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| Kobe Steel Group Unveils Medium-Term Business Plan |
| In Pursuit of Stability and Growth in Fiscal 2006-2008 |
|
April 13, 2006
| TOKYO, April 13, 2006 - Kobe Steel, Ltd. announced today
its medium-term business plan covering fiscal years 2006 to 2008 (April
1, 2006 to March 31, 2009). |
|
|
| I. Introduction |
|
| Under the previous Fiscal 2003-2005 Consolidated
Medium-Term Business Plan to strengthen business profitability, Kobe Steel
expects to achieve higher figures in nearly all targeted areas by carrying
out structural changes and improving its foundation.
Under the new Fiscal 2006-2008 Medium-Term Business
Plan, Kobe Steel aims to achieve top-class profitability as a domestic
manufacturer by implementing the following policies:
| 1. |
Expand the sales of and create "Only One" distinctive,
upper-end products that make full use of the Kobe Steel Group's
strengths and expertise.
|
| 2. |
Maintain and strengthen production infrastructure,
the basis for manufacturing industries.
|
| 3. |
Establish a solid financial base to
undertake necessary strategic investments. |
At the same time, the Kobe Steel Group intends to
build a strong corporate structure that is responsive to changes in the
business environment. It aims to achieve stable profitability, as well qualitative
and sustained growth. |
|
| II.Basic Policies |
|
|
 |
1. Expanding and creating "Only One"
distinctive, upper-end products |
|
The Kobe Steel Group defines
"Only One" products as original, value-added products that
have received high evaluations from customers. The Kobe Steel Group
plans to focus on strengthening and improving "Only One"
products under the following policies:
(In fiscal 2005, sales of upper-end products are expected to comprise
35% of total sales. By fiscal 2008, upper-end products are anticipated
to make up 40% of total sales.) |
|
|
| 1. |
Further expand sales of "Only One"
products, based on a firm grasp of market trends, and stabilize and
improve profitability. |
| 2. |
Grow and create "Only One"
products that meet the needs of customers and the times by combining
the technology and information spanning the diverse areas of the Kobe
Steel Group. |
|
|
|
2. Strengthening "monozukuri" capabilities
-- skilled manufacturing |
|
|
"Monozukuri" strength
(skilled manufacturing), the basis for manufacturers, consists of
comprehensive capabilities covering advanced technological development,
the upgrading of production technologies, meeting the need for stable
production, and other initiatives and innovations that support manufacturing
personnel. The Kobe Steel Group plans to carry out the following
policies:
|
|
|
| 1. |
Focus on cost reduction, including
energy savings and improving yield. Thoroughly undertake quality control
and risk management.
|
| 2. |
Giving consideration to balancing financial
soundness, implement capital investments for sustained growth and
to further improve and add value to products.
|
| 3. |
To manufacture "Only One"
products, improve production technologies and the research and development
structure to strengthen competitiveness. |
|
|
|
|
|
3. Strengthening the financial base |
|
| While undertaking strategic investments for sustained
growth, the Kobe Steel Group plans to continue focusing on improving its
financial structure. It plans to build a solid financial base resistant
to changes in the business environment. |
|
|
4. Promoting corporate social responsibility |
|
| The Kobe Steel Group will systematize CSR activities throughout
the Group. The Kobe Steel Group will thoroughly carry out compliance activities,
as well as focus on improving corporate governance. It will also undertake
environmental management through improved operations and equipment utilization. |
|
|
5. Creating a positive work environment that
instills pride in employees' work |
|
| For all Kobe Steel Group employees, the Kobe Steel Group
plans to establish safer and more comfortable workplaces, as well as improve
the working environment to support diverse employees in developing their
abilities. The Company will also further strengthen skill transference from
older to younger workers and human resources development.
|
|
|
6. Strengthening group management |
|
|
| By integrating systems and information infrastructure
and deploying the "KOBELCO" brand throughout the Group, Kobe Steel
plans to nurture a strong shared unity and enhance the capabilities of the
Kobe Steel Group. |
|
|
|
|
7. Stable returns to shareholders |
|
|
| The basis is to provide stable dividends regularly. On
this basis, the projected consolidated dividend rate is anticipated to range
from 15% to 25%.
|
| III. Financial Targets |
|
|
1. Major Targets (in billions of yen) |
|
| |
Fiscal 2008 Plan
|
| Sales |
About 1,900 |
| Operating income |
230 or more
|
| Ordinary income |
180 or more
|
| Net income |
100 or more
|
| Debt |
550 or less |
| Debt/equity ratio2 |
0.8 or less |
| ROA3 |
5.0% or more |
|
|
| Fiscal 2005 Forecast |
FY2003-2005 Medium-Term
Plan |
| 1,660 |
1,250 |
| 2151[191] |
125 |
| 1701[146] |
80 |
| 801[86] |
36 |
| 600 |
640 |
| 1.2 |
1.7 |
| 4.3% |
-- |
|
| Notes: |
| 1. |
In the fiscal 2005 consolidated forecast ended
March 2006, the following figures were revised:
The change to the average method of evaluating inventories is expected to
result in an additional 24 billion yen of profit. Without changing to the
average method, operating income would be 191 billion yen, and ordinary
income would be 146 billion yen. Extraordinary loss of 22 billion yen has
been excluded. |
| 2. |
In the D/E ratio, shareholders' equity consists
of common stock, capital surplus and retained earnings. |
| 3. |
Net income/total assets |
|
2. Financial Targets by Business Segment
(in billions of yen) |
|
| Segment |
Fiscal 2008 Plan |
Fiscal 2005 Forecast |
| Sales |
Operating Income |
Ratio of operating income to sales |
Sales |
Operating Income
(revised) |
Ratio of operating income to sales |
| Iron & Steel |
850 |
130 |
15.3% |
760 |
108 |
14.2% |
| IPP |
65 |
19 |
29.2% |
65 |
19 |
29.2% |
| Aluminum & Copper |
365 |
23 |
6.3% |
300 |
18 |
6.0% |
| Machinery |
285 |
18 |
6.3% |
265 |
10.5 |
4.0% |
| Construction Machinery |
280 |
15 |
5.4% |
220 |
9.5 |
4.3% |
| Real Estate |
45 |
5 |
11.1% |
45 |
4.5 |
10.0% |
| Electronic Materials, Other |
65 |
20 |
30.8% |
60 |
18 |
30.0% |
| Eliminations |
(55) |
-- |
-- |
(55) |
3.5 |
-- |
| Total |
1,900 |
230 |
12.1% |
1,660 |
191 |
11.5% |
|
3. Cash Flow Plan (in billions of yen) |
|
Cash flows from operating activities
(Depreciation, within cash flows from operating activities) |
480
280 |
| Use |
Dividends |
(60) |
| Capital expenditures, investing
and financing |
(370) |
| Reduction of debt |
(50) |
| Note: From fiscal 2006, the method
used for machinery and equipment depreciation was changed from the straight-line
method to the declining-balance method. |
|
4. Profit-Improving Plan (in billions
of yen) |
|
| Fiscal 2008 Target |
Fiscal 2005 Forecast* |
Profit Increase |
| 180 or more |
146 |
34 |
| *Without changing to the average
method of evaluating inventories |
| Area |
Amount (billions of yen) |
Content |
| Increasing |
Decreasing |
| Expanding "Only One"
products |
58 |
|
Higher demand, higher value (of which steel
comprises 36 billion yen) |
| General and standard products |
|
(7) |
Change in demand, change in market conditions
(of which steel comprises 15 billion yen) |
| Cost improvements |
32 |
|
Improvements in yield, unit cost, energy savings,
etc. |
| Upgrading of production facilities |
|
(28) |
R&D, depreciation, etc. |
| Others |
|
(21) |
|
| Total |
90 |
(56) |
|
|
|
| IV.Measures by Business Segment |
|
|
| Common policy for business segments |
|
|
By expanding the sales of and creating
"Only One" products and strengthening "monozukuri"
(skilled manufacturing) capabilities, Kobe Steel intends to establish
a business structure that promotes stability and growth in the medium-
to long-term future.
|
|
|
| (1) |
Steadily expand sales in areas of stable,
anticipated growth. (e.g. automotive specialty steel, high strength
steel, electrogalvanized steel sheet with special treatments)
|
| (2) |
Actively respond to growth fields such as steel castings and forgings,
titanium products, and welding consumables.
|
| (3) |
Strengthen manufacturing technologies
and build a stable production system. |
| (4) |
Carry out strategic investments in line
with demand trends.
|
|
|
|
|
| (1) |
Focus management resources on the automotive
and IT fields.
(e.g. automotive aluminum sheet, aluminum forgings for suspensions,
aluminum disk material, copper strip for the IT and semiconductor
fields) |
| (2) |
Make further improvements in quality and productivity by remodeling
equipment.
|
|
|
|
|
|
3. Machinery & Construction Machinery |
|
|
| (1) |
Expand "Only One" products
in the resource and energy fields, such as compressors and pressure
vessels used in oil refining. |
| (2) |
Strengthen the iron unit business and increase its profitability.
|
| (3) |
Drastically reduce costs and improve
profitability in the environmental business.
|
| (4) |
In the construction machinery business, focus on overseas operations;
strengthen the environmental and recycling machine menu.
|
|
|
|
|
| Meet the growing demand for target material used in LCD
panels; develop and commercialize new products. |
|
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|
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