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2011 New Year's Message from President Hiroshi Sato

January 5, 2011

On January 5, the first working day of the New Year, President and CEO Hiroshi Sato gave a New Year's message to company employees. Here is a summary of his remarks translated from the Japanese.

1. Business Conditions

In the global economy, emerging nations have continued growing, while Japan and other developed countries have shown only modest recovery. I expect stagnation and uncertainty will remain in 2011. Business conditions surrounding the Kobe Steel Group are also expected to remain mixed. In the material sector, competition is ever intensifying with companies in East Asia building up capacity, while raw material prices are widely predicted to remain high. The impact of these trends is unavoidable. In the machinery field, private-sector capital investment in Japan is expected to remain slow and the rising yen has been eating away export profits, thus putting pressure on profitability. On the other hand, Kobelco Construction Machinery is seizing China's strong demand and pursuing a path of solid growth. Business conditions are mixed with good and bad news, but if we look at the big picture, the global economy is expanding and business opportunities are increasing.


The Kobe Steel Group has been making steady progress in accordance with the policies set forth in our Medium- to Long-Term Business Vision called KOBELCO VISION "G" drawn up in April 2010.

One of our basic policies in this vision is penetrating deeper into growing markets. In this regard, we have decided to make capital investments in China to increase production of excavators and compressors; expand our crane business into China and India; and grow our aluminum forging business in China. We have also decided to build a new plant in the U.S. to manufacture cold-rolled high-strength steel for automobiles. As for our new ironmaking process ITmk3, the world's first commercial plant successfully began production of iron nuggets and we have received many inquiries from various countries, including Vietnam and India.

Another basic policy is to further strengthen our "monozukuri" skills, or in other words enhance our manufacturing excellence. In addition to the day-to-day activities of each of our businesses, we have been making cross-sectional efforts in order to exercise the Kobe Steel Group's comprehensive capabilities. For example, a new department called the MONODZUKURI Planning and Promotion Department operates as a secretariat to introduce advanced efforts made by some of our businesses to other businesses within the Kobe Steel Group. Through such "barrier-free" communication within the Group, we have been blending our diverse technologies and know-how and enhancing our monozukuri skills. I am encouraged to see such progress.

3. Medium-Term Business Plan

Fiscal 2010 to 2012 is the first phase of KOBELCO VISION "G." We have started drawing up a medium-term business plan covering this three-year period and will set forth profit targets for both fiscal 2011 and fiscal 2012. With KOBELCO VISION "G" being our basic policy in the medium and long term, we will also develop concrete plans to achieve sales of 3 trillion yen and ordinary income of over 200 billion yen. Our future direction can be summarized as follows: We will maintain stable production of high-value added, highly profitable "Only One" products made at an appropriate cost. We will reinforce our organization and develop our human resources in order to accelerate our globalization and expand our sales volume. We will also achieve sustainable growth hand in hand with society. In pursuing this direction, we are facing three important challenges.

a)  Maximizing profits
First, in order to enhance the profitability of our current businesses and to maximize our cash flow, we will try to determine every possible means to do so, such as improving productivity, cutting costs, raising selling prices, expanding sales, and utilizing investments and loans. We intend to implement these measures as early as possible.
b)  Pursuing growth investment
Second, in order to pursue growth strategies being developed by many of our businesses, we need to start new investments in a timely manner and I am determined to make timely decisions. At the same time, we also have to make our balance sheet stronger. For this reason, it is important that we maximize our profits and cash flow to raise money for investment.
c)  The importance of the "S" factors
And third, in my profit formula, P = (@ - c) x d x S,* "S" represents such factors as "safety" and "social responsibility." I regard the "S" factors as the basis for business activities. "Safety" entails establishing a safety and disaster prevention framework and "social responsibility" entails coexisting with society - for example, ensuring legal and ethical compliance and consideration for the environment. I would like each of you to regard the "S" factors as your own issues, paying attention to safety and the environment and turning Kobe Steel into a company with a strong law-abiding spirit. "S" also represents "service." If we have a spirit of good service and put ourselves in our customer's shoes, we can create products that meet market needs and improve customer satisfaction. I would like all of you to be aware that better service is essential to survive increasingly tough global competition. Better service will enable us to bring in greater profits.

4. Conclusion

Last year, I visited many of our plants and offices, both at home and abroad, trying to share with you KOBELCO VISION "G." I intend to continue this year such communication with all of you to deepen our mutual understanding. Let us step forward hand in hand to make 2011 a year of steady growth for the Kobe Steel Group, as well as for all of you.


Profit Formula
P = (@ - c) x d x S

  • P: profit
  • @: unit price
  • c: cost
  • d: quantity
  • S: various added values such as safety, social responsibility and service