Inauguration Message from Shoji Muneoka, Chairman & CEO

Oct. 01, 2012

Nippon Steel and Sumitomo Metal Corporation

Inauguration Message from Shoji Muneoka, Chairman & CEO

Celebrating the establishment of Nippon Steel & Sumitomo Metal Corporation (NSSMC), I would like to share my thoughts with you all.

First, let me thank our customers who have supported this integration of Nippon Steel and Sumitomo Metals, our shareholders and concerned ministries’ officials who have approved it, and those of you who have strived hard to realize it from February 3, 2011, when we officially began talking about this integration, up to this day. You have worked cooperatively under the shared slogan of the “Best for the New Company”.
Thanks partly to such tremendous efforts by our people, we are thus beginning a new chapter in our history today. However, we are not in a luxurious position with a promised rosy future. Why? This is because our business environment is changing at an unprecedented speed and in drastic ways.

Look at the global economy. The prolonged sovereign crisis in the Euro countries and the economic slowdown in China and other emerging markets are among numerous factors that create more uncertainties into the future. Japan’s economy is no exception. It has continued to struggle with a challenging environment created by sextuple whammy, which include the strong yen and the unstable energy supply.

So what is going on in Japan’s steel industry? Our domestic customers are accelerating a move to transfer their manufacturing bases overseas, while our competitors in East Asia are expanding their supply capacity, which is exacerbating the substantial demand-supply gap, and resulting in a slump in the steel market. Japan’s steel companies are thus facing harsh business conditions, just as our global peers are.

What makes it even worse is that such challenging conditions are likely to continue for a prolonged period.

I am sorry that my inaugurating speech did not start with a happy, rosy tone. However, I wanted to begin this day of celebration by sharing our harsh challenging environment with you all.

While keeping that in mind, I am happy to tell you that I am convinced that we will survive such a harsh competitive environment and become the “No.1 Steelmaker with World-Leading Capabilities” in terms of scale, costs, technologies, customer services, financial solidness, and so forth. We will achieve this by implementing four major initiatives

First, we will enhance our cost competitiveness. This is an absolute must to prevail globally. In addition to realizing synergies of 150 billion yen or more per year within three years from now, we need to think about drastic measures such as more efficient management of manufacturing facilities and scrap-and-build.

Second, we are determined to pursue and excel with advanced technologies. We will integrate both companies’ long-accumulated technological capabilities in manufacturing, product development, and R&D. We will move up further to become the best of the world. The same will apply to our manufacturing fields. I want you to keep improving your manufacturing base and capabilities. Let’s adopt best practices and combine our knowledge and insights. Let’s excel further ahead. I will also encourage those of you in product development to work together with your colleagues in sales and take the lead over our peers in capturing customer needs and making proposals to them.

Third, we are committed more than ever to globalizing the steel business. I firmly believe that worldwide demand for steel will increase, notably in emerging markets such as East Asia, including China, India, South America, and the Middle East. This will be true even if a temporary correction occurs from time to time. Please keep those growth areas in perspective. We will expand our global manufacturing and processing bases in growing sectors such as the automotive, environment, and resource/energy sectors, as well as in the railway, automotive, & machinery parts sectors, which are our areas of strength.

Fourth, we are also committed to strengthening the non-steel businesses. I encourage those of you in the engineering, chemicals, new materials and system solutions segments to promote business expansion and financial enhancement. On top of that, let’s seek greater inter-business synergies with the steel business and thereby help to raise our Group’s corporate value.

These four initiatives are the core of our management policy from Day One, which is today. We have to act speedily and bravely. As you are all aware, today is not the goal of our integration. Today is just the beginning.

Up to yesterday, we were two separate companies. From today, we are all colleagues of NSSMC. All of us have to do our best in our working field. At the same time, we all work cooperatively as one big team.

How do we start? Both companies, which have a long and precious history and traditions, have cultivated great assets. Let’s first try to understand and appreciate each other. Let’s be open and learn from each other. I sincerely hope that you, both seniors and juniors, will help to create an upbeat, cheerful, and productive workplace.

I hope each one of you will play an important role in creating a new corporate culture and a new history of NSSMC, together with your colleagues. I myself will do my best and work earnestly with Dr. Tomono, President & COO, hand in hand.

Before concluding my message, let me touch on our Group’s Corporate Values and Management Principles.

Our Corporate Values state that Nippon Steel & Sumitomo Metal Corporation Group will strive to pursue world-leading technologies and manufacturing strength, and contribute to society by providing excellent products and services.

We then have five Management Principles. While I don’t have the time to elaborate on all five points, I would like you to know that the very first one is to assign importance to integrity and reliability. Integrity and reliability are the indispensable elements for a sustainable business. You have to comply with laws, regulations, and rules. At the same time, integrity and reliability start with your basic action to keep your promises.

I encourage each of you to understand these Corporate Values and Policies and keep them in mind when doing your daily work.

Lastly, let me repeat my wholehearted determination to strive together with all of you to achieve our aim of becoming the “No.1 Steelmaker with World-Leading Capabilities.” In other words, let us seek to become the “steelmaker with an overwhelming presence in the global steel market.”

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