A look back at our 20th anniversary and the year 2024

In 2024, we will celebrate the 20th anniversary of our founding. First of all, I would like to express my sincere gratitude to all of our group employees around the world who are working to achieve our goals even in the midst of major environmental changes.

Looking back over the past 20 years, the first 10 years were not smooth at times due to the Lehman Shock and other factors, but supported by the rapid increase in demand for steel in China, we were able to generate profits mainly in the trade business. Subsequently, the environment changed drastically, and China shifted from being an importer to an exporter, and inexpensive steel products began to flow into Japan and other countries. Due to this change, it became difficult to achieve sustainable growth only with the conventional trade-centered business model in the latter half of the decade. Against this backdrop, we have been stepping up our business investments, including the acquisition of Kelly pipe in 2014 and Cogent in 2019, the acquisition of control of CEMCO in 2022 and STUDCO in 2024 to capture demand for Construction Materialsthin sheet in the Americas and Australia, and the acquisition of Malaysian ferroalloy manufacturer In addition, the Company has been shifting to a structure that combines trading and business operations through investments in OMH, a Malaysian ferroalloy manufacturer, and Arfin, an Indian manufacturer of aluminum deoxidizers.

Looking back at the most recent year, 2024, it was a year in which the contraction of domestic demand became apparent. Construction MaterialsIn the construction machinery and industrial machinery fields, the main factors were a decrease in projects due to labor shortages and rising logistics and construction costs; in the construction and industrial machinery fields, a slowdown in external demand; and in the automotive field, production cutbacks due to quality and certification issues.

Despite this difficult environment, the Japanese market remains one of the leading steel markets in Asia in terms of the scale of demand. Demand related to carbon neutral (CN) and new energy is also expected to increase in the future, and we believe that the key issue is how to tackle existing fields and those that are expected to grow.

Overseas, the slump in domestic demand in China has accelerated the flow of inexpensive steel products into Asia. This trend has led to falling market prices in many countries and an increase in trade measures against China, but Chinese export volumes are still on the rise, and we assume that it will take some time for the Asian steel products market to fully recover. On the other hand, demand in the U.S. is firm, and emerging countries such as India continue to grow. It is important to ensure that we can capture demand in these priority regions and enhance our profitability.

This fiscal year is the final year of the seventh medium-term management plan. We are looking at 45-50 billion yen as the actual value of segment profit, and we would like you to work toward achieving the initial plan of 50 billion yen in the remaining three months of the fiscal year.

 

Our Long-Term Vision

Next, let me talk about our long-term vision. Regarding earnings, we are aiming for segment profit of 100 billion yen as of 2035, and we would like to focus on earning power. In Japan, demand is expected to shrink due to population decline, but Japan remains our most important region, and we will continue our efforts to enhance our presence while taking care of our domestic business.

Overseas, we will aggressively capture growing demand, and promote insiderization in regions where we have a strong business advantage as a pillar of earnings growth. Following the Americas, ASEAN, and China, we intend to make Australia our headquarters by April 2025 and establish a structure to attack Australia and its surrounding markets. In India, JFE Steel has decided to collaborate with local JSW, and we will deepen our efforts by making the most of our processing functions. In Europe, a coil center in Serbia in Eastern Europe is scheduled to start operation in July 2013, and we will work to capture demand for electromagnetic steel sheets in Europe. In the future, we intend to make the decision-making function in each region independent and create an organizational structure that seriously considers how best to enable each operating company to grow.

 

Our 8th Mid-Term Plan

The 8th Mid-Term Plan will start in fiscal 2025, and we intend to work toward the goal of 45-50 billion yen in earnings in fiscal 2024, 165 billion yen in the next three years, and 60 billion yen in the final year of the plan, 2027. While building on our domestic business, we will aggressively pursue M&A, business investment, and facility expansion in order to steadily capture overseas demand. JFE Shoji CorporationIn addition, we will refresh our core systems, foster DEI awareness/climate, and change our corporate culture so that Minebea, Inc. can become an even stronger company. In addition, we will strongly delegate authority by reviewing regulations and other rules, and by insisting on thinking and acting on our own initiative, we hope to become a company that can be relied upon and entrusted not only within the Group but also by our customers.

 

The Environment in 2025

Regarding the global economy, there are concerns about the continued geopolitical risks and the fragmentation of global trade due to protectionist policies of various countries. The U.S. economy has moved from monetary tightening to easing, and although a soft landing is expected, there is still a risk of an economic recession depending on the policies of the Trump administration. In China, the economic slump triggered by the real estate slump continues, and although the Chinese government has announced monetary easing and real estate support measures, it remains to be seen to what extent these measures will actually be effective.

As for the domestic economy, we expect a moderate recovery driven by inbound demand and service consumption, normalization of automobile production, and increased capital investment in the environmental sector and semiconductors, etc. However, the sluggish construction sector remains a concern. In the steel sector, blast furnace companies are reducing production capacity to meet demand, and domestic demand is structurally unlikely to return due to labor shortages and other factors. Although the supply-demand environment is expected to remain severe, 2025 is the first year of the 8th Mid-Term Management Plan, and we will work to steadily achieve segment profit of 50 billion yen.

 

Responding to Management Challenges Associated with Changes in the Environment

The environment has changed significantly in the 20 years since our company was established, and it will continue to change on a daily basis in the future. In response to management issues arising from various changes in the environment, we will also promote initiatives for decarbonization, sustainability, and diversity.

In the area of sustainability, we will continue to expand our efforts in businesses that contribute to solving social issues, such as the use of renewable energy electricity through our domestic operating companies, the expansion of transactions with Biomass Fuel, and the increase in the handling of electromagnetic steel sheets and automotive high-tensile strength materials, which are expected to improve energy efficiency, toward the achievement of CN by 2050.

We will also continue our efforts in diversity equity and inclusion (DEI). We will promote career development with the goal of having 20% women in management positions by 2030. We will also foster a corporate culture that is receptive to diverse values, invigorate the organization, and build a "corporate culture and climate that encourages discussion.

As for GX and DX, we will steadily implement the renewal of our internal core system and position it as a new growth area, aiming to expand new businesses in logistics, recycling, renewable energy-related, and environment-related fields.

 

Safety, Quality, and Compliance

First of all, I would like to ask you to recognize once again that "safety and quality" are the highest priorities in business. Without these two wheels, we will not be appreciated by our customers.

I would like to ask you once again to keep in mind that "safety and quality" must be prioritized in everything you do.

Toru also asks that you "adhere to compliance." Our Group does not need any ill-gotten gains from violations of the rules. We would like to remind you again that arbitrary decisions may undermine the credibility of the company. We will also continue our efforts to eliminate harassment. We are aware that employees are becoming more aware of this issue, but please do not hesitate to use the hotline to report any damage.

In order for the JFE Shoji CorporationGroup to continue to be a good place to work for everyone, I ask that each and every one of you remain aware of compliance and act in a sensible manner.

 

In Closing

I would like all of our employees to once again consider change in order to remain "flexible" and responsive to the ever-changing world. We must always ask ourselves what our values and strengths are and why we do what we do, think about it Toru, discuss it, and take on various challenges. This culture is rooted in the idea of self-thinking and openness, and we execute "change and challenge" without fear. Let's also re-create a corporate culture in which individuals take responsibility for their own actions.

Last but not least, everything depends on the good health, both physically and mentally, of everyone in the JFE Shoji Group around the world. I would like to conclude my New Year's greeting by wishing all the members of the JFE Shoji CorporationGroup around the world and their families a fruitful and productive year.