Nisshin Steel Co., Ltd. adopted the "Medium-Term (FY2008) Consolidated Management Guideline" (Midterm Guideline)" for the whole corporate group at a Board meeting held today. An outline of the Midterm Guideline follows.
The "Midterm Guideline" sets out management goals for FY2008 taking into account the challenges that need to be overcome to achieve sustainable growth and the efforts necessary to meet these challenges from medium- and long-term perspectives. It also covers "various future management challenges (medium- and long-term challenges for growth)" and "various risks and the responses (to potential risks)" that will be required in the rapidly changing management environment.
We will seek to further enhance "consolidated corporate value" by realizing a growth strategy under the Midterm Guideline and also intend to proactively return the results of operations obtained to shareholders in line with the policy of returning profits to shareholders as newly set out under the Midterm Guideline. |
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| 1. Management Goals(millions of yen) |
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FY2005 Outlook |
FY2008 Goals |
| Consolidated |
Non-consolidated |
Consolidated |
Non-consolidated |
| Net sales |
560,000 |
420,000 |
610,000 |
460,000 |
| Income before special items |
69,000 |
67,000 |
80,000 |
70,000 |
| Net income |
35,000 |
36,000 |
45,000 |
40,000 |
| Cash flows from operating activities |
49,000 |
44,000 |
65,000 |
60,000 |
| Interest-bearing debt |
170,000 |
154,000 |
180,000 |
175,000 |
| Total assets |
710,000 |
610,000 |
780,000 |
680,000 |
* Assumptions Exchange rate: US$1=¥110 Crude steel output (FY2008): 4.2 million tons a year (including 700,000 tons a year of stainless steel)
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FY2005 Outlook |
FY2008 Goals |
| Consolidated |
Non-consolidated |
Consolidated |
Non-consolidated |
| ROS |
12% |
16% |
13% |
15% |
| ROA |
10% |
12% |
10% |
11% |
| ROE |
12% |
14% |
12% |
12% |
| EPS |
¥37/share |
- |
¥50/share |
- |
| BEP |
- |
63% |
- |
64% |
| D/E ratio |
0.55 |
0.55 |
0.46 |
0.49 |
| Interest-bearing debt/cash flows from operating activities |
3.4 |
3.5 |
2.8 |
2.9 |
* ROS (return on sales) = Income before special items/net sales, ROA (return on assets) = Business profit (income before special items + interest expense)/total assets, ROE (return on equity) = Net income/shareholders' equity, EPS (earnings per share) = Net income/(number of shares outstanding - treasury shares), BEP = Breakeven point, D/E ratio = Interest-bearing debt/shareholders' equity
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| 2. Direction of Management of the Nisshin Steel Group |
| In FY2004 and FY2005, the years covered by the ongoing 15th Medium-Term Management Plan (Profit Plan), we reinforced the financial base by securing steady profits that were much larger than initially forecast. Under the Midterm Guideline, in order to maximize the group's corporate value, we will implement an aggressive invest strategy and extensively invest management resources in areas where we are strong, making strategic moves to ensure further growth and responding to the changing environment at home and abroad. |
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| [Major Initiatives] |
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(1) |
Sustainable growth |
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① |
Advance into areas not affected by competition (Blue Ocean) |
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Expansion of strategic products by strengthening selling power (stainless steel, specialty steel, unique coated products) |
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Proportion of strategic products: Present 42% → FY2008 47% (over 50% in the future) |
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Ο |
Stainless steel... |
Expansion of "DNA: SUS" (strategic unique stainless steel with our DNA embedded) |
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DNA-SUS (Dynamic Nisshin Advanced Strategic Unique Stainless) |
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DNA proportion: Present 30% → FY2008 35% (over 40% in the future) |
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Ο |
Specialty steel... |
Pursuit of growth for products produced in small lots, with high degree of processing |
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Ο |
Unique Coated Products... |
Further market penetration of ZAM, advance into new areas |
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Present 35,000 tons/month → FY2008 45,000 tons/month |
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Building materials/processing... |
Creation of new markets by drawing upon the collective capability of the group and strengthening product development |
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Steel pipe business... |
In stainless steel pipes, shift to automotive exhaust pipes and piping
In ordinary steel pipes, development of strategic products (ZAM, specialty steel, high value-added products) |
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② |
Business operations specializing in our own strong areas in growth markets (overseas) |
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Promote operations in our own strong areas (stainless steel, surface treatment and other processing), using existing overseas bases and working jointly with partners (ACERINOX, Baoshan Iron and Steel, etc.) |
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③ |
Promotion of strategic partnership with domestic firms |
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Strengthen partnership with Nippon Steel & Sumikin Stainless Steel Corp. |
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Strengthen partnership with Nippon Metal Industry Corp. |
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Promote alliances with other domestic companies |
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(2) |
Securing product superiority |
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① |
Maintaining product superiority and boosting market creation by strengthening product development and research and development capabilities |
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Raising the proportion of new products/demand developments (Present 27% → FY2008 45%) |
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Quantity of new products/demand developments = |
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"quantity of new products introduced into the market in the past 10 years" + "quantity of products for strategic defense and sales expansion" |
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Aggressive resource investment into R&D and Market development |
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② |
Strengthening cost competitiveness |
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FY2008 variable cost reduction goal ¥9.0 billion/year (compared with FY2005 estimate: Non-consolidated) |
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③ |
Establishment of optimum production system |
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Actively promote investment that leads to stronger competitiveness and growth
Consolidated capital spending: ¥137.0 billion (on a construction basis, total for FY2006 - FY2008) |
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④ |
Securing stable supply of raw materials |
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Stronger ties with suppliers |
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(3) |
Strengthening consolidated management |
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① |
Sharing the group strategy based on consolidated management policy |
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② |
Optimum allocation of the group's management resources |
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③ |
Reinforcement of joint R&D systems with group companies |
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(4) |
Investment in human resources |
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① |
Securing, proactive fostering and prioritized assignment of human resources for promotion of strategies |
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Number of employees hired (FY2006 - FY2008 total): 690 (430 for Nisshin Steel) |
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② |
Maintaining and reinforcing shop floor strength through continuous handover of skills |
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③ |
Total efficiency and streamlining of business operations |
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| Through the above-mentioned initiatives and efforts, we plan to move away from intensively competitive markets (=markets for general-purpose products [Red Ocean]) and open up and create calm, competition-free markets (=high-grade, unique areas [Blue Ocean]), in order to maximize the group's corporate value. |
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| 3. Policy on Return to Shareholders |
| We will proactively return the results of business operations obtained through above-mentioned measures to shareholders under the following basic policy: |
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The gross total returns to shareholders combining dividends and share buybacks is set, in principle, at 20-30% of consolidated net income, and the return to shareholders shall be made mainly through dividend payments, supplemented by share buybacks. |
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| 4. Medium- and Long-Term Challenges to Growth |
In parallel with the implementation of the Midterm Guideline, we will deal with medium- and long-term challenges, and achievements made in the course of the period will be reflected in the Guideline.
The main challenges include the following: |
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① |
Examination of medium- and long-term challenges in product strategy covering coated steel, stainless steel, specialty steel, steel pipes, etc. |
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② |
Procurement of sources of iron to supplement growth of strategic products (stainless steel, specialty steel, unique coated products) |
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③ |
Overseas business operations |
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④ |
Alliances with domestic companies |
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⑤ |
Securing stable raw materials supply resources |
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| 5. Potential Risks |
| Taking into account the rapidly changing business environment at home and abroad, we will identify potential risks during the implementation period of the Midterm Guideline as well as measures to avert these risks, thereby establishing a system under which we will be able to rapidly respond to any deterioration in the business environment. |
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| Period. |
