Sumitomo Metals Seeks Sustainable Growth toward 2020

Sumitomo Metal Industries’ president Hiroshi Tomono said to a reporter of Japan Metal Bulletin the firm will launch 5-year business plan from fiscal 2009 starting April 2009 to improve the profitability through better competitiveness in high end products especially for energy and automobile industry. He didn’t disclose the profit target figure but he said the 5-year plan is for next growth toward 2020. He indicates the firm seeks sustainable profit growth toward 2013 and then 2020 while the profit could decrease in 2009 and 2010.

Mr. Tomono said the firm tries to clear the target of 300 billion yen of consolidated recurring profit for fiscal 2008 despite of the slow steel demand. He expects the firm would post 19% higher averaged recurring profit in 3-year to fiscal 2008 than the original 3-year plan target.

Mr. Tomono said the firm tries to improve the profitability to grow sustainability even in adjustment phase for the demand. He is confident the firm clears core earnings target, which is to increase the core earnings to 80% of total operating profit, for fiscal 2008 through the effort to increase the earnings from high end steel products for energy and automobile.

Mr. Tomono said the production level in fiscal 2009 is uncertain but he believes strong demand for energy industry and shipbuilders while automobile demand would take more time to figure out.

Mr. Tomono expects steel making raw materials and energy price should decrease for fiscal 2009 from fiscal 2008. He believes iron ore and coking coal price should decrease while ferroalloy and freight market already decreased. He also expects the steel users including automakers would seek major price down for steel products for fiscal 2009 but he tries to improve the steel selling price for some items in fiscal 2008.

Mr. Tomono said the firm keeps capital expenditure plan including offshore joint venture when the firm expanded the expenditure to around 500 billion yen in 3-year to fiscal 2008, which was 2.5 times of previous 3-year. He said the firm would keep aggressive expenditure including renewal of upper stream operation at Wakayama works, conversion for higher grade large diameter pipe facility at Kashima works and better steelmaking shop at Kokura in and after fiscal 2009.

Mr. Tomono said the firm expands the raw steel output capacity to 14 million tonnes in fiscal 2008 from 12 million tonnes in fiscal 2002. He believes the expansion to 16 million tonnes or more in fiscal 2012 could meet the demand growth for high end steel products. He indicates the firm could keep growing in the volume toward 2020.