Integrated Report 2019
April 2018– March 2019

Editorial Policy
The Sumitomo Heavy Industries Group (SHI Group) published an Integrated
Report for FY2017 in lieu of the Annual Report that it had published sincethe 1970s. Integrated Report 2019 contains reports on financial information
as well as the SHI Group’s unique strengths and the sources of its mediumto long-term growth with the aim of deepening understanding among awide range of stakeholders, including shareholders and investors.
Please refer to our website for detailed information and figures related tofinancial data (including Securities Reports) and non-financial data (such as
CSR data).
(Scope of Report)
This report covers Sumitomo Heavy Industries, Ltd., 141 consolidated
subsidiaries (42 in Japan, 99 overseas) and 4 equity-method affiliates (1 inJapan, 3 overseas). Context changes are duly noted in the text.
(Timeline)
This report covers FY2018 (April 1, 2018 to March 31, 2019). Coverage ofoverseas subsidiaries is from January 1, 2018 to December 31, 2018 withthe exception of two companies. Some content makes references to dates
outside of this time period.
Reference Guidelines· “International Integrated Reporting Framework,” International
Integrated Reporting Council (IIRC)· “WICI Intangibles Reporting Framework Version 1.0,” WorldIntellectual Capital Initiative· “G4 Sustainability Reporting Guidelines,” Global Reporting
Initiative (GRI)· “Guidance for Collaborative Value Creation,” METI of Japan

BUILDING ON
A SOLID
FOUNDATION

Cautionary Note Concerning Forward-Looking Statements
Integrated Report 2019 includes forward-looking statements regarding the future
performance of Sumitomo Heavy Industries, Ltd. These forward-looking statements
are based on information currently available to the Company and determinedsubjectively. All information contained herein is subject to changes in actual business performance.

Corporate Information

The Sumitomo Business Spirit and theSumitomo Heavy Industries Group’s
Business Principles . . . . . . . . . . . . . . . . . 03
SHI Group Tracings of Growth . . . . . . . . 04
At a Glance . . . . . . . . . . . . . . . . . . . . . . . 06
Message from the President . . . . . . . . . . 08
Strength of the SHI Group
Relationship of Capitals andStrength of the SHI Group . . . . . . . . . . . 14
Strength 1 Excellent Products
and Services . . . . . . . . . . . . . 16
Strength 2 Management Powerto Realize High Market
Share and Profitability . . . . . . 20
Strength 3 A Culture of Transformation . . . 22
SHI Group Value Creation . . . . . . . . . . . . 24
Business Activities
Machinery Components . . . . . . . . . . . . . 26
Precision Machinery . . . . . . . . . . . . . . . . 28
Construction Machinery . . . . . . . . . . . . . 31
Industrial Machinery . . . . . . . . . . . . . . . . 33
Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Base Supporting the SHI Group

Non-Financial
Securities Reports

To Our Stakeholders . . . . . . . . . . . . . . . . 02

Environmental Facilities & Plants . . . . . . 37

Positioning of Integrated Report 2019

Financial

The SHI Group

Corporate Governance Report
Sumitomo Heavy Industries
Technical Review

Directors, Corporate Auditors,
and Executive Officers . . . . . . . . . . . . . . 40
Messages from the External Directors . . . 43
Corporate Governance . . . . . . . . . . . . . . 44
Compliance . . . . . . . . . . . . . . . . . . . . . . . 47

To Our Shareholders

Risk Management . . . . . . . . . . . . . . . . . . 48

Integrated Report 2019
WebsiteCSR
CSR Mid-Term Plan . . . . . . . . . . . . . . . . . 50
Environment . . . . . . . . . . . . . . . . . . . . . . 52
Human Resources . . . . . . . . . . . . . . . . . . 56
ActualTo Our Shareholders

Securities Reports

Sumitomo Heavy
Corporate
Governance Report Industries
Technical Review

Please refer to our website for detailed information and figures related tofinancial data (including Securities Reports and timely disclosure information) and non-financial data (such as environmental and CSR data).
http://www.shi.co.jp/english/ir

Seven-Year Non-Financial Key Data . . . . 62
Financial Section

Our Website• Investor Relations

Eleven-Year Summary and
Key Financial Data . . . . . . . . . . . . . . . . . . 60

• CSR
http://www.shi.co.jp/english/csr

Consolidated Financial Statements . . . . . 64
Major Subsidiaries and Affiliates . . . . . . . 106
History . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Corporate Data /Stock-Related Information . . . . . . . . . . . 110

Sumitomo Heavy Industries, Ltd. Integrated Report 201901

The SHI GroupThe Sumitomo Business Spirit and the Sumitomo
Heavy Industries Group’s Business Principles

To Our Stakeholders

The Sumitomo
Business Spirit

Business Principles
Article 1

Sumitomo shall achieve prosperity based on solid
foundation by placing prime importance on integrity
and sound management in the conduct of its business.
Article 2

Sumitomo’s business interest must always be inharmony with public interest; Sumitomo shall adapt
to good times and bad times but will not pursue
immoral business.
[Commentary]
1. Sumitomo shall achieve prosperity based on a solid foundation by placing
prime importance on trust and reliability.
2. We need to watch changes and aggressively pursue business expansion
using our management resources but should not behave hastily for an easy
profit in any case.

Since its founding as an engineering shop at the Besshi Copper Mine in 1888, the SHI Grouphas progressed alongside advances in society and industry. Our “manufacturing spirit” accumulated from long-standing traditions is present in various business fields, from nanotechnology to massive buildings and structures.
Our two points of “placing prime importance on integrity and sound management” and “notpursuing immoral business” in the Sumitomo Business Spirit have stood the test of time
regardless of business conditions, expressing our approach to business even in challenging
conditions. The SHI Group, positioning the Sumitomo Business Spirit as the basis of its management, will proceed steadily with business restructuring and create a more robust corporate character in line with this spirit.
Employees of the SHI Group engage in their daily work with Our Values and the Corporate
Mission Statement based on the Sumitomo Business Spirit.
In Integrated Report 2019, we discuss our thoughts and business strategies for realizing the
Corporate Mission Statement, as well as initiatives to fulfill our corporate social responsibilities.
We hope that this report will serve to deepen everyone’s understanding of the SHI Group.

Shunsuke Betsukawa
Representative Director,
Chairman of the Board
02

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Shinji Shimomura
Representative Director,
President and CEO

Corporate
Philosophy

Corporate Mission Statement
We will aim to become a machinery manufacturer
that continues to provide excellent products andservices to the world.
With integrity being a key principle in the Group,
we will contribute towards society by gaining highrespect and confidence from all stakeholders.
Our Values◼ Customer FirstWe exceed customer expectations by providing sophisticated efficient products and services, giving the utmost consideration to theirneeds and requirements.
◼ Embrace Changes
We will continue to drive and embrace changes without accepting
the status quo.
◼ Commitment to Technology and Innovation
We are passionate about contributing to society by further developing our unique, in-house technologies.
◼ Respect People
We will nurture an organizational climate that fosters mutual respect,tolerance and learning for growth.
Sumitomo Heavy Industries, Ltd. Integrated Report 201903

The SHI GroupSHI Group Tracings of Growth
2018
11 Years of Business Results and Key Initiatives
Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery

Opened Sumitomo Heavy Industries(Tangshan), Ltd. and Sumitomo (S.H.I.)
Construction Machinery (Tangshan) Co., Ltd.

Environmental
Facilities & Plants

Ships

2008

Net
Net
sales
sales
(Billions(Billions
ofofyen)yen)
1,000.0
1,000.0

Acquired Demag Plastic Group (currently known as Sumitomo (SHI) Demag
Plastics Machinery GmbH) to accelerate
global deployment of the plastics
machinery business

1999
Employed ROIC early as amanagement index
Implemented business structuralreformIntroduced Executive Officer System
Sought separation of management
and execution

Plastics machinery
plant in Germany

2010
Built a plant forhydraulic excavators inIndonesia as the hub
for the ASEAN region

2006
Motor plant for gear
reducers completed
in Hanoi, Vietnam

700.8 billion
660.8 billion
600.3 billion

Spun off ships business624.1 billion

77.8 billion

521.3 billion

517.1 billion
481.3 billion

Invested capital*
382.0 billion
354.4 billion

47.5 billion

362.9 billion
306.4 billion
40.2 billion
8.5%

326.7 billion

331.9 billion

293.2 billion
8.8%

47.1 billion

443.7 billion

292.7 billion

46.0 billion

ROIC

1.9%

7.8%

(Return on invested capital)

1999
Medium-Term
Management
Plan

2.6%

2001

2002

75.2

60.0
60.0

billion34.3 billion

10.3%

7.6%

7.4%

10.5%

40.0
40.0

9.2%
(Plan)

7.3%

4.8%

4.9%

4.8%

2012

2013

20.0
20.0

1.3%

2000

C21

Trend of the World

Operating income

6.5%

17.2 billion

2.3%

495.2 billion

48.4 billion

31.3 billion

28.3 billion

14.2 billion

7.5 billion

459.1 billion

375.4 billion
335.2 billion

9.6%

444.9 billion
50.6 billion

387.4 billion

6.5%

12.7 billion

2003

Rebuild 04

2004

2005

2006

2007

2008

Leap to Excellence ’07

2000• Collapse of IT bubble

1999• Birth of the euro
04

12.2%

45.8 billion
338.9 billion

80.0
80.0

72.0 billion(Plan)
526.8 billion

433.9 billion

14.0%

330.3 billion

Operating income

billion482.8 billion

48.8 billion

100.0
100.0

903.1

674.3 billion

69.9 billion

56.9 billion

200.0
200.0

Net sales

516.2 billion

64.2 billion

120.0
120.0

615.3 billion

406.7 billion
400.0
400.0

905.0 billion(Plan)

791.0 billion

548.0 billion* Invested capital = interest-bearing debt + net assets

OperatingOperatingincomeincome(Billions(Billions
ofofyen)yen)

585.9 billion

551.3 billion
513.8 billion

Reformed Business Principles
Added non-financial indexes
to the performance
evaluation indexes

667.1 billion
642.9 billion

600.0
600.0

Acquired the circulating fluidized bed(CFB) boiler business of Amec Foster Boiler-related plant in
Finland
Wheeler plc to reinforce the energy
plant business

Motor plant in
VietnamIntroduced global brand in thegear reducer business

Motor plant in Italy

Hitachi Sumitomo Heavy Industries
Construction Crane Co., Ltd. (currently, Sumitomo Heavy Industries
Construction Cranes Co., Ltd.) became
a consolidated subsidiary

2015

Hydraulic excavator
plant in Indonesia

2003

566.7 billion

2017

In the semiconductor manufacturing equipment
business, made SEN-SHI and Axcelis Company(currently known as Sumitomo Heavy Industries Ion
Technology Co., Ltd.) a wholly owned subsidiary

Recorded all-time highs for orders received, net sales,
operating income and net profit (then)

Net sales

Acquired Lafert Group, a manufacturer of industrial motors in Italy,
in a bid to expand the powertransmission and controls businessOpening ceremony for
Tangshan Plant
The first overseas
manufacturing of hydraulicexcavators business

2007

800.0
800.0

Achieved new record highs in orders,
net sales and profit attributable toowners of parent

2009

Sumitomo Heavy Industries, Ltd. Integrated Report 20192009

Global 21

2008• Collapse of

Lehman Brothers

2005• Revalue therenminbi

2007• Collapse of US real estate
bubble2010

Global 21

2011

Innovation 21

2014

2015

2016

Medium-Term
Management Plan 2016

2017

2018

2019

Medium-Term
Management Plan 20192011
• Great East Japan Earthquake2010• European debt crisis

2016• Introduction of negative interest
rate by the Bank of Japan

Sumitomo Heavy Industries, Ltd. Integrated Report 201905

The SHI GroupAt a Glance

OrdersNet Sales

Operating Income¥952.2 ¥903.1
billion¥75.2

billionTotal Assets andStockholders’ Equity Ratio
Total assets(Billions of yen)

Stockholders’ equity ratio(%)

1,200.0

billion

60.0

894.8
786.0

782.9

50.0

48.1

48.2

45.8
OthersShips¥41.4 billion

0.0

2018

40.0

40.0

20.0

47.5

¥903.1

20.5%

billion32.2%

Industrial Machinery

Precision Machinery

2014
(FY)

2015

2016

2017

Net Sales

30.0

–0.2

–3.4

–8.8

903.1

–20.0

40.0

2014
(FY)

2015

2016

2017

2018

75.2

72.0

50.6

2016

2018

2017

2019
0.0
(Expected)

30.0
250.0

Asia (excluding China)¥90.4 billion / 11.4%

2015

2016

12.0

2017

2018

10.5

10.3

7.6

7.3

0.0

2015
(FY)

2016

2018

2017

2019
(Expected)¥390.5 billion / 43.3%
North America¥139.0 billion / 15.4%

2019 (FY)(Expected)

Europe¥104.7 billion / 11.6%

FY 2018

Asia (excluding China)¥97.9 billion / 10.8%

China

China

¥80.4 billion / 10.2%¥99.4 billion / 11.0%

Others¥28.6 billion / 3.6%
0.0

ROIC

Europe¥70.9 billion / 9.0%

FY 2017

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

2015
(FY)

North America¥118.5 billion / 15.0%

48.4

500.0

2019 (FY)(Expected)

16.0

Japan

¥365.5 billion / 46.2%

674.3

2018

16.0

–24.1

Japan

69.9
60.0

06

80.0

34.7

Net Sales Ratio by Region

90.0

791.0

2017

46.0

4.0

Operating Income
905.0

0.0

8.0

(Billions of yen)

2016

45.7

9.2

–30.0

2015

33.6

112.0 120.0

(%)

–2.6

0.0

¥290.5 billion(Billions of yen)

2018

(Billions of yen)¥185.7 billion

Construction Machinery¥93.7 billion

0.0

33.1

Net Interest-Bearing Debt

–10.0

700.8

50.0

(Yen)

112.0

* Stock split (5:1) in October 2017

Net Sales Ratio
by Segment

10.4%¥133.4 billion

14.8%

16.7%
4.6%

750.0

85.0

Dividends per share

Machinery Components¥151.0 billion

1,000.0

60.0

954.0

400.0

Environmental Facilities & Plants

Profit attributable to owners of parent(Billions of yen)

796.5

800.0

¥7.3 billion 0.8%

Profit Attributable to Owners of Parent
and Dividends per ShareOverseas Ships¥36.7 billion / 4.6%

Others¥32.4 billion / 3.6%
Overseas Ships¥39.0 billion / 4.3%

Sumitomo Heavy Industries, Ltd. Integrated Report 201907

The SHI Group

Message from the President
We aim to reinforce
business structuresand build a truly
strong SHI Group.
Shinji Shimomura
Representative Director, President and CEO

Appointment as
President

I am Shinji Shimomura, and it is my pleasure to greet you as the newly appointed president.
I joined Sumitomo Heavy Industries, Ltd. as a production engineer and then built
up experience on the front lines as a production manager. I was then involved in setting up operations at our hydraulic excavator production plant in China, thereafter
serving as president of Sumitomo (S.H.I.) Construction Machinery Co., Ltd., a subsidiary in charge of manufacturing and selling hydraulic excavators, from 2016 until 2018.
In fiscal 2018, the year that we posted record-high orders, net sales and net profit, theoutlook for the world economy became more uncertain, making it harder to forecast
economic conditions. Having been appointed president during these times, I aim to build
a truly strong SHI Group with the track record of our predecessors as our foundation.

Review of Fiscal
2018

In fiscal 2018, capital investment was robust in Japan, reflecting an improvement incorporate earnings. Overseas, in the U.S., production continued to recover in the
manufacturing industry on the back of stronger domestic and foreign demand. In
China, industrial output was firm overall. Globally, demand for machinery was growing. However, uncertainties still lingered, stemming from heightened US-China trade
friction, ongoing geopolitical risk, currency issues in some emerging countries, andthe rise of financial instability.
In this business environment, the SHI Group advanced Medium-Term Management
Plan 2019 to make active investments for growth through M&A and capital expenditures,and promote priority measures such as active pursuit of CSR.
In fiscal 2018, the Group received orders totaling ¥952.2 billion and booked net
sales of ¥903.1 billion, both record highs. Orders were solid in the Machinery Components, Precision Machinery and Construction Machinery segments (mass production
divisions), as well as the Industrial Machinery and Environmental Facilities & Plants
segments. Backed by firm orders, net sales increased year on year in all segments,
while earnings were boosted by Lafert Group, which manufacturers industrial motors,
becoming a consolidated subsidiary in May 2018.
The Group reported ¥75.2 billion in operating income, ¥72.6 billion in ordinary
income, and ¥45.7 billion in profit attributable to owners of parent. After-tax ROIC*
was 10.5%.

Fiscal 2018 Financial Summary

FY2017FY2018(Billions of yen)
ChangeOrders

864.0

952.2

88.2

Net Sales

791.0

903.1

112.0

Operating Income

69.9

75.2

5.3

Operating Income Ratio

8.8%

8.3%

–0.5 pt

Profit Attributable to Owners of Parent

34.7

45.7

11.0

Return on Profit Attributable to Owners of Parent

4.4%

5.1%

0.7 pt

ROIC*

10.3%

10.5%

0.2 pt* ROIC (Return on invested capital) =(Operating income + Interest and dividends received) x (1 – Effective tax rate)(FY average of stockholders’ equity + FY average of interest-bearing debt)

The Group distributed an annual dividend of ¥112 per share for fiscal 2018, an
increase compared with fiscal 2017 in reflection of its robust performance. The dividend payout ratio was 30.1%.
Total assets were ¥954.1 billion, an increase of ¥59.2 billion from the end of fiscal
2017. Of this amount, ¥33.2 billion was due to the addition of the acquired Lafert
Group through consolidation. Due to strong orders, fixed assets also increased as aresult of increases in assets and investments.

08

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Sumitomo Heavy Industries, Ltd. Integrated Report 201909

The SHI Group
Message from the President

Reflecting the increase in total assets, the stockholders’ equity ratio declined 0.7
percentage points to 47.5% compared with the end of fiscal 2017.
On a consolidated basis, cash flows from operating activities decreased ¥15.9 billion to ¥55.2 billion. This resulted from an increase in working capital alongside sales
growth. Net cash used in investing activities grew due in part to our investment in
Lafert Group, while free cash flows amounted to ¥0.2 billion.
On behalf of the Company and the SHI Group companies, I offer my deepest apologies for the great inconvenience and concern caused to our stakeholders arisingfrom the discovery of improper inspections of our products and services. The Company has earnestly and sincerely acknowledged this incident, and investigated thebackground and causes for the improper inspections through a Special Investigation
Committee established with an outside director as its head. Following the advice of
this committee, the SHI Group has drawn up measures to prevent a recurrence. We
are now in position to focus all of our efforts on restoring everyone’s trust in us
through measures to prevent a recurrence applied across the SHI Group, including thereaffirmation and re-acknowledgement of the Sumitomo Business Spirit and the SHIGroup’s Business Principles.

Financial Targets andProgress in MediumTerm Management
Plan 2019

In May 2017, the SHI Group formulated Medium-Term Management Plan 2019, which
will end in fiscal 2019.

In Medium-Term Management Plan 2019, we have set financial targets of achieving net
sales of over ¥800.0 billion and an operating income ratio of at least 7.5% in fiscal 2019.
Continually using ROIC after tax as the management indicator of the Group, we also aim toensure an ROIC of over 7.5%.
To achieve the aforementioned targets, under the basic principles of Medium-Term
Management Plan 2019 to (1) achieve steady growth, (2) become a high profit company,(3) create excellent products and services through a tireless commitment to improving
operational quality, (4) actively participate in business integrations, M&A, and formation ofbusiness alliances with third-party entities, and (5) actively pursue CSR, we will contribute tosociety by gaining the respect and confidence of stakeholders through the provision of
excellent products and services globally.
In carrying out our plans, we will continue to maintain financial discipline and makeactive investments to ensure growth by utilizing our enhanced financial strengths.
For the target of our shareholder returns, we have set a payout ratio of 30% for thethree-year time span of the medium-term management plan.

Projections for
Fiscal 2019

For fiscal 2019, SHI forecasts orders of ¥930 billion (down ¥22.2 billion compared withfiscal 2018) and record-setting net sales of ¥905 billion (up ¥1.9 billion year on year).
We estimate operating income will total ¥72 billion, for an operating margin of 8.0%.
Based on our estimate for ¥46 billion in profit attributable to owners of parent (up¥0.3 billion), we plan to pay an annual dividend of ¥112 per share, the same as in fiscal
2018, for a dividend payout ratio of 29.8%, on a par with the previous fiscal year.
SHI initially planned to spend ¥80 billion on capital investments and ¥52 billion on
R&D over the three years of the management plan, but has decided to increase theseamounts to ¥130.5 billion and ¥57.9 billion, respectively, in light of recent robust
order receipts.

Basic Principles of MediumTerm Management Plan 2019
Pursue corporate
mission124
3 5Achieve“Steady
Growth”

Become a“High Profit
Company”

Create Excellent Products andServices through “A TirelessCommitment to Improving
Operational Quality”

Customerscome first

Embracechanges

Earnings Estimates by Segment for Fiscal 2019

“M&A, andFormation ofBusiness
Alliances”(Billions of yen)
Fiscal 2017 Results“Actively Pursue CSR”

Commitment totechnology and innovation

Respect
peopleFramework for the Basic Principles ofMedium-Term Management Plan 2019
Basic Concept of Medium-Term Management Plan 2019
❶ Look to achieve steady growth after carrying out a stringent examination•of the external environment❷ Become a high profit company❸ Create excellent products and services through a tireless commitment toimproving operational quality❹ Actively participate in business integrations, M&A, and formation ofbusiness alliances with third-party entities❺ Actively pursue CSR

10

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Fiscal 2018 Results

CapitalOperatingOperating
Investment
IncomeIncome(capitalizedRatiobasis)

OrdersNet Sales

Machinery
Components

115.1

109.4

11.8

10.8%

5.6

Precision
Machinery

190.5

169.4

19.5

11.5%

Construction
Machinery

265.2

260.5

17.4

Industrial
Machinery

87.7

83.8

Ships

34.9

Environmental
Facilities & Plants

R&D

Fiscal 2019 Estimates

CapitalOperatingOperating
Investment
IncomeIncome(capitalizedRatiobasis)

OrdersNet Sales

1.5

134.0

133.4

11.1

8.3%

7.5

6.4

5.3

191.5

185.7

17.7

9.5%

6.7%

9.4

4.8

305.3

290.5

22.0

8.8

10.5%

4.1

2.2

90.8

93.7

38.3

0.7

1.9%

1.8

0.2

32.0

162.7

121.9

9.5

7.8%

1.9

0.9

Others

7.7

7.8

2.1

26.7%

1.2

Total

864.0

791.0

69.9

8.8%

30.4

R&D

CapitalOperatingOperating
Investment
IncomeIncome(capitalizedRatiobasis)

OrdersNet Sales

1.5

135.0

135.0

11.0

8.1%

12.5

8.6

5.6

180.0

186.0

18.0

9.7%

10.5

7.6%

7.6

5.0

285.0

292.0

21.5

7.4%

11.5

9.0

9.6%

2.4

3.2

94.0

91.0

8.0

8.8%

4.5

41.4

0.8

2.0%

3.7

0.1

37.0

34.0

0.0

0.0%

2.5

191.3

151.0

12.6

8.3%

2.7

1.4

192.0

160.0

12.0

7.5%

4.0

0.0

7.3

7.3

2.2

29.7%

1.2

0.0

7.0

7.0

1.5

21.4%

6.5

14.8

952.2

903.1

75.2

8.3%

33.7

16.8

930.0

905.0

72.0

8.0%

52.0

ROIC

10.3%

10.5%

9.2%

Payout ratio

30.1%

30.1%

29.8%

R&D

22.6

Sumitomo Heavy Industries, Ltd. Integrated Report 201911

The SHI Group
Message from the President

For fiscal 2019 which is the last year of Medium-Term Management Plan 2019, we
will take the following measures to achieve the plan.
➊ Achieve “Steady Growth”
As measures toward business expansion, we will maintain and enhance our competitiveness by making investments in a focused and timely manner corresponding to theroles of each business and attain steady growth for the Group as a whole.
We will also increase the strength of our products by brushing up on materials, controls
and other common technologies, in addition to peculiar technologies cultivated for eachproduct model. To this end, we will make necessary capital expenditures, R&D investments and procurement of human resources ahead of the plan, as described earlier.

➋ Become a “High Profit Company”
We will continue our portfolio management, clarify target profits and focused challenges based on the state of competition and external environment of each business,reallocate management resources and push forward our business structural reform. In
the business divisions leading the SHI Group, such as Machinery Components andPrecision Machinery, we will drive high growth and profitability by setting higher goals
and goals to be achieved by all business divisions, product models and regions.
Through achievement of these goals, we will transform ourselves into a corporategroup with a culture of high profitability and solidify our businesses.

➌ Create‌
Excellent Products and Services through “A Tireless Commitment
to Improving Operational Quality”(a) Promoting‌
quality improvements in products and services and reforming
business processes
The SHI Group is marshalling all of its capabilities to thoroughly manage quality
and improve the quality of its products and services while continuing to put“quality first” management into practice.
As measures for promoting collaboration across business divisions, we arestrengthening after-market operations as a Group-wide theme. We are sharing information about customer needs more broadly within the Group and reforming sales
processes to proactively use this information. SHI is also making the necessary
updates to its infrastructure while advancing ICT and IoT projects led by the Corporate Technology Management Group and the Corporate Information & Communication Technology Department.
(b) Ensuring strict compliance
Ensuring strict compliance remains one of the highest priorities of the SHI Group. We
are revising the Compliance Manual and redistributing it as training materials for all
officers and employees of the Company and each of the companies within the Group.
Moreover, compliance training in each business division includes case studies
about compliance violations that help increase awareness of compliance issues
throughout the entire Group.
(c) Taking safety initiatives
Having drawn up the Health and Safety Improvement Plan in fiscal 2010, the SHIGroup is currently engaged in occupational health and safety initiatives as part of
the third execution plan from fiscal 2017 to fiscal 2019. To achieve our goals under
this execution plan, we are making every effort to create pleasant workplaces
where all employees can work in safe and secure environments that promote boththeir physical and mental health.

12

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019➍ ‌Actively Participate in Business Integrations, “M&A, and Formation of Business
Alliances” with Third-Party Entities
We will proceed with business integrations and inter-organization alliances, as necessary, so that we can achieve the effect of inter-business synergies within the Group,
while actively seeking opportunities for each business to participate in M&A and toform business alliances with third-party entities.

➎ “Actively Pursue CSR”
In fiscal 2019, the SHI Group will take the following measures in the four priority areasof “Products and Services,” “Environment,” “Society,” and “Employees” set forth in
the CSR Mid-Term Plan.
For “Products and Services,” we have continued to discuss issues in each businessdivision related to the design and development of products and services that will help
solve social issues since fiscal 2017. We are clarifying issues based on the results ofthese discussions.
For “Environment,” we endeavor to minimize the environmental burden across theentire product life cycle, and will strive to improve environmental performance byconducting environmental assessments of products with the aim of reducing CO2
emissions during the use stage. We will also concentrate our efforts on proactively
communicating with stakeholders about the results of our environmental activities in
response to trends in ESG investment.
For “Society,” we strive to build sustainable relationships with suppliers, and ask
our business partners to strictly comply with laws, regulations and social norms so that
we can regain the trust of society. In fiscal 2019, we will continue to hold larger-scale
briefing sessions for our suppliers about CSR procurement guidelines.
For “Employees,” we will create workplaces where a broad variety of humanresources can be fully utilized, with a focus on our diversity promotion activities.
Regarding diversity, we are promoting women in the workplace, mainly by assistingwith their career formation based on the three pillars of “awareness,” “systems,” and“environment.” We are also taking a broad range of other steps to nurture a better
culture in our organizations.
These activities are linked to achieving the United Nation’s Sustainable Development
Goals (SDGs) by 2030, a common set of goals shared by international society. As amember of society, we will fulfil our responsibilities to meeting the demands of international society.
We will strive to communicate these combined efforts internally and externally forfurther penetration of our CSR efforts.
Based on our Business Principles, through these measures, we will leverage ouradvantages to create a stronger SHI Group.

Shinji Shimomura
Representative Director,
President and CEO

Sumitomo Heavy Industries, Ltd.

Integrated Report 201913

Strength of the SHI Group

Relationship of Capitals and Strength of the SHI Group
Organizational capital
Manufacturing capital

Spirit to embrace changes cultivated in the growth process from thestart as the Sumitomo Besshi Tool Making Workshop in 1888 to today’s
total of 175 subsidiaries including 8 affiliated companies

Responsiveness to various customers’ needs

Branded as one of the 19 core companies of the Sumitomo Group(A broad product lineup and technical capabilities
that can meet high-level requirements)
Domestic
manufacturing
sites:

Domestic subsidiary manufacturing sites:

sites

sites

Overseas manufacturing sites(Group total):

7 6 2511

sites

Capital investment
Three (3) year total in Medium-Term
Management Plan 2019:

130.5

¥

Excellent
Excellent
Products
Productsand
andServices
ServicesIntellectual capital

Technology
Technology
developdevelopmentment
capabilities
capabilities
that
that
supportsupportthethetop-rank
top-rank
position
position

Development of base technologies
for service business enhancementin addition to underlying technologies (ICT, AI and robotics, etc.)

33

billion(Three (3) year total in previous mediumterm management plan: ¥67.0 billion)

Intellectual capital
Top level in the industry thanks tosuccessive technical innovation in
individual business domain andpursuit of advanced technologies
Page 18
Number ofpatents
acquired:

6,246

Number ofoverseas patents
out of the above:

2,812

Financial
capitalSolid financial basis thatenabled conversion ofbusiness composition
over the past 20 years

14

47.5%
Net InterestBearing Debt Ratio – 0.03%
ROIC after Tax
10.5%
Stockholders’Equity Ratio(Return on
invested capital)

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

R&D expenses
Three (3) year total in Medium-Term
Management Plan 2019:

Page 16

22

Management
Management
Power
PowertotoRealize
RealizeHigh
HighMarket
MarketShare
ShareandandProfitability
Profitability
Creating
Creating
a structurea structure
forforensuring
ensuring
profitability
profitability
Page 20

57.9¥

AACulture
Cultureofof
Transformation
Transformation

billion(Three (3) year total in previous mediumterm management plan: ¥40.6 billion)

Strengthen
Strengthen
earnings
earnings
base
base
to to
respond
respondto tochangechangeHuman capital

Page 22Development of human resources
to enable conversion to highearnings business model
Page 56
New hires (domestic)Three (3) year total in Medium-Term
Management Plan 2019:

Pursuit of growth (investment)
and scrutiny of safety andbusiness conversion

Social capital
Relationship of trust with customers
maintained and reinforced by the
management in accordance with theSumitomo Business Spirit

1,400

jobs

Number of suppliers:

About

8,900 companies

Sumitomo Heavy Industries, Ltd. Integrated Report 201915

1

Strength of the SHI Group

Excellent
Products andServices

Strength 1

3

2

Excellent Products
and Services

A Culture ofTransformation

Management
Power to Realize
High Market Shareand Profitability

What SHI Considers as Excellent
Products and Services
The SHI Group considers products and services that customers “really want to buy” or “really want us to sell” as
Excellent Products and Services. In order to create Excellent Products and Services that deliver confidence to customers, we are rigorously pursuing solutions for eachcustomer’s problems and what we can do to create customer value.

R&D Framework
The Group will differentiate itself through products
and services in order to convert to a high-earnings
business model, and it will pool its collective
capacities to create Excellent Products and Services. For new product development, we are promoting activities with close coordination between
business divisions and the Technology ResearchCenter, and we are implementing an integrated
development process that involves conducting
basic technology and elemental technology development in advance at the center and commercialization development in our business divisions.

The Corporate Technology Management Group works in close collaboration with the businessdivisions through organizational units differentiated by function.

Smart ProductProject
Persons in charge of product planning and development of the following
eight models participate in
the Smart Product Project
and, with an eye towards
next generations, work on
new product development, main body development, application
development, and otherthemes in the collaborative framework involving
the Corporate Technology
Management Group andeach business division.

IoT/ICT products that improve customer’s
profitability through operation monitoring,
failure prediction, and other functions

Highly intelligent, attractive productsthat inspire customers

Injection molding
machineHydraulicexcavators

Development Strategy
Management Dept.
Intellectual Property Dept.
Production Engineering
CenterTechnology Research Center

Magnetoencephalograph

Technology Research Center(Yokosuka, Kanagawa Prefecture)

R&D Field

Large size gear
reducer (Gearbox)

Inflation apparatus

Proton therapy
systemSteam turbine

Challenge System
To sustain growth, the SHI Group is keen to develop new products and technologies while fostering an
employee mindset that accepts new challenges. We launched the Challenge System in FY2018 to nurture
this mindset, with the objective of providing a “venue for making dreams a reality” to employees whocome up with technologies, ideas and product concepts for the SHI Group. Instead of the Company assigning tasks, employees come up with their own concepts they would like to see become a reality. Key evaluation metrics are “excellent ideas,” “efforts to address issues,” and “achievement of objectives.” For now,
the Challenge System is available to employees at the Technology Research Center, and we are considering
its rollout to Group companies later.
16

Business
Divisions

Corporate
Technology
Management GroupThe Group is running the Smart Product Project as part of its Excellent Product Creation Project.

Small and medium
size gear reducer(Gearmotor)

General Manager ofCorporate Technology
Management GroupIn charge of Corporate
Quality Group

Collaborative Framework for Corporate Technology Management Group andBusiness Divisions

Smart Product Project

Definition of asmart productYoshiyuki Tomita

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

The Technology Research Center is focused on thedevelopment of proprietary technologies for our six
business segments, comprising Machinery Components,
Precision Machinery, Construction Machinery, Industrial
Machinery, Ships, and Environmental Facilities & Plants,
as well as on the development of basic technologies
that are essential to these business segments, including
machine elements, materials, CAE, control, ICT, AI, androbotics, based on a medium- to long-term roadmap.
The Production Engineering Center promotes thedevelopment of management technology and technologies for production innovation and the further trainingof human resources in order to achieve a robust form of

manufacturing that is responsive to diverse customer
needs while securing a competitive advantage.
With respect to elemental technologies, in particular,
we are closely monitoring megatrends in markets andbasic technologies to identify R&D topics based on alonger-term outlook that goes beyond the next twogenerations of products.
At the same time, SHI is strongly advancing R&D in products and services that solve social issues, such as the SDGs,
and helping build a sustainable society. We are addressing
important issues shared by all Group companies by endeavoring to improve energy efficiency, address an aging society
and labor shortages, and promote circular businesses.

Amid intense competition on global markets, most of the Group’s businesses need to more rapidly provide
Excellent Products and Services that satisfy customers. For this reason, the Company is building out a global
network of R&D functions through open innovation.
With the understanding that in-house technologies are inadequate to achieve R&D outcomes in this day andage, we aim to expand R&D alliances with overseas subsidiaries while conducting joint research with universities
in Europe and the U.S., for example.

Sumitomo Heavy Industries, Ltd. Integrated Report 201917

Strength of the SHI GroupIntellectual Property Strategy

Quality Management System

Intellectual property for the SHI Group is a source of competitive advantage.
With a focus on Creating (securing rights to intellectual property), Attacking (utilizing exclusive rights)
and Defending (respecting the rights of other companies), the SHI Group actively works on a unified basis
to create, protect and utilize the Group’s intellectual property.
To establish a direct connection between senior management in business divisions and intellectual property activities, we have appointed chief intellectual property officers (CIPO) in each division. The Intellectual
Property Department also participates in the intellectual property activities of divisions in all respects andconducts activities to enhance interdivisional synergies to raise intellectual property value throughout theGroup from a medium- to long-term standpoint and to further vitalize related activities at the division level.
In order to establish superiority in development of overseas business, we are actively working to raise
the overseas acquisition ratio of patent rights.

We will continue to consistently provide high-quality products and services that are appreciated by customers.

Major Intellectual Property Activities
Acquisition of
intellectual
property rights

Creating

Attac kingRegarding Excellent Products andServices, we plan intellectual property
portfolios from a medium- to long-term
perspective at the stage before R&D
and brainstorm ideas with each divisionand research center to establish intellectual property portfolios. Intellectual
property portfolios are periodicallyreviewed to maintain a competitive
advantage.

Intellectual
property
utilization

DefendingAcquired intellectual property rights
are utilized not only for publicity and
PR of Excellent Products and Services,
but also for checking against companies that do not respect the rights,
helping our business activities. In
recent years, we have also focused on
licensing and transferring and aretrying to make more effective use of
intellectual property rights.

Respect of othercompany’s rights

From the spirit of compliance, we
respect other company’s rights andnever infringe on them. We conduct athorough investigation of rights ofother companies before starting R&D,
and continue doing an ongoing investigation from that point onward. In
addition, the rights of other companies
are checked during each phase of DR(design review), ensuring intellectual
property activities are integrated into
the quality assurance system.

Acquisition of Patent Rights

CIPO: Chief Intellectual Property Officer
Sub-CIPO: Deputy CIPO (Group Leader)
PL: Patent Leader(Patents)(
7,000

President
and CEO

Technology
ResearchCenterEach division

Intellectual
Property
Dept.

Total number of patents
45.0 (%)
Number of overseas patents acquired) (left)
45.0
Overseas patents percentage as
6,246
compared to overall patents (right)

6,000

43.0

5,000

41.0

4,000

39.0

2,812

3,000

CIPO

CIPO

CIPO

PL

PL

Sub-CIPO
PL

18

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

In addition, we have introduced Six Sigma as theGroup’s common idea and are providing practical education on it. Master Black Belts and Black Belts placedin each division and affiliated companies are voluntarily
working on strengthening process capabilities. The
cumulative number of Green Belt certification holders
has reached 2,000, bringing the Group’s quality activities
to a higher level.

The SHI Group believes that the quality of products
depends not on chance but on its way of doing work,that is, on the appropriateness of processes employed.
To that end, the President and CEO conducts diagnosisof the process of each business division and theManagement Quality Headquarters of the Head Officeconducts QMS (quality management system) audits.

Quality Assurance System

CIPO System

Domestic
affiliatedcompany

Our Approach to Quality Assurance

37.0

2,000

35.0

1,000

33.0

0

11

12

13

14

15

16

17

Each business division and affiliated company of the SHIGroup has their own quality assurance systems that aresuitable for their various businesses ranging from large
building structures like ships to key components incorporated into industrial machinery and various devices.
The Quality Assurance Department reports directly tothe business manager or president for affiliated companies, to ensure independence. In addition, the Group’s

quality assurance managers get together to share ideas,
policies, and measures for improving quality and learn
from each other through group discussion at the Quality
Assurance Department managers meeting. In FY2017,
we worked on the theme “Recurrence prevention by
in-depth process examination,” and the theme of activities of FY2018 is “From strengthening of recurrence
prevention activities to proactive activities.”

President
and CEO

Corporate
QualityGroup

Corporate
Quality Dept.

SHI Group
Quality Policy

Product
Quality
Control Dept.

AffiliatedCompany
President
GeneralManager

AffiliatedCompany
President

Quality
Assurance Dept.

Quality
Assurance Dept.

Quality Principals

Quality Policy

Through the continuous andunwavering pursuit of worldclass quality that is recognizedglobally, we will supply customers with products and services
that they recognize as adding
value to their business.

Customer First:

Quality
Assurance Dept.

Define quality targets based on the
expectations of the customer

Continuous Progress: Continuously advance the quality
system and incorporate quality witha process mindset
Everyone Participates: Every person involved in quality sets
an objective and tackles quality
issues head on as a team0
18 (FY) 0.0

Sumitomo Heavy Industries, Ltd. Integrated Report 201919

1

Excellent
Products andServices

Strength 2Management Power toRealize High Market
Share and Profitability

2Strength of the SHI Group3

A Culture ofTransformation

Management
Power to Realize
High Market Shareand Profitability

Management with ROIC* as One of the Key Indexes
From the viewpoint of stockholders, the SHI Group
introduced ROIC in FY1999 as one of its key management indices, and has made every effort to improve
corporate value with the goal of ROIC exceeding
WACC (Weighted Average Cost of Capital).
After introducing this indicator, SHI set its sights ontransforming the business structure in order to achieve
the ROIC target, and set out to change its portfolio byconcentrating resources on strategic growth businesses,
and modify its financial position with a focus on reducing invested capital.
With ROIC as our metric, we have made significant
changes in the business structure, management, product development, marketing, manufacturing and humanresource development. These initiatives have translated
into steady growth and our more robust financial
position today.
* ROIC (Return on Invested Capital) =Hideo Suzuki
CFO

Heavy Investments to Achieve the Medium-Term Management Plan
SHI has invested aggressively to “achieve steady growth,”“become a high profit company,” and for “M&A and theformation of business alliances,” three of the basic policies
in the current medium-term management plan. The SHIGroup has expanded its global presence through largescale M&A overseas in both FY2017 and FY2018.
Furthermore, SHI continues to allocate funds forcapital investments with a focus on fields likely to see
growth and earnings, such as power transmission andcontrols and injection molding machines, as well as for
R&D to develop new products in growth businesses andfields related to healthcare, automobiles and semiconductors that have the potential to become nextgeneration pillars of business. Compared with theprevious medium-term management plan, the current
medium-term management plan has a much larger
budget for these investments, and the budget has
been increased for both capital investments and R&D
compared with when plans were initially drawn up in
March 2017.

Morihiro Kondo
General Manager ofCorporate Planning Group

Scrutiny of Markets Where Our Strengths Become Advantages andRigorous Allocation of Management Resources(Operating income + Interest and dividends received) × (1 – Effective tax rate)(FY average of stockholders’ equity + FY average of interest-bearing debt)

Final Fiscal Year of the Current Medium-Term Management Plan
FY2019 is the final fiscal year of Medium-Term
Management Plan 2019, which started in FY2017.
SHI has invested heavily in M&A in the Machinery
Components, Precision Machinery and Environmental
Facilities & Plants segments, which are positioned asbusinesses targeting growth and strong earnings
under the medium-term management plan. Over thethree years of this plan, the Company has budgeted¥130.5 billion for capital investments and ¥57.9 billion
for R&D spending.
As a result, management expects to handily surpass
its initial targets for net sales of ¥905.0 billion and ROIC
of 9.2% in FY2019.

The SHI Group’s basic approach to investment is basedon the objective of improving growth and profitability
by allocating management resources in accordance withthe roles of each Group business while evaluating the
growth potential and profitability of each business line.
When we were creating the current medium-term
management plan, we categorized the Company’sbusinesses and decided to primarily invest in businesses
targeting growth and high levels of profits, as well as
businesses keen to improve profitability.
The SHI Group has built a business portfolio withmany products and business lines. These businesses
generate synergies from their mutual technicalBusiness Roles in
Medium-Term
Management Plan 2019

Role
Positioning
Next-Generation
Business

Device-Related
Business

InfrastructureRelated Business

20

Management has also upwardly revised its numericalfinancial targets, such as for net sales and operating
income, from its original forecasts. In FY2019, theCompany intends to solidly achieve these targets while
investing in future growth.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019know-how and shared manufacturing and marketingbases. The Technology Research Center is involved in
R&D programs across the Company and is a source ofthe entire Group’s competitiveness.
Looking at these business lines from a different
angle, they can be broadly divided into mass production businesses that are sensitive to economic cycles,
and orders-based production businesses with longdelivery timeframes that are considered to stabilize
operations under the cyclic fluctuations of economic
trends. By leveraging the organic links between businesses in our portfolio, we as a Group aim to achievestronger growth and higher profits.

Growth & High Profitability

Improve Profitability

Stabilize Profit Margins

Aim to achieve growth while
maintaining high levels of
profitability (10% or greater)

Aim to achieve growth while
improving profitability

Ensure a stable levelof profit

Cryogenic Equipment
Core pillar of profitability
and growth for the GroupPower Transmission
and Controls
Injection Molding Machines

Next-Generation Growth
Devices (e.g. medical,
semiconductor, automotive)
Semiconductor
Production Equipment
Chemical Processing Equipment(e.g. agitators, food-related machinery)

Industrial Cranes / Mobile Cranes / Turbines / Boilers / Water Treatment Facilities
Maximize profitability and create a second pillar of growth(e.g. energy, environment, transportation, etc.)

Medical-Related Equipment
Metal Processing
Equipment(e.g. presses, flow forming, etc.)

Hydraulic Excavators
Stabilize business without
being concerned about scale
Shipbuilding

Sumitomo Heavy Industries, Ltd. Integrated Report 201921

1

Excellent
Products andServices

Strength 3

A Culture of Transformation
The SHI Group’s History of Transformation
The Plastics Machinery business mainly manufactures andsells plastic injection molding machines, in addition tolaminators, film and sheet production systems, and semiconductor resin sealing press machines. Our mainstay
plastic injection molding machines excel in terms ofsmall-size precision and high-cycle work. Leveraging
these advantages, our injection molding machines havepushed the boundaries of innovation in high-performancecomponent applications, such as for smartphones, andlight but strong component applications, such as forautomobiles. Moreover, by supplying sanitary containers
for consumer and medical applications, we contribute to
the realization of safe, secure, abundant and convenient
lifestyles. With a history of over 50 years, the Plastics
Machinery business has a top-class share of over 20% in
the domestic market. Globally, we have shipped morethan 130,000 units in total worldwide. Here, we introduce the history of transformation in this business.

2

Strength of the SHI Group3

A Culture ofTransformation

Management
Power to Realize
High Market Shareand Profitability

Kazuo Hiraoka
General Manager of
Plastics Machinery Divisionwaste. At the time, the Company’s lineup of products
based on mold clamping force aligned well with the
future development of electric molding machines,
which eventually translated into business expansion.

The late 1990s through the 2000s was a period when
Japanese companies were quickly making inroads into
overseas markets. In addition to sales in Japan, sales tothe overseas manufacturing bases of Japanese customers also increased. As overseas sales increased, SHI
opened new service bases in each region to continue
supporting Japanese companies, and sales to local
companies also grew as a result. At each base, we wereable to develop business with Japanese companies,
creating a reliable source of sales and earnings, whichallowed us to build out our own service network insteadof relying on local sales agencies.
However, sales to the Europe region struggled to
grow despite being a major market for molding machinery. Europe used different specifications and control
systems than Japan, and the necessity to adapt todiverse cultures and languages formed a high barrier to

Nepiomat 330

First All-Electric Molding Machine Focused on Improving Small-Size Precision andHigh-Cycle Work, Creating a Positive Cycle with the Disk Molding Machine Business

22

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

SS50

entry. For this reason, SHI acquired Demag Plastics
Group (now Sumitomo (SHI) Demag Plastics Machinery
GmbH [SDG]) in FY2008, establishing a foothold in
Europe through Germany, marking its full-fledged entry
into the European market.

SDG’s Schwaig factory

Reinforcing the Earnings Base while Adapting to Change
SHI now has three main business fields in the electricand electronic components, automotive-related anddaily necessities markets. Each of these markets accountfor 20–30% of sales in their businesses. Below, we summarize the risks and opportunities in each market.
Markets

In the late 1980s, SHI began to develop all-electric molding machines instead of the hydraulic molding machinesthat were standard at the time. In the 1990s, the Company boasted a highly competitive lineup of hydraulicmolding machines with excellent small-size precision,of small-size precision and high-cycle work, our ceaselessefforts to develop optical disk molding technologies,
which were cutting edge back then, evolved into a key
strength in our injection molding machines today.

Accelerating Global Business Development, Building a Base in Europe

Starting with the Introduction of Technologies, Evolving to Small-Size PrecisionThis business traces its origins to the manufacture ofwire coating machines in Niihama City, Ehime Prefecture,when the Company was still called Sumitomo Machinery.
The Company introduced general-purpose plastics
machinery in 1961 and constructed Chiba Works in
1965. SHI initially introduced technology from NetstalMaschinen AG in Switzerland, and then focused onsales of the Nepiomat injection blow molding machinethat was launched in 1967. Back then, the Nepiomat
was more compact than similar machines sold by othercompanies. Since the cost of resins used to make shapedmaterials was higher back then than today, the focus ofdevelopment was on increasing the accuracy and smallsize precision of shape formation in order to minimize

launched the SS series (name later changed to SE-S) of
all-electric injection molding machines featuring theindustry’s first direct drive mechanism.
Around this time, demand rapidly grew for CDs andother optical disks, presenting a major growth opportunity for SHI. Alongside advancements in physical storage
media, such as CDs, CR-Rs and Blu-ray discs, SHI developed products along with both markets and customers.
Collaboration with customers that had cutting-edge
technologies related to the entire disk production
process played a major role in spurring growth in the
Company’s disk molding machine business, and the
profits earned in this business were used to invest in
further growth in a virtuous cycle. Pursuing the concepts

productivity and durability. Nonetheless, a Companywide
effort involving research centers and other business units
was made to research and develop electric molding
machines in pursuit of a direct drive system that wasdifferent from other companies’ products. In 1997, SHI

Risks

Opportunities for SHIElectric andelectronic
components• Ups and downs on smartphone and IT-related
markets in recent years• Transition to next-generation
communications protocol (5G)

Automotiverelated• Barriers to entering
European market• Collaboration with SDG• High ratio of electricalequipment in Europe

Daily necessities• Environmental problems
caused by plastic waste• Molding technology formaterials that addressenvironmental issues

The Plastics Machinery Division, which may seem tohave grown steadily throughout its history, actuallyencountered a number of challenges along the way. Eachtime, the entire SHI Group, not just the Plastics Machinery
Division, marshalled its technologies and know-how to
overcome these challenges. In FY2018, the business wasable to achieve a scale of ¥100 billion, one of our longstanding goals. Looking ahead, we will strengthen theearnings base and focus our efforts on developing andintroducing products that fulfill market needs from anacute awareness of conditions in these three markets.
With our partner SDG headquartered in Germany, where
global standards and rules are created, we will continue
to latch onto opportunities arising from changes happening around the world. As a business that supports thegrowth and profits of the SHI Group, and also as a business that contributes to society through plastics, we willceaselessly evolve the Plastics Machinery business.
Sumitomo Heavy Industries, Ltd. Integrated Report 201923

Strength of the SHI GroupSHI Group Value Creation
Strength of the SHI Group

Value that SHI Offers

The SHI Group contributes to customer value creation by offering Excellent Products and Services basedon our high-level technological capabilities. This value creation was made possible by our culture oftransformation, which has been refined over many years. We will also utilize our management capability
to realize high market share and profitability to continuously improve our corporate value.

< Features of SHI’s products and services >Automation and labor-saving

Toward an abundant society with inspiring work

Contribute to cutting-edge fields

INPUT

1

Excellent
Products
and Services

Safe and secure products

Toward a society without injuries or accidents

Technology
development
capabilities that
support the top-rank
position

Reduce CO2 emissions

Mitigate and respond to climate change, move toward
a resource recycling society

PROCESS

3
2

Hone proprietary technologies, enable healthier and more convenient lifestyles

Management
Power toRealize HighMarket ShareandProfitability

A Culture ofTransformation
Strengthen earnings
base to respond tochangeOUTPUTPower transmission
and controls, construction
machinery, material handlingmachines, logistics systems,
ships, etc.

Buildfoundations ofsociety
Support society andinfrastructure

Creating a structure
for ensuring
profitability

Semiconductor production
equipment, cryogenic
equipment, plastics
machinery, medical
systems, etc.

Customers
Improvequality of life
Support abundant
lifestyles

Energy plants,
steam turbines,
water treatment plants, etc.

Reuse
resources andenergySupport resource andenergy recycling

SDGs

Base Supporting the SHI Group
Corporate Governance, CSR, Human Resources

24

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Increase energy
efficiency
Contribute to
renewable energy

Spur economic growth
Create exciting jobs

Infrastructuredevelopment
Improve resource
efficiency
Innovation

Build transportation
systems
Reinforce disaster
preparedness

Create arecycling-oriented
society

Combatclimate change
BCP

Sumitomo Heavy Industries, Ltd. Integrated Report 201925

Business Activities

Machinery
Components

Net Sales¥133.4Main Products and Markets◻ Power transmission andcontrols, motors
Factory automation machinery,
Industrial robots, Machine tools,
Conveying and logistics
machinery, Steel iron production
machinery, Chemical processing
machinery, Material handlingmachinery, Mining machinery,
Food processing machinery,
Water treatment plants, Elevators and escalators

billion15%
CYCLO®DRIVE

Net Sales

Orders(Billions of yen)
150.0

134.0 135.0

Operating Income/Operating Income Ratio(Billions of yen)
150.0

115.1
98.6

97.4

133.4 135.0(Billions of yen)
15.0

9.2% 11.8

109.4

100.0

100.0

10.0

50.0

50.0

5.0

0.0

16

17

18

19
(FY)
(Expected)

0.0

16

Power Transmission and Controls
Segment Overview
This segment’s main products are power transmissions
and motors. Power transmissions convert the rotating
speed of motors and other drives in order to increase
their torque. Supporting society and lifestyles, ourproducts are widely used to move objects around theworld, such as industrial robots working in plants,
conveyor systems that carry packages in logistics
centers, and cranes that unload cargo from ships at
ports. With manufacturing and sales bases in Japanand around the world, SHI has a global business presence under the Sumitomo Drive Technologies brand.
We lead in market share of domestic sales and haveglobal sales among the top for power transmissions
and controls.

17

18

19
(FY)
(Expected)

0.0

(%)
12.0

10.8%

9.1

11.1

11.0

8.3% 8.1%

8.0

4.0

16

17

18

19
(FY)
(Expected)

0.0

One of our leading products is CYCLO®DRIVE,
which boasts excellent durability and high efficiency
through the use of gears with a proprietary tooth
profile that are nearly unbreakable. As 2019 marks the80th year since production began in Japan, we are
grateful to our customers for their support, and will
strive to expand and develop the business further.

Fiscal 2018 Review and Key Topics

Fiscal 2019 Strategies and Initiatives

In FY2018, demand was brisk for power transmissions
and motors around the world, despite an uncertain
outlook due to concerns arising from trade friction.
In Japan, sales expanded moderately, supported
by new construction on logistics facilities alongside
the redevelopment of urban areas and growth in the
online shopping market. Overseas, economic conditions slowed in some regions in the last half of the
fiscal year. In China in particular, demand for industrial
robots, which had been a strong growth driver, stalled
due to inventory adjustments, leading to weaker
demand for precision gear reducers, a key componentof industrial robots.
Under these circumstances, SHI saw an increase inboth orders and sales compared with the previous
fiscal year, owing to industrial motor manufacturer
Lafert Group of Italy becoming a consolidated subsidiary, in addition to firm demand for small- andmedium-size general-purpose power transmissions.
Moreover, SHI moved to expand its global supply
capacity for precision gear reducers in anticipation ofstronger demand for industrial robots in the future,
constructing a new plant in Vietnam to produce key
components in precision gear reducers. SHI continued
to invest heavily in Japan and abroad, focusing
intently on strengthening its service operations withthe acquisition of a gear reducer servicer in Spain andconstruction of a new service base in Australia.
In June 2018, SHI brought Lafert Group into thescope of consolidation, taking its first step toward
expanding operations in the electrical and control
fields. We also domestically launched the Planetary
Gear Reducer IB Series PE Type for Servo Motors that
achieve high cost performance and short delivery
times as a part of efforts to develop new markets andapplications.

In FY2019, there are signs of deceleration in someregional economies, including China and Europe, onworsening market sentiment due to trade friction.
However, demand for power transmissions andmotors should remain brisk, supported in Japan byinvestments in automation to alleviate labor shortages
and investments to modernize aging facilities, inaddition to support overseas from investments ininfrastructure alongside urbanization and investments
to conserve energy.
SHI intends to continue making capital investments
to reinforce its supply chains and expand production
capacity in Japan and overseas, including the construction of a new gear reducer assembly plant in an areawith a concentration of Japanese manufacturing bases
in central Mexico this fiscal year. The Company targets
growth in the service business by expanding service
bases, especially overseas, while focusing on needs forinspections and maintenance of gear reducers.
SHI is keen to bring new products to market that
help customers create value, such as the launch of theHigh-Precision CYCLO®DRIVE DA Series, and the overseas launch of the Planetary Gear Reducer IB Series PE
Type for Servo Motors. With Lafert Group, SHI intends
to steadily generate synergies through the joint development of products and use of mutual channels.
We will also proactively seek alliances outside the
SHI Group to facilitate product development.

Planetary Gear Reducer IB Series
PE Type for Servo Motors

High-PrecisionCYCLO®DRIVE DA Series

Servo Motors made by Lafert

High-Efficiency Motors
made by Lafert
26

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Sumitomo Heavy Industries, Ltd. Integrated Report 201927

Business Activities

Precision
Machinery

Net Sales¥185.7billion21%

Main Products and Markets◻ Plastics machinery
Electronics, Electric equipment,
Automobiles, Containers,
Medical equipment◻ Ion-implantation systems,
Laser processing systems,
XY stages,
Transfer-molding pressmachines
Semiconductors, LCDs
◻ Cryogenic equipment
Medical equipment, Spacetechnology development,
Semiconductors◻ Precision forgings
Jet engines for airplanes,
Turbines for power generation◻ Defense equipment
DefenseSHI will pursue greater synergies through strategic
sharing with Sumitomo (SHI) Demag Plastics
Machinery GmbH.

Precision Equipment and Others,
Cryogenic Equipment

Net Sales(Billions of yen)
210.0

190.5 191.5

180.0

169.4

154.7
100.6 103.8

140.0

145.7
95.0

140.0

84.8
Plastics
machinery

Plastics
machinery

70.0

91.7

(Billions of yen)
21.0

185.7 186.0

14.6

104.1 95.0

14.0

70.0

Precisionequipment
and others

69.9

90.0 87.7 85.0

0.0

16

17

18

19
(FY)
(Expected)

Precisionequipment
and others

0.0

17.7 18.0

11.5%
9.5% 9.7%

(%)
15.0

10.0

7.0

81.6
65.0 77.7
16

Segment Overview
Our injection molding machines are able to fabricate avariety of products by injecting hot plastic into molds.
The Company’s machines excel in terms of precisionand high-cycle molding. We are particularly strong inelectric markets, especially smartphones that demandprecision molding. Our machines can quickly andefficiently create complex shapes down to thin molds
like food containers.

Fiscal 2018 Review and Key Topics
In the first half of FY2018, demand for molding
machines remained strong worldwide in continuationfrom FY2017. Demand was particularly brisk in the
Chinese market for electric and electronic components, including smartphone components, as well as
in the automotive-related and daily necessities markets in Japan and Europe. Since the second half of
FY2018, however, the deepening trade friction
between the U.S. and China and other factors led toslower growth in the Chinese market, resulting in aslight decline in orders received by the Plastics
Machinery business compared with FY2017.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

10.0%

19.5

80.8

Precision Machinery

28

Operating Income/Operating Income Ratio(Billions of yen)
210.0

17

18

5.0

91.0

19
(Expected)(FY)

Fiscal 2019 Strategies and Initiatives
SHI anticipates minor growth on the medical MRI
market, driven mainly by Chinese government measures to promote MRI. In the semiconductor market,
cutting-edge lines in Taiwan should drive growth in
the logic field, and the Company expects memory
demand, which lost momentum in FY2018, to begin
to improve in the second half of FY2019 or the firsthalf of FY2020. Therefore, a year-on-year decline isanticipated for the entirety of FY2019. In the display
market, a rebound in OLED panels for smartphones
should materialize from FY2020, but there is a plan toincrease TV panel production in South Korea. The
Company continues to take a cautious outlook onmarket trends amid concerns for inventory adjustments
caused by Brexit and the impact from U.S.-China
trade friction.
In cryocoolers for MRI systems, SHI is focusing on
maintaining its market advantages and enhancing
profitability with the switch to high-efficiency models,
which began in 2018, and tapping into growing
demand for a low-helium model. In cryopumps, while
increasing the number of its customers, SHI is keen toconvince customers to use cryopumps in ion implantation equipment, secure mass production from major
customers, and expand the business to new customers.
In the vacuum robotics business, we aim to expand ourshare among key customers, win over new customers,
and improve profitability by reducing costs.

Segment Overview

Plastics machinery

Ordershigher-efficiency models. In cryopumps, the Company
continued efforts to expand the market by having
major customers start evaluating their use in ion
implantation equipment, in addition to mainstay sputtering systems.

0.0

16

17

18

19
(FY)
(Expected)

0.0

Sumitomo (SHI) Demag Plastics Machinery GmbHgrew its market share on the back of a rise in sales
volume of electric injection molding machines andother sales in Europe.

Fiscal 2019 Strategies and Initiatives
Companies that have manufacturing facilities in China
and export products to the U.S. are considering
whether to shift production to other countries inSoutheast Asia. In continuation from FY2018, SHI
expects demand to weaken in FY2019 owing to theslowdown in China’s economy.
In addition to the Company’s traditional strengths
in electric markets, SHI will continue to strengthen
initiatives in the automotive-related and daily necessities markets in a bid to create a more competitive
product portfolio.
In the automobile market in particular, as demandfor electronic and optical parts is expected to increase
due to the conversion to EV and automatic operation,
we will reinforce our solution proposals to meetcustomer needs.
We also aim to strengthen IoT-related technologies
and accelerate sales of our i-Connect system for
managing the quality of output from injection molding machines.

Our cryogenic equipment is not only used in the
medical field for MRI and other devices, but also as
cryopumps to create clean, ultra-high vacuum environments required for semiconductor production processes. We have the No. 1 share of the global market
in MRI applications.

Fiscal 2018 Review and Key Topics
The medical MRI market continued minor growth
overall, with flat growth in Europe, but showing
steady demand in China, which accounts for 25% of
global markets, and the North American market. In
the semiconductor market, investment increased in
China in the first half of the fiscal year, but memory
demand fell sharply in the second half. In the display
market, challenging conditions persisted as major
investment plans were either delayed or suspended
in South Korea and China, centered on OLED for
smartphones.
Against this backdrop, SHI endeavored to expand
its market share by targeting replacement demandand increasing its market share by launching new
products for both cryocoolers and cryopumps. In
cryocoolers, the Company strengthened its competitive advantages in the market by starting to produce a
low-helium model in response to rising prices forhelium around the world, while also switching toi-Connect Production Quality Control System
MES(manufacturingexecutionsystem)Ethernet

PC andtabletEthernet

ERP(core information system)

Serial, binary, analog or USB communication

i-Connect system for managing production
quality and plastic processing machines(injection molding machines)

Mold
temperature
controllers

Sensors· In-moldcavity-pressure
sensor· Temperature
sensor· Flowmeter

Molds

Take-out
robotsSumitomo Heavy Industries, Ltd. Integrated Report 201929

Construction
Machinery

SHI produces ion implantation equipment that implantions with high precision into silicon wafers to control
their electrical properties. The Company has a topclass position in terms of share of domestic sales.

In product development, the Company placed its
focus on fundamental structural research for nextgeneration ultra-high energy equipment, in addition
to development for ultra-high energy equipment andnew concepts for single-wafer ion implantation equipment used in customers’ environments, which are
expected to play a role in the next medium-term
management plan.

Fiscal 2018 Review and Key Topics

Fiscal 2019 Strategies and Initiatives

In FY2018, the semiconductor market continued to
expand in the double digits in the first half in continuation from firm growth in FY2017, but in thesecond half, growth slowed down quickly in reflectionof a decline in demand and market prices for DRAM
and NAND flash memory due to lower investment indata centers, as well as weaker demand for smartphone CPUs due to sluggish growth in sales of smartphones. Even though operating rates remained athigh levels at the plants of semiconductor device
manufacturers, some companies curtailed operating
rates in order to adjust inventories and postponed
capital investments.
Under these conditions, SHI’s orders for new
equipment increased 18% compared with the previous fiscal year. In Japan, orders from image sensor
manufacturers increased sharply, accounting forroughly half of equipment orders received for the
fiscal year. Overseas, SHI saw year-on-year growth inboth customer numbers and order volume as it
tapped into robust investment demand in China,
making considerable progress solidifying its businessfoundation in China.

The correction in the semiconductor market thatbegan in the second half of FY2018 is likely to continue until the end of FY2019. An upturn in investment
in semiconductor production facilities should takeplace from 2020. Over the medium term, demand forsemiconductors is expected to continue strengthening as the spread of 5G-compatible devices increases
the volume of data communications, IoT continues toadvance, and self-driving cars and other applications
demand higher-performance semiconductors.
As was the case in the previous year, in equipment
sales, we aim to increase profitability by expanding
sales of the mainstay SAion and S-UHE Series, while
positioning aftermarket service as the revenuesupporting business to ensure business stability.

Precision Equipment and Others, Semiconductor Production
Equipment
Sumitomo Heavy Industries Ion Technology Co., Ltd.
Segment Overview

Main Products and Markets◻ Hydraulic excavators
Construction, Civil engineering,
Scrap, Forestry◻ Mobile cranes
Construction, Civil engineering◻ Road machinery
Roadway construction

Net Sales¥290.5billion32%
SH135X-7 outfitted for forestry operations

Net Sales

Orders(Billions of yen)
300.0

200.0

305.3
265.2

190.3

215.0

188.6
Hydraulicexcavatorsand road
machinery 146.3

285.0

200.0

(Billions of yen)
300.0

200.0

100.0

Mobilecranes

76.6 90.3 85.0

Mobilecranes

18

0.0

0.0

16

17

19
(FY)
(Expected)

182.5

43.4
16

Hydraulic Excavators and Road Machinery

Sumitomo (S.H.I.) Construction Machinery Co., Ltd.

Segment Overview
Our hydraulic excavators boast exceptional fuel economy, having won awards for energy efficiency from
the Ministry of Economy, Trade and Industry, a first for
construction machinery. The equipment models arehighly praised, receiving multiple awards including theEnergy-Efficient Machinery and Systems Award andthe Good Design Award. In recent years, the Company had added more sophisticated functions with
monitoring equipment to ensure safety around thehydraulic excavator work area. Our asphalt pavers forroad paving have a dominant market share in Japan,
and we are focusing on business development overseas, including Southeast Asia.

Fiscal 2018 Review and Key Topics
SICERA® Ultra cryopump

Semiconductor production equipment(New all-in-one ion implantation equipment: SAion)

30

Sumitomo Heavy Industries, Ltd. Integrated Report 2019290.5 292.0
260.5

Hydraulic
178.7
excavatorsand road 139.1
machinery

100.0

44.0

Operating Income/Operating Income Ratio

In FY2018, domestic demand for hydraulic excavators
was 24,000 units, a decrease of 5% from FY2017 in reaction to a surge in demand before stricter exhaust gas
regulations went into effect. Overseas demand totaled
322,000 units, an increase of 23% year on year withstrong growth in almost all regions, including China,
the world’s largest market for hydraulic excavators.

204.2

204.0

(Billions of yen)
24.0

18

19
(FY)
(Expected)

21.5

(%)
9.0

17.4 7.6%
7.4%
6.7%
16.0

6.0

8.0

3.0

81.7 86.3 88.0
17

22.0

0.8%
1.4
0.0

16

17

18

19
(FY)
(Expected)

0.0

In order to meet sharply growing demand worldwide, SHI focused on enhancing production capacity
at three global plants in Japan, China, and Indonesia
to raise supply capacity. As a result, the Company wasable to latch onto stronger demand, shipping morethan 13,000 hydraulic excavators, an increase of 12%
from the previous fiscal year. In our product line, themainstay SH200-7 hydraulic excavator that SHI developed won the Japan Machinery Federation Chairman’s
Award in the 2018 Energy-Efficient Machinery and
Systems Awards sponsored by the Japan Machinery
Federation. The SH200-7 model is the successor to
the SH200-6 model that won an Energy-Efficient
Machinery Award in FY2013. The latest award recognizes the energy efficiency of two successive generations of models. To strengthen our lineup of productsthat offer excellent economic performance, welaunched four models of new hydraulic excavatorsand one asphalt paver for road paving compliant with2014 standards under the Act on Regulation, Etc. of
Emissions from Non-road Special Motor Vehicles(off-road law).
In FY2018, SHI posted record-high sales of ¥204.2
billion in the segment as a result of favorable market
conditions and aggressive business development.

Sumitomo Heavy Industries, Ltd. Integrated Report 201931

Industrial
Machinery
Fiscal 2019 Strategies and Initiatives
In FY2019, the outlook for global demand for hydraulicexcavators is uncertain, with demand likely to decrease
year on year in China, the largest market in the world,and other regions as well. Based on this outlook, SHI istaking steps to increase production efficiency, including
investments to expand production at its three plants inorder to further increase supply capacity for productsthat have firm demand around the world. In Japan, we
aim to expand sales of new excavators and road machinery equipped with a new safety support device (Field
View Monitor 2+) and compatible with informationdriven construction. Overseas, we aim to increase ourmarket share through reinforced marketing and servicing
activities tailored to specific areas around the world. Ourdevelopment division will develop products that utilize
the most advanced technologies to enhance customers’
productivity while speeding up development itself.

Mobile Sumitomo Heavy Industries Construction Cranes Co., Ltd.
Cranes Link-Belt Cranes, L.P., LLLP
Segment Overview
Sumitomo Heavy Industries Construction Cranes Co.,
Ltd. mainly manufactures and sells crawler cranes inJapan and foreign countries (except the Americas).
Our market share in Japan is more than 40%. In
2018, the mainstay SCX-3 Series won the Good
Design Award.
In North America, Link-Belt Cranes, L.P., LLLP primarily manufactures and sells truck cranes, with a topclass share of the local market. We are promoting
collaboration with this company.

Fiscal 2018 Review and Key Topics
In the construction crane market, machinery operating
rates were robust due to an increase in domestic public
works projects and construction related to the Tokyo

Olympics and Paralympics. However, demand was lower
than the previous fiscal year owing in part to a shortageof crane operators and a snapback from sharp growth indemand over the past few years, leading to postponements in investments. Overseas, anticipated infrastructurerelated maintenance was slow to emerge in North
America, and business conditions were flat in Western
Europe. In China, however, domestic infrastructure
investment continued, and also in Asia excluding China,
demand grew in tandem with economic recoveries.
Overall, demand was up sharply on overseas markets.
FY2018 marked the second year after Sumitomo
Heavy Industries Construction Cranes Co., Ltd. became aconsolidated subsidiary of the SHI Group. Domestic sales
decreased 8% from the previous fiscal year, owing to a
decline in sales volume for large-sized machines, despite aminor year-on-year increase in sales volume of new models,in addition to efforts to expand the service business.
Continuing on from last year, we strengthened agent
support and developed new markets in the overseas
business, resulting in an increase in sales volume fornew models and overall growth of 3% in overseas sales
for the fiscal year. Regarding collaboration with ourconsolidated subsidiary Link-Belt Cranes, L.P., LLLP in
North America, we will further promote cooperation insales, marketing, development, and procurement.

Fiscal 2019 Strategies and Initiatives
Uncertainty in the global market environment will likely
continue in light of the stall in domestic investment amid
rising material prices, hardship in parts procurement, andthe risk of contraction in global trade due to extended
protectionist policies in trade. Looking ahead, we willcontinuously aim at building a competitive business structure, pursuing synergies by accelerating and improving
quality in new product development, enhancing customer
satisfaction by strengthening cooperation with overseas
agents, and strengthening collaboration with SHI Group
companies including Link-Belt Cranes, L.P., LLLP, in
addition to promoting the efficient use of resources.

Main Products and Markets

Net Sales¥93.7
billion10%◻ Cyclotrons for medical use
Medical equipment◻ Cyclotrons for research use
Research◻ Coating systems
LCDs◻ Forging presses
Automobiles, Iron and steel,Non-ferrous metals◻ Material handling machinery
Iron and steel, Electric power,
Shipbuilding, Port logistics◻ Logistics & handling systems
Logistics◻ Turbines
Power generation◻ PumpsOil refineries, Petrochemical
facilities

Boron neutron capture therapy (BNCT) system

OrdersNet Sales

Operating Income/Operating Income Ratio(Billions of yen)
120.0(Billions of yen)
120.0(Billions of yen)
12.0
10.8

98.9

91.3 87.7 90.8 94.0

83.8

10.9%

93.7 91.0

80.0

80.0

8.0

40.0

40.0

4.0

0.0

16

17

18

19
(FY)
(Expected)

0.0

16

Forging Presses
Segment Overview
Our hot forging presses are used to produce engine
parts and other components with hot steel in automobile manufacturing plants around the world.

Fiscal 2018 Review and Key Topics

17

18

19
(FY)
(Expected)

0.0

10.5%
8.8

(%)
12.0

9.6%
9.0

8.8%
8.0

8.0

4.0

16

17

18

19
(FY)
(Expected)

0.0

Fiscal 2019 Strategies and Initiatives
SHI has brought to market the new FPZ Series offorging presses based on the concepts of stable,
suitable and comfortable. The FPZ Series was unveiledat MF-TOKYO 2019, an exhibition at the 6th Metal
Forming Fair Tokyo held in July and August 2019.
Our goal is to contribute to a better forging work
environment and to expand our business.

Tier 1 and tier 2 suppliers are biding their time on
investment decisions amid growing uncertainties inthe biggest automobile markets in China and the U.S.,
impacted by a slowdown in the Chinese market andtrade friction between the two countries. However,
SHI continues to invest in expanding its overseas
bases with the aim of securing more market share,
and carries out investments to keep up with growing
demand for aluminum-forged parts in order to lighten
the weight of automobiles.
SHI has received orders for several medium-sizedpresses and a large-sized 6300T press.

Asphalt paver HA45C-10
SH200-7 hydraulic excavator(model that won the Japan
Machinery Federation Chairman’s
Award at the 2018 Energy-Efficient
Machinery and Systems Awards)

32

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Hydraulic crawler crane SCX2000-3

New FPZ Series of forging presses

Sumitomo Heavy Industries, Ltd. Integrated Report 201933

Business Activities

Medical Equipment

Material Handling Systems

Sumitomo Heavy Industries Material Handling Systems Co., Ltd.

Turbines and Pumps

Shin Nippon Machinery Co., Ltd.

Segment Overview

Segment Overview

Segment Overview

Our cyclotron technologies are used in the manufacture of advanced systems for cancer diagnosis andtreatments. In the diagnostics field, SHI has a dominant share of the domestic market for equipment for
production of radiopharmaceuticals for PET scans,which detect the early stages of cancer within a shorttime. In the treatment field, SHI has rich references for
proton therapy systems, which provide advanced
radiation therapy, in the global market.

This segment produces industrial material handlingsystems, automated warehouses and other logistics
systems for distributors, and automated parking lot
systems.
SHI provides material handling systems to a broad
range of customers in the steelmaking, shipbuilding
and other manufacturing fields, as well as the energy
and harbor fields. In recent years, demand for automation has been strong in the logistics industry forwarehouse-related products.

In this segment, SHI manufactures small- and mediumsize steam turbines used in power generation systems
at factories, as well as pumps for oil refineries andother plants. The overseas ratio of sales has increased
for steam turbines, mainly in Southeast Asia.

Fiscal 2018 Review and Key Topics
In the diagnosis field, there is strong demand in the
PET cyclotron market for research purposes andupdating aging facilities in Japan. In the overseas
market, demand is quite strong for clinical use,
especially in China and Southeast Asian countries.
SHI received orders for two PET cyclotron systems
from a national hospital in the Philippines, in addition
to orders of PET cyclotrons from China.
In the treatment field, demand has been increasing
for proton and heavy-ion therapy systems in the U.S.,
Europe and Asia.
SHI has completed development of high-speed
scanning technology with fast layer switching to
respond to treatment of moving respiratory organs
with proton therapy systems. SHI received orders of
linear accelerators for injectors used in heavy-ion
therapy systems for Taiwan and South Korea.

Fiscal 2019 Strategies and Initiatives
In the diagnosis field, we will work for expansion of
PET cyclotron systems at research facilities and hospitals around the world, as well as at pharmaceuticals
companies who distribute radiopharmaceuticals.
In the treatment field, SHI is developing nextgeneration proton therapy systems while marketing a
newly developed compact model. Regarding boron
neutron capture therapy (BNCT), we are focusing ourefforts on obtaining approval of medical devices fromthe Japanese government at the earliest timing.

Fiscal 2018 Review and Key Topics
In material handling systems, demand for upgrading
aging facilities remained brisk in the steel and energy
fields. Although demand weakened in the shipbuilding field, overall investments were made as planned,
resulting in domestic demand in FY2018 that was
roughly equivalent to FY2017. In logistics systems,
demand for automation was robust amid serious
shortages of workers in the logistics field while thevolume of packages in distribution grew. In automated parking systems, large-scale redevelopment
plans are gaining momentum for major urban train
stations and the surrounding areas as a source ofdemand post-Tokyo Olympic and Paralympic Games.
SHI was able to secure a certain amount of orders
for material handling systems from customers in awide range of fields, including steel, energy and harbors, leading to a year-on-year increase in orders. In
logistics systems, the Company received a large
volume of orders for RDRV® and automated warehouse systems amid brisk capital investment in thehigh-performance film segment, a field of expertise.
The Magic Rack®, the industry’s first high-density
deep storage system, continued to see firm demand,and orders were up compared with the previous fiscal
year. In automated parking systems, we received
orders, mainly for urban parking projects, thanks tothe appeal of our systems as having the fastest
speeds for loading and unloading vehicles in theindustry. SHI maintained a leading share with steady
growth in the number of installed systems.

Fiscal 2018 Review and Key Topics
In the power generation business, orders were brisk forfeed-in tariff (FIT) projects in Japan. However, challenging business conditions continued as the market contracted in size, with fewer coal-fired power generation
projects in Asia due to rising awareness of environmental issues, as well as some projects being cancelled or
postponed due to insufficient profitability following
cuts in retail electricity rates in some countries.
In the oil and gas business, several large-scale projects stalled out in the petroleum distillation segment
due to persistently low crude oil prices and politicalinstability. However, plans for environmental improvement projects (improving the performance of refineries, etc.) moved forward in India and Southeast Asia.
Against this backdrop, in the power generation
business, SHI focused on expanding orders in theoverseas private power generating segment and thepower selling segment by continuing to expand its
base of loyal customers, mainly in Southeast Asia, byleveraging its extensive track record. In the oil andgas business, SHI aimed to increase orders in the
petroleum distillation and petrochemical fields byleveraging its strengths in turbine and pump packages
compliant with API standards.

Fiscal 2019 Strategies and Initiatives
In the power generation business, despite concerns
about fewer projects in coal-fired power generation,
new projects look likely to emerge as attention
focuses on wind, solar and biomass power generation
with the objective of increasing the ratio of renewableenergy in countries.
In the oil and gas business, we expect to see new
projects related to a shift in focus toward highervalue-added facilities, in light of the emerging trend
to install ethylene plants next to existing crude oil
upstream processing facilities.
SHI aims to increase orders through a unified
approach to marketing that combines services withordered products, while upgrading its area-based
control functions and further improving its products
by increasing efficiency and reducing costs.

Magic Rack®

Fiscal 2019 Strategies and Initiatives
SHI aims to hone the competitiveness of its products byfocusing on developing and commercializing automation technologies as a way of alleviating labor shortages
across various industries, while also steadily implementing measures to reinforce its service business.
34

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Steam turbine

Tire mounted jib crane (photo provided by Niihama Port Authority)

Sumitomo Heavy Industries, Ltd. Integrated Report 201935

Main Products and Markets

Ships

Environmental
Facilities & Plants

Main Products and Markets◻ ShipsMarine transportation

Net Sales

Net Sales¥41.4¥151.05%

17%billionbillion◻ Power plants, Industrial
wastewater treatment systems
Electric utilities, Paper manufacturing, Steelmaking, Cement,
Food processing plants, Pulp
and paper, Chemicals, Electricity
and electronics, Machinery◻ Water and sewage treatment
system, Landfill leachate
treatment systems
Government agencies◻ Air pollution control plants
Electric utilities, Iron and steel
industry◻ Chemical process equipment& plants
Petrochemical plants◻ Pressure vessels, Mixing vessels
Oil refining, Petrochemicalindustries◻ Steel structures
Iron and steel industry◻ Food processing machinery
Food processing industry

Biomass power plant(Delivered to Summit Handa Power Corporation)

Aframax Tanker ALFA FINLANDIA

OrdersNet Sales(Billions of yen)
45.0(Billions of yen)
45.0

34.9
30.0

37.0

38.3

(Billions of yen)
1.5

41.4

(%)
9.0

1.3

Net Sales

Orders(Billions of yen)
210.0

191.3 192.0(Billions of yen)
180.0

151.0

139.4
1.0

30.0

Operating Income/Operating Income Ratio

162.7

34.0

32.6

32.0

30.0

Operating Income/Operating Income Ratio

4.1%

0.7

0.8

6.0

140.0

120.0

3.0

70.0

60.0

0.0

0.0

107.6

160.0

(Billions of yen)
15.0

121.9
10.0

9.1
8.5%

15.0

0.5

15.0

2.0%
1.9%

0.0

Ships

16

17

18

19
(FY)
(Expected)

0.0

16

Sumitomo Heavy Industries Marine& Engineering Co., Ltd.

Segment Overview
Over the past few years, SHI has specialized in building mid-size oil tankers, reflecting its precise customer
needs in design development through marketing
activities. By narrowing down the types of vessels, itenables us to realize efficiencies in design and manufacturing, and achieve further differentiation in products,
such as supreme environmental performance.

Fiscal 2018 Review and Key Topics
The shipping market remained sluggish with low rates
for both the dry bulker and tanker sectors. In the shipbuilding market, numbers of orders for new ships wereon the low side in anticipation of sulfur oxide (SOx)emissions regulations coming into effect in 2020. On
the other hand, oversupply conditions of new ships
eased slightly in the wake of a number of overseas
shipbuilding yards entering bankruptcy as a result of
prolonged stagnation in the shipbuilding market.
Under these circumstances, SHI concentrated its
efforts on marketing Aframax tankers ahead of SOx
regulations, winning orders for three ships in FY2018
and securing about two years’ worth of work as of

36

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

17

18

19
(FY)
(Expected)

0.0

16

17

5.0

12.6

(%)
18.0

12.0

9.5

12.0

7.8% 8.3% 7.5%

6.0

0.0%
0.0
18

19
(FY)
(Expected)

March 31, 2019. We completed construction on andhanded over four vessels, one less than the previous
fiscal year. We remained profitable at the operatinglevel for a fourth consecutive fiscal year, thanks inpart to improvements in productivity and margins on
individual projects.

Fiscal 2019 Strategies and Initiatives
It is uncertain how SOx regulations coming into effectin 2020 will impact the shipping market. However, themarket has shown gradual improvement from the previous fiscal year and looks likely to improve further inthe second half of FY2019 because of an ease of thevessel oversupply conditions as a result of the scrapping of ships in 2017 and 2018, and sharp expansion ofexports of crude oil from the U.S., which has become
the world’s second largest producer of petroleum.
Based on these market conditions, SHI will develop
ships with new designs that are able to satisfy diversifying market requirements and are more environmentally friendly. Amid lingering uncertainties in market
conditions, we will strive to secure orders acrossbroader markets, reach our targets and increase
profitability by accurately perceiving customer
requirements and market trends.

16

17

18

19
(FY)
(Expected)

0.0

16

Energy Plants
Segment Overview
SHI is a leading company in circulating fluidized bed(CFB) boilers which are able to utilize a wide variety offuels including biomass.

Fiscal 2018 Review and Key Topics
In Japan’s domestic power market, there has been asteady increase in construction projects for biomass
power plants taking advantage of the feed-in tariff(FIT) renewable energy scheme since it was introduced in 2012. In 2018, the FIT scheme was changed
so that for biomass power plants of more than 10 MW
capacity purchase prices are determined through abidding process. The market has evolved so that thecost of power generation is now a key factor, with anews report referring to large-scale biomass power
plants that do not need to depend on the FIT scheme
being considered. In this rapidly changing market, SHI
won three new equipment orders and delivered one
power plant project that features CFB boilers.
Outside Japan, demand is strong in Asian countries
for power plants due to potential electricity shortages.
Moreover, similarly to Japan, South Korea and Taiwan

17

18

19
(FY)
(Expected)

0.0

16

17

18

19
(FY)
(Expected)

0.0

also have policies to encourage installation of renewable energy systems. Sumitomo SHI FW Energie B.V.,
a subsidiary we established in FY2017, received orders
for CFB boilers for three biomass power plants inSouth Korea.

Fiscal 2019 Strategies and Initiatives
With expectations for renewable energy increasing
every year as a means of moving away from carbonbased fuels, securing enough biomass fuel for biomass power generation has become a key issue forproject development. We therefore anticipate
demand for biomass fuel that is both sustainable andBiomass power plant(Delivered to Summit Sakata Power Corporation)

Sumitomo Heavy Industries, Ltd. Integrated Report 201937

economically viable. SHI has a track record in thestable combustion of various biomass fuels around theworld, and is leveraging this experience to propose
high-efficiency facilities in response to emerging
customer needs.

Water and Wastewater Treatment Plants

Sumitomo Heavy Industries Environment Co., Ltd.

Segment Overview
Our sewage and water treatment systems and effluent
treatment systems used in production plants arehighly regarded for their energy-saving performanceand are being provided for a wide range of uses, fromconstruction of facilities through to operation andmanagement.

Fiscal 2018 Review and Key Topics
The government and public sector for water treatment systems has been a stable but fiercely competitive market. SHI was able to secure orders on a parwith the previous fiscal year thanks to redoubled
efforts to expand sales of unit products and lock inplant design-and-build projects.
The market for private sector water treatment
systems expanded with brisk investments in the steel
and chemicals sectors. SHI won orders for major
projects in the steel industry, having proposed solutions in line with customer needs.

Fiscal 2019 Strategies and Initiatives
In the market for water treatment systems in thegovernment and public sector, the public-private
partnership business is likely to gain momentum withrevisions to laws designed to promote the privatization of water treatment services, as well as higher
investments in pumping stations and other measures
to address heavy rainfall with the objective of making
Japan more resilient to natural disasters. We willcontinue to concentrate on expanding sales of unit
products and design-and-build projects, while
methodically advancing initiatives in public-private
collaborative projects.
In the market for water treatment systems in theprivate sector, companies may take a more cautious
stance on investments due to U.S.-China trade friction
and concerns about the slowing economy in China.
Regardless, we aim to expand orders by strengthening our ability to propose solutions in tune withcustomer needs, including renovation projects foraging facilities.

Base Supporting the SHI Group
Directors, Corporate Auditors,
and Executive Officers . . . . . . . . . . . . . . 40
Messages from the External Directors . . . 43
Corporate Governance . . . . . . . . . . . . . . 44
Compliance . . . . . . . . . . . . . . . . . . . . . . . 47
Risk Management . . . . . . . . . . . . . . . . . . 48
CSR Mid-Term Plan . . . . . . . . . . . . . . . . . 50
Environment . . . . . . . . . . . . . . . . . . . . . . 52
Human Resources . . . . . . . . . . . . . . . . . . 56

Wastewater treatment system(Water treatment system for sewage treatment plant)

Wastewater treatment system(Anaerobic effluent treatment system)

38

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Wastewater treatment system SUMIRATOR

Sumitomo Heavy Industries, Ltd. Integrated Report 201939

Base Supporting the SHI Group

Directors, Corporate Auditors, and Executive Officers

Board of Directors
Shunsuke Betsukawa

Shinji Shimomura

Eiji Kojima

Susumu Takahashi

Apr. 1978
Apr. 2007

Apr. 1982
Apr. 2012

Apr. 1984
Nov. 2013
Apr. 2016
Jul. 2016

Feb. 2004
Aug. 2007

Representative Director, Chairman of the Board

Apr. 2009
Jun. 2009
Apr. 2010
Apr. 2011
Apr. 2012
Apr. 2013
Apr. 2019

Reason forappointment asa director

Representative Director, President and CEO

Joined the Company
Senior Vice President, General Manager ofCorporate Finance, Accounting &Administration Group
General Manager of Corporate Planning andDevelopment Department
Director, Senior Vice President
Director, Executive Vice President
Representative Director, CFO and General
Manager of Export Administration Department
Senior Executive Vice President
Representative Director, President and CEO
Representative Director, Chairman of the Board(current)

Mr. Shunsuke Betsukawa was appointed as the Representative Director andPresident and CEO in 2013 after serving as the person in charge of the finance,accounting, and corporate planning divisions. He formulated two medium-term
management plans titled Medium-Term Management Plan 2016 and MediumTerm Management Plan 2019, and promoted the building of a robust businessstructure. Since being appointed as the Representative Director and Chairmanof the Board in April 2019, he has encouraged the enhancement of governancesystems as the Chairman of the Board of Directors and has been responsible
for the management of the SHI Group.
Since he has a high level of management knowledge and supervising ability,
SHI has determined that he is qualified to serve as a director of the Company.

Apr. 2013
Apr. 2014
Apr. 2015
Apr. 2016
Jun. 2016
Apr. 2018
Apr. 2019

Reason forappointment asa director

As Representative Director and President & CEO of Sumitomo (S.H.I.)
Construction Machinery Co., Ltd., Mr. Shinji Shimomura oversaw strong
business growth in the Construction Machinery segment with his strong
leadership, and was responsible for the management of the SHI Group. In April
2019, he was appointed as Representative Director, President and CEO of theCompany. As CEO, he has directed the management of the SHI Group withthe aim of achieving the targets in Medium-Term Management Plan 2019,
which started in FY2017.
Since he has a high level of management knowledge and supervising ability,
SHI has determined that he is qualified to serve as a director of the Company.

Reason forappointment asa director

After being appointed as General Manager of the Mechatronics Division in2013, Mr. Eiji Kojima performed his duties as the person in charge of thebusiness driving the control technologies across the SHI Group. In 2016, he
was appointed as Senior Vice President, and the same year he was appointed
as General Manager of the Energy & Environment Group. He has advanced
initiatives to strengthen business competitiveness and build competitive
advantages. In 2017, he was appointed as a director, and in this role he has
been responsible for the management of the SHI Group.
Since he has a high level of management knowledge and supervising ability,
SHI has determined that he is qualified to serve as a director of the Company.

Hideo Kojima

Apr. 1981
Apr. 2011

Apr. 1983
Apr. 2005

Mar. 1980
May 1995
May 2000
May 2004

Apr. 2016
Apr. 2018

Director, Executive Vice President

Joined the Company
Vice President, General Manager of Research &Development Center, Corporate Technology
Management Group
Director
Senior Vice President, General Manager ofCorporate Technology Management Group(current)
Executive Vice President (current)
Representative Director (current)

Apr. 2006
Apr. 2010
Apr. 2011
Apr. 2013
Jun. 2013
Apr. 2014
Oct. 2014
Apr. 2015

Mr. Yoshiyuki Tomita has held key positions in the technology divisions, and has
contributed to the development of technology for the Company over a long
period. He was appointed as Representative Director in 2018. In addition toleading the SHI Group’s research and development as the head of the technology divisions, he assists the President across all businesses and has been
responsible for the management of the SHI Group.
Since he has a high level of knowledge of the technologies which constitutethe SHI Group’s foundation, as well as a high level of management knowledge
and supervising ability, SHI has determined that he is qualified to serve as adirector of the Company.

Reason forappointment asa director

After being appointed as General Manager of the Precision Equipment Group
in 2011, Mr. Toshiharu Tanaka was appointed as a director and a Senior Vice
President in 2013. Since 2014, he has been advancing efforts to develop thebusiness as the person in charge of the Machinery Components segment. Mr.
Tanaka was promoted as Executive Vice President in 2015, and has been
responsible for the management of the SHI Group.
Since he has a high level of management knowledge and supervising ability,
SHI has determined that he is qualified to serve as a director of the Company.

Hideo Suzuki

Apr. 1980
Mar. 2008

Apr. 1982
Jun. 2005

Apr. 2012
Apr. 2017
Apr. 2018
Jun. 2018

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Reason forappointment asa director

Please see page 46 for details.

May 2006
Sep. 2010
Jun. 2011

Jun. 2013
Jun. 2015
Jun. 2016

Reason forappointment asa director

Registered as a certified public accountant
Representative Partner of Ota-Showa Auditors OfficeVice Chairman of Century Ota Showa & Co.
General Manager of International Division,
Tokyo office, Shin Nihon & Co.
Deputy Chief Executive Officer of Shin Nihon & Co.
Senior Advisor of Ernst & Young ShinNihon LLC
External Corporate Auditor of Alpine Electronics, Inc.
External Corporate Auditor of the Company
Established Hideo Kojima CPA Office
External Corporate Auditor of Mitsubishi UFJ
Financial Group, Inc.
External Director of the Company (current)
External Director (Audit and Supervisory Committee
Member) of Alpine Electronics, Inc.

Please see page 46 for details.

Director, Executive Vice President

Joined the Company
Managing Director & CEO of Demag Ergotech
GmbH
Senior Vice President of the Company
General Manager of Industrial Equipment Division(current)
Executive Vice President (current)
Director (current)

After being appointed as Managing Director & CEO of Demag ErgotechGmbH in 2008, Mr. Tetsuya Okamura was appointed as a Senior Vice Presidentof the Company in 2012, and he contributed to strengthening the competitiveness of the SHI Group’s Plastics Machinery business. After his appointment as
the General Manager of the Industrial Equipment Division in 2017, he wasappointed as a director and Executive Vice President in 2018. As the head of
this business segment, he is advancing initiatives to stabilize earnings andenhance the strengths of products.
Since he has a high level of management knowledge and supervising ability,
SHI has determined that he is qualified to serve as a director of the Company.

Jun. 2011
Jun. 2014
Apr. 2018

Counselor of The Japan Research Institute, Limited
Vice Chairman of The Japan Research Institute,
LimitedChairman of The Japan Research Institute, Limited
External Director of the Company (current)
Chairman Emeritus of The Japan Research Institute,
Limited (current)

External Director

Joined the Company
Principal Engineer of Planning & Control
Department, Quantum and Advanced Equipment
Center, Precision Equipment Group
General Manager of Planning & Control
Department, Quantum Equipment Division
Chief Staff Manager of Corporate Planning &Development Department
General Manager of Precision Equipment Group
Senior Vice President
Director (current)
General Manager of Overseas Sales Department,
Power Transmission & Controls Group
General Manager of Power Transmission &Controls Group (current)
Executive Vice President (current)

Tetsuya Okamura

Director, Executive Vice President

40

Jun. 2017

External Director

Joined the Company
General Manager of Mechatronics Division
Senior Vice President (current)
General Manager of Energy & Environment Group(current)
Director (current)

Toshiharu Tanaka

Jun. 2012
Apr. 2014

Reason forappointment asa director

Joined the Company
Director of Sumitomo (S.H.I.) Construction
Machinery Co., Ltd.
Executive Managing Director of Sumitomo (S.H.I.)
Construction Machinery Co., Ltd.
Senior Executive Director of Sumitomo (S.H.I.)
Construction Machinery Co., Ltd., Vice Presidentof the Company
Senior Vice President, Representative Director
and President & CEO of Sumitomo (S.H.I.)
Construction Machinery Sales Co., Ltd.
Representative Director and President & CEOof Sumitomo (S.H.I.) Construction MachineryCo., Ltd.
Director of the Company
Executive Vice President
Representative Director, President and CEO (current)

Yoshiyuki Tomita

Representative Director, Executive Vice President

Reason forappointment asa director

Director, Senior Vice President

Mar. 2006
Apr. 2012
Apr. 2014
Apr. 2018
Jun. 2018
Apr. 2019

Reason forappointment asa director

Joined the Company
Director of SHI Financial Services Co., Ltd.
(currently Sumitomo Heavy Industries Business
Associates, Ltd.)
Representative Director and President of SHI
Financial Services Co., Ltd.
General Manager of Corporate Finance,
Accounting & Administration Group
Senior Vice President
Executive Vice President (current)
Director (current)
CFO (current)

After being appointed as General Manager of the Corporate Finance,
Accounting & Administration Group in 2012, Mr. Hideo Suzuki was appointed
as Senior Vice President in 2014, and a director and Executive Vice President
in 2018. As CFO since April 2019, he has been working to manage the SHIGroup’s operating performance and maintain financial discipline in the
Company’s aggressive investment activities targeting growth.
Since he has a high level of management knowledge and supervising ability,
SHI has determined that he is qualified to serve as a director of the Company.

Sumitomo Heavy Industries, Ltd. Integrated Report 201941

Base Supporting the SHI Group

Messages from the External Directors

Directors, Corporate Auditors, and Executive Officers

In the SHI Group, two external directors—one is an expert in economics and management and the other isin finance and accounting—are in charge of overseeing the Group’s management. Here are the current
issues and prospects of the SHI Group seen from their respective standpoints.

Corporate Auditors
Yuji Takaishi

Jun Nogusa

Apr. 1977
Apr. 2007

Apr. 1979
Apr. 2014
Jun. 2018

Standing Corporate Auditor

Jun. 2007
Apr. 2010
Apr. 2012
Apr. 2013
Apr. 2014
Apr. 2015
Jun. 2016

Joined the Company
Senior Vice President, General Manager of
Human Resources Department
Director
Executive Vice President,
General Manager of Plastics Machinery Division
General Manager of Corporate Planning &Development Department
Representative Director, General Manager ofExport Administration Department
General Manager of Corporate Planning GroupRegional General Manager of Kansai Office
Corporate Auditor (current)Standing Corporate Auditor
Joined the Company
General Manager of Internal Control Dept.
Corporate Auditor (current)

Takeo Wakae

Masaichi Nakamura

Apr. 1983
Apr. 1992

Mar. 1987
Aug. 2008
Jul. 2014

External Corporate Auditor

Apr. 2003
Jun. 2012
Apr. 2014

Registered as attorney-at-law
Civil conciliation commissioner at Tokyo District
Court (current)
Vice President of Daiichi Tokyo Bar Association(fiscal year 2003)
External Corporate Auditor of the Company (current)
Executive Director of Japan Federation of Bar
Associations (fiscal year 2014)

External Corporate Auditor

Sep. 2016
Jun. 2017

Registered as a certified public accountant
Managing Director of Ernst & Young ShinNihon LLC
Representative Partner and Vice President of Ernst& Young ShinNihon LLC
Representative Director of Ernst & Young BusinessInitiative Co., Ltd.
Established Masaichi Nakamura CPA Office
External Corporate Auditor of the Company (current)

Executive Officers (○ designates concurrent position as a director)
President○ Shinji Shimomura

CEO

Executive Vice President○ Yoshiyuki Tomita

General Manager of Export Administration Department;
General Manager of Corporate Technology Management Group

Executive Vice President○ Toshiharu Tanaka

General Manager of Power Transmission & Controls Group

Executive Vice President○ Tetsuya Okamura

General Manager of Industrial Equipment Division

Executive Vice President○ Hideo Suzuki

CFO

Senior Vice President

Hiroo Morita

Chairman of the Board of Sumitomo Heavy Industries (China), Ltd.;
Representative Director, President & CEO of Sumitomo Heavy Industries Business Associates, Ltd.

Senior Vice President

Kazuo Hiraoka

General Manager of Plastics Machinery Division

Senior Vice President

Tatsuya Endo

Representative Director, President & CEO of Sumitomo Heavy Industries Material Handling Systems
Co., Ltd.; General Manager of Ehime Works

Senior Vice President
Senior Vice President

42

Taiji Tsuchiya○ Eiji Kojima

General Manager of Precision Equipment Group
General Manager of Energy & Environment Group

Senior Vice President

Hiroshi Arito

Representative Director, President & CEO of Nihon Spindle Manufacturing Co., Ltd.

Senior Vice President

Hideshi Shimamoto

General Manager of Ship & Marine Division; Representative Director and President & CEO of
Sumitomo Heavy Industries Marine & Engineering Co., Ltd.

Senior Vice President

Morihiro Kondo

General Manager of Corporate Planning Group

Senior Vice President

Junichi Murakami

Representative Director, President & CEO of Sumitomo Heavy Industries Ion Technology Co., Ltd.

Senior Vice President

Kyoichi Manabe

Representative Director, President & CEO of Sumitomo Heavy Industries Environment Co., Ltd.

Senior Vice President

Yasunobu Kazumi

Representative Director, President & CEO of Sumitomo (S.H.I.) Construction Machinery Co., Ltd.;
Representative Director, President & CEO of Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd.

Vice President

Toshihiko Chijiiwa

General Manager of Technology Research Center, Corporate Technology Management Group

Vice President

Shaun Dean

General Manager of Global HQ, Power Transmission & Controls Group;Managing Director and CEO of Sumitomo (SHI) Cyclo Drive Germany GmbH; CEO, Lafert S.p.A.

Vice President

Tatsuro Araki

General Manager of Gearbox Business Unit, Power Transmission & Controls Group;
Representative Director and President & CEO of Sumitomo Heavy Industries Gearbox Co., Ltd.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Management with Compliance as
Its Highest Priority

Increasing the Effectiveness ofStrengthening Corporate GovernanceJapanese companies are experiencing rapid changes inthe business environment impacted by structuralchanges in the world economy, such as trade friction
between the U.S. and China, and the digital revolution.
To keep up with these changes in the business environment, companies must quickly reform their businessstructures and corporate organizations. SHI has moved
quickly to reform its business structure and reinforce
profitability by acquiring companies and bringing forward capital investment and R&D spending with an eye
on growth. I have witnessed the Company’s measures
to strengthen corporate governance and reformmanagement.
At the spearhead of these efforts, the emergence of
projects that had inappropriate inspections underscores
the inadequacy of the Company’s compliance promotion structure. This was truly regrettable. It can only besaid that the Company’s reforms to corporate governance did not go far enough.
After the problem surfaced, SHI quickly established aSpecial Investigation Committee consisting of external
directors and auditors to investigate the backgroundand causes behind this incident and suggest measures
to prevent a recurrence. I believe this can be seen as
evidence that corporate governance is functioning now.
The string of quality management problems was not
an organization-wide problem, and as an external director,
I was in no position to know about the incidents.
Regardless, I did not fulfill all of my responsibilities as
an external director. Looking ahead, I will ceaselessly
work at reforming corporate governance with theintention of fulfilling my responsibilities as an external
director, and focus on supervision and oversight duties
to deepen compliance and advance measures toprevent a recurrence.

In June 2018, the revised Corporate Governance Codewas published, prompting listed companies to strengthen
their corporate governance. Looking back at the problems that arose over the past year, however, it can besaid that corporate governance was not always effective.
Specific problems include a case of insufficient transparency in the process for determining director compensation at a company, a series of scandals about
quality issues, and the disclosure of legal breaches.
Even though companies sought to strengthen
corporate governance by increasing the number ofexternal directors and auditors, promoting diversity
and setting up compensation and nomination committees, these problems indicate there are still operational
issues that need to be addressed.
SHI intends to reinforce corporate governance,
but I believe there are lingering issues with spreadingawareness and implementing measures.
SHI has announced measures to prevent a recurrenceof inappropriate inspections that occurred in the past.
I believe one reason for these problems was an inadequate adherence to “A Tireless Commitment to
Improving Operational Quality,” one of the basic principles in the Company’s medium-term management
plan. As part of measures to prevent a recurrence, theCompany reconfirmed the importance of thoroughly
understanding and instilling the Sumitomo BusinessSpirit and our Business Principles, in addition to management policies that have compliance as their highest
priority. As an external director, I am examining how I
can help the Company carry out these measures. I aim
to contribute to the Company’s sustained growth byreinforcing corporate governance.

Susumu Takahashi

Hideo Kojima

Chairman Emeritus,
The Japan Research Institute,
Limited
Appointed as a private sector
member of the government’s
Economic and Financial
Advisory Council in January
2013 and as External
Director of the Company
in June 2014.

Certified Public Accountant
Appointed as External
Corporate Auditor of theCompany in June 2011 andas External Director of theCompany in June 2015.

External Director

External Director

Sumitomo Heavy Industries, Ltd. Integrated Report 201943

Base Supporting the SHI Group

Corporate Governance
Sumitomo Heavy Industries (SHI) believes that the essence of corporate governance lies in theestablishment of a system that enables efficient and transparent management. Exerting continuous
efforts to enhance corporate governance helps the Group achieve higher enterprise value and gainhigh respect and confidence from all its stakeholders.

Corporate Governance Basic Policy of Sumitomo Heavy Industries, Ltd.
Chapter 1

General Provisions

Corporate Governance System
Sumitomo Heavy Industries (SHI) has adopted thecompany with a board of corporate auditors systemand, within this framework, introduced an executive
officer system to separate the business execution andsupervision functions of corporate management.
The Company has a Board of Directors, comprisingnine directors, of whom two are external directors
whose role is to supervise management from an
independent standpoint and are in charge ofGeneral Meeting of Shareholders

Securing the Rights and Equal Treatment of Shareholders▶ Securing the equal treatment of shareholders ▶ General Meeting of Shareholders▶ Basic strategy for capital policy ▶ Strategic shareholdings ▶ Related party transactions

Chapter 2

Appropriate Cooperation with Stakeholders Other Than Shareholders▶ Ethics code ▶ Approach to environmental problems ▶ Whistleblowing▶ Ensuring diversity in the Company, including the active participation of women

Chapter 3

SHI distributes a compliance manual to all employees that serves as specific action guidelines for work,
based on the Ethics Code as its code of conduct that all employees follow. At the same time, SHI implementscompliance training with the aim of spreading awareness of compliance. Furthermore, the Company draws
up a medium-term environmental plan based on the SHI Group Environmental Policy, and takes proactive
steps to help solve environmental issues. The Company has created whistleblower channels and an internal
whistleblower system for reporting violations or suspected violations of laws, regulations and corporate
ethics. Management encourages the use of this system with the intention of quickly discovering any problems.
SHI promotes diversity management with the objective of creating organizations where each and every
employee can thrive and work to the best of their abilities.

Ensuring Appropriate Information Disclosure and Transparency▶ Basic policy on information disclosure

Chapter 4

To maintain and develop relationships of trust with all stakeholders, SHI shall disclose important information
concerning the SHI Group in an appropriate and timely manner, focusing on transparency, fairness, andcontinuity.

Responsibilities of the Board of Directors, etc.
▶ Roles and responsibilities of the Board of Directors ▶ Effectiveness of the Board of Directors▶ Roles and responsibilities of corporate auditors and the Board of Corporate Auditors ▶ Outside officers▶ The Nomination Committee and the Compensation Committee ▶ Training for directors and corporate auditors

Chapter 5

SHI’s Board of Directors and senior management officials shall recognize the medium-term management
plan, which includes SHI’s specific target figures for sales, operating income, ROIC, dividend payout ratio,
and the like, as one of their commitments to shareholders, and make their utmost efforts to realize theplan. If the plan is not realized, SHI’s Board of Directors and senior management officials shall analyze thereasons for this, provide an explanation to shareholders, and then reflect such analysis in SHI’s plans forthe terms thereafter.

Dialogue with Shareholders
Chapter 6▶ Policies on constructive dialogue with shareholders

For the purpose of promoting SHI’s dialogue with its investors, including shareholders, SHI shall establish
Policies on Constructive Dialogue with Shareholders.

44

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Ethics Committee

Board of Directors

Nominating Committee

Audit

SupervisionCorporate Auditors/
Board of Corporate Auditors

Audit

Compensation Committee

Corporate Auditor’s Dept.
President andChief Executive Officer

Internal Control Dept.
Management Strategy
Committee

Internal Control
Internal Audit Dept.

Internal Auditing
Operational
Divisions

Subsidiaries
and Affiliates

Executive & Operating
Officers Committee

Audit

Independent Auditor

SHI shall treat all shareholders equally in practice according to the feature and number of each shareholder’sowned shares. Aiming to have the return on invested capital (ROIC) of each business owned by SHI always
exceed the capital cost in order to realize an improvement of shareholder value, SHI shall deem strategic
investment leading to improvements in shareholder value and the implementation of appropriate returns toshareholders as two of the most important management tasks.

appropriately reflecting the stakeholders’ perspective.
The Board of Corporate Auditors is comprised of four
corporate auditors, including two external corporate
auditors. The external corporate auditors haveadvanced specialist knowledge and a wealth ofexperience in various fields and the standing corporate
auditors have specialist knowledge and a wealth ofexperience of SHI management. They will utilize theseand provide highly effective audits.

Audit
Corporate Auditors at Subsidiaries and Affiliates

Board of Directors
The Board of Directors deliberates not only on matters
stipulated under the Japanese Corporate Law, but also
on important management issues in a preemptive
manner. Also, the Company’s Articles of Incorporation
stipulate that the Company must have no more than
12 directors.

Executive & Operating Officers Committee
The Executive & Operating Officers Committee, whichis comprised mainly of executive officers, meets on aregular basis to oversee consolidated business results
and to follow up on the implementation status ofmanagement policies.

Management Strategy Committee
The Company has also established the Management
Strategy Committee, comprising executive officers
assigned to the Company’s Head Office, as an advisory
body to the President and CEO. This committee deliberates on important matters, including those to besubmitted to the Board of Directors, and, consequently,
reports the results of any deliberation to the Company’s
President and CEO.

Corporate Auditors and the Board of
Corporate Auditors
The Company’s corporate auditors audit the executionof duties by directors and executive officers from theperspectives of legality and appropriateness. At thesame time, corporate auditors of the Company and its
subsidiaries and affiliates jointly hold regular meetings
to exchange audit-related information and reinforce
auditing functions covering the entire SHI Group. The
Company has appointed a lawyer and a certified public
accountant as external corporate auditors to reinforce
the overall system for checking compliance and corporate accounting. Also, the Company has established the
Corporate Auditor’s Department with staff directly
supporting this Board of Corporate Auditors.

Nominating Committee and Compensation
Committee
The Nominating Committee makes recommendations
to the Board of Directors with regard to candidates for
directors. Four of the current six members of the Compensation Committee have been externally appointed.
More specifically, as an advisory committee to theBoard of Directors, the Compensation Committee
determines a level of director remuneration that reflects
the Company’s business performance while ensuringtransparency and ethical appropriateness in remuneration decision processes.
Sumitomo Heavy Industries, Ltd. Integrated Report 201945

Base Supporting the SHI Group

ComplianceCorporate Governance

External Directors and External Corporate Auditors
The Company has appointed two external directors and two external corporate auditors. Sumitomo Heavy Industries (SHI)
ensures that all of its external directors have no risk of conflicts of interest with the Company’s general shareholders andhas reported them as independent officers to the Tokyo Stock Exchange on which the Company is listed.
Title

Name

Attendance at Meetings ofthe Board of Directors/
Board of Corporate Auditors

Reason for Appointment

External
Director

SusumuTakahashi

Susumu Takahashi possesses a high level of insight into economic and management matters. In addition, he has broad practical experience within private
corporations and government organizations. Based on this insight and experience, Mr. Takahashi, as an external director, objectively and independently
directs the management of the Company by providing advice on ways in which
the Company can achieve sustainable growth and increase corporate value.

External
Director

Hideo
KojimaHideo Kojima is a certified public accountant and a specialist in finance and
Mr. Kojima attended 14 of 14
accounting with many years of practical experience. Based on this insight andBoard of Directors meetings in FY2018.
experience, Mr. Kojima, as an external director, has objectively and independently
directed the management of the Company by providing advice on ways in which
the Company can achieve sustainable growth and increase corporate value.

External Takeo
Corporate Wakae
AuditorAs a lawyer, Takeo Wakae boasts a wealth of experience and has skillful insight
through the law. Based on this experience and insight, he has independently
and objectively audited the effectiveness of the Company’s management
through his role as external corporate auditor.

Mr. Takahashi attended 14 of 14
Board of Directors meetings in FY2018.

Mr. Wakae attended 14 of 14
Board of Directors meetings in FY2018.
Mr. Wakae attended 12 of 12
Board of Corporate Auditors meetings
in FY2018.

Masaichi Nakamura is a certified public accountant and a specialist in finance
Mr. Nakamura attended 13 of 14External Masaichi
Board of Directors meetings in FY2018.
Corporate Nakamura and accounting with many years of practical experience. Based on this insightand experience, he can objectively and independently audit the effectiveness of Mr. Nakamura attended 11 of 12
Auditorthe Company’s management through his role as external corporate auditor.

Board of Corporate Auditors meetings
in FY2018.

Compensation of Directors and Corporate Auditors
Compensation for the Company’s directors and executive
officers comprises basic remuneration, performance-linked
remuneration and stock purchase remuneration in a general
ratio of 60%, 30% and 10%, respectively.
Basic remuneration is a fixed form of compensation
determined for each position, with an additional amountfor directors. About 85% of basic remuneration is a preset
amount of fixed remuneration.
Performance-linked remuneration comprises dividendbased remuneration (50%), which changes in accordancewith the Company’s annual dividend, and remuneration
linked to the performance of operational divisions (50%),
which varies in accordance with the Company’s consolidated performance, as well as the performance of theoperational divisions overseen by directors and executive
officers in charge of specific business segments. Dividendbased remuneration consists of a standard amount for eachposition multiplied by a coefficient corresponding to theCompany’s annual dividend. The 15% addition for directors
varies based on the coefficient used to calculate dividendbased remuneration. Remuneration linked to the performance of operational divisions is calculated based on four
indicators comprising ROIC, net income before tax adjustments, orders and free cash flow, with additional consideration made for safety records and the state of compliance,
among other factors, with the president assigning ranks
ranging from A to E as the final decision-maker. A standard
amount for each position is then multiplied by a coefficientClassification

46

Amount ofCompensation(Millions of yen)for each rank to arrive at amounts for this form of remuneration. Through the application of these indicators, SHI
aims to share value with shareholders and reflect in thecompensation of directors and executive officers a variety
of factors that include profitability, growth potential,
financial discipline, safety and compliance.
Stock purchase remuneration is the remuneration paid
for the purpose of purchasing SHI stock, and with thisremuneration, SHI’s directors and executive officers purchase SHI shares in excess of the amounts stipulated foreach position through the officers’ shareholding association. SHI’s directors and executive officers hold these SHI
shares during their term of office.
SHI discontinued its director retirement bonus system asof the conclusion of the 109th Ordinary General Meeting of
Shareholders held on June 29, 2005.
Compensation for external directors only consists ofbasic remuneration.
The maximum amount of compensation paid to directors
shall not exceed ¥40.0 million per month pursuant to theresolution of SHI’s Ordinary General Meeting of Shareholders ratified in June 2006. The maximum amount ofcompensation paid to corporate auditors shall not exceed¥7.5 million per month pursuant to the June 2005 resolution of SHI’s Ordinary General Meeting of Shareholders.
Remuneration paid to individual corporate auditors isdetermined through a process of deliberation amongcorporate auditors.
Amount by Type of Compensation (Millions of yen)

Basic
Remuneration

Performance-Linked
Remuneration

Stock Purchase
Remuneration

Number of
Eligible Officers

Directors (excluding external directors)

345

205

108

32

10

Corporate auditors(excluding external corporate auditors)

69

69

—

—

3

External officers

38

38

—

—

4

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Compliance Activities
Basic Concept

Compliance Promoting System

The SHI Group calls for its officers and employees tocomply with laws and corporate ethics and always act
with discernment. The basic action guidelines as summarized in the Ethics Code are required to be put into
practice. We also have compiled a Compliance Manualthat summarizes detailed remarks such as various rules
to be observed by officers and employees as well as theSumitomo Business Spirit and Ethics Code.
In addition, the president of the Company sends themessage “Safety and compliance take precedence
over all” to all Group employees through many opportunities such as distributed items and briefing sessions
for employees.

We set up the Ethics Committee, chaired by the president, to formulate compliance policies of the Group,
grasp the occurrence of compliance problems, and give
guidance for prevention.
Compliance policies and other rules decided by the
Ethics Committee are being developed through theCompliance Promoting System (see page 48).
The Internal Control Department serves as thesecretariat of the Ethics Committee and is responsiblefor developing plans, implementing them, and monitoring their progress to promote compliance of the entire
Group. Each of the groups, manufacturing works, andsubsidiaries has its own internal control organization(staffed with the lead internal control promoter andinternal control promoters) to promote compliance ineach unit in collaboration with the Internal Control
Department. In 2018, we revised the SHI Group
Compliance Regulation and applied it to all domestic
subsidiaries so that they implement plans and measureson compliance more comprehensively as a group.

Whistleblowing System
We have a whistleblowing system called the SHI Group
Ethics Hotline that allows officers and employees of theCompany and affiliated companies to report to or
consult with the Ethics Committee Secretariat concerning incidences that violate or may violate laws andinternal rules. Since 2017, in Japan alone, we havebeen operating external hotlines that can be used incommon by all Group employees to facilitate reportingand consultation.

Promotion of Compliance Education
In order to maintain and improve awareness of compliance, the following multilayered education and training system
has been developed and carried out annually.
Level-SpecificEducation:

Eligible persons are newly hired employees, newly appointed assistant managers, managers,
and officers.

WorkplaceSpecificEducation:

In our compliance education, employees at each workplace are divided into small groups fordiscussion and make presentations so that they become thoroughly familiar with what compliancemeans to them.

E-learning:

In addition to compliance, safety and harassment are also taken up as subjects of education and allGroup employees take a confirmation test conducted across Group companies. From FY2018, CSR
was also added as an education subject. E-learning is also deployed to overseas affiliated companies,
with all Chinese affiliates introducing e-learning in 2016 and major ASEAN affiliates in 2018.

FunctionSpecificEducation:

In addition to education for employees newly assigned to the Sales Division, we started providing
education on misconduct to employees belonging to sales-related divisions, with division heads andother eligible persons as lecturers.

Pledge of Compliance

Compliance Awareness Survey

To ensure the execution of business activities withawareness of compliance, we require managers of eachcompany to submit the pledge of compliance to thepresident of each company every year.

We conduct a groupwide compliance awareness survey
annually to confirm employees’ level of understanding
on compliance, potential risks, and other problems,
including employees of affiliated companies in Japanand China. We carry out measures to improve compliance focusing on survey results not only from thecurrent fiscal year, but the trends in results from pastfiscal years as well.

Sumitomo Heavy Industries, Ltd. Integrated Report 201947

Base Supporting the SHI Group

Risk Management
Risk Management Activities

Procurement-Related Risk Management at Overseas Production Bases in China
and the ASEAN Region

The SHI Group divides risks into two categories,
business risk that may be posed in the course ofbusiness activities and operational risk that may
be posed through the execution of daily operations, and the risks of each category are being
addressed in each division. We designate suchrisks that have a significant impact on the Groupas priority risk items and address them in an
organizational and systematic manner.

In an emergency, we immediately report tothe top management in accordance with the“Information communication principle in emergency situations” and take appropriate measuresin a timely manner.

Since the 2000s, the SHI Group has developed production bases in China and the ASEAN region as a part ofits growth strategy. Already, 10–20 years have passed
since these production bases were created, and theCompany has successfully strengthened its relationships
with suppliers of direct and secondary materials, as well
as sellers of scrap metal. However, the Company needs

to be diligent about preventing misconduct caused bycollusion and uncomfortably close relationships formed
from doing business together for many years.
The SHI Group implements measures with a focus
on the following key points to prevent the risk of
misconduct.

1) At overseas production bases, SHI is implementing compliance training through annual
e-learning and on-site programs for the people in charge and decision-makers involved inincoming order work, in order to improve their ability to understand whether misconduct or
prohibited activity is occurring.

Compliance Promoting System

2) The Company is documenting various rules, standards and work procedures, starting with rules
about decision-making authority, and thoroughly raising awareness of the content of these
documents among relevant parties.

Board of Directors
Ethics Committee
President and CEO
Regional Ethics Committee
Internal Control Group

Each responsible divisionat the Head Office(Internal control organization)

Divisions(Internal control organization)

Head Office-controlled subsidiaries(Internal control organization)

Manufacturing works and offices(Internal control organization)

Affiliated companies*(Internal control organization)

Affiliated companies*(Internal control organization)

Cooperation

3) The Company has created a 25-point checklist for materials procurement and dealing with scrap
sellers, and periodically checks up on actual documents on the ground every year to ensure
predetermined rules, standards and procedures are being properly followed.

By repeatedly conducting these activities, SHI isreinstilling an awareness of prohibited behavior among
employees in China and the ASEAN region, whilereforming awareness in a bid to prevent misconduct
beforehand.

* Decided by officer responsiblefor internal control.

Compliance training at PT SUMITOMO S.H.I.
CONSTRUCTION MACHINERY INDONESIAThe SHI Group Ethics Hotline (whistleblowing system)

Information flow
By phone or written report

Response to Misconduct in Quality Management
By phone or web

Whistleblower in the Group(Domestic)

By phoneor e-mailExternal
whistleblower
channelInternal whistleblower channel(Ethics Committee Secretariat)

Telephone counseling: Industrial counselor, etc.
External whistleblower channel:
Professional contractor
Internal whistleblower channel:
Sumitomo Heavy Industries, Ltd.
Internal Control Dept.
Ethics Committee Secretariat

48

A whistleblower can communicate
information through an external
whistleblower channel without
the Company’s knowledge

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Affiliated companies
Ethics Hotline Secretariat

The Company and SHI Group companies would like tooffer their deepest apologies for causing their stakeholders great inconvenience and concern for the inappropriate inspections of its products and services.
Sincerely accepting the gravity of this situation, SHI
has established the Special Investigation Committee
headed by an external director to investigate the background and causes that led to these inappropriate
inspections. The SHI Group has drawn up measures toprevent a recurrence based on the advice given by thiscommittee. The employees who were involved in the
misconduct have been strictly disciplined in accordancewith our workplace rules, and some directors andexecutive officers have returned a portion of theircompensation.
While steadily implementing measures to prevent a
recurrence, SHI aims to improve work quality and reinstitute compliance as management’s highest priority.
We are sparing no effort to regain the trust of our
stakeholders.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

49

CSR

CSR Mid-Term Plan
1. CSR Mid-Term Plan and Its Progress

Develop products thattackle social issues

The SHI Group has been promoting CSR centered on its CSR
Department directing activities in related departments, following
the creation of the CSR Mid-Term Plan in 2017, which is linked tothe medium-term management plan, while identifying four priority
areas: products/services, environment, society and employees.
In fiscal 2018, the second year of the CSR Mid-Term Plan, SHI
made progress on the following issues.

SectorPurposeActivities
Create a workplace with zeroaccidents andboth physicallyand mentally
healthy
employees

Products/services

Employees

Create a vibrantworkplace for every employee
Society

Environment

Earn social trust

Minimize the environmentalload across the entire
product life cycle

Employees

Create avibrant
workplacefor every
employee
Promotingdiversity

Issues in the SHI Group’s CSR Mid-Term Plan and Progress in Fiscal 2018
SectorPurposeActivities

Dialogue withbusiness
divisions

Products/
services

Environment

Our goals· Hold meetings ontackling social issues
through products/
services with 6 divisions

Developproducts thattackle social
issuesIndex· Held meetings with 15 operational
divisions(Construction machinery· Clearly stated significance of contribuexample)
tions to society through products· Number of environmentally· Furthered understanding of contribufriendly products on the market ○tions to SDGs
· Reduction in CO2 emissions· Set indicators to measure the progress
as a result of cycle timeof CSR
improvements· Proposed CSR activities to business
managers

Improvingproduct
quality· Achieving the rework
cost of each businessdivision· Rework cost ratio

Compliancewith/shortening delivery
deadlines· Production lead time
Shorten by 30% compared to fiscal 2016

· Amount by which production· Divisional ratio of 44% in achieving
lead times for target processes △production lead time targetsof each division are reduced

Minimize theenvironmental
Reducing CO2
load acrossthe entire
emissionsproduct life
cycle

· Revised and expanded scope ofenvironmental risk assessments· Transitioned to unified ISO 14001○ certification· PT SUMITOMO S.H.I. CONSTRUCTION
MACHINERY SOUTHEAST ASIA
acquired ISO 14001 certification

Promotingclean
procurement

Society

Internal/
external
disseminationof CSR· Establish CSR procurement guidelines· Held a seminar for
suppliers· Survey key suppliers on
the implementation
status of CSR· Establish CSR procurement
guidelines, rate of progress· 100% (Finished. Disclosed on the· Number of suppliers provided
Company’s website)with a seminar○ · 275 companies· Number of divisions and· 12 business divisions, 245 companies
suppliers from which surveys
were collected· Publish integrated
reports· Series article in SHIGroup magazine· Send email magazine· Publish· Publish in series· Send as scheduled· Published integrated reports· Published series article in SHI Group○ magazine· Send email magazine· Number of sites with nodisaster prevention agreement concluded· Number of sites with noblood donor/cleaning
implemented· Concluded disaster prevention agreements between all bases and local
governments, registered businesslocations with AEDs○
· Implemented and planned cleaning
activities at all bases. Blood donation
activities implemented with exceptionof one small base

· Develop the basis ofregional cooperation
Supporting(concluding a disasterand contribut- prevention agreement,
ing to local
etc.)
communities· Reduce regional disparities in activities

50○ · Achieved 100%· During production: 107%
· During product transport: 102%
· During production: CO2
emissions per unit of sales· During product use: Disclosed the totalcompared to fiscal 2016
amount of reduction of 6,367,000 tons
· Reduce CO2 emissions· During product transport: CO2
by 2% compared with
· Obtained third-party certification forfiscal 2016 during
emissions per transport weight △ Scope 1 and 2
production and product compared to fiscal 2016
· Received energy conservation award
transport in Japan· During product use:for hydraulic excavators
Disclosure of the total amount· Investments in energy conservationof reduction
equivalent to about 0.2% of last year’s
net sales

Environmentalrisk
management

Earn social
trust

Progress in FY2018

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Our goals

Index· Zero serious accidents· 9 accidents that led tolost worktime· Number of serious accidents· Number of accidents accompanied with lost worktime(4 days or more/Japan)

Progress in FY2018· Zero serious accidents△ · 16 accidents versus the target 9
accidents (January–December 2018)· Introduction of healthmanagement system(finished selection)· System introduction steps△ · Finished system selection· Promote the active
participation of women· Ratio of female employees(non-consolidated)· Number of female managers(non-consolidated)· Female assistant manager’s training
and training plan for the purpose ofdeveloping manager candidates· Establish training plan through○ supervisors· Participated in J-Win, a group for
women’s management training· E-learning for all employees about
unconscious bias

· Promote work-lifebalance· The total number of working
hours per year (consolidated)△· 2,007 target hours· 2,024 actual hours

In addition to the aforementioned activities, SHI aims to instill a thorough awareness of compliance, led by theInternal Control Department, based on the understanding that compliance is the highest priority in CSR.

2. Promotion of Clean Procurement
SHI makes concerted efforts to gain the trust of society
by spreading awareness among suppliers of its CSR
procurement guidelines, which were created in fiscal
2017. Specifically, we ask our suppliers to strictly
comply with relevant laws, regulations and social norms,
and endeavor to build healthy and sustained relationships with suppliers based on compliance.
These activities have encouraged suppliers to disclose
CSR policies on their websites, and to declare that protecting the rights of employees and adhering to laws
and regulations are their first priority.
In fiscal 2019, SHI will continue to hold briefings for
suppliers about its CSR procurement guidelines.

As a result of these dialogues, the significance of ourbusinesses is clarified in writing, benchmarks are set formeasuring progress on CSR, and reports are made tobusiness managers.
In fiscal 2018, the managers of business divisions
began reporting the outcomes of these dialogues tothe president of SHI. Through these dialogues, we will
advance discussions to identify key issues from amongissues related to the SHI Group’s contributions tosociety through its diverse operations.

3. CSR Dialogues with Employees
CSR dialogues are held for employees with the CSR
Department and business divisions in order to further
their understanding of social contributions being madethrough business activities.

Dialogue with business managers and the president

Lessons froma Leading CSR
Company

The SHI Group invited Mr. Masafumi Yamamoto,the Executive Officer in charge of CSR at Daikin
Industries, Ltd., to give a presentation to its
board members for the purpose of deepening
their understanding of CSR in the value creation process. Among the board members who
participated, one said that the presentation
was memorable for the company’s aggressive
approach to providing value by changing therisk of global warming into business opportunities.

Presentation given by Daikin Industries, Ltd.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

51

CSR

Environment
We are promoting environmental management with the awareness that businesses have the social responsibility to protect the global environment and to engage in economic activities that are oriented toward
recycling. In particular, we consider it necessary to reduce the environmental burden throughout the entire
product life cycle and will concentrate more on reducing CO2 emissions.

SHI Group Environmental Policy
Environmental Philosophy

Environmental Policy

The SHI Group will adhere to the principles of theSumitomo Business Spirit, and make sincere efforts
towards the preservation of the global environment
throughout all of its business activities, with the aim toachieve a sustainable society.

The SHI Group will, based on the environmental
philosophy, positively and actively make efforts in thefollowing areas:• Prevention of environmental pollution• Contribution to a low-carbon society• Achievement of a recycling-based society• Preservation of biodiversity• Compliance with laws and other regulations• Strengthening and continuous improvement of theenvironmental management system

Transition of the Environmental Policy

The SHI Group has formulated a medium-term environmental plan every three years since fiscal 2005 toachieve our environmental policy and enhance environmental management.
In our 5th Medium-Term Environmental Plan (FY2017–
FY2019), we set the following four items as global
priority issues and are promoting activities.
Particularly for fiscal 2018, we started focusing on
ascertaining and disclosing reduction of a great proportion of CO2 emissions that are expected from productuse (known as avoided emissions), to address “2.
Reduction of CO2 emissions throughout the entire
product life cycle.”With the aim of increasing the efficiency of maintaining
certification and integrating rules for the operation ofenvironmental management systems in Japan, SHI
obtained uniform ISO 14001 certification on February 1,
2019, for 38 sites, including the Head Office of SHI, 6
manufacturing sites and 7 plants.
Based on Group environmental principles and policies, the SHI Group has engaged in activities to protect
the environment. Under the current 5th Medium-Term
Environmental Plan (FY2017–FY2019), SHI has identified
four priority issues to guide activities across the entire
Group, comprising strengthening environmental risk
management, reducing CO2 emissions throughout theentire product life cycle, reducing the environmental
burden associated with business activities, and conserving biodiversity. Going forward, we will continue
Group-wide promotion of these activities.

Unified ISO 14001 certification presentation ceremony

Acquisition of Third-Party Certification of Environmental Data (Scope 1 and 2)

The Environmental Committee was established in 1992 and since then the SHI Group has been promoting complianceand environmental protection in local communities. Moreover, in November 1999, we established the SHI Group
Environmental Policy to clarify the basic policy for activities and to expand environmental management across theGroup as a whole, including overseas facilities. In May 2017, we revised the above policy to address long-term CSR
objectives, basic governance policy, and the ISO 14001 revision.

Priority Issues

Uniform ISO 14001 Certification

The SHI Group has obtained third-party certification from Bureau Veritas Japan Co., Ltd. for environmental data associated with its business activities in Japan*1, including energy usage (crude oil equivalent)*2 and CO2 emissions fromenergy use*3 in fiscal 2017.
*1 Excludes Tanashi Works, which already has certification under Tokyo ordinances*2 Energy usage (crude oil equivalent): Electricity, city gas, LPG, heavy fuel oil A, gasoline, light oil, kerosene, hot water, cold water*3 CO2 emissions from energy use: CO2 emissions from energy used by the Company*2

Environmental Management System
President and CEO

Director in Charge, General
Administration Group

General Manager, General
Administration Group

Environmental
Management Division◆ Reported in Executive &Operating Officers
Committee (3 times/year)◆ General Manager Diagnosis(once/year, as needed)◆ Environmental Audit(once/year)◆ Japan and China
Environmental Management
Mtg. (twice/year)◆ Environment and Energy
Conservation Conference
for Prevention of Global
Warming (each area)

Environmental Audit Team

1. Strengthening of environmental risk
management
2. Reduction of CO2 emissions throughout
the entire product life cycle

Independent Assurance Statement
Works

DivisionsGroupcompanies
within JapanGroup
companies
outside Japan

Environmental
Committee
members

Environmental
Committee
members

Environmental
Committee
members

Environmental
Committee
members

3. Reduction of environmental burden
associated with business activities
4. Conservation of biodiversity

52

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

53

CSR
Environment

Environmentally Friendly Products
The SHI Group has its environmentally friendly products
certified using independent assessment methods. Every
year, there is an increasing number of nominations fromeach segment for environmentally friendly products,
which now represent 26%* of net sales for the entire
SHI Group.

For the next Medium-Term Environmental Plan, theCompany plans to set a target for increasing the ratio ofenvironmentally friendly products in net sales, and contribute more strongly to the reduction of CO2 emissions
when its products are used.
* 2017 results

List of Environmentally Friendly Products
Segment

Precision
Machinery

Construction
Machinery

Industrial
Machinery

Environmental
Facilities &Plants

Product name (model)

Registration classification

SEEV-A injection molding machine
SAion-300 ion-implantation devices

Environmentally friendly productEnvironmentally friendly product△○

MC3-II/GP ion-implantation devices

Environmentally friendly product△

S-UHE ion-implantation devices

Environmentally friendly product△High-reach electric forklifts

Environmentally friendly product△Resource
recycling

LEGEST hybrid hydraulic excavators

Super environmentally friendly product△

LEGEST hydraulic excavators

Super environmentally friendly product△Hydraulic asphalt finisher

Environmentally friendly product△

Assessment criteria
Combats
Environmental
global warming
risk

Environmental Fair△

In fiscal 2018, the ratio of capital investment in environmental and energy-saving equipment inside and outside
Japan was 0.28% of net sales. SHI is taking a systematicand proactive approach to upgrading aging equipment
and installing equipment with the latest technologies
from the standpoint of increasing efficiency, conserving
energy and preventing environmental accidents.

○

Initiatives to Increase Environmentally Friendly Vehicles

Environmentally friendly product△○Environmentally friendly product△○

HLX crawler craneEnvironmentally friendly product△○Forging servopress (FPS)Super environmentally friendly product

FPR hot forging presses
Steam turbines (long-blade, high-efficiency model)
Hybrid power supply equipment for transfer cranes

Environmentally friendly productEnvironmentally friendly productEnvironmentally friendly product○○Biomass boiler

Environmentally friendly product○○Compact biomass boiler
Kiln equipment
Evaporator

Environmentally friendly productEnvironmentally friendly productEnvironmentally friendly product

○
○
△

○
○
○

Sumijetter grit jet pump

Environmentally friendly product○○

DWC vertically split distillation columns

Environmentally friendly product△○Eco Pulser™ bag filter dust collector

Environmentally friendly product△○

Thermal series of air conditioners

Environmentally friendly product△○=90 or higher; ○=70–89; △=30–69; ×=29 or lower/out of a perfect 100

Tanashi Forest of Inspiration
movie director Mr. Hayao
Miyazaki (a director of Studio
Ghibli, Inc.). We are even more
motivated to continue these
activities thanks to this gift fromsuch a famous person wellversed in preserving the naturalenvironment.

■ At Yokosuka Works, we give five students from
Yokosuka Gakuin Junior High School an opportunity
to gain work experience assembling electronic
circuits and helping with processing.

Work experiences for students

Capital Investment in Environmental and Energy-Saving Equipment

SCX crawler crane

At Tanashi Works, there is a forest in Musashino thatcovers roughly 30% of the site’s land, featuring morethan 4,500 trees of 40 varieties.
Part of this forest has been named the Forest of
Inspiration and is open to the public as a place forordinary people to relax. It also functions as a disasterprevention base for the community and a learning andresearch center about biodiversity. We were gifted asigned book by the famous Japanese animator and■ Sumitomo Heavy Industries Environment Co., Ltd.
participates in an environmental fair held every Junein Minamiashigara City, talking about the environment
while displaying panels and hosting mini classes.

○○

HSL crawler crane○○△

CSR Activities: Environmental Education for Elementary School Pupils andWork Experiences for Junior High School Students

Autographed bookreceived from Mr. Hayao
Miyazaki

Ratio of capital investment in fiscal 2018

Percentageof net sales

As a part of our activities to prevent global warming,
we are prioritizing environmentally friendly vehicles forcompany cars and teaching drivers how to operatevehicles in an environmentally friendly way.
As of fiscal 2018, 56.5% of the Company’s fleet ofvehicles were environmentally friendly, an increase of
22.9 percentage points compared with fiscal 2013. SHI
will continue to prioritize environmentally friendly
vehicles with the aim of increasing this ratio to 70% by
fiscal 2023, while encouraging environmentally friendly
and safe driving techniques.

Ratio of environmentally friendly
vehicles in corporate fleet

Environmentrelated

Energyconservationrelated

Total

0.05%

0.23%

0.28%

Environmentallyfriendly vehicles

GeneralvehiclesFiscal 2013

33.6%

66.4%

Fiscal 2018

56.5%

43.5%

Fiscal 2023
(target)

70.0%

30.0%

(%)
100

Generalvehicles

80

Generalvehicles
60

30.0%

43.5%

66.4%

40

20

GeneralvehiclesEnvironmentallyfriendly
vehiclesEnvironmentallyfriendly
vehiclesEnvironmentallyfriendly
vehicles

70.0%

56.5%

33.6%
0

Forest of Inspiration at Tanashi Works

54

Sumitomo Heavy Industries, Ltd. Integrated Report 2019Children playing at the Forest of Inspiration

2013

2018

2023
(Target)(FY)

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

55

CSR

Human Resources“Our Business Is the People”

MBB

Quality Control Division managers mtg.
(Newly assigned division manager
training course available)

Coaching

WB

Specific technology education New employee training

GB

Business skills training

Basic engineering
educationBB

Newly hired
employee training< Stratified human resource development >Employees undertake career training in their third year at
the Company and at the time of promotions thereafter
based on their carefully thought out career plans for the
future. Employees are offered training opportunities toimprove their ability to solve problems and theircommunication abilities based on their rank.
In recent years, we have concentrated in particular on
training for the manager class and for foremen at manufacturing sites in a bid to enhance their management
abilities while training personnel through helpful
experiences at each worksite.
Group companies select candidates for key management positions to attend the SHI Group Business School(SBS) and take advanced courses (ASBS) in an intensive

Expertiseengineering
education(General courses/
practices)
Expertiseengineering
education(General courses/
classroom lectures)

Development design
CIPO training: Chief Intellectual Property Officer Training
VE training: Value Engineering Training< Experience and allocation of subjects >In human resource meetings held by each businessdivision, participants draw up plans for training individual
employees based on future business targets and plans.
At the same time, personnel meetings between superiors
and subordinates in each workplace serve as an opportunity to work out training plans based on individual
aptitudes, ambitions and life plans.
The topics covered in these personnel meetings areshared at the human resource meetings at the businessdivision level and reflected in employee rotation plansand plans to dispatch employees for training programs.

Expertiseengineering
education(Selective courses)

Project management training

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

CIPO training

56

employees in line with their own career visions. For
management positions, we have programs for learning
management skills to encourage the personal growth ofcolleagues.
We continue to train personnel with the objective ofsustaining growth for the SHI Group, as personal growthfor employees translates into new customer value.

Training of business leaders
ASBS: Advanced SHI Group Business School
SBS: SHI Group Business School

VE training

Starting with on-the-job training focused on target
management, we provide opportunities for employees
to learn necessary skills and knowledge through levelspecific education and specialized field training, while
establishing frameworks so employees can grow by learning and putting into practice their newfound knowledge.
We also provide career training based on promotion
tracks in order to facilitate the steady growth of all

Introduction training

Production engineer education(1) Training Personnel Able to Create New Customer Value

3-year introduction
education

Design Division
managers mtg.

New sales
employee training

Human Resource Development

Newly assigned
2nd gradefunction training

Manufacturing Division
managers mtg.

Purchasing education

We will offer a fair and convincing evaluation system and process to boost employee
motivation.

Newly assigned
1st grade function
training

Accounting / HR training

Evaluation
andTreatment

SBS

Newly assigned
manager-qualified
training

E-learning

We will respect employees’ will to develop
themselves, and will also offer learning
opportunities as well as opportunities to
put their learning into practice.

Newly assigned line
manager training

Service Division
managers mtg.

Overseas dispatch (study abroad, etc.)

TalentDevelopment

Sales Division
managers mtg.

ASBS

Training Experof
tiseManage- business educa- Others
mentleaderstion
quality

Each division

Purchasing Division
managers mtg.

Correspondence education subsidy

We will recruit people who contribute toour business growth, resonating with
Sumitomo’s Business Philosophy and the
SHI Group’s Business Principles.

We will assign the right people in the rightplaces to maximize employee and organizational performance.

StrengthAccountening of
ing andknowledgeHRand skills

Assessment
training

Education before overseas assignment

Recruitment

Deployment

Stratified education

Globalbusinesstraining

Language education (English, Chinese, etc.)

Organizational
ClimateWe will create an organization that respects
the diverse personalities and potential of all
individuals, and encourages good communication and open collaboration.
We will create a workplace that is vibrant,
and that is safe, secure and healthy.

Training ofbusinessleaders

Business-unit activities

Specialized human resource development

Mid-career new employee training

Our Business Is the People.
Based on the notion that our most important management resource is our human capital, we at the SHI Groupwill achieve HR management that will contribute to sustainable business growth.

Stratified humanresource development

Foremen training

MemberSHI Group Human Resource Policy

HR hearing / Group human resource mtg.

encourage all employees to always be aware of andfollow the Sumitomo Business Spirit and the SHI Group
Business Principles.

Transfer & development plan (development planning mtg. held for each business unit)

We have created the SHI Group Human Resource
Policy to codify our fundamental approach to all
aspects of human resource management andExperience /Allocation ofsubject

Succession plan

SHI Group Human Resource Policy

Head Office-controlled activities

HR interview / Management by objectives (assignment)* VUCA = Volatility, Uncertainty, Complexity, Ambiguity

Executive officers / managers

these targets, we provide opportunities for growthwithin the organization as a part of initiatives for
employees to grow alongside the Company. From management’s perspective, we take a strategic approachto health management, strive to provide work environments with zero accidents that are healthy for bothmind and body, and promote diversity with a focus onempowering women in the workplace and encouraging
work-life balance.

Hierarchical level

These words express a truth that runs throughout the
SHI Group. In the era of VUCA*, greater importance isbeing placed on people.
The SHI Group has declared the SHI Group Human
Resource Policy as its fundamental approach to humanresource management.
Based on this policy, the SHI Group sets growth targets for each employee after holding discussions about
personnel in the workplace, with the aim of creating
workplaces where each and every employee can work
to the best of their abilities. To help employees attain

SHI Group Human Resource Training Systems

Management quality
MBB: Master Black Belt Training
BB: Black Belt Training
GB: Green Belt Training
WB: White Belt Training

training program that lasts 1–2 years with the objectiveof training future management personnel.
< Specialized human resource development >Beginning with technical training, we conduct levelbased training for employees for acquiring an area ofexpertise required for specialized fields related to eachfunctional division at the Head Office.
E-learning is offered to employees for acquiring basic
knowledge. Hands-on training in control programs is alsooffered for moving things around.
Every year, we continue to expand the curriculum oftechnical training programs in particular, in accordancewith the needs of business divisions, such as training for
AI through external organizations.
At sales division managers meetings and manufacturing division managers meetings, the leaders of eachfunctional division across the Group learn about bestpractices in other divisions to assist with the training of
personnel in their own divisions.
< Other >Each business division also undertakes unique training
activities, such as programs for proprietary technologies
and passing along technical skills to younger employees.
Through cross-organizational coaching that spans
across business divisions, some business divisions takesteps to enhance the abilities of mid-career employees
and to invigorate their organizations.
Sumitomo Heavy Industries, Ltd. Integrated Report 2019

57

CSR
Human Resources(2) Promoting Diversity as a Corporate Strength
In order to fulfill the SHI Group’s Corporate Mission
Statement of aim to become a machinery manufacturer
that continues to provide excellent products andservices to the world, it is essential for us to nurture anorganizational foundation where diverse personnel canwork to the best of their abilities. In 2016, top management declared the promotion of diversity a priority, andbegan to advance three important business measures
to empower women in the workplace, namely raisingawareness, changing systems and improving environments. While promoting work-life balance, we are
discouraging employees from working long hours andpromoting more flexible work styles.

< Raising awareness >All employees receive e-learning about unconscious bias
Provision of information on diversity management
using e-mail magazines and internal newsletters
Manager and level-specific training for diversity
management< Deploying diverse human resources >For foreign nationals working in Japan, we offer assistance in the form of education about understanding
foreign cultures and Japanese language courses.
We have various initiatives to hire and retain people
who have disabilities.
· Cleaning and greening teams are in charge of cleaning
areas around manufacturing sites (Yokosuka Works).
· SHI Iki-Iki Farm
Vegetables grown on the farm are sold at a discount toemployees, and the proceeds are all donated to NPOs
that assist with children’s education.

SHI Iki-Iki Farm

(3) Safety Initiatives for Creating Safe and Secure Workplaces
Targets
1

Increase the number of newly employed women(Raise the ratio of women among new graduate hires
above 20%)

2

Double the number of female managers(Compared to the data of 2015, to be achieved until 2020)

3

Reduce long work hours (work-life balance)(achieved 1,900 total annual work hours in fiscal 2019)< Career development promotion for female employees >We take a sophisticated approach to managing organizations with diverse human resources, creating environments where female employees can work to the best of
their abilities.
We send employees to participate in J-Win, an NPO,for the purpose of improving measures to train
women for management positions.
We create and provide opportunities for women tolearn in workplace settings led by 3–4 women in eachbusiness office, as a part of the Plus One Project
women’s working group at the Head Office and eachmanufacturing site.

Management
training< Changing systems >Introduction of a work-fromhome system in April 2019 formanagement personnel at the
Head Office, expanding scopeof eligibility to other areas
Introduction of measures forflexible work styles, including theuse of outside satellite offices
and creation of relaxation spaces at the Head Office< Improving environments >We help employees strike a work-life balance amid anincrease in dual-income households. In fiscal 2018,
we provided information to dual-income households
through seminars about returning to work, finding
kindergartens, and finding after-school programs forelementary students. We also make it easier for
people to return to work by establishing systems thatprioritize the dependents of our employees at neighboring kindergartens.

< Safety initiatives >To create pleasant workplaces where all employees canwork in healthy, safe and secure environments, a core
principle behind occupational safety at the SHI Group,
management has declared “safety first” as its highest
priority in the Third Action Plan (2017–2019) for the
Safety and Sanitation Reform Basic Plan, under which all
employees working for the Group are promoting safety
and health activities. While working to prevent accidents with machinery and equipment in particular, apriority issue in the Ministry of Health, Labour, andWelfare’s 13th Occupational Safety & Health Program,
we are actively engaged in providing education on
occupational safety and health, in addition to realistic

Plus One Project

We have periodically held events for employees totalk with managers since 2016 (50 people participatedin fiscal 2018).
We assist with career formation through personnel
meetings with superiors of female employees eyeing
management positions and by creating training plans.
Provision of return-to-work support seminars aftermaternity leave and superior’s consultation

58

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

To encourage male employees to take time off forraising their children, the director in charge of humanresources at the Head Office sends emails about leave
programs to male employees with newborns and their
immediate superiors. We also interview male employees who took time off to care for their children andpost the interviews on the Company intranet in order
to raise awareness.
Hosting Family Day (Family visits to manufacturing sites)

Simulation-based
training using
virtual reality(4) Health Management
In January 2018, the president announced our Health
Declaration that was created to spread awareness ofhealth management initiatives inside and outside the
SHI Group.
< Health declaration >Based on “respecting people” as stated in theBusiness Principles, the SHI Group will proactively
maintain and promote the health of workers anddevelop an environment where everyone lives withgood mental and physical health.

Kindergarten
seminarssafety training experiences, in a bid to enhance risk
awareness among all employees. In recent years,
employee sensitivity to risks has declined, but we aim
to improve awareness of risks through virtual reality
training systems. Through such measures, we intend tonurture a corporate culture thatprioritizes occupational safety
Accident-preventing
Getting caught inand health.
movementan accident

SHI has established the Health Advancement
Committee in conjunction with companies, labor
unions and health insurance associations to shareissues, formulate measures and ascertain progress as acollaborative effort. Based on the Healthy Workplace
Creation Action Plan formulated by the committee, we
are implementing the following key measures.
Creation and Operation of Health Management System
It is necessary to introduce a health management
system as a part of overall management systems. By
gathering, standardizing and unifying data based on thehealth checkup results of SHI Group employees, we areable to manage this data as employees age to help
them prepare to manage their health more effectively.
By introducing this system and utilizing a PDCA cycle
for the management system, we aim to reduce healthrisks in the workplace.
Measures to Help People with Mental Health Problems
Based on the results of a stress check, we provide mental
health education to employees and direct consultations
for high-stress individuals and people who work longhours, while improving systems for helping people fix
their mental health problems and return to work.
Measures to Help People with Cardiovascular Diseases
We offer guidance about healthcare resources for highrisk individuals, such as people with high blood pressure, and refer them to specialist physicians for further
diagnosis. To prevent lifestyle-related ailments, we are
examining new programs to improve the health of ouremployees. In addition to in-house recreation programs,
we are also encouraging employees to make exercise apart of their daily lives while promoting communications
about health.

Sumitomo Heavy Industries, Ltd. Integrated Report 201959

ActualEleven-Year Summary and Key Financial Data
Sumitomo Heavy Industries, Ltd. and Consolidated Subsidiaries

Millions of yen

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018¥642,918
10,04756,94075,26050,275
13,649¥516,165
8,187
28,25447,97926,333
13,280¥548,015
7,445
45,80363,74444,25327,926¥624,100
9,343
47,13564,95544,61919,492¥585,871
9,835
31,28849,57030,997
5,865¥615,271
10,71834,32952,94633,00017,891¥667,099
11,41545,99862,27945,11324,348¥700,838
12,29950,56870,28949,13133,133¥674,328
11,27648,431
68,742
48,27433,613¥ 791,025
14,80569,921
92,92567,466
34,660¥ 903,051
16,83675,244
101,219
72,62345,650¥ 34,676(35,924)(1,248)15,62542,414¥ 57,513(13,954)
43,559(26,686)
61,452¥ 36,521(23,513)
13,008(22,020)
51,700¥ 23,309(22,672)
638
19,87972,376¥

2,660(19,660)(17,000)(11,428)
46,476¥ 63,661(27,622)36,039(9,498)76,418¥ 62,170(14,112)48,058(36,889)
90,324¥ 18,315(15,350)
2,965(23,789)
68,625¥ 38,158(25,852)
12,306(17,809)
61,017¥ 71,111(37,810)33,301(10,146)
85,503¥ 55,173(54,973)199(13,314)
69,776¥657,436
110,339
65,654
238,697¥610,087
87,66025,149254,153¥626,829
67,833
15,347269,380¥691,841
96,522
23,149282,145¥647,724
98,54750,732292,826¥724,182
107,433
29,607331,059¥786,027
83,644(8,779)365,101¥782,859
68,232(2,572)382,817¥796,484
60,460(3,360)409,171¥ 894,835
64,181(24,052)
444,964¥ 954,051
73,311(278)
465,001

¥

¥

¥

¥

¥

¥

¥

¥

¥

54.85
650.4716.00¥ 282.83
3,517.33
85.00¥ 372.56
3,701.01
112.00

Summary of Income (for the year):Net sales
R&D expenses
Operating income
EBITDA (Note 1)
Ordinary income
Profit attributable to owners of parent
Cash Flows (for the year):
Cash flows from operating activities
Cash flows from investing activities
Free cash flows (Note 2)
Cash flows from financing activities
Cash and cash equivalents at the end of year
Financial Position (at year-end):
Total assets
Interest-bearing debt
Net interest-bearing debt (Note 3)
Total net assets
Amounts per Share of Common Stock: (unit: yen) (Note 4)
Profit (Note 5)
Total net assets
Cash dividends

22.62
378.786.00

22.01
404.734.00

45.87
435.108.00

31.75
454.4310.00

9.56
470.698.00

29.17
532.287.00

39.71
587.3712.00

54.06
614.51
16.00

Financial Indexes: (unit: %)Operating income ratio
EBITDA ratio
R&D expenses ratio to net sales
Return on assets (ROA)
Return on equity (ROE)
Stockholders’ equity ratio
Interest-bearing debt ratio
D/E ratio (times)
ROIC (Note 6)

8.9
11.7
1.6
2.0
5.9
34.8
16.8
0.4
9.6

5.5
9.3
1.6
2.1
5.6
40.0
14.4
0.4
4.8

8.4
11.6
1.4
4.5
10.9
42.6
10.8
0.3
7.8

7.6
10.4
1.5
3.0
7.1
40.3
14.0
0.3
7.4

5.3
8.5
1.7
0.9
2.1
44.6
15.2
0.3
4.9

5.6
8.6
1.7
2.5
5.8
45.1
14.8
0.3
4.8

6.9
9.3
1.7
3.1
7.1
45.8
10.6
0.2
6.5

7.2
10.0
1.8
4.2
9.0
48.1
8.7
0.2
7.6

7.2
10.2
1.7
4.2
8.7
50.0
7.6
0.2
7.3

8.8
11.7
1.9
3.9
8.4
48.2
7.2
0.1
10.3

8.3
11.2
1.9
4.8
10.3
47.5
7.7
0.2
10.5

¥ 31,753
18,320¥ 24,465
19,725¥ 14,292
17,941¥ 19,682
17,820¥ 29,888
18,282¥ 20,329
18,617¥ 20,670
16,281¥ 23,721
19,720¥ 27,539
20,311¥ 30,432
23,003¥ 33,713
25,975Investment in Plant and Equipment and Others:
Capital expenditures (Note 7)
Depreciation and amortization

Notes: 1. EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) = Operating income + Depreciation and amortization
2. Free cash flows = Cash flows from operating activities + Cash flows from investing activities
3. Net interest-bearing debt = Interest-bearing debt – (Cash and time deposits + Short-term investment)
4. The Company carried out a 5-to-1 reverse stock split for its common shares with an effective date of October 1, 2017. Amounts per share of common stock
was calculated, under the assumption that such share consolidation was conducted at the beginning of FY2017.
5. Net income per share of common stock is based on the weighted average number of shares outstanding in each year.
(Operating income + Interest and dividends received) x (1 – Effective tax rate*) * Effective tax rate = 45% until FY2013,
6. ROIC (Return on invested capital) =(FY average of stockholders’ equity + FY average of interest-bearing debt)
40% for FY2014, 35% from FY2015
7. Capital expenditures are capitalized and recorded as assets.

60

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Sumitomo Heavy Industries, Ltd. Integrated Report 201961

ActualSeven-Year Non-Financial Key Data
Evaluation item
(middle classification)

E
*1

S

G

Evaluation item
(small classification)

CO2 emissions (domestic)
9.76(10,000 tons-CO2)
Climate change,
Energy productivity (domestic)
4.81
Air pollution(Millions of yen/CO2-t)
Volume of waste disposed
29,211(domestic) (ton)Domestic
1,153
Water consumption
Water resource(1,000 m3)
Overseas
373
Number of employees (consolidated)
18,245
Ratio of female
Managers (%)
1.4
employees
Regular
Ratio of female
7.0
recruitment (%)
employees
Ratio of women and foreign nationals
Number of
in upper management positions
employees—(higher than department manager,(nonofficers, including executive officers) (%)
consolidated)
Number of foreign-registered employees
68
Number of foreign-registered managers
5
Number of foreign-registered employees
5
newly employed
Employ—Average length of Male
ment
service by gender Female—
Male—
Average age
by gender
Female—Under 30—
30–39—
Number of
employees
40–49—
by age group
50–59—
Above 60—
Retirement rate (non-consolidated) (%)—
Turnover rate within three years of joining (%)—
Retirement rate for personal reasons (%)—
Number of consolidated foreign employees—
Working hours per year
2,060
Number of nursing care leave users
1
Number of annual paid leave days
22
Number of annual paid leave days taken
14.8(average per person)
Way ofNumber of disabled people employed
53
Working working
Employment ratio of disabled people (%)
2.17
practices (non0consolidated)
Number of childcare Maleleave users
Female6
Return-to-work ratio after taking
100
childcare leave (%)
Number of employees who took time off—for volunteer work
Number of work-related deaths1
Occupational health
Number of work-related injuries that2and safety
require lost work days (4 days or more)(non-consolidated)
Number of employees who took time off—
for mental health reasons
2
Industry-university collaborative research*—Support and(Millions of yen)contribution to society
Socialcontribution
expenditures(non-consolidated)
60(Millions of yen)22
Non-consolidated
Number of cases reported to
Domestic
Ethics Hotline
45
Group companies
Domestically
Number of employees
8,358
consolidated
completing complianceeducation by e-learning
Overseas—
Compliance
Number of managers submitting Domestically—
Pledge of Complianceconsolidated
Non-consolidated
2,400
Number of compliance awareness Domestic
5,738
survey respondents
Group companies
Overseas—*1. Detailed environmental data is published on the web.
*2. Total of commissioned and farmed-out studies

62

FY2012

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

FY2013

FY2014FY2015FY2016FY2017FY2018

9.65

10.22

10.75

10.80

11.12

11.57

4.67

4.86

4.68

4.67

4.88

5.07

25,98526,54731,06629,34528,80931,9191,129
337
17,936

1,099
304
18,061

1,146
248
18,491

1,143
245
19,321

1,166
239
21,0171,226
275
22,543

1.4

1.5

1.4

1.5

1.5

1.6

8.0

12.5

12.7

10.1

25.8

20.2

—

—

—

1.8

1.9

1.9

65
5

50
6

61
6

160
6

248
6

241
4

14

11

14

6

2

7

—
—
—
—
—
—
—
—
—
—
—
—
—
2,091
0
22

—
—
—
—
—
—
—
—
—
—
—
—
—
2,086
0
22

—
—
—
—
—
—
—
—
—
—
—
—
—
2,074
0
22

16.7
—
43.2
40.9
450
614
788
668
252
1.6
15.8
1.1
8,091
2,054
2
22

17.5
—
43.1
40.7
488
697
740
706
226
2.1
15.5
1.5
9,647
2,039
3
22

16
11.4
42.6
40.2
527
738
757
770
210
2.8
10.3
2.2
10,861
2,029
6
22

14.8

14.9

14.8

15.7

15.9

16.3

57
2.14
1
12

57
2.14
0
8

56
2.04
4
11

53
1.97
3
12

62
2.44
9
6

68
2.32
18
5

100

100

100

100

100

100

—

—

—

1

0

0

0

0

0

0

0

0

2

0

6

5

0

16

—

—

—

9

12

Life Cycle CO2 Emissions (FY2018)
The percentage of CO2 emissions (including energy-related emissions) from the use of products throughout their entire
life cycle was a very high 97% in FY2018. Reducing CO2 emissions when sold products are used is an important issue toaddress going forward.
Domestic and overseas CO2 emissions
Japan

Scope 1 Fuel
18,286 18,663
36,949
Electricity/heat
Scope 297,444 64,157
161,601(location)
Raw materials
312,242
Capital goods
143,234
Energy usage
9,949
Logistics (upstream)
10,192
Scope 3 Waste treatment
8,679
Business trips
1,962
Employee commuting
5,723
Use of products sold
20,213,727
Scope 3 total
20,705,708
Grand total
20,904,258
Five greenhouse gases
44
0
44

124

61

140

48

81

43

50

50

86

69

82

26

23

26

28

16

20

39

43

44

39

54

63

9,162

9,314

9,408

9,800

9,815

10,432

—

—

—

868

1,059

1,799

—

—

2,479

2,490

2,436

2,748

2,490

2,501

2,490

2,471

2,466

2,645

6,150

6,348

6,513

6,475

7,252

10,055

—

—

—

—

—

929

Other
690,531
3%

Scope 3Use ofproducts sold
20,213,727
97%

Scope 3 Capital goods
143,234
Scope 3 Logistics (upstream)
10,192

Scope 2
Electricity/heat(location)
161,601

Scope 3 Waste treatment
8,679

Scope
Scope 33
Raw
Raw
materials
materials
312,242
312,242

Scope 3 Business trips
1,962
Scope 3 Energy usage
9,949
Scope 3 Employee commuting
5,723
Scope 1 Fuel
36,949

Expansion of Scope 3 items for data collection
In FY2018, the Company expanded Scope 3 items for data collection. The expanded items comprise capital goods,
energy usage, business trips and employee commuting. Furthermore, the Company expanded the range of products
for which data is collected during their post-sales use.
By improving visibility of these items, SHI is able to more efficiently conduct activities to prevent global warming.

Product-Related Contribution to CO2 Emission Reduction
In FY2018, our products contributed to reductions of CO2 emissions by a total of 8,110,000 tons, of which energyrelated sectors comprised 79%. A decrease in sales for energy-related fields in FY2018 lowered its contribution to
reductions in CO2 emissions compared with FY2017. The size of contributions to reductions in CO2 emissions in energyrelated sectors is significant. Nonetheless, the Company is advancing measures to increase the size of contributions to
reductions in CO2 emissions in the transportation-related and industrial machinery sectors as well, while developing
technologies in a bid to increase the magnitude of their contributions, as a part of activities based on awareness ofthese important issues for the environment and CSR.
Product-related contribution amount to CO2 emission reduction(major products delivered in FY2018)

SectorContribution toCO2 emission
reduction overproduct life cycles(10,000 tons-CO2)(10,000 tons-CO2)

Energyrelated
Transportationrelated

Energy-related products
Calculation base

643.0

83.3

Improved fuel efficiency
and propulsion
capability achieved in
new models, etc.

Aframax tanker

Improved fuel efficiency,
energy saving, regenerative energy use, highefficiency achieved in
new models, etc.

Hydraulic excavator,
forklift, plastic injection
molding machine,
precision vacuum pump,diffuser, mixer, etc.

85.3

Total

811.6

5,723,000 tons-CO

Product

Reduction and highefficiency due to biomass CFB boiler, turbine
power generation

Industrial
machineryand others

Contribution to CO2 emission reduction
due to biomass power generation(accumulated in FY1999 to FY2018)(Based on design
standards)

13

41

Overseas

Life Cycle CO2 emissions (Tons-CO2)(Tons-CO2)
Total

2

Life cycle (based on design standards)
contributions to CO2 reductions■ Energy-related ■ Transportation-related(10,000 tons-CO2) ■ Industrial machinery and others
2,000

1,610.6
1,500

1,000

811.6

500

0

2017

2018

(FY)

Sumitomo Heavy Industries, Ltd. Integrated Report 201963

Financial Section

Consolidated Financial Statements[Financial Section]
1 Methods for Preparing the Consolidated Financial Statements
The consolidated financial statements of Sumitomo Heavy Industries, Ltd. (SHI) have been prepared in accordance with the “Regulation on Terminology,
Forms, and Preparation Methods of Consolidated Financial Statements” (Ministry of Finance Order No. 28 of 1976; hereinafter the “Consolidated­Financial Statements Regulation”).
Out of certain comparative information included in the consolidated financial statements for the current consolidated fiscal year (from April 1, 2018 toMarch 31, 2019), those relating to Article 15-5, paragraph (2) and paragraph (3) of the Consolidated Financial Statements Regulation as amended by the“Cabinet Office Order Partially Amending the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements”(Cabinet Office Order No. 7 of March 23, 2018; hereinafter the “Amended Cabinet Office Order”) have been prepared based on the regulation before
amendment in accordance with the Consolidated Financial Statements Regulation pursuant to Article 3, paragraph (2) of the Supplementary Provisionsof the Amended Cabinet Office Order.

2 Audit Certification
The consolidated financial statements of SHI for the current consolidated fiscal year (from April 1, 2018 to March 31, 2019) and the previous consolidated
fiscal year (from April 1, 2017 to March 31, 2018) have been audited by KPMG AZSA LLC pursuant to the provisions of Article 193-2, paragraph (1) of the
Financial Instruments and Exchange Act.
3 Efforts to Ensure the Adequacy of the Consolidated Financial Statements
SHI has been making efforts to ensure the adequacy of the consolidated financial statements. More concretely, SHI joined the Financial Accounting­Standards Foundation and attends seminars in order to enhance the understanding of the accounting standards and develop a system that enables it toadapt to the changes in accounting standards.

Consolidated Balance Sheets
Millions of yen
March 31, 2018ASSETS
Current assets
Cash and deposits
Notes and accounts receivable—tradeFinished goods
Work in process
Raw materials and supplies
OthersAllowance for doubtful accounts
Total current assets

Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
LandConstruction in progress
Others
Accumulated depreciation
Others, net
Total property, plant and equipment
Intangible assets
Goodwill
OthersTotal intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
OthersAllowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

64

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019*1 ¥   88,233*2 269,409
65,953*3 67,619
33,82830,597(4,055)551,584

Millions of yen

March 31, 2019*1 ¥   73,589*2 291,578
74,552*3 72,522
41,97133,185(3,829)583,568*1 162,382(109,157)
53,225
187,575(131,279)
56,296*1, *4 107,826
5,260
53,035(36,047)
16,988239,596

172,609(115,147)
57,462
203,668(142,832)
60,836*4 107,720
6,131
54,550(38,422)
16,128248,276

18,03032,31950,34924,04941,02265,071*5 20,243
4,466
22,297*5 11,824(5,524)53,306343,251¥ 894,835*5 18,270
3,812
26,874*5 13,493(5,314)
57,136
370,483¥ 954,051

LIABILITIESCurrent liabilities
Notes and accounts payable—trade
Short-term loans payable
Bonds redeemable within 1 year
Current portion of long-term loans payable
Commercial papers
Income taxes payable
Advances received
Provision for construction warranties
Provision for loss on construction contracts
Provision for loss on business
OthersTotal current liabilities
Non-current liabilities
Bonds payable
Long-term loans payable
Provision for loss on business transfers
Provision for loss on product liability claims
Defined benefit liability
Deferred tax liabilities for land revaluation
OthersTotal non-current liabilities
Total liabilities
NET ASSETS
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

March 31, 2018

March 31, 2019*2 ¥184,227
33,516—*1 7,801—
5,726
42,54013,478*3 5,451
228
54,718347,684*2 ¥188,069
23,44410,000
1,956
17,00011,45352,57913,339*3 6,309—
58,229382,378

20,0002,864
115
40
40,466*4 20,730
17,972102,187
449,871

10,00010,912115
39
46,082*4 20,713
18,812
106,673
489,051

30,87225,267314,296(1,000)369,434

30,872
26,071
348,863(1,048)404,757

5,406
925*4 40,831
17,565(3,153)
61,574
13,956444,964¥894,835

3,871
(318)
*4 40,820
8,879(4,542)
48,711
11,533465,001¥954,051

Sumitomo Heavy Industries, Ltd.

Integrated Report 201965

Financial Section
Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income

Consolidated Statements of Comprehensive Income
Millions of yen

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
OthersTotal non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Patent related expenses
OthersTotal non-operating expenses
Ordinary profit
Extraordinary losses
Impairment loss
Loss on settlement following buyout of pension plan
Loss on litigation-related settlement
Total extraordinary losses
Profit before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

66

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥791,025*1, *2 598,285
192,740*2, *3 122,819
69,921¥903,051*1, *2 693,128
209,923*2, *3 134,679
75,244

559
993
3,777
5,329

915
825
3,279
5,019

1,023
1,032
801
4,928
7,784
67,466

1,082
2,286
765
3,507
7,640
72,623*4 294—*5 14,480
14,774
52,692
13,737
1,505
15,24137,451
2,791¥ 34,660*4 3,448*6 2,105—
5,553
67,07021,070(2,637)
18,433
48,6372,987¥ 45,650

Millions of yen

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

For the year ended
March 31, 2018

For the year ended
March 31, 2019¥37,451¥ 48,637

1,277
621
7
4,701
2,595

(1,535)(1,240)—(9,168)(857)

6*1 9,207¥46,657

13*1 (12,787)¥ 35,850¥42,908
3,749¥ 33,345
2,505

Sumitomo Heavy Industries, Ltd.

Integrated Report 201967

Financial Section
Consolidated Statements of Changes in Equity

For the year ended March 31, 2018

For the year ended March 31, 2019

SharecapitalBalance at the beginningof the period¥30,872
Changes of items during
the period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non-controlling interests
Net changes of items otherthan shareholders’ equity
Total changes of items
during the period—
Balance at the end of
the period¥30,872

Millions of yen

Millions of yen

Shareholders’ equity

Shareholders’ equity

Retainedearnings

Total
Treasury shareholders’sharesequity¥25,267 ¥289,587¥  (915) ¥344,810(10,417)(10,417)

34,66034,660(86)
2Capitalsurplus

1

(86)
1

465

Share
capital465——

24,709¥25,267 ¥314,296(84)

24,624¥(1,000) ¥369,434
Millions of yen

Balance at the beginningof the period¥30,872
Changes of items during
the period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non-controlling interests
Remeasurements of retained
earnings due to the U.S.
tax reform
Net changes of items otherthan shareholders’ equity
Total changes of items
during the period—
Balance at the end of
the period¥30,872

Retainedearnings

Total
Treasury shareholders’sharesequity¥25,267 ¥314,296¥(1,000) ¥369,434(11,641)(11,641)

Capitalsurplus45,650
(49)
1

0
10

10

804

804

548

804

45,650(49)
134,568¥26,071 ¥348,863

548

(49)

35,323¥(1,048) ¥404,757

Accumulated other comprehensive income

Balance at the beginningof the period
Changes of items during
the period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non-controlling interests
Net changes of items otherthan shareholders’ equity
Total changes of items
during the period
Balance at the end of
the period

68

Sumitomo Heavy Industries, Ltd.

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedges

Revaluation
reservefor landForeigncurrencytranslation
adjustments¥4,128¥320¥41,289¥13,824

Remeasurements ofdefinedbenefit plans

Total
accumulated
other com­prehensive
income¥(5,770) ¥53,791

Millions of yen
Noncontrollinginterests

Accumulated other comprehensive income
Total
net assets¥10,570 ¥409,171(10,417)
34,660
(86)
2
465

—
1,278

605

(458)

3,742

2,616

7,783

3,386

11,168

1,278

605

(458)

3,742

2,616

7,783

3,386

35,792¥5,406¥925¥40,831¥17,565

Integrated Report 2019¥(3,153) ¥61,574¥13,956 ¥444,964

Balance at the beginningof the period
Changes of items during
the period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation
reserve for land
Change in ownership interestof parent due to transactions
with non-controlling interests
Remeasurements of retained
earnings due to the U.S.
tax reform
Net changes of items otherthan shareholders’ equity
Total changes of items
during the period
Balance at the end of
the period

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedges

Revaluation
reservefor landForeigncurrencytranslation
adjustments¥ 5,406¥   925¥40,831¥17,565

Remeasurements ofdefinedbenefit plans

Total
accumulated
other com­prehensive
income¥(3,153) ¥ 61,574

Noncontrollinginterests

Total
net assets¥13,956 ¥444,964(11,641)
45,650
(49)
1
10

804

548
(1,535)(1,243)(10)(8,686)(1,389)(12,863)(2,423)(15,286)(1,535)(1,243)(10)(8,686)(1,389)(12,863)(2,423)

20,037¥ 3,871¥  (318) ¥40,820¥ 8,879¥(4,542) ¥ 48,711¥11,533 ¥465,001

Sumitomo Heavy Industries, Ltd.

Integrated Report 201969

Financial Section

Notes to the Consolidated Financial Statements

Consolidated Statements of Cash Flows

Millions of yen

Cash flows from operating activities
Profit before income taxes
Depreciation
Loss on settlement following buyout of pension plan
Impairment loss
Loss on litigation-related settlement
Interest and dividend income
Interest expenses
Increase (decrease) in provision
Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade
OthersSubtotalInterest and dividend income received
Interest expenses paid
Amount paid for litigation-related settlement
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment and intangible assets
Purchase of shares of subsidiaries and investments in capital resulting inchange in the scope of consolidation
Purchase of shares of subsidiaries and associates
Proceeds from sale of shares of subsidiaries and associates
Proceeds from sale of investment securities
Net decrease (increase) in short-term loans receivable
Payments of loans receivableCollection of loans receivable
OthersNet cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Net increase (decrease) in commercial papers
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Cash dividends paid
Dividends paid to non-controlling interests
Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation
OthersNet cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Increase in cash and cash equivalents from newly consolidated subsidiaries
Increase in cash and cash equivalents resulting from merger
Cash and cash equivalents at the end of the period

70

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥ 52,692
23,003—294
14,480(1,552)
1,023
4,178(3,776)(7,610)16,475
3,934
103,141
1,553(981)(15,381)(17,221)
71,111¥ 67,070
25,975
2,105
3,448
—
(1,740)
1,082
597(11,622)(22,416)
2,972
2,448
69,9182,028(1,078)—(15,696)
55,173(29,914)
1,552(33,852)
1,081*2 (14,547)
(44)
3,911
159
6
(373)
2,289
(850)
(37,810)*2 (20,908)
(189)
—
407
139
(161)
337
(1,827)(54,973)(3,740)(5,000)3,563(1,709)10,000(10,410)(606)(12,615)
17,0009,642(8,944)—(11,636)(662)—(2,245)(10,146)
1,260
24,41461,01766
6*1 ¥ 85,503(5,166)(934)(13,314)(2,613)(15,728)
85,503——*1 ¥ 69,776(Basis of Preparation)
1 Basis of presenting consolidated financial statements(1) Basis of accounting
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (”Japanese GAAP”), which are different in certain aspect in terms ofapplication and disclosure requirements of International Financial Reporting Standards.
The accounts of foreign consolidated subsidiaries are prepared in accordance with either International Financial
Reporting Standards or U.S. generally accepted accounting principles. However, Practical Issues Task Force No. 18,“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries, etc. for Consolidated­Financial Statements” issued by the Accounting Standards Board of Japan (ASBJ) requires making adjustments for thefollowing four specific items, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of
actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing
capitalized development costs of R&D; and (d) cancelling revaluation model or fair value model of accounting for­property, plant and equipment and investment properties, and applying the cost model of accounting.
The accompanying consolidated financial statements for Sumitomo Heavy Industries, Ltd. (SHI) and its subsidiaries(collectively, the Company) have been reformatted and translated into English from the ones prepared in accordancewith Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the
Financial Instruments and Exchange Act.
(2) Transactions eliminated on consolidation
All significant intercompany accounts and transactions have been eliminated in consolidation. Unrealized gains arisingfrom transactions with equity-accounted investees are eliminated against the investment to the extent of SHI’s interestin the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there
is no evidence of impairment.
(Significant matters constituting the basis of preparation of the consolidated financial statements)

2 The scope of consolidation(1) Number of consolidated subsidiaries—140 companies
Major consolidated subsidiaries: Shin Nippon Machinery Co., Ltd.
Sumitomo Heavy Industries Gearbox Co., Ltd.
Sumitomo Construction Machinery Co., Ltd.
Sumitomo Construction Machinery Sales Co., Ltd.
Sumitomo Heavy Industries Ion Technology Co., Ltd.
Sumitomo Heavy Industries Environment Co., Ltd.
Sumitomo Heavy Industries PTC Sales Co., Ltd.
Sumitomo Heavy Industries Material Handling Systems Co., Ltd.
Sumitomo Heavy Industries Process Equipment Co., Ltd.
Sumitomo Heavy Industries Marine & Engineering Co., Ltd.
Nihon Spindle Manufacturing Co., Ltd.
Sumitomo Heavy Industries Construction Cranes Co., Ltd.
LBCE Holdings, Inc.
PT Sumitomo S.H.I. Construction Machinery Indonesia
SCM (America), Inc.
Sumitomo Heavy Industries (Vietnam) Co., Ltd.
Sumitomo Industrias Pesadas do Brasil Ltda.
SUMITOMO MSCHINERY CORPORATION OF AMERICA
Sumitomo (SHI) Cryogenics of America, Inc.
Sumitomo (SHI) Cyclo Drive Germany GmbH
Sumitomo (SHI) Demag Plastics Machinery GmbH
Sumitomo SHI FW Energie B.V.
Lafert S.p.A
Sumitomo (S.H.I.) Construction Machinery (Tangshan) Co., Ltd.
Sumitomo Heavy Industries (China), Ltd.
Sumitomo Heavy Industries (Tangshan), Ltd.
Sumitomo (SHI) Cyclo Drive China, Ltd.

Sumitomo Heavy Industries, Ltd.

Integrated Report 201971

Financial Section

From the current consolidated fiscal year, Lafert S.p.A. and 12 other subsidiaries whose shares were newly acquired
by SHI, as well as SM Cyclo de Peru S.A.C. which was newly formed, are included in the scope of consolidation. In
addition, Sumiju Tomida Machinery Co., Ltd. and 3 other subsidiaries that were dissolved upon the merger were
excluded from the scope of consolidation.
(2) Name of major non-consolidated subsidiaries
Major non-consolidated subsidiary: Kyokuto Seiki Co., Ltd.
(Reasons for exclusion from the scope of consolidation)
All of the non-consolidated subsidiaries are small-scale companies and their aggregated total assets, net sales, andprofit or loss (amount commensurate with equity interests) and retained earnings (amount commensurate with equity
interests) do not have a material effect on SHI’s Consolidated Financial Statements.

(2) Methods for depreciation of significant depreciable assets(i) Property, plant and equipment (excluding leased assets)
The straight-line method is adopted.
Depreciable lives of major assets are as shown below:
Buildings and structures: 10 to 50 years
Machinery, equipment and vehicles: 5 to 12 years

3 The application of the equity method(ii) Intangible assets (excluding leased assets)
The straight-line method is adopted.
Depreciable lives of in-house software are based on the useful life estimated by the Company (5 years).

(1) The number of non-consolidated subsidiaries accounted for using the equity method: nil(2) The number of affiliated companies accounted for using the equity method: 4Name of major company: Sumitomo NACCO Forklift Co., Ltd.
(Change in the affiliated companies accounted for using the equity method)
Lafert Motores Electricos, S.L. and 2 other subsidiaries whose shares were newly acquired by SHI are included in thescope of affiliated companies accounted for using the equity method.
(3) The non-consolidated subsidiaries (including Kyokuto Seiki Co., Ltd.) and affiliated companies (including Mizu
Kankyo Chiba K.K.) not accounted for using the equity method are excluded from the scope of application of theequity method because their respective profit or loss and retained earnings have an immaterial effect on SHI’s­Consolidated Financial Statements and are insignificant as a whole.

4 The fiscal years of consolidated subsidiaries
Among the consolidated subsidiaries, the closing date of 97 overseas subsidiaries (other than Nihon Spindle CoolingTowers Sdn. Bhd. and one more company) is December 31, and their financial statements prepared as of December 31
or for the year ended December 31 are used for the preparation of SHI’s Consolidated Financial Statements.
Material transactions that arose during the period between their closing date and the closing date of SHI’s consolidated financial statements have been adjusted as necessary for the purposes of the consolidated financial statements.
The closing date of other consolidated subsidiaries is March 31, which is consistent with SHI.

5 Accounting policies(1) Basis of and methods for valuation of significant assets(i) Securities(a) Bonds held to maturity
The amortized cost method (The straight-line depreciation method)(b) Available-for-sale securities
Securities with market value	 The market value method, for example, based on market prices at the end of the consolidated fiscal year.
	 (Valuation difference is reported as a component of shareholders’ equity, and the cost of sales is calculatedusing the moving-average method.)
Securities without market value	  The cost method based on the moving-average method(ii) Derivatives
The market value method(iii) Inventories(a) Works in process
Mainly the cost method based on the specific identification method	(Carrying amounts in the balance sheets are measured after the consideration of write-down to reflect decreased
profitability.)

72(b) Finished goods, raw materials and supplies
Mainly the cost method based on the weighted average method	(Carrying amounts in the balance sheets are measured after the consideration of write-down to reflect decreased
profitability.)

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019(iii) Leased assets
The straight-line method is adopted for leased assets for financial lease transactions without the transfer of ownership,
in which the lease period is considered as depreciable life and the residual value is zero.
For the finance lease transactions without the transfer of ownership, the lease transactions that are immaterial andwere commenced on or prior to March 31, 2008 are accounted for as ordinary rental transactions.
(3) Basis of accounting for significant provisions(i) Allowance for doubtful accounts
The allowance is provided based on historical bad debts losses from general accounts receivables. For doubtful
accounts receivable, and claims provable in bankruptcy and claims provable in rehabilitation and other, the required
allowance is determined at the amount estimated to be uncollectible on an individual basis.
(ii) Provision for construction warranties
In order to provide for free repair work expenditures after the delivery of finished goods, the required allowance isprovided for based on historical data.
(iii) Provision for loss on construction contracts
For undelivered construction works at the end of the consolidated fiscal year that are highly likely to generate losses
subsequent to the fiscal year, if the losses can be reliably estimated, the estimated amount of losses is recognized asprovision for loss on construction contracts.
(iv) Provision for loss on business
The estimated amount of losses that is expected to be generated in the future for the contracts maintained by­affiliated companies with their sales agents is recognized as provision for loss on business.
(v) Provision for loss on business transfers
The estimated amount of losses that is expected to be generated in the future as a result of transferring the resort
development business is recognized as provision for loss on business transfers.
(vi) Provision for loss on product liability claims
The estimated amount of losses on product liability claims that is expected to be generated in the future from thecrane business of overseas subsidiaries is recognized as a provision for loss on product liability claims.
(4) Methods for accounting retirement benefits(i) Method of attributing expected retirement benefits
For retirement benefit obligations, the benefit formula basis is used to calculate the expected retirement benefits up to
the term elapsed for the end of the consolidated fiscal year.
(ii) Method of amortization of actuarial difference and past service costs
Past service costs are amortized following the straight-line method over a period within the historical average remaining service period of employees when those costs are incurred.

Sumitomo Heavy Industries, Ltd.

Integrated Report 201973

Financial Section

Actuarial difference is amortized proportionally from the following year of the incurrence of actuarial difference
using the straight-line method over a period within the average remaining service period of employees at the time ofincurrence of actuarial difference.
(5) Method of significant hedge accounting(i) Method of hedge accounting
The Company adopts deferred hedge accounting. However, for interest swap transactions that meet the requirements
for simplified accounting treatment, the Company adopts such simplified accounting treatment.
If forward exchange contracts meet the requirements for allocation, the Company adopts the allocation accounting method.
(ii) Hedge instruments and hedged items
Forward exchange contracts:	Foreign currency-denominated accounts receivable, foreign currency-denominatedaccounts payable and forecast transaction
Interest swap transactions:
Loans(iii) Hedge policy
Under the “Market Risk Management Policy” stipulated by the Board of Directors, the Company’s objective for hedging transactions is to mitigate foreign currency and interest rate fluctuation risks, and not to execute speculativetransactions.
(iv) Method of assessing hedge effectiveness
The Company compares the aggregated fluctuation from cash flow or market condition of the hedged items against
aggregated fluctuation from cash flow or market condition of the hedged instruments every six months, and assesses
hedge effectiveness based on the fluctuation. The Company, however, does not assess the hedge effectiveness ofinterest swap transactions for which it is subject to simplified accounting treatment.
(6) Basis of recognition of material revenues and expenses
For construction works, for which the progress can be reliably estimated by the end of the consolidated fiscal year,
the Company adopts the percentage-of-completion method (with the output method by compositely aggregating theestimated total man-hours required for each stage of project constructions and man-hours consumed during the estimated construction period to estimate a progress rate or the cost to cost method). For other construction works, theCompany adopts the completed-contract method.
(7) Method and period of amortization of goodwill
Goodwill is amortized using the straight-line method over a period of up to 20 years. However, any insignificant
amount of goodwill is amortized in full upon its recognition.
(8) Cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents consists of cash on hand, immediately available cash, and short-term investments that arehighly liquid, have an insignificant risk of changes in value with maturities of three months or less.
(9) Other significant matters for preparation of consolidated financial statements(i) Accounting for the consumption taxes
The consumption tax and local consumption tax are accounted for on a tax-exclusive basis.
(ii) Application of the consolidated tax payment system
SHI and some of its consolidated subsidiaries follow the consolidated tax payment system.
(iii) Net assets
Under the Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon share. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus.
Under the Japanese Corporate Law (”the Law”), in case where a dividend distribution of surplus is made, the smallerof an amount equal to 10% of the dividend or the excess, if any, of 25% of common share over the total of additional
paid-in-capital and legal earnings reserve must be set aside as additional paid-in-capital or legal earnings reserve. Legalearnings reserve is included in retained earnings in the accompanying consolidated balance sheets.

74

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

Under the Law, generally legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a
deficit by a resolution of the shareholders’ meeting.
Under the Law, all additional paid-in-capital and all legal earnings reserve may be transferred to other capital surplus
and retained earnings, respectively, which are potentially available for dividends.
The maximum amount allowed to be distributed as dividend is determined based on SHI’s non-consolidated financial statements in accordance with the Japanese laws and regulations.
(iv) Research and development (“R&D”) expense
R&D expenditures are expensed as incurred.

(Standards and guidance not yet adopted)
SHI and its domestic subsidiaries• “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement
No. 29, March 30, 2018, Accounting Standards Board of Japan)• “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March
30, 2018, Accounting Standards Board of Japan)(1) Overview
The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) jointly
developed a comprehensive accounting standard for revenue recognition and published “Revenue from Contracts with
Customers” (IASB’s IFRS 15 and FASB’s Topic 606) in May 2014. Given the situation that IFRS 15 applies to an annual
reporting period beginning on or after January 1, 2018 and Topic 606 applies to an annual reporting period after
December 15, 2017, a comprehensive accounting standard for revenue recognition was developed and issued with an
implementation guidance by the ASBJ.
For the accounting standard for revenue recognition, the ASBJ introduced the fundamental principles of IFRS 15
from the standpoint of comparability among companies’ financial statements, which is to ensure the consistent application of IFRS 15 and, if there are any considerations required for the practices in Japan, alternative treatment will be
added without compromising comparability.
(2) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(3) Effects of the application of the standards
SHI and its consolidated domestic subsidiaries are currently in the process of determining the effects of these newstandards on the consolidated financial statements.

Overseas subsidiaries• “Leases” (IFRS 16) and “Leases” (ASU 2016-02)(1) Overview
Amended, in particular, to require a lessee to recognize assets and liabilities for all leases.
(2) Effective date
IFRS 16 will apply to SHI’s overseas subsidiaries other than those in the United States of America, effective from the
beginning of the fiscal year ending March 31, 2020.
ASU 2016-02 will apply to SHI’s subsidiaries in the United States of America effective from the end of the fiscal year
ending March 31, 2021.
(3) Effects of the application of the standards
The Company plans to apply IFRS 16 using the modified retrospective approach by recognizing the cumulative effectsof the adoption of IFRS 16 on the date of initial application for transition.
On transition to IFRS 16, “Others” of property, plant and equipment, “Others” of current liabilities, and “Others”
of non-current liabilities are expected to increase by ¥2,684 million, ¥1,146 million and ¥1,538 million respectively.
In addition, ¥2,830 million included in “Others” of intangible assets is expected to be reclassified to “Others” ofproperty, plant and equipment.
The Company is currently in the process of determining the effects of adopting ASU 2016-02 on the consolidated
financial statements.
Sumitomo Heavy Industries, Ltd.

Integrated Report 201975

Financial Section(Changes in Presentation Methods)*3 Presentation of inventories and provision for loss on construction contracts(Changes as a result of the adoption of “Partial Revision of ‘Tax Effect Accounting’”)

Inventories and the provision for loss on construction contracts relating to construction contracts that are highly likely
to incur losses have been presented separately and have not been offset. The amount of the provision for loss on­construction contracts that relate to inventories resulting from construction contracts which are likely to generate losses
is presented below.

Upon application of the “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ No. 28,­February 16, 2018) (hereinafter the “Partial Amendments to Accounting Standard for Tax Effect Accounting”) from the
beginning of the current consolidated fiscal year, the Company changed the presentation for deferred tax assets in“Investments and other assets” and deferred tax liabilities in “Non-current liabilities,” and changed the notes to Tax
Effect Accounting.
As a result, in the consolidated balance sheets of the previous consolidated fiscal year, “Deferred tax assets” of­current assets decreased by ¥13,253 million, while “Deferred tax assets” of investments and other assets increased by¥12,519 million. Furthermore, “Others” of current liabilities decreased by ¥36 million, and “Others” of non-current­liabilities decreased by ¥698 million.
Total assets decreased by ¥734 million compared with total assets before the amendments due to the effect of thesame tax paying entity offsetting deferred tax assets against deferred tax liabilities.
In addition, the narrative descriptions in (Note 8) (excluding the total of valuation allowance) and (Note 9) of­Comments on “Accounting Standard for Tax Effect Accounting” stipulated in paragraphs 3 through 5 of the “Partial
Amendments to Accounting Standard for Tax Effect Accounting” were added to the notes to Tax Effect Accounting.
However, those narrative descriptions that corresponding to the previous consolidated fiscal year were not required todisclose in accordance with the transitional treatment stipulated in paragraph 7 of the Partial Amendments to AccountingStandard for Tax Effect Accounting.

(Consolidated Balance Sheets)

Millions of yen

Provision for loss on construction contracts related to inventories

¥513

¥489

*4 Revaluation of land
Land for business use is revalued pursuant to the Act on Revaluation of Land (Act No. 34 of March 31, 1998) and the
Act for Partial Amendment of the Act on Revaluation of Land (Act No. 19 of March 31, 2001).
For revaluation difference, the amount corresponding to the tax on such revaluation difference has been recognized
as “Deferred tax liabilities for land revaluation” under the Act for Partial Amendment of the Act on Revaluation of Land
(Act No. 24 of March 31, 1999), and the amount from which Deferred tax liabilities for land revaluation are deductedhas been recognized as “Revaluation reserve for land” in net assets.
• Method of revaluation
While revaluation has been done by making reasonable adjustments to the value of the property tax stipulated in­Article 2, item (iii) of the Order for Enforcement of the Act of on Revaluation of Land (Cabinet Order No. 119 of March
31, 1998), revaluation has at times been done based on the appraised values by real estate appraisers stipulated initem (v) of the said Article.

Millions of yen

The assets offered as collateral are presented below.
Millions of yen
March 31, 2018

March 31, 2019

¥ 12
826
154
¥992

¥11
—
—
¥11

Secured obligations are presented below.
Millions of yen

Current portion of long-term loans payable
Total

March 31, 2019

• Date of revaluation
March 31, 2002

*1 Collateralized assets and secured obligations

Cash and deposits
Buildings and structures
Land
Total

March 31, 2018

March 31, 2018

March 31, 2019

¥10
¥10

¥—
¥—

Difference between the market value of revalued landat the end of the year and the book value after revaluation

March 31, 2018

March 31, 2019¥(18,104)¥(18,174)*5 Securities of non-consolidated subsidiaries and affiliated companies are as follows.
Millions of yen

Investment securities (equity)
Investments in capital

March 31, 2018

March 31, 2019

¥3,458879¥3,810750

For presentation purposes, investments in capital have been included in “Others” of “Investments and other assets.”*6 Loan commitment line agreements*2 Notes due at the end of the year
Notes due at the end of the consolidated fiscal year are accounted for as of the clearing dates.
As the last day of the consolidated fiscal years was a bank holiday, the following notes due at the end of the­consolidated fiscal years have been included in the balance at the end of year.
Millions of yen

Notes receivable—trade
Notes payable—trade76

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

March 31, 2018

March 31, 2019

¥4,1601,870¥4,9691,966

The Company has the loan commitment line agreements with 10 banks to finance operating funds efficiently.
Balances of undrawn loan commitment lines under those agreements are presented below.
Millions of yen

Total loan commitment lines
Balance of drawn loan commitment lines
Undrawn loan commitment lines

March 31, 2018

March 31, 2019

¥36,000—¥36,000¥34,000—¥34,000

Sumitomo Heavy Industries, Ltd.

Integrated Report 201977

Financial Section*7 Guaranteed liabilities*4 Impairment loss

The Company guarantees loans and other liabilities of companies other than the consolidated companies from banks
and financial institutions as shown below.

For the year ended March 31, 2018
The Company recognized impairment loss for the following groups of assets.
Millions of yen

Millions of yen
March 31, 2018

Sumitomo Mitsui Finance and Leasing
Company, Ltd.
(Purchase guarantee, etc. in connection
with the lease agreement)
IBJ Leasing Company, Limited(Purchase guarantee, etc. in connection
with the lease agreement)
Fuyo General Lease Co., Ltd.
(Purchase guarantee, etc. in connection
with the lease agreement)
ITOCHU CONSTRUCTION MACHINERYCO., LTD.
(Purchase guarantee, etc. in connection
with the lease agreement)
Shutoken Leasing Co., Ltd.
(Purchase guarantee, etc. in connection
with the lease agreement)
Another 14 transactions(Purchase guarantee, etc. in connection
with the lease agreement)
Total¥11,638

2,235

1,624

275

243

410
¥16,424

March 31, 2019

Sumitomo Mitsui Finance and Leasing
Company, Ltd.
(Purchase guarantee, etc. in connection
with the lease agreement)
IBJ Leasing Company, Limited(Purchase guarantee, etc. in connection
with the lease agreement)
Fuyo General Lease Co., Ltd.
(Purchase guarantee, etc. in connection
with the lease agreement)
Diamond Construction Equipment Corp.
(Purchase guarantee, etc. in connection
with the lease agreement)
Shutoken Leasing Co., Ltd.
(Purchase guarantee, etc. in connection
with the lease agreement)
Another 14 transactions(Purchase guarantee, etc. in connection
with the lease agreement)
Total

Purpose of use

Category

Business assets
Idle assets

Buildings and others
Buildings

Location

Niihama City, Ehime and others
Yokosuka City, Kanagawa

Amount¥289
5¥14,811

3,425

978

285

For the above-mentioned assets, the Company recognized impairment loss because it was not possible to recover
the investments due to decreased profitability.
The Company determined impairment loss for each business segment and idle assets not expected to be used in
the future, and grouped them by individual property.
Recoverable amounts are calculated mainly by net selling value and are calculated based on the amount of disposal
values less costs of disposal.
For the year ended March 31, 2019
The Company recognized impairment loss for the following groups of assets.
Millions of yen
Purpose of use

243

450
¥20,191

The amounts at the end of previous year include foreign currency-denominated liabilities of CNY649 million(¥11,239 million) and NTD5 million (¥17 million), and the amounts at the end of current year include foreign currencydenominated liabilities of CNY933 million (¥15,080 million) and NTD13 million (¥47 million).

(Consolidated Statements of Income)*1 Provision for loss on construction contracts included in the cost of sales
Millions of yen
For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥5,770¥6,423Business assets
Business assets
Idle assets

Category

Goodwill and others
Machinery, equipment and others
Buildings and others

Location

United States
Niihama City, Ehime and others
Obu City, Aichi

Amount¥2,946265
238

For the above-mentioned assets, the Company recognized impairment loss because it was not possible to recover
the investments due to decreased profitability.
The Company determined impairment loss for each business segment and idle assets not expected to be used in
the future, and grouped them by individual property.
Recoverable amounts are calculated based on the underlying net selling value or value in use. Net selling value has
been calculated based on the amount of disposal values less costs of disposal. Value in use has been calculated bydiscounting future cash flow by 11%.

*5 Represents the settlement money and related losses associated with the settlement of the litigation
over the incinerated ash melting facility between SHI and Kyoto City in December 2017.
*6 Incurred as a result of the settlement following the buyout of defined benefit pension plans of SHI’s
consolidated subsidiary Sumitomo (SHI) Demag Plastics Machinery North America, Inc.

*2 R&D expenses included in general and administrative expenses and production cost for the period
Millions of yen
For the year ended
March 31, 2018

For the year ended
March 31, 2019¥14,945¥16,899

For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥44,603
14,805
2,789
(702)
811

¥48,200
16,836
3,639
(220)
163

*3 Major items of selling, general and administrative expenses
Millions of yen

Salaries and allowances
R&D expenses
Retirement benefit expenses
Provision for loss on business
Provision of allowance for doubtful accounts and bad debts expenses

78

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

Sumitomo Heavy Industries, Ltd.

Integrated Report 201979

Financial Section(Consolidated Statements of Comprehensive Income)(Consolidated Statements of Changes in Equity)*1 Reclassification adjustment and tax effect relating to other comprehensive income

For the year ended March 31, 2018
Millions of yen

For the year ended
March 31, 2018

Valuation difference on available-for-sale securities
Amount accrued during the year
Reclassification adjustment
Before tax effect adjustment
Tax effect
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Amount accrued during the year
Reclassification adjustment
Before tax effect adjustment
Tax effect
Deferred gains or losses on hedges
Revaluation reserve for landTax effectForeign currency translation adjustments
Amount accrued during the year
Reclassification adjustment
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Amount accrued during the year
Reclassification adjustment
Before tax effect adjustment
Tax effectRemeasurements of defined benefit plans
Share of other comprehensive income of entities accounted forusing the equity method
Amount accrued during the year
Reclassification adjustment
Share of other comprehensive income of entities accounted forusing the equity method
Total other comprehensive income

80

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

1 Type and total number of issued shares and treasury shares

For the year ended
March 31, 2019

¥ 1,837
(63)
1,774
(497)
1,277

¥ (1,907)(216)(2,123)588(1,535)

947
67
1,014
(393)
621

(915)
(932)
(1,847)608(1,240)

7

—

4,701
—
4,701

(9,168)—(9,168)

3,628
605
4,233
(1,638)2,595(4,730)
3,731
(998)
141
(857)

10
(4)

7
7

6
¥ 9,20713¥(12,787)

Thousand shares

Issued shares
Common share
Total
Treasury shares
Common share
Total

Number of sharesat the beginningof the year

Increaseduring the year

Decreaseduring the year

Number ofshares at theend of the year

¥614,527¥614,527¥—¥—¥491,622¥491,622¥122,905¥122,905¥  1,742¥  1,742¥52¥52¥  1,427¥  1,427¥    367¥    367

Notes: 1 The decrease in total issued shares of common share by 491,622 thousand shares was due to the consolidation of shares closed effective
October 1, 2017.
2 The increase in common share of treasury shares by 52 thousand shares was due to requests for repurchase of shares less than one unit.
3 The decrease in common share of treasury shares by 1,427 thousand shares comprised a decrease of 1 thousand shares due to the sale ofshares less than one unit and a decrease of 1,426 thousand shares due to the consolidation of shares effective October 1, 2017.

2 Dividends(1) Cash dividends paid
(Resolution)

June 29, 2017
Annual general meetingof shareholders
October 31, 2017
Meeting of the Boardof Directors
Total

Total amountof dividends(Millions of yen)Amount ofdividend pershare (Yen)Commonshare¥ 5,515¥ 9

Common
share

4,902

8

¥10,417¥—

Type of share

Record date

Effective date

March 31, 2017

June 30, 2017

September 30, 2017

December 1, 2017

Note: The share consolidation of five shares of common share into one share was effective on October 1, 2017. The amount of dividend per share payable to SHI’s shareholders registered as of the record dates of March 31, 2017 and September 30, 2017 represents the actual amounts of dividends
prior to such consolidation of shares.

(2) Dividends recorded during the year, but effective in the next fiscal year
(Resolution)

Type of share

Source forpayment ofdividends

June 28, 2018
Annual general meetingof shareholders

Commonshare

Retainedearnings

Total amountof dividends(Millions of yen)

¥5,514

Amount ofdividend pershare (Yen)¥45

Record date

March 31, 2018

Effective dateJune 29, 2018

Sumitomo Heavy Industries, Ltd.

Integrated Report 201981

Financial Section*2 Major components of assets and liabilities of the companies newly included in the scope of
consolidation as a result of acquisition of shares

For the year ended March 31, 2019

1 Type and total number of issued shares and treasury shares
Thousand shares

Issued shares
Common share
Total
Treasury shares
Common share
Total

Number of sharesat the beginningof the year

Increaseduring the year

Decreaseduring the year

Number ofshares at theend of the year

¥122,905¥122,905

¥—
¥—

¥—
¥—

¥122,905¥122,905¥    367¥    367

¥13
¥13

¥ 0
¥ 0

¥    380¥    380

Notes: 1 The increase in common share of treasury shares by 13 thousand shares was due to requests for the repurchase of shares less than one unit.
2 The decrease in common share of treasury shares by less than 1 thousand shares was due to the sale of shares less than one unit.

2 Dividends(1) Cash dividends paid
(Resolution)

Total amountof dividends(Millions of yen)Amount ofdividend pershare (Yen)Record date

Effective dateCommonshare¥ 5,514¥45

March 31, 2018

June 29, 2018

Common
share

6,126

50

September 30, 2018

December 3, 2018

Type of share

June 28, 2018
Annual general meetingof shareholders
October 31, 2018
Meeting of the Boardof Directors
Total¥11,641¥—(2) Dividends recorded during the year, but effective in the next fiscal year
(Resolution)

Type of share

Source forpayment ofdividends

June 27, 2019
Annual general meetingof shareholders

Commonshare

Retainedearnings

Total amountof dividends(Millions of yen)

¥7,597

Amount ofdividend pershare (Yen)¥62

Record date

March 31, 2019

Effective dateJune 28, 2019

(Consolidated Statements of Cash Flows)*1 Reconciliations between the cash and cash equivalents and cash and deposits presented
in the Consolidated Balance Sheets
Millions of yen

Cash and deposits
Time deposits with term of over 3 months to maturity
Cash and cash equivalents

For the year ended
March 31, 2018

For the year ended
March 31, 2019¥88,233(2,729)¥85,503¥73,589(3,814)¥69,776

For the year ended March 31, 2018
SHI consolidated the newly acquired subsidiary, Sumitomo SHI FW Energie B.V. The following summarizes the recognized amount of assets acquired and liabilities assumed, and net cash outflow arising from the acquisition of the­subsidiary at the acquisition date.
Millions of yen

Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Non-controlling interests
Foreign currency translation adjustments
Price at which SHI acquired shares
Cash and cash equivalents
Net of acquisition cost

¥ 22,908
17,37912,645(24,446)(4,537)(979)(132)
22,838(8,291)¥ 14,547

For the year ended March 31, 209
SHI consolidated the newly acquired subsidiary, Lafert S.p.A. and its holding company. The following summarizes therecognized amount of assets acquired and liabilities assumed, and net cash outflow arising from the acquisition of thesubsidiary at the acquisition date.
Millions of yen

Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Non-controlling interests
Foreign currency translation adjustments
Price at which SHI acquired shares
Cash and cash equivalents
Net of acquisition cost

¥ 12,571
11,727
12,107(10,245)(4,369)(10)(425)
21,356(737)¥ 20,619(Lease Transactions)
1 As lessee(1) Finance lease transactions without the transfer of ownership
Although finance lease transactions without the transfer of ownership carried out before March 31, 2008 have beenaccounted for by using the accounting treatment for ordinary lease transactions, no further disclosure has been madebecause those transactions are immaterial.
(2) Operating lease transactions
Lease payments
Millions of yen

Within 1 year
Over 1 year
Total

82

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

March 31, 2018

March 31, 2019

¥1,4643,150¥4,614¥1,563
1,634¥3,197

Sumitomo Heavy Industries, Ltd.

Integrated Report 201983

Financial Section

2 As lessor(1) Finance lease transactions without the transfer of ownership
Although finance lease transactions without the transfer of ownership carried out before March 31, 2008 have beenaccounted for by using the accounting treatment for ordinary lease transactions, no further disclosure has been madebecause those transactions are immaterial.
(2) Operating lease transactions
For operating lease transactions, no further disclosure has been made because those transactions are immaterial.

(Financial Instruments)
1 Financial instruments(1) Policy to cope with financial instruments
As a general machinery manufacturer, the Company manufactures, sells, and distributes various machines and systems
including gear reducers and transmissions, as well as finances necessary operating and equipment funds through bankloans and issue of corporate bonds. Temporary surplus funds are limited to investment in highly stable and short-term
financial assets. Derivatives are used to hedge the risks described below and the Company has a policy to refrain fromentering into any speculative transactions.
(2) Details of financial instruments and their risks
Notes and accounts receivable—trade, and long-term loans receivable are exposed to customers’ credit risks. Althoughforeign currency-denominated trade accounts receivable generated from the global expansion of business operations
are exposed to foreign exchange fluctuation risks, the Company hedges net position of foreign currency-denominatedtrade accounts receivables and trade accounts payable by utilizing forward exchange contracts to maintain those positions at a certain range of percentages. Reports on hedge ratios and unhedged positions are submitted to the Boardof Directors in a timely manner.
Investment securities consist of shares in the companies with which the Company has a business relationship andwhich are exposed to market price fluctuation risks. Most notes and accounts payable—trade are due within one year.
Some of them, which relate to imports of raw materials and are denominated in foreign currencies, are exposed toforeign exchange fluctuation risks and are hedged by utilizing forward exchange contracts.
Loans and bonds are principally intended to finance operating funds and equipment funds necessary for business
transactions. For some of the long-term loans payable, the Company utilizes derivative transactions (interest rate swap
transactions) as hedge instruments for each individual contract. As interest swap transaction satisfies the requirements
for simplified accounting treatment, assessment of the effectiveness is not carried out. Foreign currency-denominatedloans are exposed to foreign exchange fluctuation risks.
Derivative transactions consist of forward exchange contracts designed for hedge transactions in preparation forforeign exchange fluctuation risks for foreign currency-denominated trade accounts receivable and payable, and ­interest
rate swap transactions designed to hedge fluctuation risks involving interests payable on loans and foreign exchanges.
For details of hedge accounting instruments and hedged transactions, hedge policy, and methods of assessment of theeffectiveness, please refer to “Method of significant hedge accounting” in “Accounting policies” above.

84

foreign exchange transactions, and submits a report on how those positions are hedged to the Board of Directors on amonthly basis. Major consolidated subsidiaries with foreign currency-denominated trade accounts receivable and payable also manage their foreign exchange fluctuation risks through currency hedging in accordance with the exchange
hedging policy which stipulates, among others, hedge ratio or unhedged volume of foreign exchange transactions.
Moreover, the Company monitors interest expenses on loans and submits a report to the Board of Directors in atimely manner. The Company utilizes interest rate swap transactions to control interest expense fluctuation risks.
For investment securities, the Company monitors market values and financial conditions of issuers in a timely
manner. The Company also reviews its holdings position considering its relationships with business partners.
SHI and its major consolidated subsidiaries have a policy to utilize derivative transactions for the sole purpose ofhedging the foreign exchange and interest fluctuation risks mentioned above and reconcile balances with each­counterparty on a monthly basis.
(iii) Management of liquidity risk for financing (risk of becoming unable to pay debts when they become due and payable)
The Company introduces the cash management systems for major consolidated subsidiaries, under which SHI centrally
manages the Company’s funds. The Company prepares and updates financing plans on a timely basis based on reports
from the business divisions and major affiliated companies and manages the liquidity risk.

2 Market values for financial instruments
Carrying amount and market value of financial instruments on the consolidated balance sheets and their difference arepresented below. The following table does not include financial instruments that are not practicable to identify market
value (see Note 2).
March 31, 2018
Millions of yen(1) Cash and deposits(2) Notes and accounts receivable—trade(3) Investment securities(4) Long-term loans receivable
Total(1) Notes and accounts payable—trade(2) Short-term loans payable(3) Bonds payable(4) Long-term loans payable
Total
Derivative transactions (*1)

Carrying amountMarket value

Difference¥ 88,233
269,409
14,3224,466¥376,430¥184,227
33,51620,000
10,665¥248,408¥  2,033¥ 88,233
267,321
14,322
3,877¥373,752¥184,227
33,516
20,06910,732¥248,544¥  2,020¥      —
(2,089)—(589)¥(2,678)¥      —
—6966¥   136¥   (14)(*1) Receivables and payables generated from derivative transactions are presented on a net basis, and net payables are presented in brackets.

March 31, 2019
Millions of yen
Carrying amountMarket value

Difference¥ 73,589
291,578
11,993
3,812¥380,973¥188,069
23,44420,00012,867¥244,380¥   (624)¥ 73,589
288,901
11,9933,203¥377,687¥188,069
23,44420,024
13,064¥244,601¥   (625)¥      —
(2,677)—(609)¥(3,286)¥      —
—24196¥   221¥    (1)(3) Risk management structure for financial instruments(i) Management of credit risk (risk from default, etc. of counterparty)
For domestic transactions and export transactions in excess of certain levels of amounts, the Company endeavors to
mitigate its concerns about the recoverability of trade accounts receivable, for example, by conducting credit examinations prior to accepting orders. In addition, each business division manages due dates and balances of trade accounts
receivable for each counterparty in accordance with the credit management regulations, thereby trying to identify­concerns about recoverability as early as practicable.
In using derivative transactions, the Company enters into transactions only with highly rated financial institutions to
mitigate counterparty risks.
The Company maintains term deposits only with highly rated financial institutions with which the Company has loantransactions to mitigate repayment risks. Therefore, the Company is subject to an insignificant level of credit risks.

(1) Cash and deposits(2) Notes and accounts receivable—trade(3) Investment securities(4) Long-term loans receivable
Total(1) Notes and accounts payable—trade(2) Short-term loans payable(3) Bonds payable(4) Long-term loans payable
Total
Derivative transactions (*1)(ii) Management of market risk (risk from the fluctuation of foreign currency exchange rate, interest rate or other factors)
The Company hedges net positions of foreign currency-denominated trade accounts receivable and payable in accordance with the Market Risk Management Policy which stipulates, among others, hedge ratio and unhedged volume of(*1) Receivables and payables generated from derivative transactions are presented on a net basis, and net payables are presented in brackets.

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

Sumitomo Heavy Industries, Ltd.

Integrated Report 201985

Financial Section

Note 1: Method of calculation of market values of financial instruments and matters regarding securities andderivative transactions
Assets(1) Cash and deposits
The carrying amount of the cash and deposits is approximate the market value because of its short-term in nature.
(2) Notes and accounts receivable—tradeMarket value of notes and accounts receivable is calculated at present value obtained by discounting the amounts ofreceivables after categorizing each receivable by duration, by interest rate that reflects the duration to maturity andcredit risk.
(3) Investment securities
Investment securities consist of shares, and their market value is based on prices on the exchanges they are listed or traded.
(4) Long-term loans receivable
Market value of long-term loans receivable is calculated at present value obtained by discounting future cash flows byinterest rates, such as yields on government bonds/notes or other appropriate indices, plus credit spread.
Liabilities(1) Notes and accounts payable—trade, and (2) Short-term loans payable
The carrying amounts of the notes and accounts payable—trade and short-term loans payable approximate the market
values because of their short-term nature.
(3) Bonds payable
Market value of bonds issued by SHI is calculated at present value obtained by discounting total amount of principal
and interest by interest rate that reflects the durations of those bonds to maturity and credit risk.
(4) Long-term loans payable
Market value of long-term loans payable is calculated at present value obtained by discounting total amount of­principal and interest by interest rates assumed at the time of new similar borrowing.

March 31, 2019
Millions of yen

Cash and deposits
Notes and accounts receivable—tradeLong-term loans receivable
Total

Over 5 years¥ 73,589
282,7819¥356,380¥     —
8,666
3,799
¥12,464

¥   —
130
5
¥136

Note 4: Amounts of bonds payable and long-term loans payable to be repaid after the end of year
March 31, 2018
Millions of yen

Bonds payable
Long-term loans payable
Total

Within1 yearOver 1 year
but within
2 years

Over 2 years
but within
3 years

Over 3 years
but within
4 years

Over 4 years
but within
5 yearsOver
5 years¥    —
7,801¥7,801¥10,000
598¥10,598

¥   —
164
¥164

¥—
—
¥—

¥10,000
2,102¥12,102¥——¥—

Within1 yearOver 1 year
but within
2 years

Over 2 years
but within
3 years

Over 3 years
but within
4 years

Over 4 years
but within
5 yearsOver
5 years¥10,000
1,956¥11,956¥    —
2,814¥2,814

¥   —
178
¥178

¥10,000
4,400¥14,400¥    —
2,900¥2,900

¥   —
621
¥621

March 31, 2019
Millions of yen

Bonds payable
Long-term loans payable
Total

Derivative transactions
Refer to notes to “Derivative transactions.”

Within 1 year

Over 1 year but
within 5 years

Note 2: Carrying amounts of financial instruments on consolidated balance sheets that are not practicable to identify
market value are shown as below.
Millions of yen
Category

Shares of subsidiaries and associates
Unlisted shares
Equity securities

March 31, 2018

March 31, 2019

¥3,4582,458
5¥3,8102,462
5Those financial instruments have not been included in “(3) Investment securities” because they have no active market
price and it is not practicable to identify their market value.
Note 3: Amounts of financial assets expected to be redeemed after the end of year
March 31, 2018
Millions of yen

Cash and deposits
Notes and accounts receivable—tradeLong-term loans receivable
Total

86

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

Within 1 year

Over 1 year but
within 5 years

Over 5 years¥ 88,233
261,36526¥349,624¥     —
7,956
4,435
¥12,391

¥—
87
6
¥93

(Securities)
1 Available-for-sale securities
March 31, 2018
Millions of yen

Category

Securities for which carrying amount on the consolidatedbalance sheets is in excess of acquisition cost
SharesSecurities for which carrying amount on the consolidatedbalance sheets is not in excess of acquisition cost
Shares
Total

Carrying amounton the consolidatedbalance sheets

Acquisition cos

Difference¥12,094¥4,628¥7,4662,228¥14,3222,415¥7,043(187)¥7,279Note: Shares of subsidiaries and associates (carrying amount on the consolidated balance sheets: ¥3,458 million), unlisted shares (carrying amount on the
consolidated balance sheets: ¥2,458 million) and equity securities (carrying amount on the consolidated balance sheets: ¥5 million) are notincluded in “Available-for-sale securities” in the table above, as those shares have no active market price and it is not practicable to identify theirmarket value.

Sumitomo Heavy Industries, Ltd.

Integrated Report 201987

Financial Section

March 31, 2019

March 31, 2019
Millions of yen

Category

Securities for which carrying amount on the consolidatedbalance sheets is in excess of acquisition cost
SharesSecurities for which carrying amount on the consolidatedbalance sheets is not in excess of acquisition cost
Shares
Total

Carrying amounton the consolidatedbalance sheets

Acquisition cos

Difference¥ 9,706¥4,022¥5,684

2,287¥11,993

2,815¥6,837(528)¥5,156

Millions of yen
Category

Off-market
transactions

Note: Shares of subsidiaries and associates (carrying amount on the consolidated balance sheets: ¥3,810 million), unlisted shares (carrying amount on the
consolidated balance sheets: ¥2,462 million) and equity securities (carrying amount on the consolidated balance sheets: ¥5 million) are notincluded in “Available-for-sale securities” in the table above, as those shares have no active market price and it is not practicable to identify theirmarket value.

2 Available-for-sale securities sold during the year
Millions of yen
TypeOver 1 year

Market value

Valuation gains(losses)¥30,291
3,751
772
336
86
50

¥—
—
—
—
—
—

¥(184)
28
(9)
(20)
(1)
(0)

¥(184)
28
(9)
(20)
(1)
(0)

796
¥36,082—¥—(5)¥(190)(5)¥(190)

Note: Method of calculation of market value
Forward exchange contracts: calculated using forward exchange rates.

For the year ended March 31, 2018

SharesType

Forward exchange contracts
Selling
USD
EUR
CNY
IDR
THB
GBP
Buying
USD
Total

Contract
amountAmount soldTotal amount ofselling profits

Total amount ofselling losses

¥159

¥63

¥—

2 Derivative transactions to which hedge accounting is applied(1) Foreign currency-related transactions
March 31, 2018
Millions of yen

For the year ended March 31, 2019
Millions of yen
TypeSharesAmount soldTotal amount ofselling profits

Total amount ofselling losses

¥407

¥216

¥—

(Derivative transactions)
1 Derivative transactions to which hedge accounting is not applied
Foreign currency-related transactions
March 31, 2018
Millions of yen
Category

Off-market
transactions

Type

Forward exchange contracts
Selling
USD
EUR
IDR
CNY
GBP
THB
AUD
Buying
USD
Total

Contract
amountOver 1 year

Market value

Valuation gains(losses)¥23,414
6,035
266
172
157
104
1

¥—
—
—
—
—
—
—

¥487
124
13
4
(2)
(7)
0

¥487
124
13
4
(2)
(7)
0

565
¥30,714

—
¥—

1
¥620

1
¥620

Method of hedge
accounting

Major
hedged items

Contract
amountOver 1 year

Market value

Accounts
receivable—trade¥32,520
2,595
828¥14,4171,530
53¥1,522
70
5

6,120
1,410
1,195
127
22

3,648
—
153
—
—

(137)
(50)
9
(5)
1

192
4

—
—

0
(0)

287
¥45,300—¥19,801(1)¥1,413Type

Forward exchange contracts
Selling
USD
SEK
EUR
Basic
Buyingaccounting
method
USD
SEK
EUR
CHF
CNY
Forward exchange contracts
Selling
Allocation of
USD
forward exchange
EUR
contracts
Buying
JPY
Total

Accounts
payable—trade

Accounts
receivable—trade
Accounts
payable—trade

Note: Method of calculation of market value
Forward exchange contracts: calculated using forward exchange rates.

Note: Method of calculation of market value
Forward exchange contracts: calculated using forward exchange rates.

88

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

Sumitomo Heavy Industries, Ltd.

Integrated Report 201989

Financial Section

March 31, 2019
Millions of yen
Method of hedge
accounting

Major
hedged items

Contract
amountOver 1 year

Market value

Accounts
receivable—trade¥32,770
2,806
747¥11,913567—¥(778)
81
20

7,818
1,068
1,036
130
108

3,463
369
—
—
—

277
(21)
(2)
(6)
1

47
5

—
—

(3)
0

946
¥47,481—¥16,31218¥(413)Type

Forward exchange contracts
Selling
USD
SEK
EUR
Basic
Buyingaccounting
method
USD
EUR
PLN
JPY
CNY
Forward exchange contracts
Selling
Allocation of
USD
forward exchange
EUR
contracts
Buying
JPY
Total

Accounts
payable—trade

Accounts
receivable—trade
Accounts
payable—trade

Note: Method of calculation of market value
Forward exchange contracts: calculated using forward exchange rates.

(2) Interest-related transactions(Retirement Benefits)
1 Outline of the retirement benefit plans adopted
SHI and its major domestic consolidated subsidiaries have adopted a combination of the lump-sum retirement allowance plan and the defined contribution pension plan, while certain overseas consolidated subsidiaries have defined
benefit-type plans.
A retirement benefit trust has been created for SHI’s lump-sum retirement allowance plans.
Some consolidated subsidiaries with the lump-sum retirement allowance plans calculate net defined benefit liability
and retirement benefit costs based on the simplified method.

2 Defined benefit plans (excluding the plans to which the simplified method is applied)(1) Movements in retirement benefit obligations
Millions of yen

Balance at the beginning of the year
Service cost
Interest cost
Actuarial loss (gain)
Benefit paid
Increase due to change from the simplified method to the principle method
Increase due to merger
Decrease due to deconsolidation
Increase due to newly consolidated subsidiaries
Loss on settlement following buyout of pension plan
OthersBalance at the end of the year

For the year ended
March 31, 2018

For the year ended
March 31, 2019¥88,897
3,354
1,250
870
(4,038)
698
52
(328)
—
—
101
¥90,855¥90,855
3,651
973(1,082)(3,784)288——
566(4,932)(1,346)¥85,189

For the year ended
March 31, 2018

For the year ended
March 31, 2019¥47,797
1,649
4,768
1,467
(1,219)—(529)¥53,934¥53,934
1,504(5,784)
1,256(1,122)(5,427)(562)¥43,800

March 31, 2018
Millions of yen
Method of hedge
accounting

Simplified accounting
treatment ofinterest swaps

TypeInterest rate swap transactions
payable at fixed rate andreceivable at floating rate
Total

Major
hedged items

Long-term loans
payableContract
amount¥3,810¥3,810Over 1 year

¥3,800¥3,800

¥(13)
¥(13)

Note: Method of calculation of market value
Swap transactions: calculated using the amounts presented by financial institutions with which the Company has a swap contract.

March 31, 2019
Millions of yen
Method of hedge
accounting

Simplified accounting
treatment ofinterest swaps

TypeInterest rate swap transactions
payable at fixed rate andreceivable at floating rate
Total

Major
hedged items

Long-term loans
payableContract
amountOver 1 year

Market value¥3,022¥3,022¥2,220¥2,220

¥(22)
¥(22)

Note: Method of calculation of market value
Swap transactions: calculated using the amounts presented by financial institutions with which the Company has a swap contract.

90

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019(2) Movements in plan assets
Millions of yen

Market value

Balance at the beginning of the year
Expected return on plan assets
Actuarial loss (gain)Contributions paid by the employer
Benefit paid
Loss on settlement following buyout of pension plan
OthersBalance at the end of the year(3) Reconciliations from retirement benefit obligations and plan assets to net defined benefit liability (asset)
Millions of yen
March 31, 2018

March 31, 2019

Unfunded retirement benefit obligations
Total net defined benefit liability¥ 66,698(53,934)
12,76424,158¥ 36,921¥ 60,198(43,800)
16,39824,992¥ 41,390

Defined benefit asset
Defined benefit liability
Total net defined benefit liability¥    (12)36,934¥ 36,921¥ (1,181)
42,571¥ 41,390

Funded retirement benefit obligations
Plan assets

Sumitomo Heavy Industries, Ltd.

Integrated Report 201991

Financial Section(4) Retirement benefit expenses
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Net actuarial loss amortization
Past service costs amortization
Increase due to transition from the simplified method
to the principle method
OthersTotal retirement benefit expenses

For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥ 3,354
1,250(1,649)187
78¥ 3,651
973(1,504)
1,483
143

—
46
¥ 3,266

162
29¥ 4,938%

Discount rateLong-term expected rate of return on plan assets

Past service costs
Actuarial gains and losses
Loss on settlement following buyout of pension plan
OthersTotal¥ (110)4,140—
203¥4,233¥     58
(3,218)2,10558¥  (998)¥  (120)(5,000)¥(5,120)¥  (118)(6,008)¥(6,126)%

SharesCash and deposits
OthersTotal

March 31, 2019

67
1
31
100

79
7
14
100

For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥3,733¥3,514

(327)
637
(458)
(70)
¥3,514

(126)
557
(397)
(69)
¥3,479Millions of yen(7) Plan assets(i) Major components of plan assets
Percentages by major category of total plan assets is as follows.
March 31, 2018

0.0 to 7.8
0.0 to 8.0(2) Reconciliations from retirement benefit obligations and plan assets to net defined benefit liability

Millions of yen

Past service costs that are yet to be recognized
Actuarial gains and losses that are yet to be recognized
Total

Balance at the beginning of the year
Decrease due to change from the simplified method
to the principle method
Retirement benefit expenses
Benefit paid
Contributions paid by the employer
Balance at the end of the year

March 31, 2018

March 31, 2019

Unfunded retirement benefit obligations
Total net defined benefit liability¥  879
(897)
(18)
3,532
¥3,514¥  912
(944)
(32)
3,511
¥3,479Defined benefit asset
Defined benefit liability
Total net defined benefit liability¥  (18)3,532¥3,514¥  (32)
3,511¥3,479Funded retirement benefit obligations
Plan assets

March 31, 2019

0.0 to 5.4
0.0 to 8.0

Millions of yen(6) Remeasurements of defined benefit plans
Items recognized in accumulated remeasurements of defined benefit plans (before tax effect) are as follows.
March 31, 2018

For the year ended
March 31, 2019(1) Movements in net defined benefit liability

Millions of yen
For the year ended
March 31, 2019

For the year ended
March 31, 2018

3 Defined benefit plans to which the simplified method is applied(5) Remeasurements of defined benefit plans
Items recognized in remeasurements of defined benefit plans (before tax effect) are as follows.
For the year ended
March 31, 2018(8) The basis of actuarial assumptions
Basis for major actuarial assumptions(3) Retirement benefit expenses
Retirement benefit expenses calculated using the simplified method: ¥637 million for the precious year
¥557 million for the current year

4 Defined contribution plans
The amounts required to be contributed to the defined contribution plans of the Company are ¥855 million for theprevious year, and ¥873 million for the current year.

Note: Total plan assets include the retirement benefit trust created for SHI’s lump-sum retirement allowance plan. The retirement benefit trust included asa percentage of total plan assets is 51% (¥27,605 million) at the end of the previous year and 54% (¥23,835 million) at the end of the current year.

(ii) Method of setting a long-term expected rate of return on plan assets
In order to determine a long-term expected rate of return on plan assets, present and predicted allocation of plan
assets, and present and expected long-term rate of return on various assets comprising plan assets are considered.

92

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019

Sumitomo Heavy Industries, Ltd.

Integrated Report 201993

Financial Section(Tax Effect Accounting)
1 Major components of deferred tax assets and deferred tax liabilities
Millions of yen

Deferred tax assets
Accrued bonuses
Amount exceeding the limit on deductible allowance for doubtful accounts
Provision for construction warranties
Defined benefit liability
Unrealized profit on inventories
Loss on valuation of investment securities
Excess of depreciation
Tax loss carryforward
Loss on valuation of inventories
Impairment loss
Provision for loss on construction contracts
OthersSubtotal
Valuation allowance for tax loss carryforward (Note 2)
Valuation allowance for deductible temporary differences
Subtotal of valuation allowance (Note 1)
Total
Deferred tax liabilities
Reserve for reduction entry
Unrealized gains on full market value valuation of consolidated subsidiaries
Extra depreciation in overseas subsidiaries
Retained earnings of overseas subsidiaries
Intangible assets identified by business combinations
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
OthersTotal
Net deferred tax assets

March 31, 2018

March 31, 2019¥   3,364
1,155
2,729
13,523
1,893
1,698
1,296
5,205
2,353
2,263
1,766
5,998
43,244——(10,473)
32,771¥   3,664
1,252
3,473
14,416
1,934
1,336
1,561
4,821
2,615
2,199
1,942
7,656
46,868(3,069)(6,865)(9,934)36,933(31)(2,850)(2,580)(3,381)(3,081)(1,892)(415)(492)(14,723)¥ 18,048(29)(2,850)(2,856)(4,116)(4,848)(1,274)—(1,005)(16,978)¥ 19,955

Notes: 1 There is no material change in the valuation allowance.
2 Tax loss carryforward and its deferred tax assets by expiration periods

March 31, 2019
Millions of yen

Tax loss carryforward (a)Valuation allowance
Deferred tax assets

Within1 yearOver 1 year
but within
2 years

Over 2 years
but within
3 years

Over 3 years
but within
4 years

Over 4 years
but within
5 years

¥126
—
¥126

¥90
—
¥90

¥ 450
(316)
¥ 134

¥110
(34)
¥ 76

¥ 120
(120)
¥   —

Over
5 years

Total¥ 3,924¥ 4,821(2,599)(3,069)¥ 1,325 (b) ¥ 1,752(a)	Tax loss carryforward shown in the above table is after multiplying the statutory tax rate.
(b)	The Company recognizes deferred tax assets of ¥1,752 million in relation to tax loss carryforward of ¥4,821 million (amount multiplied by thestatutory tax rate). These deferred tax assets were recognized mainly for tax loss carryforward at SHI’s consolidated subsidiaries. Tax loss
carryforward which resulted in the recognition of such deferred tax assets were generated from previously recognized loss before income
taxes; however, valuation allowance was not recognized for the portions that were determined to be recoverable based on expected futuretaxable income and other factors.

94

Sumitomo Heavy Industries, Ltd.

Integrated Report 20192 SHI and its consolidated domestic companies are subject to corporate, inhabitants’ and enterprisetaxes, which, in the aggregate show a statutory tax rate in Japan of approximately 30.9% and30.6% for the years ended March 31, 2018 and 2019, respectively. Major items causing the differences between the statutory effective tax rate and the effective income tax rate after applicationof tax effect accounting are as follows.
%

Statutory effective tax rates(adjustments)
Items not deductible permanently, such as entertainment expenses
Inhabitant tax on a per capita basis
Items not taxable permanently, such as dividend income
Valuation allowance
Tax credit
Share of profit of entities accounted for using equity method
Retained earnings of overseas subsidiaries
Tax rate differences of overseas subsidiaries
Amortization of goodwill
Impairment loss on goodwill
Others
Effective income tax rates after application of tax effect accounting

March 31, 2018

March 31, 2019

30.9

30.6

0.6
0.5
0.3
3.8
(2.5)
(0.3)
1.2
(7.0)
0.8
—
0.6
28.9

0.6
0.4
(0.1)
(0.8)
(2.7)
(0.0)
1.1
(4.3)
1.0
1.2
0.5
27.5

(Business Combination)
Business combination through acquisition
The Board of Directors of SHI adopted the resolution for acquisition of shares in Lafert S.p.A, an Italian manufacturer
and distributor of industrial motors (“Lafert”) and its holding company at its meeting held on May 25, 2018, and SHI
entered into the share transfer agreement on the same day. The share transfer was completed on June 25, 2018.
(1) Outline of the acquisition(Lafert S.p.A.)(i) Name and nature of business of the acquired company
Name of the acquired company: Lafert S.p.A.
Nature of business:	Manufacture, sale and distribution of motors and motion control devices(ii) Main reason for the business combination
To expand product portfolios of the Company and offer comprehensive solutions to broader customer bases througha combination of gear products of the Company and various motors and driver products of Lafert.
(iii) Business combination dateJune 25, 2018(iv) Legal form of business combination
Acquisition of shares(v) Company name after the business combination
Lafert S.p.A.
(vi) Percentage of the voting rights acquired
Percentage of voting rights held shortly before the business combination:—%
Percentage of voting rights acquired on the business combination date: 100.0%
Percentage of voting rights after acquisition:
100.0%(vii) Major grounds leading to the selection of the acquiring entity
Due to the fact that SHI acquired the shares in cash.

Sumitomo Heavy Industries, Ltd.

Integrated Report 201995

Financial Section(9FIN S.r.l.)(i) Name and nature of business of the acquired company
Name of the acquired company: 9FIN S.r.l.
Nature of business:
Shareholding company(ii) Main reason for the business combination
To expand product portfolios of the Company and offer comprehensive solutions to broader customer bases througha combination of gear products of the Company and various motors and driver products of Lafert.
(iii) Business combination dateJune 25, 2018(iv) Legal form of business combination
Acquisition of shares(v) Company name after the business combination
9FIN S.r.l.
(vi) Percentage of the voting rights acquired
Percentage of voting rights held shortly before the business combination:—%
Percentage of voting rights acquired on the business combination date: 100.0%
Percentage of voting rights after acquisition:
100.0%(vii) Major grounds leading to the selection of the acquiring entity
Due to the fact that SHI acquired the shares in cash.
(3FIN S.r.l.)(i) Name and nature of business of the acquired company
Name of the acquired company: 3FIN S.r.l.
Nature of business:
Shareholding company(ii) Main reason for the business combination
To expand product portfolios of the Company and offer comprehensive solutions to broader customer bases througha combination of gear products of the Company and various motors and driver products of Lafert.
(iii) Business combination dateJune 25, 2018(iv) Legal form of business combination
Acquisition of shares(v) Company name after the business combination
3FIN S.r.l.
(vi) Percentage of the voting rights acquired
Percentage of voting rights held shortly before the business combination:—%
Percentage of voting rights acquired on the business combination date: 100.0%
Percentage of voting rights after acquisition:
100.0%(vii) Major grounds leading to the selection of the acquiring entity
Due to the fact that SHI acquired the shares in cash.
(2) Financial performance period of the acquired company included in the consolidated financial statements
From April 1, 2018 to December 31, 2018
(3) Acquisition cost of the acquired company and breakdown by kind of consideration
Millions of yen

Consideration for acquisition: Cash
Acquisition cost:(4) Details and amount of major acquisition-related expenses
Advisory fees and other: ¥413 million

96

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019¥21,356
21,356(5) Amount of goodwill generated, cause of generation, and method and period of amortization(i) Amount of goodwill generated¥12,107 million(ii) Cause of generation
Generated because the acquisition cost exceeded the net amount of assets acquired and liabilities assumed.
(iii) Method and period of amortization
To be amortized equally over 16 years(6) Amounts and major components of assets acquired and liabilities assumed on the date of acquisition
Millions of yen

Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities¥12,571
11,727¥24,297¥10,245
4,369¥14,614(7) Amount allocated to intangible assets other than goodwill and component by major type, and weighted­average amortization period
Type

Customer relationships
Technical assets
Total

Amount(Millions of yen)

¥5,5042,301¥7,805Weighted averageamortization period(Years)1616—(8) Details of contingent consideration for acquisition set forth in the business consolidation contracts and theaccounting policy for the current and subsequent years
SHI will make additional payments depending on the future level of financial performance of the acquired companies.
For increase in goodwill resulting from the payment of contingent consideration for the acquisition, the total consideration is adjusted as if the contingent consideration was paid at the time of the acquisition of the equities to adjust theamount of goodwill and goodwill amortization.
(9) If the business combination had been completed at the beginning of the current year, the estimated financial effects
on the consolidated statements of income for the current year would have been as follows.
Millions of yen

Sales
Operating profit
Ordinary profit
Profit before income taxes
Profit attributable to owners of parent¥5,872
240
223
223
105

Method of calculating estimated financial effects
The estimated financial effects are the differences between net sales and profit/loss information calculated assumingthat the business combination has been completed at the beginning of the current year, and net sales and profit/loss
information in SHI’s consolidated statements of income. The amount of amortization is calculated assuming that goodwill is recognized at the beginning of the current year.
This note is unaudited.

Sumitomo Heavy Industries, Ltd.

Integrated Report 201997

Financial Section

Transactions between the entities under the common control(Segment Information)

Additional acquisition of shares in the subsidiary[Segment Information](1) Outline of the transaction(i) Name and nature of business of the combined company
Name of the combined company: Sumitomo Heavy Industries Material Handling Systems Co., Ltd.
Nature of business: Industrial crane business(ii) Business combination date
October 1, 2018(iii) Legal form of business combination
Acquisition of shares from non-controlling interests(iv) Company name after the business combination
No change.
(v) Other matters relating to the outline of the transaction
The voting ratio of shares additionally acquired by SHI was 17.2%, and SHI made Sumitomo Heavy Industries Material
Handling Systems Co., Ltd. its fully owned subsidiary through the transaction. The purpose of such additional acquisition was to maximize revenues from the industrial crane business, aiming at further business growth.

1 Summary of reporting segments(2) Outline of the accounting adopted
SHI accounted for such additional acquisition as the transaction with the non-controlling interests, considering as atransaction under the common control based on the “Accounting Standards for Business Combinations” and the“Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.”(3) Matters to be referred to for additional acquisition of shares in the subsidiary
Acquisition cost of shares and breakdown by kind of consideration
Millions of yen

Consideration for acquisition: Cash
Acquisition cost:¥5,0235,023(4) Matters relating to change in ownership interest of parent due to transactions with non-controlling interests(i) Major causes for changes in capital surplus
Additional acquisition of shares in the subsidiary(ii) Amount of capital surplus increased due to transaction with non-controlling interests¥611 million(1) Method for determining reporting segments
The reporting segments of the Company are based on the business units for which financial information is separately
available and are periodically reviewed by the Board of Directors to determine the allocation of management resources
and assess their operating performance.
(2) Type of finished goods and services belonging to each reporting segment
The Company formulates domestic and global comprehensive strategies for its products and services handled by thehead office and each consolidated subsidiary and develops business activities. Thus, the reporting segments consist of
the following six segments for each of the products and services handled by the head office and each consolidated
subsidiary: “Machinery Components,” “Precision Machinery,” “Construction Machinery,” “Industrial Machinery,”“Ships,” and “Environmental Facilities & Plants.”
Businesses

Machinery Components
Precision Machinery

Construction Machinery
Industrial Machinery
Ships
Environmental Facilities& Plants

Main finished goods

Power transmission and control equipment
Plastics machinery, film forming machines, semiconductor production equipment, laser
processing systems, cryogenic equipment, precision positioning equipment, precision­forgings, control components, defense equipment, machine tools
Hydraulic excavators, mobile cranes, road machinery
Ion accelerators, medical machines and equipment, forging press machines, material­handling systems, logistics systems, automated parking systems, turbines, pumps
Ships
Private power generation facilities, boilers, industrial waste treatment facilities, air pollution
control equipment, water and sewage treatment systems, process equipment, pressure
vessels, mixing vessels, air-conditioning equipment, food processing machinery

2 Method of calculating net sales, profits or losses, assets and other items of eachreporting segment
Method of accounting treatment of the business segments reported is almost identical to the descriptions in “Notes to
the Consolidated Financial Statements.”
Internal sales and transfers among the segments are based on market prices in effect.

(Asset Retirement Obligations)No further disclosure is made as those obligations are immaterial in terms of amount.

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Financial Section

3 Information on the amounts of sales, profits or losses, assets and other items
by reporting segment[Related Information]
For the year ended March 31, 2018

1 Information by finished goods and services

For the year ended March 31, 2018
Millions of yen
Reporting Segments

Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery

Environmental
Facilities& Plants
Ships

Total

Others(Note 1)

Total

Carrying
amount on the
consolidated
financial
Adjustments
statements(Note 2)
(Note 3)

No further disclosure is made because the finished goods and services categories are identical to those in the reporting segments.

2 Information by region(1) Sales

Sales
Sales to externalcustomers
Inter-segment sales  TotalMillions of yen¥109,396 ¥169,405 ¥260,457¥83,790¥38,291 ¥121,885 ¥783,224¥ 7,801 ¥791,025¥    — ¥791,025

2,040

478

44

1,417

8

2,060

6,047

3,771

9,817

(9,817)—

111,436

169,883

260,501

85,20738,299123,945789,271

11,572800,843(9,817)

791,025

Japan

United States

China

OthersTotal¥365,524¥119,607¥80,446¥225,448¥791,025

Note: Sales are based on the locations of customers and are divided into countries or regions.

Segment profit

11,847

19,462

17,448

8,810

742

9,531

67,8402,067

69,907

14

69,921

Segment assets

123,909

187,158

235,905

75,957

61,147

133,730

817,806

50,632

868,437

26,398894,835(2) Property, plant and equipment

23,003Japan

OthersTotal¥183,019¥56,577¥239,596

Millions of yen

Other categories
Depreciation

4,228

4,529

9,428

1,718

810

1,727

22,439564

23,003—

Amortization of goodwill

—

417

414

111

—

335

1,277

—

1,277

—

1,277

Investments to companies
accounting for using theequity method

—

2,386

—

—

—

—

2,386

—

2,386

—

2,386

3 Information by major customer

5,555

10,973

9,400

4,095

1,772

31,63563,430862

64,292—64,292

There is no description because the Company has no single external customer that accounts for at least 10% of net
sales in the consolidated statements of income.

Increase in tangible andintangible assets

Notes: 1 “Others” is the business segment which is not included in the reporting segments, and contains real estate business, software-related businessand other businesses.
2 Adjustments are as follows.
		 (1) Adjustments of segment profit (¥14 million) include inter-segment eliminations of ¥14 million.
		 (2) Adjustments of segment assets (¥26,398 million) include assets of ¥26,398 million relating to surplus investment funds (cash and deposits)
and long-term investment funds (investment securities) of SHI.
3 Segment profits have been adjusted to operating profit in the consolidated statements of income.

For the year ended March 31, 2019
Millions of yen
Reporting Segments

Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery

Environmental
Facilities& Plants
Ships

Total

Others(Note 1)

Total

Carrying
amount on the
consolidated
financial
Adjustments
statements(Note 2)
(Note 3)

Sales
Sales to externalcustomers
Inter-segment sales

For the year ended March 31, 2019

1 Information by finished goods and services
No further disclosure is made because the finished goods and services categories are identical to those in the reporting segments.

2 Information by region(1) Sales
Millions of yen
Japan

United States

China

OthersTotal¥390,469¥142,509¥99,445¥270,628¥903,051

Note: Sales are based on the locations of customers and are divided into countries or regions.
¥133,426 ¥185,688 ¥290,472¥93,737¥41,443 ¥150,951 ¥895,716¥ 7,335 ¥903,051¥    — ¥903,051(2) Property, plant and equipment

2,191

318

8

1,651

8

882

5,058

3,642

8,700

(8,700)—  Total135,617

186,006

290,480

95,38741,451

151,832

900,774

10,976

911,750(8,700)903,051

Segment profit

11,06917,682

21,957

8,955

830

12,56573,0582,180

75,2386

75,244Japan

Others

Total

Segment assets

165,368

195,393245,701

73,34668,081

134,094

881,984

47,627929,61124,440954,051¥187,382¥60,894¥248,276

5,603

5,395

9,442

1,744

1,149

2,083

25,416559

25,975—25,975

664

537

414

122

—

460

2,197

—

2,197

—

2,197

3 Information by major customer
There is no description because the Company has no single external customer that accounts for at least 10% of net
sales in the Consolidated Statements of Income.

Millions of yen

Other categories
Depreciation
Amortization of goodwill
Investments to companies
accounting for using theequity method

204

2,351

—

—

—

—

2,555

—

2,555

—

2,555

Increase in tangible andintangible assets

29,167

8,588

7,564

2,446

3,726

3,494

54,985

1,220

56,205—56,205

Notes: 1 “Others” is the business segment which is not included in the reporting segments, and contains real estate business, software-related businessand other businesses.
2 Adjustments are as follows.
		 (1) Adjustments of segment profit (¥6 million) include inter-segment eliminations of ¥6 million.
		 (2) Adjustments of segment assets (¥24,440 million) include assets of ¥24,440 million relating to surplus investment funds (cash and deposits)
and long-term investment funds (investment securities) of SHI.
3 Segment profits have been adjusted to operating profit in the consolidated statements of income.

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Financial Section[Information on Impairment Loss of Non-current Assets by Reporting Segment][Information on Related Parties]

For the year ended March 31, 2018

Not applicable.
Millions of yen
Reporting segments

Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery

¥—

¥—

¥—

¥289

Total

Environmental
Facilities& Plants
Ships

¥—

¥—

Total

OthersCorporate/
Eliminations(Note)

¥289

¥—

¥5

(Per-share information)
Total

¥294

Yen

Note: All the amounts of corporate/eliminations relate to idle assets, such as residential land or corporate assets.

For the year ended
March 31, 2019

¥3,517.33
282.83¥3,701.01
372.56

Net assets per share
Earnings per share

For the year ended March 31, 2019
Millions of yen
Reporting segments
Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery¥—¥2,946

¥—

¥265

Total

For the year ended
March 31, 2018

Environmental
Facilities& Plants
Ships

¥—

¥—

Total

OthersCorporate/
Eliminations(Note)¥3,211

¥—

¥238

Total

¥3,448Notes: 1 There is no disclosure for diluted earnings per share information after adjustments of dilutive potential shares, because there are no dilutive
potential shares.
2 The share consolidation of five shares of common share into one share was effective on October 1, 2017. Net assets per share and earnings per
share are calculated assuming that such share consolidation had been executed at the beginning of the previous year.
3 Basis for calculation of earnings per share is presented below.
Millions of yen

Note: All the amounts of corporate/eliminations relate to idle assets, such as residential land or corporate assets.

[Amortization and Unamortized Balance of Goodwill by Reporting Segment]
For the year ended March 31, 2018
Millions of yen

For the year ended
March 31, 2018

For the year ended
March 31, 2019

¥ 34,660—
34,660122,547¥ 45,650—
45,650122,530

Profit attributable to owners of parent
Value not attributable to common shareholders
Profit attributable to common shareholders of parent
Average number of outstanding shares for the term (in thousand shares)

Reporting segments
Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery¥—¥  417

¥414

—

3,518

829

Amortization
during the year
Balance at theend of the year

Environmental
Facilities& Plants

Corporate/
Eliminations

Total

Others¥111¥— ¥   335 ¥ 1,277¥—¥— ¥ 1,277

277

—

—

—

Ships

13,40618,030Total

18,030(Significant Subsequent Events)
On July 24, 2019, SHI issued the following unsecured bonds and received the proceeds on the same date.
(1) Name
Sumitomo Heavy Industries Limited Series 5 Unsecured Bond (with Inter-Bond Pari Passu Clause)(2) Total issuance amount¥10,000 million

For the year ended March 31, 2019
Millions of yen(3) Issuance price¥100 per ¥100 of face value

Reporting segments

Amortization
during the year
Balance at theend of the year

Machinery
Components

Precision
Machinery

Construction
Machinery

Industrial
Machinery¥   664

¥537

¥414

11,212

256

414

Environmental
Facilities& Plants
Ships

Total

Others¥122¥— ¥   460 ¥ 2,197¥—¥— ¥ 2,197

200

—

—

—

11,967[Information on Gain on Negative Goodwill by Reporting Segment]
Not applicable.

Corporate/
Eliminations

24,049Total

24,049(4) Interest rate
0.130% per annum(5) Redemption value¥100 per ¥100 of face value(6) Redemption period and repayment method
July 24, 2024 (bullet maturity amortization)(7) Purpose of loan
Planned to be allocated as a part of funds for purchasing equipment by March 2020

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Financial Section(Consolidated Supplementary Schedules)[Bonds Schedule]
Millions of yen

Company name

Sumitomo Heavy
Industries, Ltd.
Sumitomo Heavy
Industries, Ltd.
Total

Name of issue

Issue date

3rd unsecured October 28,
bonds
2014
4th unsecured March 15,
bonds
2018
   —

   —

Balance at the
beginning of thecurrent period

Balance at theend of thecurrent period

Interest
rate (%)

Security

Redemption date

¥10,000¥10,000[10,000]

0.26

Unsecured

October 28, 2019

0.17

Unsecured

March 15, 2023——

10,000¥20,000

10,000¥20,000[10,000]    —Notes: 1 The figures in [ ] of the Balance at the end of the current period represents the amounts redeemable due within 1 year.
2 Annualized amounts to be redeemed within five years after the end of the current year are as follows.
Millions of yen
Within 1 year

Over 1 year but
within 2 years

Over 2 years but
within 3 years

Over 3 years but
within 4 years

Over 4 years but
within 5 years¥10,000¥—¥—¥10,000¥—[Loans Schedule]
Millions of yen

Category

Short-term loans payable
Current portion of long-term loans payable
Lease obligations due within 1 year
Long-term loans payable (excluding
long-term debt due within 1 year)
Lease obligations (excluding leaseobligations due within 1 year)
Total

Balance atthe beginning of
the current period

Balance at theend of thecurrent period

Averageinterest rate(%)

¥33,516
7,801
3,169

¥23,444
1,956
2,105

2.49
3.98
—

2,864

10,912

0.87

8,038¥55,3887,108¥45,524——

Repayment
date     —
     —
     —
From January 13, 2020
to October 31, 2029     —
     —

Notes: 1 For “Average interest rate,” weighted average interest rate to the balance at the end of the year of loan is presented.
2 The table below is the maturity profile of long-term loans payable and lease obligation at the end of the current year that are due after one year.
Millions of yen
Category

Long-term loans payable
Lease obligations (long-term)

Over 1 year but
within 2 years

Over 2 years but
within 3 years

Over 3 years but
within 4 years

Over 4 years but
within 5 years¥2,8143,758¥  1781,547¥4,400828¥2,900605

3 No interest rate information is available because lease obligations are measured by including interest expenses, except for certain consolidated subsidiaries.

[Asset Retirement Obligations Schedule]
No further disclosure has been made because the amount of asset retirement obligations was 1% or less than the
total balance of the liabilities and the net assets at the beginning of the current consolidated fiscal year and at theend of the current consolidated fiscal year, respectively.

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Integrated Report 2019105

Major Subsidiaries and Affiliates(As of June 30, 2019)

Sumitomo (SHI) Demag Plastics Machinery Espana S.L.
Ningbo Sumiju Machinery, Ltd.
SHI PLASTICS MACHINERY (SHANGHAI) CO., LTD.
SHI PLASTICS MACHINERY (HONG KONG) LTD.
S.H.I. Plastics Machinery (S) Pte. Ltd.

Machinery Components Segment
Power Transmission& Controls

Sumitomo Heavy Industries PTC Sales Co., Ltd.
Sumitomo Heavy Industries Gearbox Co., Ltd.
Sumitomo Heavy Industries Gearmotors Co., Ltd.
SUMITOMO MACHINERY CORPORATION OF AMERICASM Cyclo de Mexico S.A. de C.V.
SM Cyclo Redutores do Brasil Com. Ltda.
SM Cyclo de Chile, Ltda.
SM-Cyclo de Argentina S.A.
SM-Cyclo de Colombia Ltda.
SM Cyclo de Guatemala Ensambladora, Limitada
SM CYCLO OF CANADA, LTD.
SM Cyclo de Peru S.A.C
Sumitomo Industrias Pesadas do Brasil Ltda.
Sumitomo (SHI) Cyclo Drive Germany GmbH
SM-Cyclo France S.A.S.
SM-Cyclo UK Ltd.
SM-Cyclo Italy Srl
SM-Cyclo Iberia, S.L.
SM-Cyclo Turkey Ltd. Sti.
Sumi-Cyclo Drive India Private LimitedHansen Industrial Transmissions NV
Sociedad Industrial de Transmissiones S.A.
Lafert S.p.A.
Lafert GmbH
Lafert Electric Motors Ltd.
Lafert Moteurs S.A.S.
ICME S.p.A.
Lafert (Suzhou) Co., Ltd.
Lafert Elektromotorji D.o.o.
Lafert Servo Motors S.p.A.
Lafert Servo Drives S.r.l.
Sumitomo (SHI) Cyclo Drive Korea, Ltd.
Sumitomo (SHI) Cyclo Drive China, Ltd.
SM-Cyclo of Hong Kong Co., Ltd.
Sumitomo (SHI) Cyclo Drive Logistics, Ltd.
Sumitomo Heavy Industries (Tangshan), Ltd.
Sumitomo (SHI) Cyclo Drive Asia Pacific Pte. Ltd.
SM-CYCLO (Malaysia) SDN. BHD.
SM-CYCLO (Thailand) CO., LTD.
Sumitomo (SHI) Hansen Australia Pty. Ltd.
PT SM-Cyclo Indonesia
SM-Cyclo (Vietnam) Co., Ltd.
Sumitomo Heavy Industries (Vietnam) Co., Ltd.

Cryogenic Equipment

Sumitomo (SHI) Cryogenics of America, Inc.
Sumitomo (SHI) Cryogenics of Europe GmbHSUMITOMO (SHI) CRYOGENICS OF EUROPE, LTD.
SUMITOMO (SHI) CRYOGENICS SHANGHAI, LTD.
SHI MANUFACTURING & SERVICES (PHILIPPINES), INC.

Precision Equipment
and Components

Sumitomo Heavy Industries Himatex Co., Ltd.
SUMIJU BUSINESS, LTD.
Sumiju Precision Forging Co., Ltd.
Persimmon Technologies Corporation

Semiconductor
Equipment

Sumitomo Heavy Industries Ion Technology Co., Ltd.
SENSE Co., Ltd.

Machine Tools

Sumitomo Heavy Industries Finetech, Ltd.

Defense Equipment

Sumiju Tokki Service Co., Ltd.

Construction Machinery Segment
Hydraulic Excavators
and Road Machinery

Sumitomo Construction Machinery Sales Co., Ltd.
Sumitomo Construction Machinery Co., Ltd.
Kenki Engineering Chiba Co., Ltd.
Kenki Support Chiba Co., Ltd.
Parks Koushinetsu Co., Ltd.
Esukei Ishisho Co., Ltd.
Osaka Sumijukenki Co., Ltd.
SCM (AMERICA), INC.
LBX Company, LLC
LBX do Brasil Comerico de Equipmentos Industriais LtdaLBX International LLC
Sumiju SCE (Xiamen) Construction Machinery Co., Ltd.
Sumitomo (S.H.I.) Construction Machinery (Tangshan) Co., Ltd.
Sumitomo Heavy Industries (China) Financial Leasing, Ltd.
PT SUMITOMO S.H.I. CONSTRUCTION MACHINERY INDONESIAPT SUMITOMO S.H.I. CONSTRUCTION MACHINERY SOUTHEAST ASIASCMSEA (Thailand) Co., Ltd.

Mobile Cranes

Sumitomo Heavy Industries Construction Cranes Co., Ltd.
LBCE Holdings, Inc.
Link-Belt Cranes, L.P., LLLPLBCE Services, Inc.
TRIAD MACHINERY, INC.

Precision Machinery Segment
Plastics Machinery

106

Sumiju Platec Co., Ltd.
Sumiju Logitech Co., Ltd.
Sumitomo Heavy Industries Modern, Ltd.
Izumi Seiki Co., Ltd.
SUMITOMO (SHI) DEMAG PLASTICS MACHINERY NORTH AMERICA, INC.
Sumitomo (SHI) Demag Plastics Machinery GmbH
Sumitomo (SHI) Demag Plastics Machinery (Italia) S.r.l.
Sumitomo (SHI) Demag Plastics Machinery (France) S.A.S.
Sumitomo (SHI) Demag Plastics Machinery (UK) Ltd.
Demag Plastics Machinery (Ningbo) Co., Ltd.
Sumitomo (SHI) Demag do Brasil Comercio de Maquinas para Plasticos Ltda
Sumitomo (SHI) Demag Plastics Machinery Sp. z.o.o.
JSC Sumitomo (SHI) Demag Plastics Machinery
Sumitomo (SHI) Demag Plastics Machinery Hungaria Kft.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Industrial Machinery Segment
Material Handling
Systems

Sumitomo Heavy Industries Material Handling Systems Co., Ltd.
Sumimec Engineering Inc.

Turbines and Pumps

Shin Nippon Machinery Co., Ltd.
Shin Nichizo Engineering Co., Ltd.

Quantum Equipment
and Cyclotron
Accelerators

SHI-ATEX Co., Ltd.
SHI Accelerator Service Ltd.

Sumitomo Heavy Industries, Ltd. Integrated Report 2019107

Major Subsidiaries and Affiliates

History

Ships Segment

1888 The Company was launched as a machinery production andShips

repair shop for the Besshi Copper Mine

Sumitomo Heavy Industries Marine & Engineering Co., Ltd.
Sumiju Yokosuka Kogyo Co., Ltd.

1897 Incorporated as Uraga Dock Co., Ltd.
1928 Name changed to Sumitomo Besshi Copper Mine, Ltd.—
Niihama Works

Environmental Facilities & Plants Segment
Energy-Related andEnvironmental
Protection Systems

Water Treatment
Systems

Sumiju Environmental Technologies, Ltd.
Sumiju Plant Engineering Co., Ltd.
Sumitomo SHI FW Energie B.V.
Sumitomo SHI FW Energia Polska Sp. z.o.o.
Sumitomo SHI FW Energia Oy
SHI FW FAKOP Sp. z.o.o.
Sumitomo SHI FW International Trading (Shanghai) Co., Ltd.
Sumitomo SHI FW Energy Management (Shanghai) Co., Ltd.
Sumitomo SHI FW Power Group Asia Ltd.
FW Europe B.V.
Sumitomo SHI FW Energy North America Corporation
Sumitomo SHI FW Energie GmbH
Sumitomo SHI FW Energia Aktiebolag
Sumitomo SHI FW Power Vietnam Ltd.
OOO Foster Wheeler Energia
Graf-Wulff US Corp.
Sumitomo SHI FW Service (Thailand) Ltd.
Sumitomo SHI FW Brasil Gerenciamento e Gestão Empresarial Ltda.
Sumitomo SHI FW Turkey Enerji Ekipman Hizmetleri Anonim Irketi
Sumitomo SHI FW Power Service Philippine Corporation
Amec Foster Wheeler Power Machinery Co., Ltd.
Sumitomo Heavy Industries Environment Co., Ltd.
SHI Airport System Co., Ltd.

Pressure Vessels,
Chemical Processing
Equipment and Plants

Sumitomo Heavy Industries Process Equipment Co., Ltd.

Food Processing
MachineryIzumi Food Machinery Co., Ltd.

Industrial andEnvironment
Equipment

Nihon Spindle Manufacturing Co., Ltd.
SFK Co., LTD.
Dalian Spindle Environmental Facilities Co., Ltd.
NIHON SPINDLE COOLING TOWERS SDN. BHD.

1934 Incorporated as Sumitomo Machinery Co., Ltd.
1940 Name changed to Sumitomo Machinery Industries Co., Ltd.
1945 Name changed to Shikoku Machinery Industries Co., Ltd.
1949 Listing of company stock on both the Tokyo and Osaka
Stock Exchanges

1952 Renamed Sumitomo Machinery Industries Co., Ltd.
1961 Established Nagoya Works
1962 Opened Hiratsuka Laboratory
Uraga Dock Co., Ltd. merged with Uraga Tamashima Diesel
Co., Ltd. to form Uraga Heavy Industries Co., Ltd.

1965 Established Chiba Works
1966 Establishment of Sumitomo Machinery Corporation ofAmerica (SMA)

1969 Merged Sumitomo Machinery Industries Co., Ltd. andUraga Heavy Industries Co., Ltd. to form Sumitomo Heavy
Industries, Ltd.

1972 Established Oppama Shipyard (currently known as
Yokosuka Works)

Establishment of Sumitomo Yale Co., Ltd. (currently,
Sumitomo NACCO Material Handling Co., Ltd.) jointlywith Yale Corporation in the U.S.

Braren GmbH (currently, Sumitomo (SHI) Cyclo Drive
Germany GmbH)1980 Established Sumitomo Heavy Industries Casting and

Forging Co., Ltd. (currently known as Sumitomo Heavy
Industries Himatex Co., Ltd.)
Precision Equipment Division (currently known as thePrecision Equipment Group)(currently, Sumitomo Heavy Industries Ion Technology
Co., Ltd.) jointly with Eaton Corporation in the U.S.

1986 Established Sumitomo (S.H.I.) Construction Machinery Co., Ltd.
1988 Separation of the Diesel Engine Division to form Diesel

United Ltd. jointly with IHI (current SHI stockholding ratio 0%)
jointly with IHI (current SHI stockholding ratio 0%)

known as Sumitomo Heavy Industries Gearbox Co., Ltd.)
Established Sumitomo Heavy Industries Engineering &Services Co., Ltd. (currently known as Sumitomo Heavy
Industries Material Handling Systems Co., Ltd.)

2000 Separated the precision forging business from the Company
and established Sumiju Precision Forging Co., Ltd.

Established Sumitomo Heavy Industries Finetech, Ltd.

Precision Machinery Segment
Forklift Trucks

Sumitomo NACCO Forklift Co., Ltd.
Three other companies

Co., Ltd. after a stock swap

Split the Shipbuilding Division and subsequently established
Sumitomo Heavy Industries Marine & Engineering Co., Ltd.
Merged the film processing equipment business andSumitomo Heavy Industries Modern Machinery, Ltd. toform Sumitomo Heavy Industries Modern, Ltd.

2004 Established Sumitomo Heavy Industries (Shanghai), Limited(currently known as Sumitomo Heavy Industries (Shanghai)Management, Ltd.)

2006 Acquired 100% ownership of SEISA Gear, Ltd.

(currently, Sumitomo Heavy Industries Gearbox Co., Ltd.)

2007 Established Sumitomo Heavy Industries Environment Co., Ltd.
Made Nihon Spindle Mfg. Co., Ltd. a subsidiary
Established Sumitomo Heavy Industries (Tangshan), Ltd.
Established Sumitomo (S.H.I.) Construction Machinery(Tangshan) Co., Ltd.

2008 Acquired 100% ownership of Demag Plastics Group(currently, Sumitomo (SHI) Demag Plastics Machinery GmbH)2009 Made SEN-SHI and Axcelis Company, a joint venture

Established Sumitomo Heavy Industries Process Equipment
Co., Ltd.

Works—Saijo Factory)

1999 Acquired Osaka Chain and Machinery, Ltd. (currently[ Equity-method affiliates ]2003 Acquired 100% ownership of Shin Nippon Machinery

1974 Equity investment made into Cyclo Getriebebau Lorenz

1983 Establishment of Sumitomo Eaton Nova Corporation

Lightwell Co., Ltd.
Izumi Support Corporation
Sumitomo Heavy Industries Business Associates, Ltd.
SUMITOMO HEAVY INDUSTRIES (USA), INC.
Sumitomo Heavy Industries (China), Ltd.

Establishment of Hitachi Sumitomo Heavy Industries
Construction Crane Co., Ltd. (currently, Sumitomo Heavy
Industries Construction Cranes Co., Ltd.) jointly with
Hitachi Construction Machinery Co., Ltd.

1973 Established Toyo Factory (currently known as Ehime

1995 Establishment of the naval shipbuilder Marine United

OthersPress Machine Divisions and established Sumitomo Heavy
Industries Techno-Fort Co., Ltd.

between SHI and Axcelis Company, a wholly owned
subsidiary (currently known as Sumitomo Heavy Industries
Ion Technology Co., Ltd.)1982 Merged with Nittoku Metal Industry Co., Ltd. to form the

Others

2002 Split the Company’s Paper Manufacturing Machinery and

Acquired CBC Tech Co., Ltd., a manufacturer of extrusion
molding machines, and renamed it as Sumitomo Heavy
Industries Modern Machinery, Ltd. (currently known as
Sumitomo Heavy Industries Modern, Ltd.)

2001 Split Sumitomo (S.H.I.) Construction Machinery Co., Ltd.

2010 Established Sumitomo Heavy Industries Business
Associates Ltd.

Acquired 100% ownership of Nihon Spindle Mfg. Co., Ltd.

2011 Acquired 100% ownership of Hansen Industrial
Transmissions NV in Belgium

Established Sumitomo Heavy Industries Gearmotors Co., Ltd.

2012 Establishment of Sumitomo Heavy Industries (China)
Financial Leasing, Ltd.

2013 Establishment of Sumitomo Heavy Industries Material

Handling Systems Co., Ltd., by integrating the logistics
system and automated parking lot businesses and Sumitomo
Heavy Industries Engineering & Services Co., Ltd.
Establishment of the Industrial Equipment Division by
integrating the Quantum Equipment Division and
Sumitomo Heavy Industries Techno-Fort Co., Ltd.

2015 Sumitomo Heavy Industries Material Handling Systems Co.,
Ltd. takes over the industrial crane business from Mitsubishi
Heavy Industries Machinery Technology Corporation

2016 Sumitomo Heavy Industries Environment Co., Ltd. mergedwith Sumiju Environmental Engineering Co., Ltd.

2017 Acquired 100% ownership of Persimmon Technologies in
the U.S.

Hitachi Sumitomo Heavy Industries Construction Crane
Co., Ltd. (currently, Sumitomo Heavy Industries Construction
Cranes Co., Ltd.) became a consolidated subsidiary
Acquired the CFB boiler business of Amec Foster Wheelerplc (currently, Sumitomo SHI FW Energie B.V.)

2018 Acquired 100% ownership of Italian industrial motor
manufacturer, Lafert Group

into two companies: Sumitomo Construction MachineryCo., Ltd., which focuses on roadwork equipment andexcavators, and Sumiju Construction Crane Co., Ltd., which
focuses on the crane businessTransfer of the Research and Development Center(currently, Technology Research Center) from Hiratsuka
Works to Yokosuka Works

108

Sumitomo Heavy Industries, Ltd. Integrated Report 2019

Sumitomo Heavy Industries, Ltd. Integrated Report 2019109

Corporate Data

(As of March 31, 2019)

Evaluations by External Organizations

Corporate Data
Head Office

Sumitomo Heavy Industries, Ltd.
1-1, Osaki 2-chome, Shinagawa-ku,
Tokyo 141-6025, Japan+81-3-6737-2331
http://www.shi.co.jp/english/index.html

Tel
URL

Domestic Offices
Chubu Office 10-24, Higashi-sakura 1-chome, Higashi-ku,
Nagoya-shi, Aichi 461-0005, Japan
Tel: 81-52-971-3063
Kansai Office 3-33, Nakanoshima 2-chome, Kita-ku,
Osaka-shi, Osaka 530-0005, Japan
Tel: 81-6-7635-3610
Kyushu Office 8-30, Tenyamachi, Hakata-ku, Fukuoka-shi,
Fukuoka 812-0025, Japan
Tel: 81-92-283-1670
Tanashi Works 1-1, Yato-cho 2-chome, Nishitokyo-shi,
Tokyo 188-8585, Japan
Tel: 81-42-468-4104
Chiba Works 731-1, Naganumahara-machi, Inage-ku,
Chiba-shi, Chiba 263-0001, Japan
Tel: 81-43-420-1351

Transfer Agent
Stock Exchange
Listing
SharesOutstanding
Number of
Shareholders

YokosukaWorks

19, Natsushima-cho, Yokosuka-shi,
Kanagawa 237-8555, Japan
Tel: 81-46-869-1842
1, Asahi-machi 6-chome, Obu-shi,
Aichi 474-8501, Japan
Tel: 81-562-48-5111
8230, Tamashima-Otoshima, Kurashiki-shi,
Okayama 713-8501, Japan
Tel: 81-86-525-6101
5-2, Sobiraki-cho, Niihama-shi,Ehime 792-8588, Japan
Tel: 81-897-32-6211
1501, Imazaike, Saijo-shi,Ehime 799-1393, Japan
Tel: 81-898-64-4811
19, Natsushima-cho, Yokosuka-shi,
Kanagawa 237-8555, Japan
Tel: 81-46-869-2300

OkayamaWorks
Ehime Works—Niihama
Factory
Ehime Works—Saijo
Factory
Technology
ResearchCenter

SHI received the following evaluations from external organizations during FY2018.
Name

Financial
Institutions

12.1%

34.9%

ForeignCompanies

Ownership
ratio (%)

The Master Trust Bank of Japan, Ltd.
(Trust account)

10,014

8.2

Japan Trustee Services Bank, Ltd. (Trust account)

6,479

5.3

NORTHERN TRUST CO. (AVFC) RE SILCHESTERINTERNATIONAL INVESTORS INTERNATIONALVALUE EQUITY TRUST

4,730

3.9

Sumitomo Life Insurance Company

4,333

3.5

NORTHERN TRUST CO. (AVFC) RE U.S. TAXEXEMPTED PENSION FUNDS

2,923

2.4

Sumitomo Heavy Industries, Ltd. Kyoeikai

2,714

2.2

Financial
Instruments
Business
Operators

Japan Trustee Services Bank, Ltd. (Trust account 9)

2,579

2.1

Japan Trustee Services Bank, Ltd. (Trust account 5)

2,245

1.8

Sumitomo Mitsui Banking Corporation

2,000

1.6

3.5%

STATE STREET BANK WEST CLIENT – TREATY 505234

1,827

1.5

Other Companies

43.6%

2,000

4,000

1,600

3,000

1,200

2,000

800

1,000

400

7

8

14th CSR Company Rankings

TOYO KEIZAI INC.

Overall ranking: 118th

Kurumin

Ministry of Health,Labour and Welfare

2018 certification

21st Environmental
Management Rankings

Nikkei Inc.

133th

2nd Smart WorkManagement Survey

Nikkei Inc.

3.5★

Share price (left)

5,000

6

B–

Note: Ownership ratios are calculated less treasury stock (380,153 shares). The Company’s
name is listed as the shareholder of record for treasury stock, but this figure includes 200
shares that the Company in effect does not own.

5.9%

Share Price Chart

4 5
2014

CDP

Third-party certification of Scope 1 and 2 CO2 emissions is on page 53.

Number ofshares held
(thousandsof shares)

Name of shareholder

34,210Individuals
and Others0

Climate change
Water security

Evaluation / Certification

Major Shareholders

122,905,481

TOPIX (right)

CDP
CDP

Sponsor organization(As of March 31, 2019)

Sumitomo Mitsui Trust Bank, Limited
Tokyo

Distribution of Shareholders

(Yen)

1888
November 1, 1934
¥30,871,651,300
22,543 (Consolidated)
3,002 (Non-consolidated)

NagoyaWorks

Stock-Related Information
Stock Information

FoundedIncorporated
Paid-In Capital
Number of
Employees

9 10 11 12 1 2
2015

3

4

5

6

7

8

9 10 11 12 1 2
2016

3

4

5

6

7

8

9 10 11 12 1 2
2017

3

4

5

6

7

8

9 10 11 12 1 2
2018

3

4

5

6

7

8

9 10 11 12 1 2
2019

3

4

5

6

0

*T
 he Company carried out a 5-to-1 reverse stock split for its common shares with an effective date of October 1, 2017. Figures for FY2014–2016 have been retroactively
adjusted as if the stock split had occurred at the beginning of each fiscal year.

110

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Integrated Report 2019

Sumitomo Heavy Industries, Ltd.

Integrated Report 2019111

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