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Sumitomo Steel 20110929


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Sumitomo Steel 20110929

  1. 1. Creating th Best St l k C ti the B t Steelmakerwith World Leading Capabilities World-Leading September 22, 2011 1
  2. 2. Note Regarding Forward-looking StatementsThis presentation includes “forward-looking statements” that reflect the plans and expectations of Nippon Steel Corporation andSumitomo Metal Industries, Ltd. in relation to, and the benefits resulting from, their business integration described below. To theextent that statements in this presentation do not relate to historical or current facts, they constitute forward-looking statements.These forward-looking statements are based on the current assumptions and beliefs of the two companies in light of the informationcurrently available to them, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties andother factors may cause the actual results, performance, achievements or financial position of one or both of the two companies (orthe post-transaction group) to be materially different from any future results, performance, achievements or financial positionexpressed or implied by these forward-looking statements. The two companies undertake no obligation to publicly update anyforward lookingforward-looking statements after the date of this presentation. Investors are advised to consult any further disclosures by the twocompanies (or the post-transaction group) in their subsequent domestic filings in Japan and filings with the U.S. Securities andExchange Commission.The risks, uncertainties and other factors referred to above include, but are not limited to:(1) economic and business conditions in and outside Japan;(2) changes in steel supply, raw material costs and exchange rates;(3) changes in interest rates on loans, bonds and other indebtedness of the two companies, as well as changes in financial markets;(4) changes in the value of assets (including pension assets), such as marketable securities and investment securities;(5) changes in laws and regulations (including environmental regulations) relating to the two companies’ business activities;(6) rise in tariffs, imposition of import controls and other developments in the two companies’ main overseas markets;(7) interruptions in or restrictions on business activities due to natural disasters, accidents and other causes;(8) the two companies’ being unable to complete the business integration; and( )(9) difficulties in realizing the synergies and benefits of the p g y g post-transaction group. g p 2
  3. 3. Agenda1. Highlights of the Merger2. Growth Strategy3.3 Financial Strategy 3
  4. 4. Best for the new company 1. Highlights of the Merger 4
  5. 5. Overview of the Integrated CompanyTrade Name Nippon Steel & Sumitomo Metal CorporationLocation of Chiyoda-ku, Tokyo, JapanHead OfficeDate of Merger October 1, 2012 (planned)(Effective date)Method of the A merger (a business holding company)Business Integration – Nippon Steel to be the surviving company Nippon Steel 1 00 1.00 Sumitomo Metals 0.735Merger Ratio 0.735 Nippon Steel shares to be allotted for each share of Sumitomo MetalsListing Exchanges Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo 5
  6. 6. Creating the Best Steelmaker with World-Leading CapabilitiesMaximize the potential of steel through utilization of world-leadingtechnology. Contribute to the growth of global economies and the improvement impro ement of global societ society. Globalizing the Steel Business The Best Steelmaker with World-Leading Capabilities Nippon Steel & Sumitomo Metal Corporation Utilizing the Improving I i World’s Leading Cost Competitiveness Technologies 6
  7. 7. Maximizing Corporate Value • Re-organize/Expand existing bases mainly in emerging countries Globalizing • Establish /Reinforce the bases incl. integrated steelworks outside the Steel Business Japan • Improve capabilities t offer solutions t customers I biliti to ff l ti to t Utilizing the World’s • Respond to increasingly sophisticated needs of customers through Leading Technologies g g maximization of the potential of steel by consolidating technologies. Improving Cost • Generate synergies of JPY 150 billion per annum Competitiveness in approx. 3 years after the business integrationCorpora value ate Corporate C t Value The Best Steelmaker with World-Leading Capabilities Nippon Steel & Sumitomo Sumitomo Metal Metals Corporation Nippon Steel 7
  8. 8. GlobalizationIntegrated Company’s Scale 2010 Sales Arcelor Nippon Nippon Baosteel JFE TATA Jiangsu Gerdau POSCO U.S. Sumitomo Ansteel Mittal Steel & Steel Steel Shagang Sumitomo Steel Metals Metal ( Source : Published Information of each company) 2010 Crude Steel Production Nippon TATA U.S. Arcelor Steel & Baosteel POSCO Nippon JFE Jiangsu Ansteel Gerdau Sumitomo Mittal Sumitomo Steel S l Shagang Sh Steel Steel Metals Metal ( Source : World Steel Association) 8
  9. 9. Roadmap to Merger September 22 S t b 22, 2011 Execution of the Master Integration Agreement April, 2012 Execution of a Merger Agreement (Planned) (予定) June, 2012 Shareholders meetings to approve the Merger Agreement (Planned) (予定) Date of Merger (Effective date) g ( ) October 1 2012 1, (Planned) (予定) *The Business Integration is subject to, inter alia, the approval of the relevant authorities and shareholder approval at the respective shareholders meetings of Nippon Steel and Sumitomo Metals. 9
  10. 10. Best for the new company 2. Growth Strategy 10
  11. 11. (1) Globalizing the Steel Business 11
  12. 12. GlobalizationCapture the Growing Demands in Emerging Countries The Trend of Apparent Consumption of Crude Steel (Consumption in 1970 =1.0)10.0 Emerging 8.0 (China, Brazil, India, ASEAN5) 6.0 4.0 Global 2.0 0.0 Japan, North America, Europe 1970 1975 1980 1985 1990 1995 2000 2005 2010 (Source: World Steel Association ) 12
  13. 13. Globalization Expand Local Production in Emerging Countries Continue to produce in Japan as the core base Supply high quality products in growth markets Produce in Japan as the core base Develop and manufacture leading-edge products JAPAN ASIA AMERICAs Growth Market Re-organize / expand manufacturing , processing, Capture local demands and sales bases From Brazil and the other countriesRe-organize and Expand the Bases incl. Integrated Steelworks e.g. in ASIA / AMERICAS Target: 60 - 70 million tons of global production 13
  14. 14. GlobalizationGlobal No.1 Product Line-up for Automotives (million units) Global Auto Production 10,000 100 8,000 80 Emerging E i 6,000 60 countries <Growth Market> 4,000 Japan 40 Europe 2,000 20 North America 0 2000 2005 2010 2012E 2015E 2020E (Source: Automobile Manufacturers Associations of Each Country and Region, and Estimates by Nippon Steel and Sumitomo Metals) Strength of NSC Strength of SMI Strength of both 14 14
  15. 15. Globalization Growing Global Demand for Energy Correlation between Energy consumption by region(Mtoe) # of rigs and oil demand (Mtoe) ( (units) )18,00018 000 8,000 4,00016,000 Oil/Gas consumption 7,000 (left) 3,50014,000 China 6,000 3,00012,000 5,000 2,50010,000 US 4,000 # of rigs (right) 2,000 8,000 Europe India 3,000 1,500 6,000 Middle East Japan 4,000 2,000 1,000 Others 2,000 1,000 500 0 1980 2000 2008 2015 2020 2030 2035 - - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (Source: OECD/IEA-2010) (Source: Baker Hughes, BP Estimates by Nippon Steel and Sumitomo Metals) 15
  16. 16. GlobalizationHigh-end Products for Energy Sector Exploration / Production イメージを表示できません。メモリ不足のためにイメージを開く こ とができないか、イメージが破損している可能性があります。 コンピュータ を再起動して再度ファイルを開いてください。それでも赤い x が表示される場合は、イメージを削除して挿入してください。 Transportation / Storage T t ti St Power-Generation Power Generation 16
  17. 17. GlobalizationGrowing Demand for Railway Infrastructure Railway market: € 136 billion with approx. 3% growth p.a. Global market size (projected) € in billions Breakdown by type (annual average) € in billions 160 160 € 136 bn € 136 bn 140 140 € 122 bn 11 12 120 10 120 6 27 100 22 100 80 80 45 37 60 105 60 40 40 53 53 20 20 13 0 0 2005-2007 2007-2009 Maintenance High speed Trunk road Railway vehicles Civil engineering and electricity Light rail g Urban Operation systems (Source: Ministry of Land, Infrastructure, Transport and Tourism) 17
  18. 18. GlobalizationBest Quality for Growing Railway Demand Deliver the best quality rails and wheels from US/Japan production bases Nippon Steel & Sumitomo M t l S it Metal Standard Steel Wheels 0.24 million pieces/year (Export ratio 50%) Sole US manufacturer of forged railway wheels and axles Rails 0.62 million tons/year Wheels 0.3 million pieces/year (Export ratio 80%) 18
  19. 19. (2) Utilizing the World’s Leading Technologies 19
  20. 20. TechnologyMaximizing the Potential of Steel Increasing sophisticated, efficient, and quicker R&D R&D: JPY 70 billion Better solutions for customer needs Joint Researches with Customer: 450 themes Developing new technologies incl. innovative production processes Improving competitiveness by developing de facto standard technologies Leading technologies for global environment The highest energy efficiency and lowest CO2 emissions Developing technology to use lower-grade raw materials Technologies for lower g g grade iron ore 20
  21. 21. TechnologyIntegration of Manufacturing and Product Technologies Technology to solve customer problems Nippon Steel Sumitomo Metals Up-stream •Diagnose and repair technologies of coke-oven ・Development of new-generation technologies for Process restoring steelmaking process •Automotive high-strength steel sheet with ・Development of Steel Plate for Improving the Fatigue excellent crash energy absorption capacity Strength in Welded Joints Auto •Development of high strength steel plate and • Development of advanced stainless boiler tube for Shipbuilding new hull structure design for large container Ultra-Supercritical coal-fired thermal power plants Energy ships • Invention for super-high strength low-alloy steel •Corrosion resistant steel for cargo oil tank oil country tubular goods No.1 Patents among Global Steel Companies Nippon Steel & pp Nippon Steel Ni St l Sumitomo Metals S it M t l Sumitomo Metal Domestic patents (as of May, 2011) 7,957 3,698 11,655 Int’l patent application publications (2006-2010)* 561 347 908 R&D (FY2010, JPY bn) 46.6 22.7 69.3* Int’l patent application publications of competitors: JFE 329, POSCO 234, ArcelorMittal 100 (Source: Japan Patent Office Database) 21
  22. 22. Technology Transforming Customer Needs into Opportunities Trend in body weight Regulations for CO2 emissions (Frame Format) 300 (g/km) For fuel efficiency For safety For global warming 中国 China 日本 Japan 250 欧州 Europe Lighter body Heavier body Wider application 米国 USBody of functional high 200 via high tensile for collision tensile steelweight steel safety 150 - DP, TRIP 590~980MPa - BH sheets, 100 - Hot Stamp ~ - High tensile ~1500MPa ~440MPa 50 1995 2005 2010 2015 2020 1985 1990 2000 (Source: JSTP) (Source: Companies’ research) Tighter regulations for CO2 emissions We will apply functional high tensile steel with nano- More demand for lighter steel g technology to balance collision safety and lighter body technology 22
  23. 23. (3) Improving Cost Competitiveness 23
  24. 24. CostRealization of Synergies Generate synergies of JPY 150 billion per annum in approx.3 years after merger Approx. Amount of Main measures y g SynergiesExpansion of global development1. Accelerating overseas expansion by utilizing the Companies’ human resources JPY 30 bn / year2. Re-organizing and reinforcing overseas manufacturing and sales bases3.3 Improving efficiency of administrative/back office functions administrative/back-office etc. etcTechnology/R&D1. Realizing the benefits of advanced technology by consolidating the areas of JPY 40 bn / yeartechnology and R&D gy2. Speeding up and increasing efficiency in R&D etc.Production/Sale1. Improving production efficiency by integrating the manufacturing process JPY 40 bn / year2.2 Improving productivity by optimal allocation of tasks among production lines etc.Procurement1. Improving efficiency in procurement and transport of raw materials JPY 40 bn / year2. Reducing costs by standardizing equipment specifications3. Unifying financing, and improving efficiency in capital management etc. Total JPY 150 bn / year Endeavor to increase the above target synergy amount. In addition, continue to make .further efforts to reduce costs. 24
  25. 25. CostBest Practices among Domestic SteelworksReinforce ties among domestic steelworks Steelworks in Japan Crude Steel Energy Raw Materials Transportation Maintenance Raw Materials Inventory Materials / Equipment Infrastructure etc.Share the Best Practice p Hot Strip 6 Plate 4 Seamless 4 Cold Strip 13 Shapes 3 Spiral 4 CGL 18 Bar 2 UO 2 EGL 8 Wire R d Wi Rod 4 ERW 2 Site of NSC Site of SMI 25
  26. 26. CostThe World’s Highest Energy Efficiency40% of large capacity / highly advanced BF in the world is operated by Integrated Company BF Ranking (by Capacity) Energy Efficiencies in Steel Industry 1 Jiangsu Shagang No.4BF 5,800㎥ 日本 Japan 100 Japan=100 Nippon Steel & Oita 1BF 5,775㎥ 2 Sumitomo Metal Oita 2BF 5,775㎥ Korea 韓国 102 The best 4 POSCO Pohang 4BF 5,600㎥ energy efficiency ドイツ Germany 112 5 Severstal No.5BF 5,580㎥ Nippon Steel & フランス 120 6 Kimitsu 4BF 5,555㎥ France Sumitomo Metal 7 ThyssenKrupp Schwelgern2BF 5,513㎥ 英国 UK 122 Caofeidian I 5,500㎥ Shougang China 中国 123 8 Caofeidian II 5,500㎥ JFE Fukuyama 5BF 5,500㎥ インド India 125 Nippon Steel & 11 Nagoya 1BF 5,443㎥ カナダ 128 Sumitomo Metal Canada 12 Kobe Steel Kakogawa 2BF 5,400㎥ 米国 US 130 Nippon Steel & Kashima 1BF 5,370㎥ 13 Sumitomo Metal Kashima 3BF 5,370㎥ ロシア Russia 143 15 Hyundai Dangjin1,2BF ㎥ 5,250㎥ (Source: Research by Nippon Steel and Sumitomo Metals) (Source: RITE) 26
  27. 27. Cost Investment in Raw Materials Interests Securing access to ores and coals / mitigating price risk by acquiring stakes in quality mines and diversifying suppliers Raw Material Self Sufficiency Ratio Iron ore Approx. 30% Coal Approx. 20% Canada C d (FY2010/A) Procurement Elkview 2.5% 68 million tons Volume 32 million tons Hail Creek 8.0% (Total) Moranbah North 5.0% * USIMINAS Warkworth 9.5% MUSA 70%* Integra 6.0%NIBRASCO 31.4% Bulga 12.5% MBR 2.4% Foxleigh 10.0% CBMM 2.5% Revuboe 23.3% Brazil MozambiqueMines with long-term Australia A t licontracts or investments Iron ore Coal Robe River 14.0% Other alloy Beasley River 37.6% (planned)% Investment % 27
  28. 28. Best for the new company 3. Financial Strategy 28
  29. 29. Earned Cash goes to Good Investments and Shareholders Profit + Depreciation & A D i ti Amortization ti ti + Asset Compression, etc Improvement ofRe-organize/Expand Competitiveness of Investment in Raw Improve Return toProduction Facilities Domestic Steel Materials Interests Financial Condition Shareholdersin Growing Markets Business 29
  30. 30. Creating the Best Steelmaker with World-Leading CapabilitiesMaximize the potential of steel through utilization of world-leadingtechnology. Contribute to the growth of global economies and the improvement impro ement of global societ society. Globalizing the Steel Business The Best Steelmaker with World-Leading Capabilities Nippon Steel & Sumitomo Metal Corporation Utilizing the Improving I i World’s Leading Cost Competitiveness Technologies 30
  31. 31. Best for the new company 31