Nippon Steel and Sumitomo Metal Industries await antitrust authorities’ screening process for proposed merger. They try to improve the competitiveness based on wider resources. The firm already announced annual 150 billion yen or more of synergy from the merger in 3 years from October 2012. Nippon Steel’s vice president Shinichi Taniguchi said the synergy target is better profit per share message for the shareholders. The firm could clear targeted 10% of recurring profit on sales earlier than expected when the merger company would realize the synergy on combined target figures of Nippon Steel and Sumitomo Metals of 280 billion yen of recurring profit with 5.7 trillion yen of sales for fiscal 2011 ending March 2012. Mr. Taniguchi said the companies discuss on solid actions for the better profitability.
Mr. Taniguchi said the merger company keeps current steel works and workers. He said the new company tries to improve productivity through optimization of the production at each facility. He expects the new company can get major synergy through deep cooperation in wider production network and wider products line. Mr. Taniguchi said the merger company reshuffles and expands existing offshore operations of the both companies to follow growing world steel demand. He emphasized the new company increases the presence at home and abroad by utilizing world best technology on the way to best steel maker with world leading capabilities. Mr. Taniguchi said Japanese apparent steel consumption is still around 60 million tonnes per year compared with around 80 million tonnes before Lehman shock. Japanese steel makers try to expand export to keep the operation but the export situation is severe for Japanese makers under slower economy, higher production capacity in China and South Korea and extremely higher yen rate. He emphasized proposed merger with Sumitomo Metals is major driver for the firm to accelerate the effort for better international competitiveness and offshore business expansion. The firm revised the annual recurring profit target downward by 50 billion yen to 180 billion yen for fiscal 2011 ending March 2012, which is 20% lower than fiscal 2010 level. Mr. Taniguchi said the second half profit is 86 billion yen in second half of fiscal 2011, which is 34 billion yen lower than former outlook and 8 billion yen lower than the first half. The lower second half profit is mainly due to lower profit from steel unit, which is 135 billion yen or 55 billion yen lower than former plan. Mr. Taniguchi said the steel unit posted actual loss in the first half excluding 50 billion yen of inventory valuation gain from raw materials. He expects the unit will secure 17.1 billion yen of actual profit in the second half due to higher shipment than the first half and cost cutting effort. However, he warns the profit could be lower depending on Thai flood impact.