Review of Operations
Segment
Net Sales
Major Businesses
The Optical Fiber Cable
Business
Telecommunications
15.2%
The Photonics and
Network Solutions Business
The Energy Business
Energy and
Industrial Products
ANNUAL REPORT 2006
23.1%
The Industrial Products Business
The Copper Strips & Pipes Business
Metals
18
The Plating Business
Bound to Innovate
14.2%
The Electrolytic
Copper Foils Business
The Automotive Parts Business
Electronics and
Automotive Systems
The Electronics Components Business
20.7%
The Magnet Wire Business
The Rolling Business
The Extrusion Business
Light Metals
23.0%
Services and Others
3.8%
The Casting, Forging and
Other Processing Businesses
•Optical fibers and cables
•Optical components
•Optical fiber cable
accessories and installations
•Network equipments, etc.
MIHARU COMMUNICATIONS INC. / Okano Electric Wire
Co., Ltd. / SHODENSHA CO., LTD. / SEIWA GIKEN INC. /
T.H. FURUKAWA ELECTRIC CO., LTD. / FURUKAWA
INFONET PRODUCTS CO., LTD. / Access Cable Company /
Shianfu Optical Fiber & Cables Co., Ltd. / FURUKAWA
INDUSTRIAL S.A. PRODUTOS ELETRICOS / Optical
Communication Products, Inc. / OFS Fitel, LLC /
OFS BrightWave, LLC, others
•Bare wires •Aluminum wires
•Insulated wires •Power cables
•Power transmission cable
accessories and installations
•Plastic products such as power
cable conduit material and
foam sheets thermoelectric
products, etc.
Furukawa Elecom Co., Ltd. / FURUKAWA INDUSTRIAL
CABLE CO., LTD. / Asahi Electric Works, Ltd. / INOUE
MANUFACTURING CO.,LTD. / The Kyusyu Furukawa
Electric Co., Ltd. / FURUKAWA INDUSTRIAL PLASTICS CO.,
LTD. / F-CO CO., LTD. / KYOWA ELECTRIC WIRE CO., LTD. /
THE FOAM KASEI CO., LTD. / SUNSUNNY INDUSTRY CO.,
LTD. / Shenyang Furukawa Cable Company Ltd. / PHILLIPS
FITEL INC / PT TEMBAGA MULIA SEMANAN TBK, others
•Copper pipes
•Copper strips
•Electrolytic copper foils
•Shape memory alloys and
other processed copper
products, etc.
Furukawa Circuit Foil Co., Ltd. / Furukawa Precision
Engineering Co., LTD. / OKUMURA METALS CO., Ltd. /
FURUKAWA PRECISION (THAILAND) CO., LTD. /
FURUKAWA METAL (THAILAND) PUBLIC CO., LTD., others
•Battery products
•Automotive components
and electrical wires
•Magnet wires •Heat sinks
•Aluminum blanks for hard
discs
•Electronic component
materials, etc.
The Furukawa Battery Co., Ltd.
Riken Electric Wire Co., Ltd.
FURUKAWA AUTOMOTIVE PARTS INC.
FCM CO., LTD.
FE MAGNET WIRE (MALAYSIA) SDN.BHD.
FURUKAWA ELECTRIC NORTH AMERICA APD, INC.
FURUKAWA ELECTRIC AUTOPARTS PHILIPPINES INC.
FURUKAWA AUTOMOTIVE PARTS (VIETNAM) INC., others
•Aluminum sheets
•Extruded aluminum
products
•Cast and forged products,
etc.
Furukawa Sky Aluminum Corp. / Nippon Foil Mfg. Co.,
Ltd. / FURUKAWA COLOR ALUMINUM CO., LTD. / Nikkei
Kakoh Co., LTD. / NIPPON METAL FOIL IND CO., LTD. /
Higashi Nihon Tanzou Co., Ltd. / Furukawa-Sky Shiga
Corp. / ACE21 Co., Ltd. / P.T. Furukawa Indal Aluminum,
others
•Real estate
•Logistics
•Information and various
other services
2004
Results
2005
Results
2006
Results
Net
Sales
129.0
117.4
143.1
Operating
Income
(31.3)
(9.8)
5.4
Net
Sales
170.8
189.0
217.5
3.8
3.1
6.7
100.4
111.0
133.4
4.8
6.0
4.9
153.7
165.3
194.9
4.7
5.7
6.0
Net
Sales
207.3
219.6
216.8
Operating
Income
11.7
16.3
12.7
Net
Sales
31.9
32.7
35.6
Operating
Income
3.1
2.4
2.1
Operating
Income
Net
Sales
Operating
Income
FURUKAWA DENKO REAL ESTATE CO., LTD. / FURUKAWA
LOGISTICS CORP. / FITEC Corp. / THE FURUKAWA
FINANCE AND BUSINESS SUPPORT CO., LTD. / THE
ZAIKOO CO., LTD. / THE YOKOHAMA DRUM CO., LTD. /
FURUKAWA ELECTRIC NORTH AMERICA, INC. / FEJ SALES
INC. / FURUKAWA FINANCE NETHERLANDS B.V. /
FURUKAWA LIFE SERVICE Inc. / Furukawa Nikko Power
Generation Inc., others
Net
Sales
Operating
Income
Billions of yen
ANNUAL REPORT 2006
Major Affiliated Companies
19
Bound to Innovate
Major Products
Review of Operations
Telecommunications
ANNUAL REPORT 2006
Promoting
global growth strategies
to meet the expansion of
the FTTx market
Bound to Innovate
20
Results of Operations in Fiscal 2006
In the telecommunications segment, given the
spread of optical broadband services, we finally
observed a recovery in demand, which had
remained under a prolonged state of stagnation
following the collapse of the IT bubble, both in
Japan and overseas. Sales of optical fiber cables
rose despite declines in product prices due to
significant growth in FTTH-related optical cables
in the Japanese market and robust demand for
optical cables and specialty fibers in the
European and U.S. markets. In the area of
photonics and network solutions, sales of
FTTH-related optical components and fusion
splicers remained strong from the previous fiscal
year, and sales of optical amplifiers also
increased.
As a result, consolidated net sales for the
telecommunications segment rose considerably
to ¥143.1 billion, a 21.9% increase from the
previous fiscal year. In addition, consolidated
operating income increased by ¥15.1 billion
from the previous fiscal year to ¥5.4 billion,
returning to profit for the first time in four years,
due to the benefits to the business structure of
various reform measures launched in the
previous fiscal year, including a concerted effort
to reduce costs and fixed expenses, and the
transfer of manufacturing to subsidiaries in
Japan and abroad. On a non-consolidated basis,
net sales rose 13.8% from the previous fiscal
year to ¥73.0 billion. OFS, our U.S. optical fiber
manufacturing and sales subsidiary, is also
making progress toward a return to profitability
targeted for fiscal 2007 in the Furukawa Action
Plan.
Policies for Fiscal 2007
In the telecommunications segment, we will
concentrate our efforts on expanding sales of
FTTH-related products in the Japanese market,
while bolstering products targeting the overseas
FTTx market, where expansion is being led by the
North American market, to raise sales in both the
cable and photonics and network solutions
businesses. Our goal is to generate operating profit
at OFS, which had been plagued by losses, by
expanding sales of cables and specialty fibers.
In fiscal 2007, we project consolidated net sales
of ¥147.3 billion—¥89.4 billion for optical fiber
cables and ¥57.8 billion for photonics and network
solutions, and consolidated operating income of
¥6.5 billion—¥2.3 billion for optical fiber cables and
¥4.1 billion for photonics and network solutions.
Net sales (Billions of yen)
147.3
2006
2007
5.4
6.5
2006
2007
117.4
100
50
0
2002
2003
2004
2005
(Plan)
Operating income (Billions of yen)
10
5.6
0
-10
-9.8
-20
-30
-31.3
-40
-50
-60
-70
-60.7
2002
2003
2004
2005
(Plan)
* Projections for fiscal 2007 are current as of May 11, 2006.
In recent years, the metro access markets have
entered the initial phase of technological
innovation involving the transition from
conventional “point-to-point” networks to
“mesh” type networks with new features such
as high-speed transmission, monitoring
prevention and emergency retreat using route
switching and alternate routing. We expect
considerable expansion in markets for
wavelength tunable WDM network devices that
will serve as the backbones for mesh-type
networks beyond 2006. Furukawa Electric will
concentrate on developing and expanding sales
of next-generation devices that are pioneering
the way into the coming tunable wavelengths
era, including Reconfigurable Optical Add/Drop
Multiplexers (ROADM) that enable bandwidth
switching, temperature-dependent surface
emitting laser arrays and tunable DFB lasers that
offer an open choice of WDM wavelengths.
Measures for
The Optical Fiber Cable Business
The number of FTTH subscribers in Japan is
steadily on the rise, and Nippon Telegraph and
Telephone Corporation is currently focusing its
efforts on developing an optical fiber network
that will provide access for 30 million subscribers
by the end of fiscal 2011. In response to these
market needs, Furukawa Electric will endeavor
to continue supplying optical fiber cables, for
which we boast top-level global
competitiveness, while aggressively seeking to
develop and present new products that will
enhance on-site safety and simplicity of
processes involving fiber cables.
In North America, Europe and Asia, the FTTx
market is beginning to expand along with the
establishment of high-speed broadband lines.
Furukawa Electric will promote expanded sales
of cables for RBOCs in the U.S. market through
OFS and seek to improve profitability by
ROADM: Reconfigurable Optical
Add/Drop Multiplexer
Advancing from Point-to-Point to Mesh
—Replacing high capacity with variable wavelength
ANNUAL REPORT 2006
129.0
143.1
21
Bound to Innovate
211.2
200
150
Measures for
The Photonics and
Network Solutions Business
250
151.4
strengthening specialty fiber products to return
OFS to the black in fiscal 2007.
Review of Operations
Energy and
Industrial Products
ANNUAL REPORT 2006
Concentrating our efforts for
the global expansion of
high-performance plastic
products
Bound to Innovate
22
Results of Operations in Fiscal 2006
In the energy and industrial products segment,
sales of bare copper wires and industrial cables
increased due to economic expansion and rising
bare copper prices, while sales of tapes used in
manufacturing semiconductors such as DDF (dicing
die-bonding film) grew significantly due to
favorable conditions in the field of digital consumer
products. In addition, driven by broadening health
concerns over asbestos, demand rose for our
foamed product Funen Ace, a fire-resistant thermal
insulating liner for metal roofs that offers an
alternative to asbestos and glass wool.
As a result, consolidated net sales increased
15.0% from the previous fiscal year to ¥217.5
billion in the energy and industrial products
segment.
Consolidated operating income grew 2.2 times
the previous fiscal year to ¥6.7 billion, as efforts to
reduce the cost of sales made an additional
contribution to the progress in passing higher raw
materials prices to product prices.
In November 2005, in a joint effort with Otsuka
Chemical Co., Ltd., Furukawa Electric acquired
Trocellen GmbH, a cross-linked polyolefin maker
based in Germany with business bases in Italy,
Spain, Rumania, Hungary, Malaysia, Brazil and
other locations, thereby globally expanding its
polyolefin products business that was traditionally
focused on the Japanese market. Since Furukawa
Net sales (Billions of yen)
Operating income (Billions of yen)
300
10.0
255.5
250
200
164.5
150
147.2
170.8
8.3
8.0
217.5
6.7
189.0
6.0
4.0
100
2.0
50
0
3.5
3.8
2003
2004
3.1
1.9
0
2002
2003
2004
2005
2006
* Projections for fiscal 2007 are current as of May 11, 2006.
2007
(Plan)
2002
2005
2006
2007
(Plan)
ANNUAL REPORT 2006
Policies for Fiscal 2007
In the energy and industrial products segment, we
will concentrate our efforts on expanding sales and
reducing costs of copper alloy wires, raising sales of
Funen Ace and boosting production of AT tapes
for semiconductors. Furthermore, Trocellen’s net
sales of approximately ¥10 billion will be reported
under consolidated results in fiscal 2007, which
leads us to project consolidated net sales of ¥255.5
billion and consolidated operating income of
¥8.3 billion.
Measures for
The Energy Business
Favorable sales of copper wires and
electricity cables will continue.
In fiscal 2007, we intend to
fortify our power cables for vessels
and automobiles, while responding
to a rebound in electricity demand
UV tape for
semiconductor processing
in the Japanese market and increases in
industrial capital expenditures.
Measures for
The Industrial Products
Business
As the miniaturization and high-performance
requirements in electronics devices gather
momentum, demand is expanding for dicing
high-performance tapes used in the
manufacture of semiconductor wafers. In
response to this demand, Furukawa Electric is
planning to increase production of DDF (dicing
die-bonding film) to respond to the needs of
multi-layer manufacturing of semiconductors.
We plan to realize an annual production of
1.5 million m2 by the start of fiscal 2008,
approximately three times the volume of fiscal
2006, toward further increasing sales and
market share.
Apart from expanding sales of environmental
recycled products and asbestos substitutes
such as our foamed product Funen Ace,
we will also concentrate on global
development of the plastic product
business, centered around Trocellen GmbH
in Europe.
23
Bound to Innovate
Electric’s competitive edge lies in construction
materials such as Funen Ace, while Torcellen’s
strengths lie in materials for automotive trim and
sporting goods, we also expect to benefit from
synergies in technology and sales.
Review of Operations
Metals
ANNUAL REPORT 2006
High value-added products
as a driving force
Bound to Innovate
24
Results of Operations in Fiscal 2006
In the metals segment, sales of automotive
electronic strips grew on the back of brisk
demand for automotive products. Leveling off of
production and inventory cutbacks in the digital
consumer product sector led to a second half
rebound in sales for strips and foil for electronic
devices, which had remained stagnant toward the
end of the second half of the term. With the
additional impetus of surging bare copper prices,
consolidated net sales jumped 20.1% from the
previous fiscal year to ¥133.4 billion. However,
consolidated operating income remained subdued
at ¥4.9 billion, for a 19.5% year-on-year increase,
as sales of copper piping for air conditioning
equipment, which had been robust in the first
quarter, plummeted from the second quarter in a
retreat from the high demand caused by the hot
summer weather of the previous fiscal year. Price
competition was also fierce. Non-consolidated net
sales increased 13.1% year-on-year to ¥79.5
billion.
Measures for
The Copper Strips and
Pipes Business
In the copper wire business, we will draw on the
Strategic Fund to invest ¥5 billion for increasing
production capacity for electronics components
used in IT, digital consumer products and
automotive products. In the copper tubes
business, we will strengthen our production
system in Asia to establish optimal global
production.
Policies for Fiscal 2007
Net sales (Billions of yen)
148.3
133.4
120
90
83.1
87.7
100.4
Plating metals
25
Measures for
The Electrolytic Copper
Foil Business
30
0
2002
2003
2004
2005
2006
2007
4.9
4.9
2006
2007
(Plan)
Operating income (Billions of yen)
6.0
6.0
4.8
5.0
4.0
3.0
1.5
2.0
1.0
-1.0
We will further develop new
applications for our products and
intend to expand production
capacity in an effort led by
Furukawa Precision Metal
Industrial Co., Ltd.
111.0
60
0
The Plating Business
-1.0
2002
2003
2004
2005
* Projections for fiscal 2007 are current as of May 11, 2006.
(Plan)
In the electrolytic copper foil business, we will
expand sales in the growing digital-related
markets. In particular, demand is rapidly growing
for WS foil, a high-performance electrolytic
copper foil used in flexible printed-wiring boards
(FPC) for mobile phones, negative electrode
materials used in lithium ion batteries and
electronic shields for plasma display panels (PDP).
Furukawa Circuit Foil Co., Ltd. is currently
increasing production capacity for WS foil and
other high value added products and plans to
expand monthly production capacity by 20% to
5 million m2 over the course of fiscal 2007.
Bound to Innovate
150
Measures for
ANNUAL REPORT 2006
In the metals segment, we project consolidated
net sales of ¥148.3 billion and consolidated
operating income of ¥4.9 billion as we bolster our
production facilities for copper strips used in
automotive and electronic components, develop
higher value for our copper tubes and strengthen
our production in Asia.
Review of Operations
Electronics and
Automotive Systems
ANNUAL REPORT 2006
Meeting the needs of
the automotive and
electronics markets by
bolstering production bases
in Japan and abroad
Bound to Innovate
26
Results of Operations in Fiscal 2006
In the electronics and automotive systems
segment, growth in the automotive electronics
market led to increased sales in automotive parts
such as wire harnesses and steering roll connectors
(SRC) and electronics components such as
enameled wires. In addition, recovery in demand
for electronics-related products resulted in brisk
sales of triple insulated wires for mobile phones,
aluminum blank materials for memory discs and
heatsinks (heat-dissipation components for
electronic devices). As a result, consolidated net
sales for the segment increased 17.9% from the
previous fiscal year to ¥194.9 billion. However, due
to a hiatus in orders for wire harnesses at the start
of the fiscal period, consolidated operating income
was limited to an annual growth of 5.4% at ¥6.0
billion. Non-consolidated net sales rose 10.3%
from the previous fiscal year to ¥110.0 billion.
In the automotive components business that
comprises the segment, we established FAST
(Furukawa Automotive System (Thailand) Co., Ltd.)
in September 2005, as a manufacturing and sales
subsidiary for automotive components located in
Thailand, which is fast becoming a major base for
automobile production in Southeast Asia. Since
beginning mass production in January 2006, FAST
has been manufacturing and selling SRCs to
automobile makers centered on Japanese
companies operating in Thailand.
Policies for Fiscal 2007
In the automotive markets, where continued
growth is expected, we will endeavor to double our
sales of new, distinctive products for automotive
electronics such as metal core substrates that we
hope will follow the success of SRC, which boasts a
35% global market share, and to expand our
business in China. Meanwhile, the electronics
market is experiencing a further acceleration in
miniaturization and pursuit of higher performance
in products such as mobile devices and digital
consumer products. We will expand our sales of
thermal components that are enjoying growing
demand and raise our market share of memory
discs and heat-resistant wires. In fiscal 2007, we are
projecting consolidated net sales of ¥214.0 billion
and consolidated operating income of ¥6.4 billion
for the segment.
Net sales (Billions of yen)
250
194.9
200
135.8 139.6
153.7
165.3
Measures for
50
0
2002
2003
2004
2005
2006
2007
5.7
6.0
6.4
2005
2006
2007
(Plan)
Operating income (Billions of yen)
10
8
6
4.7
4
1.7
2
0
-2
-1.3
2002
2003
2004
(Plan)
* Projections for fiscal 2007 are current as of May 11, 2006.
Measures for
The Automotive Parts Business
In our automotive parts business, we will
promote development and sales expansion for
highly original products, including metal core
substrates that contribute to advanced car
electronics, rudder angle sensors that support
the safety and comfort of automobiles, and slide
door harnesses. In our overseas business, we will
boost our
production and sales
systems in China and
Thailand toward
accomplishing
unified global
quality. At FAST,
Metal core substrate
In the electronics components business, we are
striving to create a product lineup with top
global market share and to expand sales of new
products. Among our mainstay products are
aluminum blank materials for HDDs, which
boast nearly 50% of the global market share. In
recent years, HDDs have been mounted not only
in PCs and servers but in diverse electronics
devices ranging from video recorders, car
navigation and mobile music players to
flat-panel TVs, CATV set-top boxes, video movie
and game machines.
Furukawa Electric has already responded to
rising demand by boosting production capacity
for aluminum blank materials by 40%
year-on-year to a monthly production of 25
million units in fiscal 2006. We intend to further
expand market share by bolstering our supply
systems in line with global demand for HDDs.
Measures for
The Magnet Wire Business
In the magnet wire business, we will seek to
further expand the strong sales of heat-resistant
enameled wires for automotive electronics. Our
TEX series triple-insulated wires are contributing
to the miniaturization of transmissions and
continue to demonstrate strong sales driven by
their use in battery chargers for mobile phones,
notebook PCs and game machines. We plan to
further increase production for the series.
ANNUAL REPORT 2006
The Electronics Components
Business
100
27
Bound to Innovate
150
214.0
which we established in Thailand in September
2005, we plan to launch production and sales
of wire harnesses in addition to strengthening
our production system for SRCs. Furthermore,
we will expand our sales system in global
markets by aggressively pursuing strategic
alliances and joint ventures.
Review of Operations
Light Metals
Tokyo Stock Exchange Listing for
Stronger Mid- to Long-Term
Competitiveness
ANNUAL REPORT 2006
Results of Operations in Fiscal 2006
Bound to Innovate
28
In our Light Metals segment, while a vigorous
automotive market resulted in a favorable
performance by various automotive materials, sales
volume declined as demand fell for thick plates used
in LCD and semiconductor fabrication equipment due
to the effects of adjustments in production and
inventory that occurred in the digital home electronics
market during the first half of the fiscal year, and as
demand for aluminum plate materials for beverage
cans decreased from the high levels enjoyed in the
previous fiscal year as a result of an extremely hot
summer. In addition, despite our efforts to reduce
costs, including the optimized allocation of production
among plants, surging prices for crude oil and bare
aluminum resulted in year-on-year declines in both
consolidated revenue and profit, with net sales falling
by 1.3% to ¥216.8 billion and operating income by
21.9% to ¥12.7 billion.
In December 2005, Furukawa-Sky Aluminum
Corp., the core company of this segment, listed its
stock on the First Section of the Tokyo Stock
Exchange. Demand for light metal products is
Net sales (Billions of yen)
250
200
207.3 219.6 216.8
192.0 197.1
248.0
150
100
50
0
2002
2003
2004
2005
2006
expected to expand and diversify over the mid- to
long-term. Maintaining and strengthening
competitiveness in response to this situation would
require considerable capital expenditure and R&D
expenses. Furukawa-Sky Aluminum Corp.’s stock
listing has opened the way for directly procuring funds
from the financial market.
Policies for Fiscal 2007
The environment surrounding the aluminum business
has remained harsh into fiscal 2007, as crude oil and
bare aluminum prices continue to rise. However, as
Japan’s leading flat-rolled aluminum manufacturer,
Furukawa-Sky Aluminum Corp. will endeavor to
expand profit through a further strengthening of its
business foundation by maximizing synergies,
increasing management efficiencies, and promoting
global operations. We will continue to concentrate
efforts on the production of specific products at
designated plants, while flexibly investing in renewing
and expanding major facilities both in Japan and
abroad to improve product quality, enhance
production efficiency and increase production
capacity. In addition, through a market segmentation
strategy, we will focus on promising markets and key
products while striving to effectively reinforce
production and marketing in strategic areas. Through
these efforts, the Light Metals segment will seek to
achieve net sales of ¥248.0 billion and operating
income of ¥16.4 billion in fiscal 2007.
2007
(Plan)
Operating income (Billions of yen)
20
12.7
11.7
12
6.8
8
4
16.4
16.3
16
2.9
0
2002
2003
2004
2005
2006
* Projections for fiscal 2007 are current as of May 11, 2006.
2007
(Plan)
Measures for
The Rolling Business
We expect demand to recover and sales volume to
increase for thick plates, which constitute our forte.
Together with this projection, we intend to maximize
profitability through the optimal allocation of
Measures for
The Extrusion Business
We will focus our efforts in the extrusion business on
enhancing production capabilities for products with a
competitive edge at our four manufacturing plants—
Oyama and Shiga in Japan, P.T. Furukawa Indal
Aluminum (FIA) in Indonesia, and Tianjin in China,
which is scheduled to start production in the second
half of fiscal 2007. At the Oyama Plant, we will install
the latest 4,000-ton indirect extrusion machine with
the aim of rationalizing production by disposing of
conventional presses and enhancing production
Measures for
The Casting, Forging and
Other Processing Businesses
In the casting business, we will respond to rising
global demand by focusing efforts on our newly
established affiliate in Vietnam and enhancing
production of precision cast products for automobiles,
including compressor wheels for automotive turbo
chargers. In the forging business, we intend to
differentiate our products from the competition by
using large-scale hydraulic presses in the
manufacturing process. We will also strive to maintain
our competitive edge in parts for LCD panel
fabrication equipment and in the aerospace fields.
In the processing business, we will forge ahead
with operational restructuring encompassing our
affiliates and endeavor to develop and supply high
value-added products that respond to the rapidly
changing needs of the times, primarily in IT and
automotive fields where continued growth is
expected to lead to demand for new functions.
ANNUAL REPORT 2006
capacity for pipes, bars and rods. By doing so, we will
raise profit by expanding sales of competitive
products, including materials for automobiles and
office equipment, at our flagship plant.
At the Shiga Plant, we plan to expand production
of high value-added products, including drums for
copiers. We will also actively seek to expand our
overseas production capacity for competitive
products by launching a new line at FIA and starting
operations in Tianjin, China, within the current year,
to offer a timely supply of high-quality extrusion
products, such as precision extrusion tubes for
automotive heat exchangers and fine tube products,
in response to growing automobile production in
Asia, China and Australia.
29
Bound to Innovate
production among three manufacturing plants—
Fukui, Fukaya and Nikko—based on their respective
strengths, in a continued effort since integrating
their operations. At the Fukui Plant, we will focus on
manufacturing large-lot products such as cans and
foils, thick plates for LNG tankers, and quenched
sheets for aerospace materials, taking advantage of
its high-powered, large-scale facilities.
The Fukaya Plant will concentrate on full-line
production from general materials such as thick
plates and cut sheets, to special materials such as
printing plates and sheets for automobiles. The
Nikko Plant will mainly manufacture special products
that require small-lot production, such as clad
products for automotive heat exchangers,
high-purity aluminum materials for memory discs
and high-stretchable materials for bottle caps. To raise
ingot manufacturing capacity at the Fukui Plant to
the necessary levels, we will
invest ¥4.0 billion to build a
melting and casting facility
with the intention of
starting operations in June
The Fukui Plant
2007.
Review of Operations
Services and Others
Pursuing new growth
through the uncompromising
streamlining of operations and
the shift to strategic products
Results of Operations in Fiscal 2006
The Services and Others segment adds value to the
Furukawa Electric Group by providing support to
each business Company.
Net sales for the Services and Others segment in
fiscal 2006 increased 8.9% from the previous year to
¥35.6 billion. Operating income declined ¥0.3 billion
to ¥2.1 billion.
Measures for
ANNUAL REPORT 2006
The Logistics Business
Bound to Innovate
30
There is a high demand for expertise in logistics
solutions throughout industry as a means of
efficiently focusing corporate resources on core
business. Furukawa Logistics Corporation, carrying
out its mission to provide logistics support for Group
companies, has accumulated know-how and
expertise that ensure the provision of optimal logistics
solutions to suit the challenges and needs of
corporations.
Measures for
The Environmental and
Recycling Business
The Furukawa Electric Group utilizes its nationwide
network to collect out-of-service power lines and
cables and recycle them through its dismantling
system and at our plastic recycling plant, which are
among Japan’s largest. As a result, nearly 100% of
conductor materials, such as copper and aluminum
are recycled, even as we expand our use of insulation
materials such as recycled plastic and fuel.
Measures for
The Information Systems
Development Business
We develop and operate a variety of network
systems, not limited to the Furukawa Electric Group,
but also serving other companies. We respond to a
broad range of needs, from building networks that
incorporate the strongest security measures and
mission-critical systems, to developing and operating
various operational application systems including
sales support systems, CAD/CAE, and others. The
core responsibility lies with Furukawa Information
Technology Corporation, which quickly achieved
CMM Level-3 in Japan and is highly regarded for the
quality of its work.
Directors and Auditors
Hiroshi Ishihara
President &
Chief Exective Officer &
Chief Operating Officer
ANNUAL REPORT 2006
Hiroshi Wada
Director, Member of the Board
Corporate Senior Executive Vice President
Chief Administrative Officer
Atsushi Kitanoya
Director, Member of
the Board
Corporate Executive
Vice President
Senior Advisor
Junnosuke Furukawa
Masao Yoshida
Director, Member of
the Board
Corporate Executive
Vice President
Chief Officer, Marketing
& Corporate Planning
Directors, Members of
the Board
Tetsuo Yoshino
Takasuke Kaneko
Chikamasa Ujihira
Yasuhiro Kamikura
Kosaku Nakano
Director, Member of
the Board
Corporate Senior
Vice President
Chief Officer, Technology
& Production
Statutory Auditors
Kiyoshi Takeuchi
Hiromasa Ogawa
Yuzuru Fujita
Tadashi Kudo
Hideo Sakura
Director, Member of
the Board
Corporate Senior
Vice President
Chief Financial Officer
Bound to Innovate
31
FIVE-YEAR SUMMARY
THE FURUKAWA
FURUKAWA EL
ELECTRIC
ECTRIC CO., LTD.
LTD. AND ITS CONSOLIDATED
CONSOLIDATED SUB
SUBSIDIARIES
For the
the years en
ended
ded March 31
Millions of yen
Net sales
Cost of sales
Selling general and administrative expenses
Operating income (loss)
Income (loss) before income taxes and minority interests
Net income (loss)
Cash dividends paid to minority shareholders
Total current assets
Property, plant and equipment, net of accumulated depreciation
Total assets
Total current liabilities
Total shareholders’ equity
2006
2005
¥ 872,536
722,576
112,530
37,430
44,542
25,508
2,085
483,171
325,325
1,052,256
430,206
¥ 223,244
¥ 775,894
640,901
111,257
23,736
33,060
15,805
—
442,937
335,687
991,358
392,909
¥ 175,846
2004
¥ 739,867
624,061
118,967
(3,161)
(145,142)
(140,128)
1,967
422,358
368,848
1,110,666
493,100
¥ 166,940
Thousands of U.S. dollars
2003
2002
¥ 710,616 ¥ 771,411
623,539
642,617
130,924
118,143
(43,847)
10,651
(153,951)
5,538
(114,026)
(3,384)
1,967
5,244
423,395
557,371
419,146
485,118
1,179,399 1,501,705
544,457
616,175
¥ 295,901 ¥ 494,777
2006
$ 7,457,573
6,175,864
961,794
319,915
380,701
218,017
17,821
4,129,667
2,780,556
8,993,641
3,676,974
$ 1,908,068
ANNUAL REPORT 2006
Note: U.S. dollar amounts have been translated, for convenience only, at the rate of ¥117 to US$1.
Bound to Innovate
32
Financial Section
Contents
FIVE-YEAR SUMMARY
32
CONSOLIDATED FINANCIAL REVIEW
33
CONSOLIDATED BALANCE SHEETS
38
CONSOLIDATED STATEMENTS OF INCOME
40
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
41
CONSOLIDATED STATEMENTS OF CASH FLOWS
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
45
REPORT OF INDEPENDENT AUDITORS
70
CONSOLIDATED FINANCIAL REVIEW
Overview of Business Performance
Net sales
The Japanese economy on the whole continued to
steadily expand in fiscal 2006. While the surge in the
prices of crude oil and petroleum products continued
unabated and the rising cost of materials such as
nonferrous metals reached new highs, strong exports,
mainly to the United States and China, maintained their
momentum and both capital expenditures and
consumer spending showed sustained growth.
In this context, the Furukawa Electric Group pursued
various measures in the second year of the Furukawa
Action Plan, the three-year medium-term management
plan launched in fiscal 2005, to accomplish the goals of
the plan and resume dividend payments at the earliest
possible time. The Group united in concerted efforts to
strengthen profitability by expanding sales and market
share and reducing cost of sales and fixed costs, while
also seeking to bring down interest-bearing debt and
improve the level of shareholders’ equity by sustaining
the drive launched in fiscal 2005 to sell investment
securities and real estate holdings.
In March 2005, the Group issued ¥20 billion in
subordinated stock and used the procured cash as a
Strategic Fund for investing in the Group’s future.
Accordingly, in fiscal 2006 we utilized the fund to establish
an automotive parts manufacturing subsidiary in Thailand
and to acquire a major polyolefin maker in Europe.
Furukawa Electric absorbed FURUKAWA DENKO REAL
ESTATE CO., LTD. in May 2005 to secure a stable source
of profit on a non-consolidated basis, while forging
ahead with reorganization of the Group itself through
activities such as integrating the industrial wire business
of The Kyusyu Furukawa Electric Co., Ltd. into Furukawa
Electric Industrial Cable Co., Ltd. in January 2006.
As a result, consolidated net sales rose 12.5% from
the previous fiscal year to ¥872.5 billion (US$7.5 billion)
due to factors including a recovery in demand for
telecommunications products, favorable conditions in
the automotive products market, and the completed
cycle of production and inventory adjustments in the
digital home electronics market that occurred in the
latter half of fiscal 2005, as well as the added effect of
surging prices for copper and other raw materials.
Energy and Industrial Products
Consolidated net sales grew 15.0% to ¥217.5 billion
(US$1.9 billion), due in part to increased sales of bare
copper wires and industrial wires caused by the effects of
economic expansion and surging prices for copper and
other raw materials as well as the favorable conditions in
the digital home electronics market and rising demand for
polyolefin products.
Metals
Consolidated net sales rose 20.1% to ¥133.4 billion
(US$1.1 billion), as sales of strips mounted on
automobiles increased on the back of surging prices for
copper and other raw materials and robust demand from
the automotive market, along with the completion of a
cycle of production and inventory adjustments in the
digital home electronics market.
Light Metals
Consolidated net sales decreased 1.3% to ¥216.8 billion
(US$1.9 billion), as demand declined in the digital home
electronics market due to the cycle of production and
inventory adjustments.
Electronics and Automotive Systems
Consolidated net sales rose 17.9% to ¥194.9 billion
(US$1.7 billion), as sales of automotive parts such as wire
harnesses increased driven by growth in the automotive
systems market, and as sales of triple-insulated wires for
mobile phones and heat sinks (heat-dissipating
components for electronic devices) also grew due to a
recovery in demand in the electronics market.
Services and Others
Consolidated net sales increased 8.9% to ¥35.6 billion
(US$0.3 billion).
Cost of sales, and selling, general
and administrative expenses
Cost of sales increased by ¥81 billion from the previous
fiscal year to ¥872.5 billion (US$7.5 billion) and the cost of
sales ratio increased by 0.2 percentage points from 82.6%
to 82.8%. This was mainly due to the rise in the price of
raw materials, including crude oil and copper. Selling,
general and administrative expenses rose ¥1.3 billion from
the previous fiscal year due to increases in fixed costs,
including personnel and R&D expenses.
ANNUAL REPORT 2006
The consolidated financial statements for the fiscal year
ended March 31, 2006 (fiscal 2006) include the business
results of 97 subsidiaries and 13 affiliates accounted for
using the equity method. In the year under review, 11
subsidiaries were added to consolidation while11subsidiaries
were removed. With respect to consolidated equity-method
affiliates,one was added and one was removed.
Results by Business Segment
Telecommunications
Consolidated net sales jumped 21.9% to ¥143.1 billion
(US$1.2 billion), as the spread of optical broadband
networks led to a recovery in demand both in Japan and
abroad, ending a prolonged period of stagnation that
ensued in the aftermath of the IT bubble.
33
Bound to Innovate
Scope of Consolidation
CONSOLIDATED FINANCIAL REVIEW
Net income
Operating income improved by ¥13.7 billion to ¥37.4
billion (US$0.3 billion).
Other income fell ¥2.2 billion to ¥7.1 billion. The main
reason was the ¥13.4 billion in loss on impairment of
property, plant and equipment reported in accordance
with the application of impairment accounting, which
more than offset the effects of a ¥16.9 billion net increase
in foreign exchange gains to ¥14.2 billion.
As a result, income before income taxes and minority
interests amounted to ¥44.5 billion (US$0.4 billion) and
net income before corporate tax, resident tax, business tax,
corporate tax adjustments and minority interests was
¥25.5 billion (US$0.2 billion) for the fiscal year under review.
Liquidity
ANNUAL REPORT 2006
Dividends
Bound to Innovate
34
increased trade receivables, resulting in a smaller annual
increase in cash compared with the previous fiscal year.
Net cash provided by investing activities was ¥11.1
billion (US$0.1 billion). While income from the sale of
investment securities and real estate holdings remained
below levels of the previous fiscal year, the amount
nevertheless exceeded expenses for asset acquisition, thus
resulting in a net increase in cash.
Net cash used in financing activities was ¥46.8 billion
(US$0.4 billion). While the stock issuance by Furukawa-Sky
Aluminum Corp. generated ¥13.1 billion in income, we
also made advances in repaying long- and short-term
debt.
Furukawa Electric had been unable to pay dividends for
the previous two fiscal years because of a significant
decline in shareholders’ equity, causing considerable
inconvenience and concern among our shareholders.
For fiscal 2006, considering that we were able to
recover profitability, reporting an operating profit on a
non-consolidated basis, and the continued need for
strengthening our financial condition, we decided to pay
a dividend of ¥3 per share.
Looking ahead, we intend to pay dividends by
upholding our basic policy of paying solid dividends while
maintaining a long-term outlook on future income trends
and business development.
Cash Flows
In fiscal 2006, we pursued the goals of the Furukawa
Action Plan, our three-year midterm management plan
launched in fiscal 2005, by selling investment securities
and real estate holdings and reducing interest-bearing
debt to bolster our financial condition.
As a result, interest-bearing debt decreased by ¥47
billion from the previous fiscal year to ¥435.3 billion.
In the future, we intend to create an Internal
Procurement Fund by generating cash from raising asset
efficiency and reducing inventory and trade receivables,
and to use this fund for new strategic investments.
In terms of numerical targets, we plan to lower
inventory turnover period to no more than 1.0 months,
total asset turnover ratio to 1.0 and debt-to-equity ratio
to 1.3.
In fiscal 2006, income before income taxes and minority
interests increased by ¥11.5 billion from the previous fiscal
year to ¥44.5 billion (US$0.4 billion), and we repaid
long-term debt and reduced interest-bearing debt by
¥46.9 billion. As a result, the balance of cash and cash
equivalents at the end of fiscal 2006 declined ¥9 billion to
¥41.6 billion.
Net cash provided by operating activities was ¥22.7
billion (US$0.2 billion). While income before income taxes
and minority interest exceeded levels of the previous fiscal
year, this was not enough to offset the negative effects of
Furukawa Electric Group maintains a solid R&D structure
that enables it to create and develop new businesses,
innovative products and technologies, and to aggressively
pursue R&D activities. The Group operates five research
laboratories in Japan, including Yokohama R&D
Laboratories, the Metal Research Center, the Ecology and
Energy Laboratory, the FITEL Photonics Laboratory, and
the Automotive Technology Center, as well as research
laboratories of other Group companies. We also operate
Operating income (loss) and
net income (loss)
Operating income (loss)
(Ratio to net sales)
10.7
2002
2003
2004
2002
-3.4
-43.8
2003
-114.0
-3.2
23.7
15.8
37.4
25.5
2006
-100
Operating income (loss)
0
(%)
1.4
-6.2
2004
-140.1
2005
-200
(Billi
illions
ons of
of yen)
R&D Activities
-0.4
2005
3.1
2006
100
Net income (loss)
200
-8
4.3
-4
Operating income
0
4
8
Energy and Industrial Products
We are developing second-generation, Yttrium-based,
high-temperature superconducting power cables as a
national project in Japan.
MC-PET, our microcellular, high-reflection foamed
sheet, was adopted for use in reflectors for LCD Television
display backlighting, and we developed high-function
materials such as semiconductor tapes and heat radiation
sheets, which are enjoying brisk sales.
R&D expenditures for the segment totaled ¥0.8 billion.
Metals
We commercialized precious metal stripe-plated products
Research and development costs
0
6
12
((B
Billions of yen)
24
30
18
23.1
2002
3.0
2003
24.9
3.5
19.1
2004
2.6
17.2
2005
2.2
18.0
2006
0
R&D costs
1.0
2.0
2.1
% of net sales
3.0
4.0
5.0
(%)
Light Metals
To maintain our top domestic share in flat rolled products
amid the wave of globalization, we are striving to attain
the world’s top technology and are endeavoring to
deepen our understanding of products and the basic
manufacturing technology to develop new products and
manufacturing technology based on this knowledge, as
well as to create new businesses. Particularly in the
automotive field, we are responding to the need for
reduced automobile weight by developing aluminum
materials for heat exchangers, such as our
next-generation, compact, lightweight radiator
evaporator, and supplying samples. We also began
applied research into materials for hot work with high
formability for automotive applications. These materials
moved into the mass production phase in the previous
fiscal year.
We are also developing aluminum materials for future
uses of hydrogen, as basic research responding to the
need for reducing carbon dioxide emissions to prevent
global warming, and we constructed a pilot plant for
conducting research on generating hydrogen from
scrapped aluminum.
R&D expenditures for the segment totaled ¥2.5 billion.
Electronics and Automotive Systems
We have been developing heat-dissipating components
for power electronics equipment with higher density and
functionality and have maintained the top market share.
In addition, our GPS/ VICS/ ETC-integrated antenna for
automobiles were introduced as standard equipment and
are enjoying expanding sales. In our TEX (triple-insulated
wires) series, we are developing a next-generation version
that excels in resistance to heat and solvents.
R&D expenditures for the segment totaled ¥3.5 billion.
Services and Others
This area is primarily related to our new business fields.
We are developing fiber lasers and blue lasers
and have started delivering engineering samples. These
products are expected to be applied in such fields as
medical care, measurement, signals and data processing.
R&D expenditures for the segment totaled ¥2.3 billion.
ANNUAL REPORT 2006
Telecommunications
We developed and commercialized
temperature-insensitive AWG modules (devices for optical
wavelength division multi/demultiplexers) suitable for
outside installation. The modules are expected to be
applied to ROADM (Reconfigurable Optical Add/Drop
Multiplexers) in metro networks and to WDM-PON
(Wavelength-Division-Multiplexed Passive Optical
Networks) in the future. We also developed and began
sales of splitter modules and prefabricated splitter
modules to carriers. Sales of these products are growing.
Shipments of analog DFB lasers developed for the FTTH
market to domestic and overseas carriers and equipment
makers increased dramatically. We also completed
development of gateway mechanisms for
next-generation IP networks and began full-scale delivery
to domestic and overseas carriers.
We are planning to develop and commercialize
wavelength tunable light sources for DWDM (Dense
Wavelength Division Multiplexing) transmission systems,
while concurrently strengthening the structure and
installing facilities for the development of optical
interconnections as part of our strategic investment.
R&D expenditures for the segment totaled ¥7.7 billion.
for high-speed welding points and expanded sales.
Our original, new copper and chrome-based alloys
were adopted for use as new terminal material and have
entered the mass production phase.
Our new internally grooved tubes have won accolades
for their performance, cost and overseas development
capabilities, and were adopted by a major air conditioner
maker, raising hopes for future prospects.
R&D expenditures for the segment totaled ¥1.2 billion.
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Bound to Innovate
two overseas laboratories, OFS Laboratories in the U.S.
and FETI in Hungary. Total R&D expenditures in fiscal 2006
were ¥18.0 billion. The major results of our R&D activities
segment were as follows.
CONSOLIDATED FINANCIAL REVIEW
ANNUAL REPORT 2006
Financial Position
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36
Total current assets increased ¥40.2 billion to ¥483.2
billion (US$4.1 billion) compared with the previous
fiscal year. This was primarily due to increases of ¥37.7
billion in trade receivables and ¥6.5 billion in inventory.
Investment and long-term loans rose ¥28.6 billion
compared with the end of the previous fiscal year to
¥175.2 billion (US$1.5 billion), mainly attributable to
an increase in the reported amount of investment
securities resulting from rising stock prices. On the
other hand, property, plant and equipment, net of
accumulated depreciation decreased ¥10.4 billion to
¥325.3 billion (US$2.8 billion), mainly due to the
effects of applying impairment accounting.
Current liabilities rose ¥37.3 billion compared with
the end of the previous fiscal year to ¥430.2 billion
(US$3.7 billion), and long-term liabilities fell ¥43.4
billion compared with the end of the previous fiscal
year to ¥335.3 billion (US$2.9 billion).
Total shareholders’ equity at the end of fiscal 2006
increased ¥47.4 billion compared with the end of the
previous fiscal year to ¥223.2 billion (US$1.9 billion), in
the wake of increases of ¥25.4 billion in retained
earnings and ¥18.4 billion in unrealized gains
on available-for-sales securities. As a consequence,
total shareholders’ equity ratio rose 3.5 percentage
points from 17.7% at the end of the previous fiscal
year to 21.2%, recovering to levels above 20%.
Business-Related Risks and Future Outlook
The Furukawa Electric Group’s management
performance is affected by the economic conditions of
the various markets in which we sell our products and
provide services.
The Furukawa Electric Group’s management
performance, stock price and financial condition may
be affected by the following risks, assessed by the
Group as of June 29, 2006, the date on which we
submitted our financial report.
Capital expenditure and cash flow
1. Infringement of third-party intellectual property
rights and other rights
The Furukawa Electric Group takes appropriate
measures to prevent the infringement of intellectual
property and other rights owned by third parties in
connection with business activities, including the
development, manufacture, use and sales of products
and software.
These measures include prior research of such rights
and the arrangement of licensing as required. However,
we may become engaged in a dispute with a third
party who sues the Group for alleged infringement of
intellectual property or other rights owned by the third
party.
Suspension of the manufacture or sale of Group
products or a major claim for damages or settlement
benefits as a result of alleged infringement of third
party rights may adversely affect the results of
operations and financial position of the Group.
2. Defective products
The Furukawa Electric Group manufactures products
and services in accordance with prevailing domestic and
international standards and specifications as well as its
own quality control standards developed over the
course of its extensive business experience. However,
we cannot warrantee that all our products and services
are free from defects or that we will not be liable for
any future losses or damages. Any defects in products
such as power cables, communication cables and
automotive parts may incur significant additional costs.
While our product liability insurance policy covers
risks associated with our products, it may not cover all
the damages we might be required to pay. Product
defects causing significant damage or product liability
may incur major costs and tarnish the Group’s
reputation, adversely affecting the results of the Group’s
operations and financial position.
3. Higher prices for raw materials
Prices for our main raw materials, such as copper,
aluminum and polyethylene, along with fuels such as
heavy oil and LNG, may rise beyond expectations due
Total assets and shareholders’ equity
((B
Bill
illions
ions of yen)
68.8
41.2
23.2
2002
2003
2004
29.4
-100
-50
Capital expenditure
0
27.3
56.8
30.9
62.5
50
100
494.8
1,179.4
2003
295.9
1,110.7
2004
-91.8
2006
-150
2002
-56.8
2005
(Bill
illions
ions of
of yen)
yen)
1,501.7
166.9
991.4
2005
175.8
1,052.3
2006
150
200
250
Cash flow (net income + depreciation)
223.2
0
Total assets
500
1,000
Shareholders’ equity
1,500
2,000
5. Higher interest rates
If interest rates rise, our interest expenses will increase,
which may adversely affect the results of operations.
6. Lowering of credit ratings
Should our performance stagnate, we may incur the
risk of credit rating agencies downgrading our
long-term bonds and commercial paper.
7. Impairment of assets
In the event of unfavorable conditions in the market or
business environment, the market value of our assets
may substantially decline, or the profit generated by our
assets may decrease, leading us to incur impairment
losses on such assets.
8. Soil pollution on land held for business
purposes
The Furukawa Electric Group discovered contaminated
soil on part of land owned by the Group in the Nikko
area. We are implementing the necessary soil
remediation actions.
When we sell our land or change how it is used in
other areas, we may incur costs associated with soil
pollution in the event a soil survey demonstrates the
land is contaminated.
9. Overseas activities
The Furukawa Electric Group manufactures and sells
products not only in Japan but also in overseas markets,
including markets in the U.S., Europe and Asia, as well as
emerging markets. We face various potential risks in
these overseas markets, such as unexpected changes in
laws and regulations, labor disputes caused by changes
in the economic environment or sudden outbreaks of
epidemics. Such risks may adversely affect the result of
our operations.
Particularly in China, where the annual GDP growth
rate has exceeded 7% over the past several years, we
have established and operate a number of business sites,
namely in Shanghai, Beijing and Tianjin. Unexpected
events in China, such as changes in laws, rules and
In view of these risks, the Furukawa Electric Group has
been endeavoring to enhance profitability and improve
its financial position based on the Furukawa Action Plan
formulated in 2004. In fiscal 2006, consolidated net sales
reached ¥872.5 billion, far exceeding our original target
of ¥846.0 billion for fiscal 2007, while the
Telecommunications segment returned to profitable
operations a year earlier than planned, allowing us to
foresee the successful achievement of plan goals.
Therefore, we decided to shift into a more aggressive
management posture a year in advance and formulated
Innovations 09, our 2006-2009* Medium-Term
Management Plan for becoming reborn as a truly
creative company with a global presence.
Innovations 09 consists of three goals: development of
priority fields and the global market, enhancement of
asset efficiency, and revision of the Group management
system.
Numerical targets for the year ending March 2010 are
as follows:
(1) Net sales
¥1 trillion
(2) Operating income
¥70.0 billion
(3) ROE
11.0%
(4) ROA(based on operating income)
7.0%
(5) Total asset turnover rate
1.0
(6) D/E ratio
1.3
With respect to consolidated performance for fiscal
2007, we plan to generate ¥950.0 billion in net sales and
¥15.0 billion in net income.
The Furukawa Electric Group will strive to become a
global company with product development capabilities
based on materials technology.
We will forge ahead toward further growth by
improving our asset efficiency and solidifying our
foothold for expanding our overseas businesses. We will
make the utmost effort to raise dividends and enrich our
shareholders, customers, employees and local
communities.
* The designated years of the Medium-Term Management Plan are one year
earlier than the fiscal years, e.g., year 2006 of the plan equals fiscal 2007.
ANNUAL REPORT 2006
4. Fluctuations in exchange rates
The Furukawa Electric Group owns foreign
currency-denominated credit and obligations.
Therefore, we may incur exchange losses as a result of
an unfavorable foreign currency environment.
regulations associated with investment, foreign currency,
finance and trade; suspension of power supply; or the
outbreak of epidemics, may adversely affect our
operations. Concretely, should the Chinese GDP growth
rate sharply decline due to the adoption of a
governmental policy to curb excessively rapid economic
growth, or should the exchange rate of the yuan be
adjusted, the results of our operations in China may
significantly differ from our business plan forecast. In
such cases, the cash flows of our subsidiaries in China
may be adversely affected because the collection period
for sales receivables from Chinese customers is relatively
long.
37
Bound to Innovate
to changes in international politics and market trends.
In the event of substantial price increases, we may not
be able to sufficiently raise sales prices to compensate
for higher raw material costs, or we may unable to do
so in a timely manner. This may adversely affect the
results of our operations or financial position.
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Corporate Data
Head Office
Manufacturing Facilities
2-3, Marunouchi 2-chome, Chiyoda-ku,
Chiba, Nikko, Hiratsuka, Mie, Osaka
Tokyo 100-8322, Japan
PHONE: 81-3-3286-3001
Research Laboratories
FAX: 81-3-3286-3747, 3748
Yokohama R&D Laboratories
URL: http://www.furukawa.co.jp/
Metal Research Center
Ecology & Energy Laboratory
Paid-in Capital
FITEL Photonics Laboratory
¥69,312 million (As of March 31, 2006)
Automotive Technology Center
Branches
Stock Information
Number of shares authorized
March 31, 2006
2,596,000,000
Common stock
2,500,000,000
Preferred stock
50,000,000
Subordinated stock
46,000,000
Total number of shares
issued and outstanding
Major Stockholders
705,958,179
(Common stock)
March 31, 2006
Number of
Shares held
The Master Trust Bank of Japan, Ltd.
(trust account)
83,940,000
Japan Trustee Services Bank, Ltd.
(trust account)
30,034,000
Japan Trustee Services Bank, Ltd.
(trust account 4)
24,796,000
Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement
Benefit Trust Account re-entrusted by
Mizuho Bank, Ltd.)
22,928,250
Asahi Mutual Life Insurance Co., Ltd
16,050,000
Furukawa Co., Ltd.
13,290,455
Nippon Life Insurance Company
11,895,000
Fuji Electric Holdings Co., Ltd.
11,000,000
Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement
Benefit Trust Account re-entrusted by
Furukawa Co., Ltd.)
10,919,000
The Nomura Trust and Banking Co., Ltd
(trust account)
10,509,000
Distribution of Stock Ownership
(Common Stock)
March 31, 2006
71
Domestic corporations,
others
7.17%
50,610,662 shares
Individuals and
others
21.83%
154,166,240 shares
Financial institutions
47.34%
334,181,234 shares
Foreign corporations
20.98%
148,115,056 shares
Securities companies
2.68%
18,884,987 shares
Total number of shares issued and outstanding: 705,958,179 stocks
Bound to Innovate
Stock Information
ANNUAL REPORT 2006
Osaka, Nagoya, Fukuoka