Develop the overseas steel business into a profit pillar on par with the domestic business

「In Vietnam, robust demand for steel products continued throughout the fiscal year, centered on infrastructure investment by the government after its policy shift toward prioritizing economic growth. Product shipments increased from the previous fiscal year at both the northern and southern bases, and, together with the effects of ongoing cost-reduction measures, this resulted in operating profits at all bases. In North America, amid firm demand for steel products, the US base continued production while addressing operating challenges caused by aging facilities. It recorded a loss for the full year, as it had in the previous fiscal year, but posted an operating profit in the second half due to more stable operations and higher product market prices. At the Canadian base, profit exceeded that of the previous fiscal year through measures including expanding sales of small-diameter reinforcing bars, which have higher profit margins.」

「当社グループが推進する「世界３極体制」の下、海外鉄鋼事業の業績改善により、営業利益、経常利益の増益を確保しました。」

「In Vietnam, demand for steel recovered, driven by government-led infrastructure investment, and product shipments from each base increased year on year. Although the competitive environment remained severe, the Vietnam business recorded an operating profit at every base due to the effects of higher shipments and cost reductions.」

「In Vietnam, construction demand, which had been weak due to political factors, showed signs of recovery and shipments increased. However, the competitive environment remained severe due to the sluggish Chinese economy and the resulting impact of steel exports from China. Although the loss narrowed, the business continued to record an operating loss. In North America, performance at the Canadian base remained strong on continued robust construction demand, while performance at the US base remained weak as market conditions softened somewhat and it took time to stabilize operations following the fire. As a result, revenue increased by ¥12,496 million, or 17.9%, year on year to ¥82,315 million, while operating results were a loss of ¥1,590 million, compared with an operating loss of ¥2,296 million in the same period of the previous year.」

「In Vietnam, the prolonged slump in real estate and construction demand created an extremely difficult business environment. At the southern base, which focuses mainly on housing, performance remained weak due to higher cost burdens from production adjustments in response to lower demand and falling product market prices. In North America, at the US base, production and shipments declined and manufacturing costs increased due to equipment problems caused by aging facilities and a fire in August, resulting in a substantial deterioration in performance. At the Canadian base, production and shipments increased in response to strong construction demand, but profit declined year on year due to the lingering effects of periodic maintenance during the cumulative second-quarter consolidated period and soaring electricity costs. As a result, revenue decreased by ¥41,072 million, or 27.3%, year on year to ¥109,117 million, while the operating loss was ¥3,293 million, compared with an operating loss of ¥993 million in the same period of the previous year.」

「In Vietnam, the recession in the real estate and construction sectors that began in the second half of the previous year continued. We worked at each base to expand sales to new customers and thoroughly reduce costs, but performance remained weak amid severe competition. In North America, although construction demand was strong, performance was weak due to higher costs resulting from periodic maintenance in the first quarter and equipment problems caused by aging facilities. As a result, revenue decreased by ¥31,013 million, or 30.8%, year on year to ¥69,819 million, while operating results were a loss of ¥2,296 million, compared with operating profit of ¥597 million in the same period of the previous year.」

「As a result, revenue decreased by ¥17,104 million, or 34.8%, year on year to ¥32,004 million, while operating results were a loss of ¥1,321 million, compared with operating profit of ¥1,851 million in the same period of the previous year.」

「As a result, revenue increased by ¥37,594 million, or 24.7%, from the previous fiscal year to ¥189,603 million, while operating results were a loss of ¥674 million, compared with operating profit of ¥5,233 million in the previous fiscal year.」

「In Vietnam, amid the continued slump in actual demand and customers' reluctance to purchase in anticipation of lower product prices from the second quarter accounting period onward, we worked to strengthen production and inventory management, but the business became loss-making due to higher manufacturing costs. In North America, although manufacturing costs increased, including due to higher electricity expenses, performance remained strong as higher product prices widened the spread between purchase and selling prices. As a result, revenue increased by ¥44,015 million, or 41.5%, year on year to ¥150,189 million, while the operating loss was ¥993 million, compared with operating profit of ¥4,123 million in the same period of the previous year.」

「As a result, revenue increased by ¥26,086 million, or 34.9%, year on year to ¥100,832 million, while operating profit decreased by ¥3,186 million, or 84.2%, to ¥597 million.」

「As a result, revenue increased by ¥17,420 million, or 55.0%, year on year to ¥49,108 million, while operating profit increased by ¥736 million, or 66.0%, to ¥1,851 million.」

「The overseas steel business as a whole recorded its highest-ever profit. In Vietnam, performance was strong in the first half as the spread between purchase and selling prices widened amid a sharp rise in product prices, while operations were difficult in the second half due to COVID-19. For the full year, however, the Vietnam bases as a whole recorded their highest-ever profit. In North America, strong demand continued throughout the year for both bar steel and mining-related products, while product shipments increased following renovations to production facilities and other measures, resulting in a substantial improvement in performance.」

「In the overseas steel business, earnings at the Vietnam bases declined due to the impact of COVID-19, but earnings at the North American bases were strong, supported by robust steel demand, driving earnings for the overseas steel business as a whole. As a result, revenue increased by ¥32,117 million, or 43.4%, year on year to ¥106,174 million, while operating profit increased by ¥4,289 million from the same period of the previous year, when there was an operating loss of ¥166 million, to ¥4,123 million.」

「In Vietnam, the pass-through of higher raw-material prices into product prices progressed after the Lunar New Year, and second-quarter performance was strong in both the north and south. In North America, demand for steel products surged as economic activity resumed, and steady sales and shipments continued. As a result, revenue increased by ¥27,482 million, or 58.1%, year on year to ¥74,746 million, while operating profit increased by ¥4,155 million from the same period of the previous year, when there was an operating loss of ¥372 million, to ¥3,783 million.」

「In Vietnam, amid firm demand that had continued since the second half of the previous fiscal year, the pass-through of higher raw-material prices into product prices progressed after the Lunar New Year, and first-quarter performance was strong in both the north and south. In North America, performance declined from the same period of the previous year, when the impact of COVID-19 was limited, due to factors including the severe cold wave in Texas in February and the shutdown for periodic maintenance at the Canadian base, acquired in March 2020. However, performance began to recover from the difficult second half of the previous fiscal year as steel demand increased and product market prices rose with the resumption of economic activity. As a result, revenue increased by ¥11,268 million, or 55.2%, year on year to ¥31,688 million, while operating profit increased by ¥1,638 million from the same period of the previous year, when there was an operating loss of ¥523 million, to ¥1,115 million.」

「Strengthening the profitability of the overseas steel business is an urgent priority. By improving technological standards through stronger cooperation with the domestic business, improving facilities and taking other measures, we will reduce costs and improve productivity, secure stable earnings in both Vietnam and North America, and aim to establish an overseas shipment capacity of 2.3 million tonnes through capacity expansions and other measures.」

「The third-quarter accounting period in Vietnam (July to September) was an off-season for demand due to the rainy season. At the southern base, where difficult business conditions had continued since the beginning of the fiscal year, performance began to recover through measures including a review of the sales strategy. In the north, a trend toward profitability gradually became established through continued initiatives in both manufacturing and sales. As a result, revenue decreased by ¥9,540 million, or 11.4%, year on year to ¥74,057 million, while the operating loss was ¥66 million, a ¥2,158 million deterioration from the same period of the previous year, when the company recorded operating profit of ¥2,091 million.」

「As a result, revenue decreased by ¥9,741 million, or 17.1%, year on year to ¥47,264 million, while the operating loss was ¥256 million, compared with operating profit of ¥2,452 million in the same period of the previous year.」

「This business segment operates steel businesses in Vietnam and North America, including the United States and Canada.」

「Under the medium-term management plan ending in fiscal 2020, we have also set out the objective of “increasing shipments and improving profitability in the overseas steel business.” We aim to establish an overseas shipment capacity of 2.2 million tonnes and raise the overseas steel business's profit to approximately 30% of total profit by improving profit per tonne.」

「In Vietnam, although business conditions varied between the north and south, the spread between purchase and selling prices widened, partly due to the decline in global scrap steel prices, and overall performance exceeded the initial plan. In the United States, although the overheated product market in the second half of the previous fiscal year was beginning to ease, performance remained strong. As a result, revenue increased by ¥11,412 million, or 25.0%, year on year to ¥57,005 million, while operating profit increased by ¥1,387 million, or 130.1%, to ¥2,452 million.」

「In the overseas steel business, although the overheated product market in the United States in the second half of the previous fiscal year was beginning to ease, performance remained strong. In Vietnam, performance was firm compared with the same period of the previous year, partly because product market conditions, which had been declining since the second half of the previous fiscal year, bottomed out and turned upward at the beginning of the year. As a result, revenue increased by ¥9,770 million, or 54.0%, year on year to ¥27,850 million, while operating profit increased by ¥448 million, or 114.9%, to ¥838 million.」

「In Vietnam, although demand for steel remained firm, the competitive environment became increasingly severe as peer companies successively expanded production capacity, making business conditions difficult. In the United States, by contrast, business conditions were favorable as firm demand for steel products and higher import tariffs under the country's protectionist policies tightened the steel supply-demand balance and lifted market prices. As a result, revenue increased by ¥20,180 million, or 37.3%, year on year to ¥74,327 million, while operating profit increased by ¥147 million, or 15.6%, to ¥1,092 million.」

「In both Vietnam and the United States, demand for steel products remained firm and product shipments increased year on year. Product prices also rose, widening the spread between purchase and selling prices, and performance remained strong. As a result, revenue increased by ¥12,857 million, or 39.3%, year on year to ¥45,593 million, while operating profit increased by ¥1,191 million from the previous year, when there was an operating loss of ¥125 million, to ¥1,066 million.」

「In Vietnam, demand for steel products continued to grow steadily against a backdrop of vigorous economic growth. Combined product shipments from Vina Kyoei Steel (VKS), the southern base, and Kyoei Steel Vietnam (KSVC), the northern base, totaled 1.09 million tonnes, an increase of 90,000 tonnes from the previous fiscal year. VKS in particular operated its steelmaking process, or upstream process, at full capacity, and both production and sales remained strong. In the United States, product shipments by Vinton Steel (Vinton) totaled 200,000 tonnes, and the company generated a profit as planned amid firm demand for steel products.」

「In the overseas steel business, production and sales in Vietnam remained strong as demand for steel products continued to grow steadily against a backdrop of vigorous economic growth. In the United States, we also generated a profit through sales expansion and cost reductions amid firm demand for steel products. As a result, revenue increased by ¥20,411 million, or 60.5%, year on year to ¥54,147 million, while operating profit increased by ¥138 million, or 17.1%, to ¥944 million.」

「Beginning with the cumulative second-quarter consolidated period under review, we have included the results of Vinton Steel (VS), which was acquired in December last year, in the consolidated accounts. In the United States, VS expanded sales and reduced costs almost as planned, generating a profit.」

「Beginning with the cumulative first-quarter consolidated period under review, we have included the results of Vinton Steel (VS) in the consolidated accounts. In Vietnam, the competitive environment is becoming increasingly severe as peer companies expand capacity in anticipation of growth in steel-product demand driven by economic growth, but we secured a certain level of profit during the cumulative first-quarter consolidated period under review, partly because it was a demand season. In the United States, VS, our manufacturing and sales base, expanded sales and reduced costs almost as planned, generating a profit. In the overseas steel business segment, we had recorded provisional goodwill of ¥375 million following the acquisition in the previous consolidated fiscal year of 100% of the equity interests in Vinton Steel and one of its subsidiaries through consolidated subsidiary Kyoei Steel USA. As the purchase price allocation has been completed, the amount has changed to ¥705 million.」

「On 21 December 2016, through consolidated subsidiary KYOEI STEEL America LLC (Delaware, USA), we acquired all equity interests in BD Vinton LLC (Texas, USA; now Vinton Steel LLC) and made the company and one of its subsidiaries consolidated subsidiaries. By establishing a new business base in the United States, we aim to expand our global network, diversify the risks associated with business investment and strengthen the earnings base of the overseas steel business.」

「Although the Vietnamese economy was affected by the slowdown in the Chinese economy, real GDP growth remained high at 5.2% in the first half of the year (January to June), and demand for steel products was 25% higher than in the same period of the previous year. Against this backdrop, VKS's steelmaking and rolling integrated line, completed last year, operated as planned, and both production and sales remained strong. At KSVC, amid favorable demand conditions in the northern Vietnamese market, as in the south, production was maintained at nearly full capacity and sales remained strong.」

「At VKS, demand for steel products in southern Vietnam remained firm, the steelmaking and rolling integrated line completed last year operated smoothly, and sales activities were strong. At KSVC, demand for steel products in northern Vietnam was also firm, as in the south, and both manufacturing and sales remained strong. As a result, revenue increased by ¥2,850 million, or 31.3%, year on year to ¥11,966 million, while operating profit increased by ¥644 million to ¥642 million, compared with an operating loss of ¥2 million in the same period of the previous year.」

「We will expand the overseas steel business by leveraging the Group's technological capabilities and its operational expertise cultivated through providing technical guidance and developing businesses in countries around the world. We will enhance the value of the “KYOEI” brand, establish a firm position in Vietnam and other ASEAN countries, and develop the business into a profit pillar on par with the domestic steel business.」