Steel supports people’s lives and supports society. NSSMC plays the important role of broadly supporting the foundation of society through steelmaking. However, the business of steelmaking is deeply rooted in society, and so the business environment has a tendency to fluctuate greatly in connection with economic and industrial trends. Based on this recognition, we have endeavored to establish a strong earnings base centered on high-end products and a corporate structure that can overcome even a severe environment through various measures based on a long-term viewpoint.
The Mid-Term Management Plan ending in fiscal 2017 that we are currently implementing is the materialization of our intention to maintain growth in any environment. Recently, the environment surrounding us has become increasingly severe, with excess production capacity in China and declining demand depressing global steel prices and the drop in oil prices rapidly reducing demand for energy-related steel products. In particular, with regard to deterioration in the environment originating in China, although the Chinese government has steered in the direction of changing policy in order to reduce capacity, a full-fledged improvement is likely to take some time. Despite facing such a severe environment, I believe that we should focus all our efforts on implementing the Mid-Term Management Plan without any hesitation or deviation.
In the current Mid-Term Management Plan, our basic strategy is to achieve growth by placing particular emphasis on “technology,” “cost,” and “being global” as the pillars of our competitive superiority, with domestic businesses and overseas businesses acting as the two halves of the whole. In other words, we will strengthen our domestic manufacturing bases by prioritizing investment in facilities and human resources, acquire unsurpassable technological capabilities and cost competitiveness, and expand earnings in overseas markets by developing the best practices we have cultivated in Japan in overseas businesses and enhancing the strength of our overseas manufacturing bases. More specifically, by consolidating upstream processes including the cessation of blast furnaces and renovating facilities such as coke furnaces in Japan, we will refine our cost competitiveness. Moreover, in addition to maintaining and bolstering our technological superiority by ensuring a high level of investment in R&D, we will also expand recruitment and foster human resources that will support NSSMC in the future. Overseas, while increasing our production capacity to 19 million tons, we will focus on the three strategic sectors in which growth is projected in the medium to long term—automotive, energy and resources, and infrastructure-related. At the same time, we will establish an organization that can deliver high-quality, high-performance steel products to customers that are expanding their business operations overseas and thereby expand overseas earnings.
In addition to this series of initiatives, we adopted several measures that will lay the groundwork for our future growth at the start of 2016. In terms of measures in Japan, we commenced studies into making Nisshin Steel Co., Ltd., the fourth largest blast furnace steelmaker in Japan, a subsidiary of NSSMC and constantly supplying steel slabs to the company. In terms of overseas measures, we deepened the strategic partnership with the French firm Vallourec S.A., a manufacturer of steel pipes and tubes for the energy and resources sector, by increasing our equity investment in the company and expanding cooperation in R&D and customer service. Furthermore, we underwrote a capital increase by Usinas Siderurgicas de Minas Gerais S.A.-Usiminas, an equity-method affiliate in Brazil of NSSMC that is one of our most important bases overseas. All these investments were based on a long-term perspective and determined by focusing on technology, cost, and being global. Another measure we undertook to enable the implementation of flexible capital policy to support our growth strategy was the repurchase of 40 million shares of NSSMC’s common stock. I believe this share buyback will enhance the corporate value of NSSMC and, in turn, provide profits to our shareholders and other stakeholders.
Despite the current harsh environment, the economies of emerging nations especially are developing and people’s lives are becoming more affluent. Therefore, I am convinced that needs for steel will expand more and more, and I have not changed my view that the steel industry will grow over the long term. At NSSMC, we bear a heavy responsibility to supply high-quality steel that supports people’s lives and supports society to everyone. Based on safety, the environment, disaster prevention, and compliance, we will steadily implement the measures I have described to realize sustainable growth. In this way, NSSMC will firmly establish its position as the best steelmaker with world-leading capabilities and fulfill the expectations of all stakeholders. I look forward to your continued support and cooperation in this regard.
Nippon Steel & Sumitomo Metal Corporation
Kosei Shindo, President