Sumitomo Precision to exit, curtail profit-losing operations
Japanese company sees communications, water treatment as too costly to revive
OSAKA -- Sumitomo Precision Products will withdraw from or scale back loss-making businesses including communications as the Japanese company seeks to more than triple its operating profit margin to 5% over the next four years.
The manufacturer will slash staff in operations for thermal and environmental-related products. The company also will partner with trading house Sumitomo Corp., its new leading shareholder, to expand sales outlets in the profitable aerospace segment. Sumitomo Precision's operating margin totaled 1.5% for the fiscal year that ended in March.
Junichi Suekane, a company director and financial affairs official, discussed plans for the fiscal year through March 2021 with The Nikkei. Sumitomo Precision will cut about 50 technical workers at its domestic plants, as well as around 120 nonregular employees and other staff, over four years as part of an effort to reduce fixed costs by 1 billion yen ($8.96 million). The manufacturer hopes to shave off a further 900 million yen by reviewing how it procures materials.
Sumitomo Precision will exit operations in sensor networks, including in communications devices, as well as from its Chinese water-treatment equipment business. These operations have combined for a deficit of roughly 400 million yen. Though the company expects growing demand in those areas, it judged that turning the red ink to black would necessitate large-scale capital investment and other efforts.
The company's operating margin hit a high-water mark of 8.9% in the year ended March 2011. But Sumitomo Precision's production efficiency soured after expanding sales channels in the aerospace segment from defense bodies to include aircraft makers, and the margin has stalled in the 1-3% range.