Jfe Holdings, Inc. · TSE:5411
Jfe — Morgan Stanley MUFG Teleconference (October 2010)
71 slides from Jfe's conference presentation, Oct 26, 2010
Slide 1: JFE Group: Capturing Growth Opportunities in Greater East Asian Market
Morgan Stanley MUFG for the Teleconference, 26th October 2010 JFE Group Capturing Growth Opportunities in Greater East Asian Market JFE Holdings, Inc. October 2010 1
Slide 2: Contents
Contents 1. Financial Results for the Second Quarter ending March 31, 2011…………………………………..3 2. Financial Forecast for the FY10 …………………………8 3. Interim Dividends…………………………………………14 4. Topics ……………………………………………………..15 5. Others……………………..……………………………….38 This presentation material is for information and dis
Slide 3: 1. Financial Results for the Second Quarter
1.Financial Results for the Second Quarter ending September 30, 2011 3
Slide 4: Financial Results for the Second Quarter
Financial Results for the Second Quarter JFE Holdings ending September 31, 2011 (billion yen) FY2009 FY2010 Change Apr-Spｔ Apr-Spｔ Net Sales 1,307 1,572 266 Operating Income -41 115 156 Other loss -16 -10 7 Ordinary Income -57 105 162 Extraordinary loss 0 -20 -20 Income before income taxes and minor
Slide 5: Sales/Recurring Profit by Business Segment
JFE Holdings Financial Results for the Second Quarter ending September 31, 2010 Sales/Recurring Profit by Business Segment (billion yen) FY2009 FY2010 Change Apr-Spt Apr-Spt Steel 1,062 1,370 308 Engineering 117 105 -12 Shipbuilding 139 107 -32 Urban Development 11 9 -2 LSI 12 12 0 Eliminations and
Slide 6: Decrease in JFE Steel's Ordinary Income (1Q vs 2Q)
JFE Steel 4Bn Yen Decrease in JFE steel’s Ordinary Income (FY10-1Q v.s. FY10-2Q) Billion yens CY2009 CY2010 Changes Apr-Jun Jul-Spt Oct-Dec Jan-Mac Apr-Jun Jul-Spt previous Q Sales 476 586 589 631 657 712 55 Operating Profit ▲ 70 12 45 60 47 51 4 Ordinary Profit ▲ 77 4 42 62 46 42 ▲4 Sales-related
Slide 7: Increase in JFE Steel's Ordinary Income (1H vs 2H)
24 Bn Yen Increase in JFE steel’s Ordinary Income JFE Steel (FY10 1H(Apr-Spt) v.s. 2H(Oct-Mar) Billion yen Apr-Spt Oct-Maｒ Chnages Ordinary 88 112 24 Income Sales-related 70 Sales price increase Raw Material -60 Including negative impact of –90Bn yen carry-over* Cost Reductions 20 Inventory
Slide 8: 2. Financial Forecast for FY10
2. Financial Forecast for FY10 8
Slide 9: Financial Forecast for FY10
Financial Forecast for FY10 Financial Results (billion yen) FY2010（ Previous） FY2010（ Current） Change Apr-Spt Apr-Mar Apr-Spt Apr-Mar Apr-Spt Apr-Mar Net Sales 1,620 3,420 1,572 3,360 -48 -60 Operating Income 105 230 115 230 10 0 Other loss -5 -10 -10 -10 -5 0 Ordinary Income 100 220 105 220 5 0 Ext
Slide 10: Sales/Recurring Profit by Business Segment Forecast
Financial Forecast for FY10 Sales/Recurring Profit by Business Segment (billion yen) FY2010（ Previous） FY2010（ Current） Change Apr-Spt Apr-Mar Apr-Spt Apr-Mar Apr-Spt Apr-Mar Steel 1,410 2,960 1,370 2,900 -41 -60 Engineering 110 270 105 270 -5 0 Shipbuilding 110 210 107 210 -3 0 Urban Development 7
Slide 11: Financial Forecast for FY10
Financial Forecast for FY10 (billion yen) FY09(A) FY10(e) Change Full Year Full Year (Y/Y) Steel 2,281 2,900 619 Net Sales 2,844 3,360 516 Operating Income 89 230 141 Steel 32 200 168 Ordinary Income 69 220 151 Net Income 46 110 64 11
Slide 12: Reference: Increase in JFE Steel's Ordinary Income
Reference: 168 Billion Yen Increase in JFE Steel’s Ordinary Income (FY 09(A) vs. FY 10(e)) (billion yen) Change JFE Steel FY09 FY10 FY09⇒FY10 Ordinary Income 32 200 168 Sales-related 330 Sales price increase, Volume increase Raw materials -310 *Including positive impact of 150Bn yen carry-over* Cost
Slide 13: C/F & Debt Outstanding for the FY10
C/F & Debt Outstanding for the FY10 (billion yen) Ordinary Income 220 Cash Flow Depreciation 250 Keep the same level with Capex - 220 the previous year Investments(JSW) - 100 NWC/Tax/Dividend etc. - 152 Debt Outstanding 2,057.1 1,837.4 1,768.7 1,446.7 1,470 1,468.4 1,281.9 1,180.5 1,162.8 FY02 FY04
Slide 14: Proactive Return to Shareholders
Proactive Return to Shareholders Basic Policy for pay-out ratio is around 25%. Pay-out Ratio 16% 16% 18% 23% 27% 25% 23% (billion yen) 80 70 60 50 58.5 70.5 40 17.5 26.3 68.8 30 49.0 20 10.5 10 0 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 Dividends (yen/share) 30 45 100 120 120 90 20 14
Slide 15: 3. Topics
3.Topics 15
Slide 16: (1) More Self Sufficiency for Raw Materials
(1) More Self Sufficiency for Raw Materials 16
Slide 17: JFE Group to acquire Australian Coal Mine interests
JFE Group to acquire Australian Coal Mine interests （announced on October 20, 2010) Overview of the Mines to be acquired by JFE Trading Baralaba Mine Wonbindi Project Location Queensland, Australia Share 37.5% 20% of JFE Mining Method Open Cut Coal Types Low Volatile PCI, Thermal Coal Production Vol
Slide 18: Increasing Self-Sufficiency Ratio
Increasing Self-Sufficiency Ratio ・A steady, secure supply of raw materials is a source of competitive strength. ・Consequently, JFE Steel acquires resource rights where there is a clear economic rationale for doing so. ・Aim at increasing the self-sufficiency ratio from 18% to 30% in some two years.
Slide 19: (2) Target Market: Greater East Asia as our Home Market
(2) Target Market Greater East Asia as our “Home Market” 19
Slide 20: JFE Steel to Construct CGL for Autos in Thailand
JFE JFE Steel Steel to to Construct Construct CGL CGL for for Autos Autos in in Thailand Thailand Announced on Oct.22, 2010 □JFE determined to construct Thailand’s first CGL for Automobiles, -Capturing the growing demand of high-end automotive steel sheets . -Customizing the automakers’ strategies o
Slide 21: Growing Automobile Market in Thailand
Growing Growing Automobile Automobile Market Market in in Thailand Thailand Thailand Auto makers plan further expansion of their capacity. 2 million units in 2009 → 2.7 million units in 2015 3.0 Capacity Expansion after 2010 Units Nissan: 2010, 120 thousand units (operating) in million Suzuki: 2012,
Slide 22: Location
Location Location ●：Automakers チャオプラヤ川 Thailand Honda All of the Automakers in Thailand are located within Hemaraj district. Bangkok Isuzu② Nissan Isuzu① Toyota③ Toyota② Toyota① Ford Suzuki The new CGL will enable Mitsubishi JFE steel to respond to GM Ford,Matsuda increasingly sophisticated Map Ta P
Slide 23: Capturing growing demand for high-end steel in Asian markets
Capturing growing demand for high-end steel in Asian markets. Shipments to allied steelmakers, following a temporary decrease due to the global economic crisis triggered by the collapse of Lehman in FY2008, continue to increase as the company captured growing demand for high-end steel in Asian marke
Slide 24: 4. Steel Business Environment
4. Steel Business Environment 24
Slide 25: (1) Market Conditions
(1)Market Conditions 25
Slide 26: Export Demand and Supply Trends in Asia (2010)
Export Demand and Supply Trends in Asia (2010) Healthy demand and supply trends in Asia will continue throughout the year 2010 Demand Increase in Asia Capacity Increase in Asia Apparent Steel Use in Asia (09⇒ 10) 1,200 +67Mt(y/y)* 1,000 Crude Steel +64Mt(y/y) Others Production 900 1,000 India Othes
Slide 27: Crude Steel Production & Im/Export, China
Export Crude Steel Production & Im/Export, China Supply-demand situation is expected to balance by the end of this year. 10 60 Crude Steel 9 Production (Mt) 8 Right axis 7 40 Im /Export (M t) 6 5 4 20 3 2 1 0 0 08/1 09/1 10/1 3 5 7 9 11 3 5 7 9 11 3 5 7 9 27
Slide 28: World Steel Capacity Utilization Ratio
Export World Steel Capacity Utilization Ratio World steel capacity utilisation ratio 85.0% 82.2% 80.0% 74.4% 75.0% 70.0% 65.0% 60.0% 61.5% 55.0% 50.0% Jun-09 Jun-10 Apr-09 Apr-10 Oct-08 Feb-09 Oct-09 Feb-10 Aug-08 Dec-08 Aug-09 Dec-09 Aug-10 Source :WSA 28
Slide 29: Steel Sheet Prices in China
Export Steel Sheet Prices in China (US$ / ton) Price has rebounded since late July and we assume gradual increase as its upward trend is not so strong. $800 HRC CRC $700 $600 $500 $400 Nov Aug Aug Jun Jun Oct Apr Apr Ma Dec Ma Jan Feb Sep Jan Feb Sep Jul Jul Mar Mar CY2009 CY2010 Notes: Figures does
Slide 30: Auto Sales in Key Countries
Export Auto Sales in Key Countries Upward momentum continues in Asian Region. Keep rising y/y. Automobile Sales in Key Countries (YoY changes) 120% 100% Korea China 80% 80% 60% 40% 40% 20% 0% 0% -20% -40% Indonesia Thailand India -40% -60% Jul,Aug Apr-Jun Apr-Jun Apr-Jun Apr-Jun Oct-Dec Oct-Dec Oct-
Slide 31: Production in China
Export Production in China Consumer Goods Production(Year-on-year growth) 150% Automobiles 100% Refrigerators 50% 0% -50% TV Air conditioners -100% Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- 09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 1
Slide 32: Domestic Production Volume of Automobiles
Domestic Production Volume of Automobiles FY05(10.9M) FY06(11.5M) FY07(11.8M) FY08(10.0M) FY09(8.9M) FY10(9.5M) 3.50 3.13 3.18 2.98 2.97 2.88 2.91 2.99 3.00 2.74 2.73 2.79 2.74 2.61 2.76 2.58 2.59 2.54 2.47 2.50 2.30 2.14 million units 2.00 1.71 1.61 1.50 1.00 0.50 0.00 Apr-Jun Jul-Sept Oct-Dec Jan-
Slide 33: Combined Inventories of Domestic Steel Sheet
Combined Inventories of HR, CR and Domestic Surface-treated Steel Sheet 5,000 Maker Wholesaler Coil center 4,500 4,000 3,500 thousand tons 3,000 2,500 2,000 1,500 1,000 500 0 Jul-08 Jul-09 Jul-10 Oct-08 Oct-09 Jan-08 Apr-08 Jan-09 Apr-09 Jan-10 Apr-10 33
Slide 34: Domestic Business Environment
Domestic Business Environment Overall: The gradual recovery since FY 2009 will continue, but demand from construction sector will remain at low levels. Steel Demand from Manufacturing Industry Steel Demand from Construction Sector 10,000 10,000 9,000 Shipyards Automobiles Others 9,000 Construction 8
Slide 35: (2) Price Trends of Raw Materials
(2) Price Trends of Raw Materials 35
Slide 36: Main Raw Material Prices
Raw Materials Main Raw Material Prices (US$/ton) 300.0 300 280 260 225(+12.5％) 240 220 200(+55％) 200 209 180 160 147(+22.5%) 140 120 89.7 129 120(+100%) 127 100 80 Australian premium hard coking coal 60 40 60.1 20 Australian fine ore (62% Fe) 0 03 04 05 06 07 08 09 10-1Q 10-2Q 10-3Q 36
Slide 37: Trends in Scrap Price
10,000 20,000 30,000 40,000 50,000 60,000 70,000 （Yen/ｔ） Apr-05 Jul-05 Oct-05 Raw Jan-06 Materials Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Trends in Scrap Price Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 37
Slide 38: 5. Others
５. Others 38
Slide 39: JFE Engineering Results: Changes between FY2009 and FY2010
Engineering JFE Engineering Results: Changes between FY 2009 and FY 2010 Y on Y (billion yen) FY09 FY10(e) Change 1H Total 1H Total Orders 157 279 127 310 31 Net Sales 117 294 105 270 ▲ 24 Operating Income 3 13 3 8 ▲5 ※ Ordinary Income 3 13 3 8 ▲5 Notes: Main Factors behind Changes 3.5 billion yen d
Slide 40: Shipbuilding Business Results: Changes between FY09 and FY10
Shipbuilding Business Results: Shipbuilding Changes between FY 09 and FY 10 ※ Y on Y (billion yen) FY09 FY10(e) Change 1H Total 1H Total Orders 14 59 38 110 51 Net Sales 139 287 107 210 ▲ 77 Oprating Income 10 21 12 13 ▲ 8 Single year income/loss ▲ 3 4 11 14 10 Changes of allowance for losses on 15
Slide 41: Trends of OP Margin
Trends of OP Margin 15.0% 10.0% OP Margin JFE Holdings 5.0% OP Margin Company X 0.0% 07/1H 07/2H 08/1H 08/2H 09/1H 09/2H -5.0% 41
Slide 42: Main Financial Data
Main Financial Data FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010(e) Main financial indicators Ordinary income 218 461 517 514 503 401 69 220 (billion yen) ROS 8.8% 16.4% 16.7% 15.8% 14.2% 10.2% 2.4% 6.5% ROE 15.9% 18.7% 28.6% 21.3% 17.5% 13.7% 3.3% 7.6% ROA 6.5% 13.1% 14.6% 14.1%
Slide 43: 6. Capturing Growth Opportunities in Greater East Asian Market Steel
６. Capturing Growth Opportunities in Greater East Asian Market Steel 43
Slide 44: (1) Advantages of JFE Steel
(1) Advantages of JFE Steel 44
Slide 45: Advantages of JFE Steel (1): Economies of Scale
Advantages of JFE Steel (1): Economies of Scale Cost competitiveness of JFE Steel based on we have consolidated large steelworks at two location. Sharing infrastructure, JFE’s steelworks are operated at energy-efficient way, need no transferring cost of slabs to the other works and fixed cost of tho
Slide 46: Advantages of JFE Steel (2): Flexible Production System
Advantages of JFE Steel (2): Flexible Production System Accurately adjusted production to demand (blast furnace) Number of Blast Furnaces Under Operation ９ ⇒ ７ ⇒ ８ Kurashiki Suspension of Kurashiki No.3 BF (Jan. 2009) Suspension of Fukuyama No. 3 BF (Feb. 2009) 7 Million tons Re-lined and Restart No
Slide 47: Advantages of JFE Steel (3): Stable Customer Bases
Advantages of JFE Steel (3): Stable Customer Bases both Domestic and Asia FY 09 Exports Domestic 55% 45% Exports by Destination Other Americas 6% 5% Other Asian S. Korea 22% 39% Thailand China Domestic Shipments by Customer Dealers 10% 18% 13% Autos Secondary 30% Exports by Customer processing 16
Slide 48: Reference: Alliances with Overseas Steelmakers
Reference : Alliances with Overseas Steelmakers China ・Bohai NKK Drill Pipe South South Korea Korea ・Fujian Sino-Japan Metal ・・Dongkuk Dongkuk Steel Steel Canada ・Hainan Haiwoo Tinplate ・・Hyundai Hyundai HYSCO HYSCO ・DJG ・Guangzhou JFE Sheet ・・Dongbu Dongbu Steel Steel Germany ・ThyssenKrupp ・Georgsm
Slide 49: (2) Target Market: Greater East Asia as our Home Market
(2) Target Market Greater East Asia as our “Home Market” 49
Slide 50: Export Expansion Focusing on Asia
Export Expansion Focusing on Asia Regional Import Volumes in 2008 Strategies to Expand Exports (see legend) Organization Middle and Near East China Make extended visits to develop sales (7.89 mil tons) (6.79 mil tons) Restructure sales: 10 departments & 15 sections Æ 13 departments & 18 0.92 s
Slide 51: Business Models that Respond to Each Market
Business Models that Respond to Each Market ◆Further Strengthen the established relationship ◆Seek New Alliance in New Market Distance from Japan Korea China Thai East India Middle North South Europe Asia East America America Export Expanding Sales Vertical Dongkuk ＧＪＳＳ ＴＣＲ Tin Plate ＣＳＩ Tin Plate A
Slide 52: Expansion of Capacity in Guangzhou, China
Expansion of Capacity in Guangzhou, China Guangzhou JFE Steel Sheet (JFE ownership: 50%) Phase 1: Started operating #1 CGL (March 2006) Phase 2: Start operating expanded line Equipment Shipments JFE Steel (operating) (1,000t/p.a.) No.1 High-end Steel CGL Auto (GA) 600 Providing 400 HRC Under Const
Slide 53: Expansion of Alliances
Expansion of Alliances India India Strategic collaboration with JSW Steel, India’s major steel maker [announced Nov. 2009] Help JSW Steel expand crude steel capacity from current 7.8 million tons to 11 million tons in 2011 and then to 32 million tons in 2020. Collaborate on steel products for auto
Slide 54: Capturing growing demand for high-end steel in Asian markets
Capturing growing demand for high-end steel in Asian markets. Shipments to allied steelmakers, following a temporary decrease due to the global economic crisis triggered by the collapse of Lehman in FY2008, continue to increase as the company captured growing demand for high-end steel in Asian marke
Slide 55: JFE Steel and JSW Steel Take First Concrete Steps in Strategic Cooperation
JFE Steel and JSW Steel Take First Concrete Steps in Strategic Cooperation As As aa first first step step of of the the implementation implementation ofof “Strategic “Strategic Collaboration Collaboration Agreement” Agreement” signed signed on on November November 19, 19, 2009, 2009, JFE JFE Steel S
Slide 56: JFE Steel and JSW Steel: Technical Assistance
JFE Steel and JSW Steel Take First Concrete Steps in Strategic Cooperation (B) (B) JFE JFE Steel’s Steel’s technical technical assistance assistance for for JSW JSW (a) (a) Cooperation Cooperation in in the the Automotive Automotive Steel Steel 【Objective 【Objective of of Agreement】 Agreement】 Throu
Slide 57: JFE Steel and JSW Steel: Vijayanagar Works Assistance
JFE Steel and JSW Steel Take First Concrete Steps in Strategic Cooperation (b) (b) Technical Technical Assistance Assistance for for operational operational improvements improvements of of JSW’s JSW’s Vijayanagar Vijayanagar Works Works The The two two companies companies agreed agreed on on the the
Slide 58: JFE Steel & JSW Steel Strategic Collaboration
(Reference) JFE STEEL & JSW STEEL COME TOGETHER IN A STRATEGIC COLLABORATION [announced on Nov. 19th , 2009] (A) Collaboration for Automotive Steel Production: ・ Supply of substrate materials for hot rolled, cold rolled and galvanized products. ・Joint service activities including application enginee
Slide 59: (3) Expansion of Production Capacity
(3) Expansion of Production Capacity 59
Slide 60: Production Capacity Expand to 33 million tons
Production Capacity Expand to 33 million tons (JFE Steel non-consolidated basis) (Mｔ) Trends of Crude Steel Production(stand-alone basis) 35 Nine BF 33 were under operation 31 30 30 29 29 27 27 26 25 7 Millionton 5 3 FY06 FY07 FY081Q 2Q 3Q 4Q FY091Q 2Q 3Q 4Q 20 FY05 FY06 FY07 FY08 FY09 FY10(E) FY11(
Slide 61: Reference: Expand Capacity by Reducing Bottlenecks
Reference: Expand Capacity by Reducing Bottlenecks Crude steel production (million tons/yr) 33.0 Primary investments 30.0 • Construction of new continuous slab caster, increase in degassing capacity, and addition of slab West Japan Works finishing equipment at Fukuyama • Relining #3 BF at Kurashiki
Slide 62: Reference: Efficient Expansion of Capacity
Reference: Efficient Expansion of Capacity (JFE Steel, non-consolidated basis) (billion yen) Total Amount and Cost per Ton of Increased Crude Steel production Capacity 300 Other integrated steelworks (80,000-120,000 yen/ton) Present 250 200 Total 6.5 million tons/year @ 250 billion yen: 150 38,000 y
Slide 63: (4) Price Trends of Raw Materials
(4) Price Trends of Raw Materials 63
Slide 64: Main Raw Material Prices
Raw Materials Main Raw Material Prices (US$/ton) 300.0 300 280 260 225(+12.5％) 240 200(+55％) 220 209 200 180 147(+22.5%) 160 140 120 89.7 129 120(+100%) 127 100 Australian premium hard coking coal 80 60 60.1 40 Australian fine ore (62% Fe) 20 0 03 04 05 06 07 08 09 10-1Q 10-2Q 10-3Q 64
Slide 65: (5) More Self Sufficiency for Raw Materials
(5) More Self Sufficiency for Raw Materials 65
Slide 66: Mining Interests & Operations Overseas
Mining Interests & Operations Overseas JFE Steel Corporation Minas da Serra Geral S/A JV with Vale Iron ore Erdos Manganese Alloys Co., Ltd. Philippine Sinter Corporation Silico-manganese Sinter Capital investment in 7 coal mines (including JFE group companies) Coking coal Cato Ridge Alloys (PTY) Lt
Slide 67: Acquisition of Interests by JFE Group
Acquisition of Interests by JFE Group Announced on Oct. 20, 2010 Overview of the Mines to be acquired by JFE Tradings Baralaba Mine Wonbindi Project Location Queensland, Australia Share 37.5% 20% of JFE Mining Method Open Cut Coal Types Low Volatile PCI, Thermal Coal Production Volume 750kt/annum 2.
Slide 68: Acquisition of Interest in Byerwen Project
Latest Developments: Coal Acquisition of Interest in Byerwen Project JFE Steel acquired a 20% interest in QCoal Pty Ltd’s new Byerwen Coal project in Dec. 2009. Project will produce 10 million tons of hard coking coal per annum. JFE Steel signed a 10-year off-take contract for the annual deliver
Slide 69: NAMISA Project in Brazil
Latest Developments: Iron Ore NAMISA Project in Brazil • Investment: December 2008 • Owners: CSN & Japan–Korea consortium • Projected sales: 38 MT/year in FY2013 Self-sufficiency ratio of 15% (Iron Ore) TOP-Ranked among competitors 69
Slide 70: Increasing Self-Sufficiency Ratio
Increasing Self-Sufficiency Ratio ・A steady, secure supply of raw materials is a source of competitive strength. ・Consequently, JFE Steel acquires resource rights where there is a clear economic rationale for doing so. ・Aim at increasing the self-sufficiency ratio from 18% to 30% in some two years.
Slide 71: Contact: Finance and Investor Relations Dept., JFE Holdings
Contact: Finance and Investor Relations Dept., JFE Holdings, Inc. Koji Matsunaga (Mr.) Sou Shigeoka (Mr.) Manager Staff Manager Phone: +81-3-3597-4381 Phone: +81-3-3597-4382 E-mail: k-matsunaga@jfe-holdings.co.jp E-mail: s-shigeoka@jfe-holdings.co.jp
JFE Holdings — Morgan Stanley MUFG Teleconference (October 2010) on 6ix