Second Quarter FY2014 Earnings Summary - Nippon …...2014/10/30 · 5401: JP 1 NSSMY: ADR (US) Second Quarter FY2014 Earnings Summary Katsuhiro Miyamoto Executive Officer and Head

15401: JPNSSMY: ADR (US)

Second Quarter FY2014Earnings Summary

Katsuhiro MiyamotoExecutive Officer and Head of Div., Accounting & Finance Div.

October 30, 2014

© 2014 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved. © 2014 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved.

• ‘NIPPON STEEL & SUMITOMO METAL CORPORATION’ is abbreviated as ‘NSSMC’• All output figures are presented in metric tons• Unless otherwise noted, all financial figures are consolidated

In this presentation,

2Agenda

1. FY2014 1H Results & Full Year Forecast

22. Progress in Mid-term Management Plan

3. Reference

© 2014 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved.

3

1. FY2014 1H Results & Full Year Forecast


4Overview: FY2014 1H Results & Full Year Forecast

Excess capacity of global steel industry Domestic demand will remain generally firmPositives: Challenges:Business Environment Forecast

Operation Forecast

Excess capacity of global steel industry Domestic demand will remain generally firm• Esp. demand from private equipment investment • Oversupply from China will continue

Production : Expecting 46.10MMT crude steel production

Other Efforts: Keep pursuing our Mid-term Plan Put more efforts into achieving stable• In spite of accidents in Nagoya crude steel

*1

Put more efforts into achieving stable operation & supply

• In spite of accidents in Nagoya, crude steel production will be the same level as beforefinancial crisis Investment on coke ovens to enhance

cost reduction (Kimitsu, Kashima)

Financial HighlightsFY2014 1H Earnings: FY2014 Full Year Guidance:

O di fi ¥1 6 3 Ordinary profit : ¥400 0 bn

( , )

*2 Ordinary profit : ¥176.3 bn (+ 26.3 bn)

Net income : ¥112.2 bn (+ 27.2 bn)

Ordinary profit : ¥400.0 bn

Interim dividend : ¥2/share Net income : ¥250.0 bn No change from previous announcement*2


Non-consolidated volume, but includes NIPPON STEEL & SUMIKIN KOUTETSU WAKAYAMA

ROS: 6.3%, ROE: 8.2% ROS: 7.1%

Changes from forecast as of July 31, 2014*2*1

5Key Indicators of Demand

1H 2H 1Q 2Q 1H(E) 1H 2H(E) (E)

14/1H VS.

14/2H(E)

FY13 VS.

FY14(E)

Change

14/1H(E) VS.14/1H

FY13 FY14

13/2H VS.14/1H

*2*2*2*1*2*2

0.50 0.49 0.99 0.22 0.22 (0.42) 0.44 0.45 0.89 -0.05 +0.01 +0.01 -0.10

29.15 27.12 56.27 13.98 14.20 (27.82) 28.18 28.64 56.82 +1.06 +0.36 +0.47 +0.55

4 042 4 129 8 171 2 196 1 856 (3 872) 4 052 3 552 7 604 -77 +180 -500 -568

(million houses)

(million m³)

(¥ in billion)

Housing Starts

Non-residential Construction Starts

Public Works Orders 4,042 4,129 8,171 2,196 1,856 (3,872) 4,052 3,552 7,604 -77 +180 -500 -568

4.74 5.17 9.91 2.40 2.39 (4.82) 4.80 4.95 9.75 -0.37 -0.03 +0.16 -0.16

2.35 2.28 4.63 1.09 1.22 (2.39) 2.31 2.44 4.75 +0.02 -0.08 +0.14 +0.12

(million cars)

(million cars)

(¥ in billion)Public Works Orders

Finished Auto Production

Export of Finished Auto

7.90 8.46 16.37 4.27 4.15 8.42 -0.04

38 42 80 19 18 (36) 37 34 71 -5 +1 -3 -9(thousand units)

( )

(million cars)Overseas Auto Production( 8 Japanese car makers)

Large & Middle sized Shovel Production

154 190 344 108 94 (203) 202 202 404 +11 -1 +0 +59

5.99 6.65 12.64 3.45 3.48 (6.94) 6.94 6.96 13.90 +0.29 +0.00 +0.02 +1.26

(thousand tons)

(m. gross tons)

Metal Machine Tool Production

Keel-laid New Ships

Rig Count CY08 CY09 CY10 CY11 CY12 CY13 Latest

USA 1,879 1,089 1,546 1,875 1,919 1,761 1,927 (October 24, 2014)

Deep well (≧15,000ft) 283 249 249 395 324 326 370 (August, 2014)

World total (Except N America 1 323


(Source: Baker Hughes, Smith international, NSSMC est.)

World total (Except N. America, Russia & China) 1,079 997 1,094 1,167 1,234 1,296 1,323 (September, 2014)

Figures as of July 31st, 2014*1

*2 Estimates as of end of August, 2014

6Domestic Steel Consumption by Industrial Sector

1H 2H 1Q 2Q 1H(E) 1H 2H(E) (E)14/1H VS.

14/2H(E)

FY13 VS.

FY14(E)

ChangeFY1313/2H VS.14/1H

14/1H VS.

14/1H(E)

FY14(Million tons)

C d S l P d i

*2*1 *2*2*2*2

55.82 55.71 111.52 27.67 27.88 (55.62) 55.56 -0.15 -0.06

31.71 33.36 65.07 15.94 15.98 (31.97) 31.93 32.78 64.71 -1.43 -0.05 +0.85 -0.36

Crude Steel Production in Japan

Domestic Steel Consumption (A + B)

62.8 62.7 62.7 63.2 62.8 (63.5) 63.0 62.2 62.6 +0.2 -0.6 -0.8 -0.2

25.16 26.68 51.84 12.70 12.70 (25.36) 25.40 26.25 51.65 -1.28 +0.04 +0.85 -0.18

11 17 11 80 22 97 5 55 5 63 (11 03) 11 18 11 77 22 95 -0 62 +0 15 +0 59 -0 02

% for manufacturing sector

Ordinary Steel Consumption (A)

Construction 11.17 11.80 22.97 5.55 5.63 (11.03) 11.18 11.77 22.95 -0.62 +0.15 +0.59 -0.02

13.99 14.88 28.87 7.14 7.08 (14.33) 14.22 14.48 28.70 -0.66 -0.11 +0.27 -0.16

1.98 2.18 4.16 1.12 1.13 (2.55) 2.25 2.26 4.51 +0.07 +0.00 +0.01 +0.35

Construction

Manufacturing

Shipbuilding

5.64 5.90 11.54 2.77 2.78 (5.62) 5.55 5.73 11.28 -0.35 -0.07 +0.18 -0.26

2.45 2.65 5.10 1.30 1.24 (2.55) 2.53 2.43 4.97 -0.11 -0.02 -0.10 -0.13

1.53 1.62 3.15 0.80 0.78 (1.58) 1.59 1.58 3.17 -0.04 +0.01 -0.00 +0.01

Automotive

Industrial Machine

Electronic Machine

6.55 6.68 13.23 3.25 3.28 (6.61) 6.53 6.53 13.06 -0.15 -0.08 -0.00 -0.17

2.77 3.78 6.55 1.76

Specialty Steel Consumption (B)

Steel Imports


20.28 18.87 39.15 9.49

( Source : NSSMC est.)Estimates as of end of August, 2014

Steel Exports

*1 Figures as of July 31st, 2014

*2

7NSSMC Operational Highlights

1H 2H 1Q 2Q 1H (E) 1H 2H(E) (E)

FY13 FY14 Change14/1HVS.

14/2H(E)

FY13VS.

FY14(E)

14/1H(E)VS.

14/1H

13/2HVS.

14/1H

(million tons) *2

22.77 22.03 44.80 11.05 11.60 (23.00) 22.64 23.30 45.90 +0.61 -0.36 +0.66 +1.10

24.27 23.89 48.16 11.86 12.16 (24.30) 24.02 24.60 48.60 +0.13 -0.28 +0.58 +0.44

Pig-iron production

Consolidated Crude Steel Production

*1

23.02 22.64 45.67 11.29 11.59 (23.20) 22.88 23.20 46.10 +0.24 -0.32 +0.32 +0.43

20.97 21.05 42.02 10.43 10.68 (21.30) 21.11 21.80 42.90 +0.06 -0.19 +0.69 +0.88

Non-ConsolidatedCrude Steel Production

Steel Shipments

0.58 0.62 1.20 0.30 0.29 (0.62) 0.58 0.60 1.18 -0.04 -0.04 +0.02 -0.02Seamless PipeShipments

A St l84.4 87.6 -1.8 +0.0

48

86.0 87.6 86.0

+1 +145 46 46 47 46 47 47

85.0 86.086.8 +0.8

+0

-0.8

+1

(86.0)

(46)

Average Steel Selling Price (000 yen/ ton)

Steel Export Ratio( l b i (%))

98 102 100 102 103 (102) 103 107 105 1 1 4 5

48 +1 +145 46 46 47 46 47 47 +0+1(46)

FOREX (¥/$)

(value basis (%))

DepreciateDepreciateDepreciateDepreciate


Includes pig-iron production of Hokkai Iron & Coke corp. and NIPPON STEEL & SUMIKIN KOUTETSU WAKAYAMA CORP.Figures as of July 31st, 2014*2

*1

8FY2014 1H Results & Full Year Forecast

1Q 2Q1H 2HFY13VS.

FY14(E)

FY13 FY14 Change

1H 2H14/1HVS.

14/2H(E)1H(E)

14/1H(E)VS.

14/1H

13/2HVS.

14/1H(¥ in billion) *1

2,674.5 2,841.5 5,516.1 1,361.4 1,417.0 [2,750.0] 2,778.4 2,871.6 5,650.0 -63.1 +28.4 +93.2 +133.9

139.2 159.0 298.3 59.6 75.8 135.5 -23.5

173 6 187 4 361 0 74 3 102 0 [150] 176 3 223 7 400 0 11 1 26 3 47 4 39 0

Net Sales

Operating Profit

173.6 187.4 361.0 74.3 102.0 [150] 176.3 223.7 400.0 -11.1 +26.3 +47.4 +39.0

16.5 21.5 38.0 - -4.9 -4.9 -26.4

Ordinary ProfitSpecial Profit & Loss

115.5 127.1 242.7 48.3 63.9 [85.0] 112.2 137.8 250.0 -14.9 +27.2 +25.6 +7.3

[ 12.7 ] [ 13.9 ] [ 26.7 ] [ 5.3 ] [ 7.0 ] [ 9.3 ] [ 12.3 ] [ 15.1 ] [ 27.4 ] [ -1.6 ] [ 3.0 ] [ 2.8 ] [ 0.7 ]

Net Income

[ EPS ]

300.7 329.4 630.2 135.8 154.2 290.1 -39.3

11.2% 11.6% 11.4% 10.0% 10.9% 10.4% -1.2%

EBITDA

ROS

EBITDA / Sales

6.5% 6.6% 6.5% 5.5% 7.2% [5.5%] 6.3% 7.8% 7.1% -0.3% 0.8% 1.5% 0.6%

9.4% 9.8% 9.6% 7.2% 9.2% 8.2% -1.6%

ROS

ROE


*1 Figures as of July 31st, 2014

9Ordinary Profit Variance Analysis [FY13/2H→FY14/1H ]

（¥ in billion ）FY13/2H

[A]FY14/1H

[B]Change[A→B]

Ordinary Profit 187 4 176 3 -11 1

Inventory evaluationFY13/2H：+5.0 → FY14/1H：-10.0 Incl. carry overPrice increase in logistics & electricity, etc.

*1

*2*3Ordinary Profit 187.4 176.3 -11.1

Steel 163.0 159.1 -3.9

Non-Steel 25.7 17.6 -8.1

Adj stment 1 3 0 5 +0 8

Price increase in logistics & electricity, etc.Incl. the merger synergy +10.0Engineering -9.2, Chemical +1.3, New Materials+0.4, System Solution -0.7

3*4*5

Adjustment -1.3 -0.5 +0.8

PositiveRaw Materials

+40.0-22.0

+15 0 2 0 4 0

Negative

*2 Cost Reduction

Non-Steel

*5187 4 Volume

Raw Materials Prices Steel Prices

& Product MixGroup

CompaniesNagoya Accident *4

+4.040.0

-11.0 +15.0-7.0 -9.0

-2.0 +4.0-8.0 176.3

( +0.06MMT：21.05→21.11)

187.4

*3Procurement, etc. Others FOREX

FY13/2H FY14/1H

186.3182.4

Exclude Inventory Exclude Inventory


FY13/2H FY14/1Hc ude e to yEvaluation Impact*1

c ude e to yEvaluation Impact*1

10Ordinary Profit Variance Analysis [FY14/1H(E)→FY14/1H ]

（¥ in billion ）FY14/1H(E)

[A]FY14/1H

[B]Change[A→B]

Ordinary Profit 150 0 176 3 +26 3

Inventory evaluationFY14/1H(E)：-20.0 → FY14/1H：-10.0 Engineering-0.2, Chemical+1.3, New Materials+0.6, System Solution+2.2

*1

*2

*

Ordinary Profit 150.0 176.3 +26.3Steel 136.0 159.1 +23.1

Non-Steel 13.5 17.6 +4.1

Adj stment 0 5 0 5 1 0

New Materials 0.6, System Solution 2.2

Adjustment 0.5 -0.5 -1.0

Positive

～ +4.0 176.3

Negative

Raw Materials P i

Procurement, etc. Nagoya

Group Companies

-3.0～ +18.0 -5.0

-6.0 -7.0 +5.0

+10.0

186.3150.0

VolumePrices

Steel Prices& Product Mix

Cost Reduction Others

Accident

FOREX

Non-Steel*2

FY14/1H(E) FY14/1H

( -0.19MMT：21.30→21.11 Approx.）170.0

Exclude InventoryExclude Inventory


FY14/1H(E) FY14/1HExclude Inventory Evaluation Impact*1

c ude e to yEvaluation Impact*1

* Figures as of July 31st, 2014

11Ordinary Profit Variance Analysis [FY14/1H→FY14/2H (E)]

（¥ in billion ）FY14/1H

[A]FY14/2H(E)

[B]Change[A→B]


Inventory evaluation FY14/1H：-10.0 → FY14/2H：-20.0 Incl. carry overPrice increase in logistics & electricity etc.

*1

*2*3Ordinary Profit 176.3 223.7 +47.4

Steel 159.1 195.9 +36.8

Non-Steel 17.6 25.4 +7.8

Adj stment 0 5 2 5 +3 0

Price increase in logistics & electricity etc.Incl. the merger synergy +14.0Relining blast furnace ：+10.0(14/1H-10.0→14/2H(E)～),Accidents in Nagoya works：+2.0(14/1H-17.0→14/2H(E)-15.0)Engineering +7.0, Chemical ～、New Materials ～ System Solution +1 0

3*4*5

*6Adjustment -0.5 2.5 +3.0

Positive

New Materials ～, System Solution +1.0

Raw Materials Prices Non Steel

+100.0 -100.0+4.0 +12.0 +9.0

-6.0

+8.0 223.7Negative *6

( +0.70MMT：21.11→21.80 Approx.)

Volume

Prices*2

Steel Prices& Product Mix

Cost Reduction

*4

Others

FOREX

Group Companies

Non-Steel

+15.0-10.0

+25.0 243.7176.3

186.3*5

Volume & Product Mix

Procurement, etc. *3

BF Relining & Nagoya Accident

FY14/1H FY14/2H(E)Exclude Inventory Exclude Inventory


FY14/1H FY14/2H(E)Exclude Inventory Evaluation Impact*1

Exclude Inventory Evaluation Impact*1

12Ordinary Profit Variance Analysis [FY13 → FY14 (E)]

（¥ in billion ）FY13[A]

FY14(E)[B]

Change[A→B]


Inventory evaluationFY13：+16.0 → FY14：-30.0 Inc. carry overPrice increase in logistics & electricity, etc.

*1

*2*3Ordinary Profit 361.0 400.0 +39.0

Steel 321.2 355.0 +33.8

Non-Steel 41.9 43.0 +1.1

Adj stment 2 1 2 0 +4 1

Price increase in logistics & electricity, etc.Inc. the merger synergy +40.0Engineering-1.0, Chemical-1.0,

New Materials+0.5, System Solution+2.5

3*4*5

Adjustment -2.1 2.0 +4.1

PositiveCost

Reduction*4 Others

-120.0+80.0

-35.0-24.0

-10.0

+13.0 +1.0Steel Prices& P d t Mi

400.0Volume

Group Companies

Negative

FOREX

4Non-Steel

*5( +0.88MMT：42.02→42.90 Approx.)

361 0

Nagoya Accident

+20.0+200.0

-40.0& Product Mix

430.0Raw Materials

Prices

361.0

345.0Procurement, etc.

*3

FY13 FY14(E)Exclude Inventory

Prices*2

Exclude Inventory


FY13 FY14(E)Exclude Inventory Evaluation Impact*1

yEvaluation Impact*1

13Non-Steel Business: FY2014 1H Results & Full Year ForecastSales & Ordinary Profit Trend Change in Ordinary Profit （FY13 → FY14(E)）

350 0411.3 380.7 400.3

Sales & Ordinary Profit Trend(Non-steel business total)

Sales

(¥ in billion)

Change in Ordinary Profit （FY13 → FY14(E)）

Engineering & Construction

: Steady progress in efforts for cost reduction & margin improvement, but profit will decrease due to change in sales mixDecrease

25 7 25 4

350.0

Ordinary ProfitChemicals

System Solutions

: Decline of margin because of weak chemical marketDecrease

: SG&A increase, but profit will increase due to strong earning of solution business

16.1 25.7 17.6 25.4

FY13/1H FY13/2H FY14/1H

SolutionsNew

Materials

due to strong earning of solution business

: Demand shift from gold to copper wire continued & sales will decrease, but cost reduction efforts will work effectively to increase profit.

Increase

(¥ in billion)FY14/2H(E) Increase

115.0 230.1 112.2 230.0

FY2013 FY2014(E)1H 1H

134.3 314.1 155.3 320.0

FY2013 FY2014(E)1H1H Chemicals

Sales

Engineering & Construction

Sales

( )

FY2013 FY2014(E)

7.0 10.0 4.3 9.0

FY2013 FY2014(E)

3.6 17.7 4.8 16.5

N M t i lSystem

OrdinaryProfit

OrdinaryProfit

19.2 37.2 18.2 36.0

0 6 1 3 1 1 2 0

1H1H

81.4 179.8 94.8 195.0

8 12 2 1

( )1H 1H New MaterialsSystem

SolutionsSales

Ordinary

Sales

Ordinary


0.6 1.3 1.1 2.04.8 12.7 7.2 15.5OrdinaryProfit

OrdinaryProfit

14Balance Sheets

As of March 31,2014(¥ in billion) (¥ in billion)

As of September 30,2014

Current Assets Other Liabilities Current Assets Other Liabilities

2,273.31,547.9

2 296 3

2,242.3 1,637.6

2 077 9

Current Assets

Interest-bearing Debt

Current Assets

Interest-bearing Debt2,296.3

2 683 64,808.9

2,077.9

2 816 94,846.9

Fixed AssetsEquity Capital

Fixed AssetsEquity Capital

2,683.6

554.3

2,816.9

556.8Minorit Interests in Consolidated S bsidiaries

End of March, 2014 End of September, 2014 Changes

Total assets （bn¥） 7,082.2 7,089.2 +7.0

Minority Interests in Consolidated Subsidiaries

Total assets （bn¥） , ,Interest-bearing debt （bn¥） 2,296.3 2,077.9 -218.3Equity Capital （bn¥） 2,683.6 2,816.9 +133.2DER 0 86 0 74 0 12


DER 0.86 0.74 -0.12

15Interim Dividend

As announced on July 31, 2014, NSSMC has decided to di t ib t i t i di id d f ¥2 0 h ( lid t ddistribute a interim dividend of ¥2.0 per share(consolidated dividend payout ratio of 16%).

NSSMC plans to determine and announce the forecast of the NSSMC plans to determine and announce the forecast of the year-end dividend distribution amount at the 3Q result briefing.

[Cash Dividend Policy] Allocate profits according to earnings Factors below need to be considered as well

・Reserves for future investment ・Earnings forecastC lid t d d lid t d fi i l t t・Consolidated and non-consolidated financial structure

Target dividend payout ratio: approx. 20% (consolidated basis)


16CAPEX and Depreciation( ¥ in billion)

NSSMC(Upper : NSCLower ：SMI)

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 (E)

C A P E X490.0(310.0)(178.8)

460.0(300.0)(159.1)

465.0(330.0)(136.6)

400.0(290.0)(109.9)

380.0(265.0)(115.7)

420.0 257.0 320.0

346 5 383 5 404 8 417 7 403 8 338 5 331 8 320 0

Major CAPEX plan

Depreciation346.5(244.0)(102.5)

383.5(273.7)(109.8)

404.8(284.0)(120.8)

417.7(291.5)(126.2)

403.8(280.9)(122.9)

338.5 331.8 320.0

600

CAPEX

420 0 CAPEX DEP

Kimitsu： Relining No.4 Coke oven ¥29bn

Kashima： Replacing Coke oven ¥18bn

400420.0

338.5CAPEX DEP

SMI

257.0331.8DEP

SMI

320.0 320.0

0

200

NSCNSC


0FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14見FY14 (E)

17

2. Progress in Mid-term Management Plan


18

10%I. Financial Indicators Target & Progress

ROS bn ¥Asset Compression

6.5% 6.6%7.8%

90

70

240

330400

300

ROSAt least 5%

& bring to 10%

- bn ¥ -Asset Compression

1.2%

2.3%6.3%

140

90

100

240

*15%

Over 3001.2%

100

1H 2HFY12

1H 2HFY13

1HFY14 Target

1H 2HFY12

1H 2HFY13

1HFY14 Target

2H(E)*1Base

1.20

200DER - bn ¥ -Merger Synergy( ), improvement in production cost

Annual basis 100（62）140（90）

0

1.06

0.96 0.86 1.0

At least 1.0& b i t 0 8

Annual basis＜given term x 2＞

35（21）50（31）

15(10)

70（45）

15（10）

20(14)

20（12）50（30）

70（42）100（62）

Over 2000.96

0.74 0.8

3Q 2H 1H 2H 1HT t

& bring to 0.8

Base 10（6）

15（9）10（6）

25（15）

10（6）

15（9）

10（6）

*110（6）

15（9）

10（6）

10（6）

2H(E)10（6）

15（9）

10（6）

1H 2H 1H 2H 1H


QFY12 FY13 FY14 Target

Total of NSC+SMI*1

Target2H(E)

FY12 FY13 FY14

19Ⅱ. Pursuing Global Business Strategy

JV with Indonesian steelmaker : Capture local demandKNSS : Auto sheet JV in Indonesia

• Name of company： KNSS (PT Kurakatau Nippon Steel Sumikin)

• JV partner： PTKS (PT Kurakatau Steel (Persero) Tbk)CGL

Annealing AND Galvanizing

• Business description：Production & sales of automotive flat steel products

• Equity ratio： NSSMC 80 %, PTKS 20%g g

• Investment amount ： Approx. US$ 300 million• Facility： GAPL (Galvanizing, Annealing & Processing Line)

• Capacity： 0 48 MMT / year

All materials are galvanized

GAPL

Estimate of auto production in Indonesia*

• Capacity： 0.48 MMT / yearGAPLAnnealing Galvanizing

On /offpossible

ANDOR

Annealing ONLY• Expected start of operation: Mid 2017

1.2 1.740% growth

Galvanizing could be skipped

（Million Units）


2014 (E) 2020 (E)

* NSSMC estimate

Galvanizing could be skipped

20Ⅱ. Pursuing Global Business Strategy

JV with Indonesian steelmaker : Establish production base in growth marketKOS : Construction Products JV in Indonesia

• Name of company： KOS (PT Kurakatau Osaka Steel)

• JV partner： PTKS (PT Kurakatau Steel (Persero) Tbk)Estimate of construction product

demand in Indonesia*

• Equity ratio： OSC 80 %, PTKS 20%* NSSMC estimate• JV partner： PTKS (PT Kurakatau Steel (Persero) Tbk)

（MMT） ** NSSMC’s subsidiary (NSSMC investment ratio：66.3%)

demand in Indonesia

60% growth

• Business description：Production & sales of small & middle shapes, rebar and flat bar

2012 2019 (E)

PTKS • Investment amount ： Approx. US$ 200 million

• Facility： Combined mill for small & middle shapes, b d fl t b

PTKS•Establishment：

• Business description：

1971（Indonesian government：80％）

rebar and flat bar

• Capacity： 0.5 MMT / yeari

• Business description：Production & sales of plate, shapes, bar & wire rod and pipe & tube

• Capacity：2 4 （）

• Expected start of operation: By end of 2016


Approx. 2.4MMT/Y （CY2013） Expected start of operation: By end of 2016

21

I t t M j P d ti

Ⅲ. Key Overseas Investment Plan & Progress%: NSSMC group investment ratio Investment

AmountMajor

FacilityProduction

Capacity FY13 FY14 FY15

1.55bn$5.3MMT/Y

- Hot stripApprox. Hot Strip,

PLCL,CGL, etc(USA)AM/NS Calvert 50%

Feb/14(JV with ArcelorMittal)

*

300MM$ CGL 0.4MMT/Y

40bn¥ CAPL 0.6MMT/Y

Approx.

Aug/13

May/14Approx.

TENIGAL(Mexico)

49%

JCAPCPL(India)

49%

(JV with Ternium)

(JV with TATA)

Auto300MM$ GAPL 0.48MMT/Y

300MM$ CGL 0.36MMT/Y

May/14(India) ( )

Oct/13Approx.NSGT

(Thailand)100%

(Indonesia)KNSS

(JV with PTKS)80%

Approx. FY17 Start-up

46MM$No4 ForgingPress Line 1.3MM

crankshafts/Y

1.1 bn CNYNo4 CGL 0.42MMT/Y

( )

(New Forging Press Line) FY15 Start-upCrankshafts/Y）(USA)

ICI 80% Approx.Forging press capacity（2.7 →4.0MM

Approx.

CGL capacity（1 25 →1 67MMT/Y）

FY15 Start up

BNA(China)

Approx.

(JV with Bao)50%

(New line)1.1 bn CNY

3.2bn¥ 0.042MMT/Y

554MM$ CGL etc 1.40MMT/Y Mar/13NSBS 50%

NSCh(China)

42%(Capacity expansion

of NBC China) Approx. Pickling, wire

drawing, etc FY15 Start-up

（1.25 →1.67MMT/Y） Start-up(China) (JV with Bao) (New line)

Const-ruction

554MM$ CGL, etc- CGL

1,150MM$(JV total)

CDCM 1.20MMT/Y

Small and iddl h 0 5

Mar/13JV Established

Apr/13

(Singapore, etc.)50%

CSVC(Vietnam) 30%

(JV with BSL)

(JV with CSC)

KOS 80% Approx. FY16

Approx.


200MM$middle shapes, Rebar, Flat bar

0.5MMT/YKOS

*(Indonesia) (JV with PTKS)

80% pp FY16 Start-up

Figures are from press releases announced when JV agreements were concluded or investment decisions were made.

22Ⅳ. Pursuing Domestic Business Strategy

Products Works Action Equipment FY13 FY14 FY15

Restructuring of production framework Facility close down schedule

Products Works Action Equipment FY13 FY14 FY15

Up streamprocess

Kimitsu CloseNo.3 BFNo.5 CC

4Q2Q Done

pWakayama Suspend No.2 BF (Postpone opening of new BF)

Kashima Close No.2 CPL, No.1 Cold Strip Mill No.1 CAL , BAL No.1 CGL, No.2 EGL

Wakayama Close No 3 PL No 1 Cold Strip Mill CGL ACL

4Q

1Q DoneSheet

Wakayama Close No.3 PL, No.1 Cold Strip Mill, CGL, ACL

Nagoya CloseNo.4 CGLEGL

Kimitsu Close No 1 CAP

1Q Done4Q4Q

1Q Done

Kimitsu Close No.1 CAPPipe & tube Kimitsu Close Butt welded pipe line

4Q4Q Done

C D i ti FY13 FY14 FY15 Works and facility close down schedule at subsidiary

Company Description FY13 FY14 FY15NSPC

NISC

Close: 24-inch mill at Wakayama works 3QClose: Sakai Works (Aug. 2015), Kawasaki Works (Nov.,2015） 2Q～3Q(ERW reorganization)Close: PL and Cold strip mill at Nishi-Nihon Works Amagasaki 4Q Done*2

*1


NISC p gClose: PL and Cold strip mill at Funabashi Works 1Q Done

*1 Nippon Steel & Sumikin Pipe Corporation *2 Nippon Steel & Sumikin Coated Sheet Corporation

(Sheet reorganization)

23

3. Reference


24World Economic Outlook ＜Released on October 7, 2014 by IMF＞

( ): Outlook as of July. 24, 2014

2007 2008 2009 2010 2011

W ld T t l

2012 2013 2014outlook

2015outlook

( ) y ,

World Total 5.2 3.0 -0.5 5.3 3.9

DevelopedCountries 2.7 0.5 -3.4 3.2 1.7

3.4

1.2

3.3

1.4

(3.2)

(1.3)

3.3

1.8

(3.4)

(1.8)

3.8

2.3

(4.0)

(2.4)

USA 2.1 0.4 -2.6 3.0 1.8

EU27 2.7 0.6 -4.1 1.9 1.5

2.3

-0.7

2.2

-0.4

(1.9)

(-0.4)

2.2

0.8

(1.7)

(1.1)

3.1

1.3

(3.0)

(1.5)

(1 1)Japan 2.3 -1.2 -6.3 4.4 -0.6

DevelopingCountries 8.3 6.1 2.7 7.5 6.2

1.5

5.1

1.5

4.7

(1.5)

(4.7)

0.9

4.4

(1.6)

(4.6)

0.8

5.0

(1.1)

(5.2)

China 13.0 9.6 9.2 10.4 9.3

India 9.4 7.3 6.8 10.6 6.3

7.7

4.7

*1

7.7

5.0

(7.7)

(5.0)

7.4

5.6

(7.4)

(5.4)

7.1

6.4

(7.1)

(6.4)

ASEAN5 6.3 4.7 1.7 7.0 4.5

Russia 8.1 5.6 -7.8 4.3 4.3

Brazil 5 7 5 1 0 6 7 5 2 7

6.2

3.4

1 0

15.2

1.3

2 5

(5.2)

(1.3)

(2 5)

4.7

0.2

0 3

(4.6)

(0.2)

(1 3)

5.4

0.5

1 4

(5.6)

(1.0)

(2 0)


(Source ： IMF)ASEAN 5 : Thailand, Malaysia, Indonesia, Philippines, Vietnam*

Brazil 5.7 5.1 -0.6 7.5 2.7 1.0 2.5(2.5) 0.3(1.3) 1.4(2.0)

25Worldwide Steel Demand Trend

(Source: WSA Apparent finished steel consumption released on October 2014)*＜CY11＞＜CY12＞

1.43＜CY13＞

1.53＜CY14(E)＞

1.56* *Worldwide

Total 1.38（）

(Source: WSA, Apparent finished steel consumption released on October., 2014)*＜CY15(E)＞

1.59 bn tons*

ChinaOthers

CY14

1.56

From CY13 approx.+2～3 %/yearCY13

1.53

（billion tons）

CY12

CY15

1.59

7.4

7.5

7.5Japan/North America/Europe CY08

1.221.43

6.6

CY74CY74

0.55

74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14


74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

26World Crude Steel Production

(million tons)

Jul Aug Sep Jul -Sep

Change(A→ C)Jan -

JunJan -

Sep [B]

CY13[A]

CY14CY14

[C](B*12/9)

*1World Total

J

（RC）*2

p1,582.5 820.5 137.1 135.2 138.0 410.3 1,230.8 1,641.0 +58.5

(+4.0%) (+3.8%) (+3.3%) (+3.1%) (+4.2%) (+3.5%) (+3.7%) (3.7%)

110 6 55 2 9 3 9 3 9 2 27 9 83 1 110 8 0 3Japan

Korea

（RC）*2

110.6 55.2 9.3 9.3 9.2 27.9 83.1 110.8 +0.3(+3.1%) (+1.0%) (+0.0%) (+2.2%) (-0.4%) (+0.6%) (+0.8%) (0.2%)

66.0 36.1 5.9 5.6 5.7 17.2 53.3 71.0 +5.0

USA

EU28

（RC）*2 (-4.4%) (+9.1%) (+6.2%) (+14.4%) (+10.3%) (+10.1%) (+9.5%) (7.6%)

87.0 43.6 7.7 7.8 7.3 22.7 66.3 88.4 +1.5165 8 87 6 13 9 12 1 14 1 40 1 127 7 170 3 +4 5EU28

Russia

Brazil

165.8 87.6 13.9 12.1 14.1 40.1 127.7 170.3 +4.569.4 35.2 6.1 6.2 5.9 18.2 53.4 71.2 +1.834.2 16.7 2.9 2.9 2.9 8.7 25.5 34.0 -0.2

India

China

（RC）*2

81.2 41.6 6.9 7.0 6.8 20.8 62.4 83.2 +2.0779.0 409.6 68.3 68.9 71.2 208.4 618.0 824.0 +45.0(+8 7%) (+5 3%) (+4 4%) (+4 0%) (+8 8%) (+5 7%) (+5 4%) (5 8%)

© 2014 NIPPON STEEL & SUMITOMO METAL CORPORATION All Rights Reserved. ( Source ：World Steel Association)Total of 65 countries *1 Rate of Change from a year earlier period*2

（RC）*2 (+8.7%) (+5.3%) (+4.4%) (+4.0%) (+8.8%) (+5.7%) (+5.4%) (5.8%)

27Hot Rolled Sheets Prices by Region

2.5 1.0

October 21

October 22

( Prices of Hot Rolled Sheets in local currency as of Apr. 2009=1.0 ） Cf.) The Latest Spot Price of Hot Rolled Sheets

Guangzhou/ China

2.0

EU

USA0.6

USAOctober 21

1 5

EU

1.5

Bao Steel Prevailing Listprice

1.0

Japan

0.5


( Source : The Japan Iron and Steel Federation )

28

Consumption(Manufacturing Sector)

Domestic Steel Consumption Trend – Long Term

120114 113 112 111113113

118122

111 112120

p ( g )Consumption(Construction and Civil Engineering Sector)Crude Steel ProductionSteel Exports

Crude Steel Production

( million tons)

102

108

101105 107

103

96100

106104

96102

106108 106

99 97101100101103

91

98

107102

110111

106

96

111106

112

100

8894

89

107

96

80 74

64 63

71 69 6763 64

68 6968

74

81

8882

75 76 7781

77

69 7072 71 71 73

76 78 79 79

70

62 6165 65

37 36 35 3638 39

4440

44 42

40

6058 59 59 57

60 62 61

Manufacturing SectorSteel Exports

26

3431

37 3431 31 30 30 29

33 33 32 3025 23

19 17 18 1924 24 23 21

2427 30 28

3336 35 35

3236 34

20

40

0Construction and Civil Engineering Sector


( Source：JISF Steel Consumption/ NSSMC est.)

29Domestic Crude Steel Production Trend

All J ( illi t ) （D ti C d St l P d ti f 3Q (E) FY14 l d b METI O t b 2 2014)All Japan (million tons) （Domestic Crude Steel Production of 3Q (E), FY14 released by METI on October 2, 2014)

FY07121.51

FY08105.50

FY0996.45

FY10110.79

FY11106.46

FY12107.30

FY14/3Q(E)(million tons)

(million tons)FY13

111.52

28.08

27.74

28.14

27.57 27.67

27.88 27.98

25 0

30.020.0

SMI (Left axis)*1

FY14/3Q(E)

*2

11 63 11.5920.0

25.0

15.0

NSC (Left axis)

All Japan (Right axis)

*2

FY14/2H(E)23.20

11.5011.52

11.63

11.0111.29

3.073.38

17.6015.010.0

7.10

10.4011.05

4.827.70

7.952.28

5.0

10.0

5.0

45 6746 73 43 55FY14 (E)

0.00.0Total Production of Crude Steel ( NSC (non-consolidated)＋SMI )

45.6746.73 41.48 39.15 45.37 42.92 43.55( )

46.10


Includes Sumitomo Metals(Kokura), Sumitomo Metals(Naoetsu) and Sumikin Iron & Steel Co.*1Includes NIPPON STEEL & SUMIKIN KOUTETSU WAKAYAMA CORP *2

30Domestic Steel Products Prices

90 90 ）

Hot-rolled sheets & Cold-rolled sheetsPlates & H-flange beams( thousand yen / ton ) ( thousand yen / ton )

Hot-rolled sheets (2.3xS）

Cold-rolled sheets（1.0xS)

H-flange beams (200×100）

Plates(19mm)October 28

81.0 O t b 2880 80

74

81.0

7778.0

October 28

70 70

66.0

60 60

50 50


31Domestic Steel Inventory Trends

*2

Ordinary steel products inventory (Left axis)

Rolled sheets inventory (Left axis)（MMT）

Rolled Sheets Inventory

（Ti ）

H-flange beams Inventory

（Times）（MMT）*1

*2

Inventories of the distributors dealing with H-flange beams manufactured by NSSMC

*2

1 5

7.0Rolled sheets inventory (Left axis)

Ordinary steel products inventory turnover ratio (Right axis)

3.0

3.5 0.5 Inventory Quantity (Left axis)Inventory Turnover Ratio (Right axis)

（Times）（）

Hot-rolled, Cold-rolled and Coated sheets*1

1.5

6.02.5

0 3

0.4

1.05.0

1.5

2.0

0 2

0.3

0.54.0

1.0

0.1

0.2

0.03.0 0.0

0.5

0

0.1


( Source : Japan Iron and Steel Federation )

32Iron Ore & Coking Coal Price Trends

400200（US$/dmt）（US$/wmt）

Iron Ore Coking CoalFOB from Australia to Japan FOB from Australia to Japan

300150 300150

200100

10050

0

FY04

FY05

FY06

FY07

FY08

FY09

/ 1Q 2Q 3Q 4Q / 1Q 2Q 3Q 4Q / 1Q 2Q 3Q 4Q / 1Q 2Q 3Q 4Q / 1Q 2Q 3Q

0

FY04

FY05

FY06

FY07

FY08

FY09

/ 1Q 2Q 3Q 4Q / 1Q 2Q 3Q 4Q / 1Q 2Q 3Q 4Q / 1Q 2Q 3Q 4Q / 1Q 2Q 3Q


F F F F F F 10 11 12 13 14F F F F F F 10 11 12 13 14

33Market Trends ＜Crude Oil & Scrap＞

60.0600800 0

(US$/bbl）

ScrapCrude Oil(US$/MMT) (US$/ton）（thousand yen/ton）

700.0

800.0

140.00

40.0400

500.0

600.0

120.00 340

515

400.0

120.00 340

30.5

20.0200

USA Scrap(No1HMS) (US$/t CIF Korea)（Left axis)

200.0

300.0

100.00

Arabian Light Crude

0.00

(US$/t, CIF Korea)（Left axis)

Iron Scrap Bid Prices in Kanto Region(thousand yen/ton, in terms of high grade scrap)(Right axis)

0.0

100.0

80.00

g(Left axis)Bunker (Right axis)

82.7


34Market Trends ＜Freight & Mold Pig Iron＞

60035

(US$/T,CIF Korea)(US$/WMT, Cape size 170 thousand tons hull form)

Mold Pig IronFreight

500

Mold Pig Iron(US$/t,CIF Korea)

30

400

20

25

18 7 375

300

15

20

From Brazil

From Western Australia

18.7 375

100

200

10

From Western Australia

7.6

0

100

0

5


35

Apr 1 2008 Latest （Won /$）（¥/$）

FOREX Trend

1,600 160Apr. 1, 2008101.85 ¥/$985 won/$ Oct. 28, 2014

108.15 ¥/$1,050 won/$

Latest （Won /$）（¥/$）

1 300

1,450

130

145 Won /$

1,150

1,300

115

130

1,000 100

850 85 ¥/$

700 70


36

This presentation does not constitute an offer or invitation to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. This presentation is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. No warranty is given as to the accuracy or completeness of the information contained herein. Investors and

ti i t i iti f i ti d h i i d t k th i i d d t i ti ti d i l f thprospective investors in securities of any issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financial condition of such company and the nature of the securities. Any decision to purchase securities in the context of a proposed offering, if any, should be made solely on the basis of information contained in an offering circular published in relation to such an offering. By participating in this presentation, you agree to be bound by the foregoing limitations. This presentation contains statements that constitute forward looking statements. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of Nippon Steel & Sumitomo Metal Corp. or its officers with respect to its financial condition and results of operations, including, without p pp p p p , g,limitation, future loan loss provisions and financial support to certain borrowers. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in such forward looking statements as a result of various factors. The information contained in this presentation, is subject to change, including but not limited, to change of economic conditions, financial market conditions, and change of legislation / government directives.

Any statements in this document other than those of historical facts are forward looking statements about future performance of Nippon Steel &Any statements in this document. other than those of historical facts, are forward-looking statements about future performance of Nippon Steel & Sumitomo Metal Corp. and its group companies, which are based on management’s assumptions and beliefs in light of information currently available, and involve risks and uncertainties. Actual results may differ materially from these forecasts.


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