Kobe Steel Targets 180B yen of Recurring Profit for F2008

Kobe Steel announced on Thursday the firm increases capital expenditure to 340 billion yen in payment for fiscal 2006-2008, which is 1.4 times of that in 3 years to March 2006 under the new 3-year plan. The firm targets more than 180 billion yen of consolidated recurring profit and more than 100 billion yen of net profit for fiscal 2008 while the firm reduces debt equity ratio to less than 80% excluding project financing. Mr. Yasuo Inubushi, president of Kobe Steel said the firm tries to improve the profitability to top class of Japanese manufacturers by expanding sales of newly selected only one products and developing such products while the firm improves the production ability. The firm redefined the only one products or the strategic products through the reshuffle, in which the firm excluded high-tensile automotive steel with less than 60 kilogram per square millimeters of tensile strength from the category. The firm will increase the sales of new only one products by 650,000 tonnes to 3 million tonnes in fiscal 2008 from fiscal 2005. The firm expects the sales increases by 300,000 tonnes for special steel, by 270,000 tonnes for sheet steel and by 80,000 tonnes for plate steel. The sales increase to more than 40% of total sales in fiscal 2008 from current 35%. The firm plans 370 billion yen of capital expenditure, investment and financing in payment base for 3 years, which is more than 280 billion yen of depreciation. The firm uses 340 billion yen for capital expenditure, which is highest level in recent years, for blast furnace relining at Kakogawa and Kobe works, new continuous caster at Kobe and other items. The firm increases the consolidated recurring profit to more than 180 billion yen for fiscal 2008 by annual 8% of profit growth compared with 146 billion yen for fiscal 2005, which excludes 24 billion yen of inventory valuation profit from estimated 170 billion yen. The firm made the plan with same level of raw materials cost as fiscal 2005. The firm expects 58 billion yen of higher profit from higher sales of only one products, in which steel products represent 36 billion yen, in the 3 years. The firm expects 32 billion yen of cost cutting, 7 billion yen of lower profit from lower sales of commodity grade products, in which steel represents negative 15 billion yen and 28 billion yen of higher cost to improve production ability. The firm expects those factors increases the consolidated recurring profit by 34 billion yen in the 3 years.