Column 1: Progress on ƒ(x)

In fiscal 2011, Sumitomo Corporation reported record net income of ¥250.7 billion. This result was far higher than the quantitative net income target for ƒ(x) of ¥220 billion. While partly a reflection of tailwinds such as buoyant resource prices, this strong performance also signifies that our iron ore project in Brazil has started contributing to earnings, and that core businesses in non-resource fields, which Sumitomo Corporation has long focused on, are developing in line with expectations.

In fiscal 2012, the global economy should continue to see moderate growth overall. By region, European economies will see the sovereign debt crisis continue to cast a shadow over the global economic outlook, but the U.S. economy should remain firm thanks to a continuation of a monetary easing policy. Emerging economies are projected to grow steadily, supported by robust internal demand.

In this business environment, in fiscal 2012, Sumitomo Corporation expects to achieve its quantitative net income target for ƒ(x) of ¥260 billion, which would be another all-time high. Growth should be driven by the Metal Products and Infrastructure segments in emerging countries, and non-resource fields such as the Media, Network & Lifestyle Retail segment, despite projected lower earnings year on year in resource fields based on external factors such as falling resource prices. Sumitomo Corporation also expects to achieve ƒ(x)'s target for the Risk-adjusted Return Ratio of at least 15% in fiscal 2012.

 

Progress on Asset Replacement

Under ƒ(x), we are promoting strategic resource management from a Company-wide perspective in an effort to achieve business model innovation in fields where higher growth potential and profitability can be expected. To replace the portfolio with even better assets and improve the quality of assets, we plan to acquire and enhance assets by an additional ¥1,150.0 billion, while maintaining total assets at the same level by offsetting the asset acquisitions and enhancements with the same amount of asset divestitures and reductions.

In fiscal 2011, we acquired and enhanced assets by an additional ¥570.0 billion, but also offset this by executing the same amount of asset divestitures and reductions. In this manner, we have made steady progress on the replacement of assets.

 

New investment and finance

In fiscal 2011, we actively executed investment and finance in non-resource fields, focusing on core businesses in each field and businesses where growth is expected, in order to achieve steady growth in each of these fields. Additionally, in the resources field, we acquired prime new interests and expanded existing projects. As a result, we executed new investment and finance of ¥220 billion in fiscal 2011, marking steady progress against our total investment and finance target of ¥580.0 billion over the 2-year period. In fiscal 2012, as new investment opportunities increase due to the impact of the European sovereign debt crisis, we plan to execute new investment and finance of ¥360.0 billion in each field. While uncovering prime assets, we will steadily proceed with this new investment and finance without relaxing our investment rules.