President’s Message

President and Chief Executive Officer
Sumitomo Corporation of America

It goes without saying that the fiscal year ending March 31, 2010 was a tough year for everyone, and our company was no exception. The ongoing liquidity problems and the financial meltdown in 2008 all continued to severely impact the global marketplace and made it extremely challenging to maintain the steady growth we had managed to achieve in years prior. Given the cyclical nature of some of our business areas, it can be difficult to control results when markets fluctuate so severely.

A combination of the slowdown of overall U.S. economy in addition to the increased instability in the overall global market contributed to our shortfall last year, closing the year with a consolidated net income of $80.9 million, which was down from fiscal year ending March 31, 2009.

With the macro environment still unstable in many regards, our people worked extremely hard to weather this "perfect storm" and through careful management of their inventories and cost cutting, and being more vigilant to our goals of profitability, most managed to maintain control of their business and get a fair return on their investments.

I am proud of the dedication and strong efforts that everyone in our company exuded during this difficult year. At the same time, I was very pleased with the initiatives that were taken toward the future through continued innovation of our business model and leveraging opportunities in developing business in new and emerging industries, like clean technology and renewables.

With the implementation of our current mid-term business plan FOCUS 10, we concentrated on managing our assets and balance sheet exposures. Our concern was to ensure that our credit remained strong and efficient through promotion of medium and long-term growth. These efforts paid off and we have maintained a strong balance sheet which has allowed us to capitalize on emerging prospects for the future.

I believe that SCOA's strengths are its integrated corporate functions and its diversified portfolio of businesses. It's this diversity that contributes to our ability to remain profitable, even during a recession.

For instance, although our businesses that rely on the housing industry did continue to suffer, we were at the same time able to take advantage of low prices and acquire new assets in other business sectors at fairly good rates. Our Tubular products group once again was our leader in revenue, although their earnings were softer than the year prior. However, they anticipate the marketplace is improving and their numbers will start to trend upward again.

The Steel and Non-Ferrous Metal group continued to feel the effects of reduced demand in 2009, which caused deterioration in prices and margins. Although the group faced a difficult year, the Specialty Steel unit enjoyed stronger results compared to 2008.

Our Machinery, Power and IT group had lower income from the Automotive Business unit, which was hit hard by the economic downturn. However, investments in green energy projects and traditional power plants fostered revenue growth in the Power and Telecom Business unit.

The Chemicals and Electronics group's consolidated subsidiary The Hartz Mountain Corporation experienced a significant turnaround from the negative impact of impairments taken in 2008. With stronger results from Hartz and other subsidiaries, the Life Science unit net income increased by $41 million compared to 2008.

The Living-Related Business group's consolidated subsidiary, TBC Corporation, a wholesale and retail tire business, saw increased income in 2009 as consumer spending on tires increased as consumers began to hold cars longer in the uncertain economy. TBC's contribution helped the Living-Related Business group increase income by $32 million in 2009 compared to 2008.

In this context, I believe we have taken strong actions to protect the Company during this recessionary cycle. I can confidently say that SCOA is managing its business for the long-term, adhering to the ethical principles embodied in our mission statement. These are timeless management principles that are woven into the fabric of our corporation and will continue to see us through the challenges and prospects that lie ahead.

Michihisa Shinagawa
Sumitomo Corporation of America
President and Chief Executive Officer

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