May 9, 2017

To Whom It May Concern:
Company
Representative::

CodeContact::Phone:

Sumitomo Heavy Industries, Ltd.
Shunsuke Betsukawa
President and Chief Executive Officer
6302
Tsuneyoshi Sato
General Manager, Corporate
Communications Department+81-3-6737-2333

Notice Regarding the Medium-Term Management Plan 2019
Sumitomo Heavy Industries Ltd (hereinafter referred to as “SHI” or the “Company”) has completed the formulationof the next three-year medium-term management plan entitled “Medium Term Management Plan 2019 (MTMP19)”
which will see initial implementation during FY2017.
FY2015 was the second year of implementation of the “Medium Term Management Plan 2016 (MTMP16)” thatcommenced in FY2014. During that year, most of the final-year financial targets set forth in the MTMP16 (sales ofJPY700.0 billion, operating income of JPY52.5 billion) were achieved a year in advance. However, the Company was
not able to sustain these levels in the final year of implementation mainly due to the slowdown of the Chinese
economy and low growth figures in emerging markets. Nevertheless, SHI firmly believed that the pursuit of the basic
policies of “Steady growth”, “Return to higher levels of profitability” and “Persistent efforts for operational quality
improvements” was effective under any type of economic environment. With this in mind, the Company has
promoted further globalization, expanded its service-related businesses, made focused investments into high-profit
business areas, and formulated a new management philosophy which is currently being implemented. In order toproduce results from these key policies, SHI has created the MTMP19.
DETAILS
1.

Objectives of the MTMP19
The following targets for FY2019 have been set with respect to financial metrics:(1) FY2019
Sales – JPY800.0 billion(2) FY2019
Operating Income – JPY60.0 billion (Operating income ratio of 7.5%)
Please note that ROIC will continue to be the management indicator for the SHI Group. As a Company, the aim isto keep ROIC greater than WACC with a target figure of greater than 7.5% for ROIC.

2.

Management Strategy Associated with MTMP19
In order to achieve the above financial targets, the Group has established five basic policies in the MTMP19
which are (1) look to achieve “Steady Growth” after carrying out a stringent examination of the external
environment, (2) make the conversion to become a “High Profit Company”, (3) create first-class products andservices through “A Tireless Commitment to Improving Operational Quality”, (4) actively participate in “Businessintegrations, M&A, and formation of business alliances with third-party entities”, and (5) “Actively Pursue CSR”
activities. Ultimately, the aim is to continue to be a company that provides first class products to the world.

1

3.

Investment Plan
The Group plans to make active investments in growth areas while maintaining financial discipline.
Capital Investments

Key Points

Focused investments
into areas of strength
andinformation-related
improvements.

Three-YearTotal

JPY80.0 billion

4.

R&D Expenses

Domestic Hires

Continue to actively fill
Enhance productpositions in the technology
capabilities that targetand service related
growthfunctions
JPY52.0 billion

1,400 people

M&A

Explore growth
proposals from key
business areas

JPY30.0 billion

Thoughts Regarding Capital Policy
The Company will prioritize growth related investments (capital investments, M&A) while maintaining adividend payout ratio of 30% for shareholders return for the three-year period from FY2017. If the level ofretained earnings is projected to become excessive, the Company will consider share buy-backs.

※ROIC is an abbreviation for Return on Invested Capital, and it measures the amount of profit generated frominvested capital (the sum of shareholders’ equity and interest-bearing liabilities) as well as profitability as comparedto the cost of capital. WACC is an abbreviation for Weighted Average Cost of Capital and it represents the costs
associated with shareholders’ equity and interest-bearing liabilities.
END2