Representative Director, President and Chief Executive Officer, Sumitomo Corporation
Sumitomo CEO on Growth Areas, Weak Yen Impact
One of Warren Buffett’s favorite Japanese trading houses, Sumitomo says a weaker yen is good for the company, but a prolonged depreciation is worrisome for the future of Japan. CEO Shingo Ueno spoke exclusively with Bloomberg's Shery Ahn at Sumitomo's headquarters in Tokyo about the firm's strategy and expansion plans, amid yen weakness.
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About Shingo Ueno
Shingo Ueno, who became CEO of Sumitomo Corporation about two months prior to a late June 2024 interview, stated that he aims to shift the company's approach "from defense to offense" and pursue "dramatic growth" over the next two years. He identified a focus on reallocating management resources into key areas such as agribusiness, and noted that the company evaluates potential investments based on dollar-denominated value rather than yen fluctuations. Ueno also announced a change to the company's shareholder return policy, which he said was intended to attract investors. Regarding the weak yen, Ueno said that a weaker yen is beneficial for Sumitomo to some extent, but added that "such a poor, say, Japanese yen depreciation... not good for the country's strengths in the long run." He declined to comment on specific conversations with activist investor Elliott Management, but stated that the company is open to discussing suggestions from various investors. Ueno also confirmed that Sumitomo has been communicating with Berkshire Hathaway, which he said has expressed expectations for the company's future growth.
Transcript (21 segments)
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Interviewer0:00
I know that you've been at the helm of your company for about two months now. You already have a management plan out there with some shifts in your portfolio. Tell us a little bit about the biggest changes that we can expect at Sumitomo.
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Shingo Ueno0:11
For the last three years we have been working on structural reform. So now it's changed the mood. I would like to change the mood from defense to offense. In other words, we will have to realize dramatic growth in the next two years. That's why I tried to change our company's mindset. The main theme is to be number one in each business line.
That's a kind of mindset, but at the same time I would like to accelerate the reallocation of our management resources into the focus areas. That's the main part.
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Interviewer1:03
Tell us a little bit about those focus areas, because as you said, you have so many different businesses.
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Shingo Ueno1:07
Exactly. There are especially eight business lines. We have steel businesses, healthcare, agriculture — so many things. Let me pick up three examples. One is agribusiness. We are doing fertilizer and biochemicals, expanding seed sales, and going into other types of agriculture products. We are now in Latin America and Europe, and we would like to expand that. That's the first one. The second is construction machinery businesses. We have been working in Canada and the United States in sales and also rental business. The rental business will be expanded to Singapore and other Southeast Asian countries, and then we are targeting Europe. The third one is real estate, where we would like to develop city or urban development projects centered on real estate. Those three have the strongest experience and competitive advantage.
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Interviewer2:36
When you were talking about expansion in your business, are we talking about growth coming organically or even through M&A? How would a very cheap Japanese yen play into that strategy? Because M&A has become more expensive when the yen is this weak.
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Shingo Ueno2:52
Exactly. However, we just count on a dollar basis. That's why nothing changes. Regardless of the yen appreciation or depreciation, we would like to see what the value is in dollars, and then we will decide whether to invest into those businesses. At the same time, for businesses where we are confident it will increase corporate value, we decided to go into the investment.
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Interviewer3:33
Does that mean that so far you're not seeing a meaningful impact from the depreciation of the yen?
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Shingo Ueno3:41
I don't think so.
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Interviewer3:44
Do you expect to see more meaningful impact? Because I know that your yen assumption for until March of 2025 was 140 yen.
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Shingo Ueno3:53
I know, I know. When I made that mid-term plan, our assumption was that the U.S.-Japan gap would be narrower at that time. But actually, as you said, it depreciated further. So I'm not sure what will happen in the future, but I think interest rates will rise slowly, and then yen depreciation may change to appreciation. I think it is good for our company to some extent, because the depreciated yen may mean around two billion yen increase in profit. However, such Japanese yen depreciation is not good for the country's strength in the long run.
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Interviewer5:14
Tell us a little bit about that, because we have seen that overall the yen weakness has helped exporters in Japan, but at the same time, households and smaller businesses have suffered. You have business lines in different sectors of the Japanese economy. At what point does it become too painful?
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Shingo Ueno5:44
If the yen depreciation is due to the lack of domestic demand for funds, then as I said, in the long run the Japanese economy will get weaker and weaker. So we need to create domestic demand for funds.
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Interviewer6:11
We're seeing a lot of interest from overseas businesses and foreign investors in Japan. And you've decided to boost your return to shareholders as well. Why now?
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Shingo Ueno6:25
I think the market is paying attention to Sumitomo Corporation. Many investors are showing interest. That's a very good thing. We would like to increase shareholder returns. That's why we decided to change our shareholder return policy to attract them.
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Interviewer6:56
Is there some negative attention as well? We know that Elliott Management apparently increased their stake at Sumitomo.
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Shingo Ueno7:00
We always appreciate the support of investors who share our interest and believe in our future growth potential.
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Interviewer7:17
Are you having those conversations with Elliott?
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Shingo Ueno7:21
I cannot say anything about conversations with specific investors. But I think we are very open to discuss with various investors, and if there is a very good recommendation or suggestion, we would try to utilize those ideas.
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Interviewer7:47
Have you gotten some of those recommendations from Berkshire Hathaway as well?
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Shingo Ueno7:50
Actually, we have been communicating with them. But they are also saying that they are expecting our future growth. So we would like to live up to their expectations.