy:

Net sales increased by ¥199,234 million (31.4% compared with the preceding fiscal year) to ¥833,425 million, and operating income increased by ¥19,000 million to ¥44,024 million due to the effect of an increase in the price of copper, in addition to the expansion of sales of power cables, flat magnet wires for electric vehicles, etc.; an increase in Sumitomo Densetsu Co., Ltd.'s electric work; and an increase in demand for substation equipment, etc. form Nissin Electric Co., Ltd. The operating income margin improved by 1.4 percentage points to 5.3%. Meanwhile, orders received for plant and installation work came to ¥369,982 million (the order backlog at end of this fiscal year being ¥384,610 million), a rise of ¥28,304 million (8.3%).

Industrial Materials and Others:

Due to an increase in demand for cemented carbide tools, diamond and CBN tools, sintered powder metal parts, prestressed concrete, steel tire cords, etc., net sales increased by ¥25,359 million (8.4% compared with the preceding fiscal year) to ¥327,883 million. Operating income increased by ¥16,364 million to ¥23,024 million, mainly due to the improvement of profitability associated with an increase in the operation rate of factories. The operating income margin improved by 4.8 percentage points to 7.0%.

Cash Flows

Net cash provided by operating activities recorded ¥76,002 million, a decrease by ¥93,654 million compared with the preceding fiscal year, after adjustment of the fluctuation in working capital made in the cash flow generated by business activities of ¥340,429 million, represented by an addition of depreciation and amortization of ¥180,508 million back in profit before income taxes of ¥159,921 million.

Net cash used in investing activities recorded ¥165,447 million, an increase by ¥2,017 million compared with the preceding fiscal year, due to capital expenditure of ¥174,059 million on the purchase of property, plant and equipment.

Free cash flow, represented by net cash used in investing activities offset against net cash provided by operating activities, was negative ¥89,445 million, while free cash flow was positive ¥6,226 million in the preceding fiscal year.

Cash flow from financing activities recorded an increase of ¥82,816 million, while a decrease of ¥13,099 million was recorded in the preceding fiscal year, due to a net increase in loans payable offset against redemption of bonds and payment of dividends.

Year-end balance of cash and cash equivalents stood at ¥255,540 million, a year-on-year increase of ¥4,099 million (1.6%).

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Consolidated Balance Sheet

SUMITOMO ELECTRIC INDUSTRIES, LTD. AND CONSOLIDATED SUBSIDIARIES

				Thousands of
	Millions of yen		U.S. dollars
				(Note 1)
	FY2021	FY2020		FY2021
As of	March 31, 2022	March 31, 2021		March 31, 2022
ASSETS
Current Assets:
Cash and time deposits (Notes 3 and 4)	¥ 259,581	¥ 253,668	$ 2,120,933
Trade notes and accounts receivable (Note 4)	784,647	755,258	6,411,038
Contract assets (Note 22)	30,030	－	245,363
Inventories (Note 7)	844,837	606,343	6,902,827
Other current assets	140,152	116,068	1,145,126
Allowance for doubtful receivables	(2,319)	(1,966)	(18,948)
Total current assets	2,056,928	1,729,371	16,806,340

Non-current Assets:
Property, Plant and Equipment (Note 8):
Buildings and structures	786,964	748,670	6,429,970
Machinery, equipment and others	2,113,611	1,948,047	17,269,475
Land	98,637	93,806	805,924
Construction in progress	64,054	62,012	523,360
	3,063,266	2,852,535	25,028,728
Accumulated depreciation	(2,036,482)	(1,871,376)	(16,639,284)
Net property, plant and equipment	1,026,784	981,159	8,389,444

Intangible Assets

36,062

36,232

294,648

Investments and Other Assets:
Investments in unconsolidated subsidiaries and affiliates	299,986	263,222	2,451,066
(Note 4)
Investment securities (Notes 4 and 5)	143,910	144,184	1,175,831
Net defined benefit asset (Note 13)	173,434	158,447	1,417,060
Deferred tax assets (Note 12)	32,329	29,519	264,147
Other	38,810	40,869	317,101
Allowance for doubtful receivables	(853)	(1,089)	(6,970)
Total investments and other assets	687,616	635,152	5,618,237
Total non-current assets	1,750,462	1,652,543	14,302,329
Total assets	¥3,807,390	¥3,381,914	$31,108,669

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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