Consolidated results for FY 2000

2001/05/24

Nippon Steel Corporation
May 24， 2001

1. Business policy

Nippon Steel formulated the Medium-Term Consolidated Business Plan to be implemented from fiscal 2000 to 2002. With the following items as its basic policies， the plan sets the sales target at approximately ￥2，900 billion， the ordinary profit target at more than ￥180 billion and the interest-bearing debt balance target at less than ￥1，800 billion in fiscal 2002 on a consolidated basis:

(1) Cultivation of solid total group strength worthy of a high market evaluation in the whole of industry.
(2) Establishment of solid business foundations which will not be influenced by changes in management climate in the steel business.
(3) Structural strengthening of the engineering business， urban development business， chemical and nonferrous materials business， electronics and information systems business and their contribution to consolidated business performance.
(4) Priority technical development toward stronger corporate competitiveness.
(5) Positive contribution to the protection of the global environment and the building of a recycling-oriented society.

Along with the achievement of the above numerical targets， Nippon Steel will strive for fair business operations to make the company long trusted by society.

Regarding the distribution of profit， the company pays dividends in consideration of funds needed for strengthening the business base， the business results in the term concerned and future prospects so as to continue stable dividends.

2. Business Results
(1) Outline of the term under review

The Japanese economy in fiscal 2000 experienced moderate recovery in the first half supported by increased exports and the improvement in private sector capital investment. In the second half， however， future prospects rapidly became cloudy due to the slump of the stock market and high crude oil prices， in addition to other causes for concern such as the deceleration of the U.S. and Asian economies. In the Japanese steel industry， total national crude steel production amounted to 106.90 million tons， a gain of 8.90 million tons over the previous term， reflecting the increase in exports to Asia in the first half and the domestic steel demand which remained strong. In the second half， the export environment deteriorated and the prospect of excess inventories grew in the domestic market.

Under these circumstances， Nippon Steel continued its greatest possible efforts to achieve the goals set for the first year of the Medium-Term Consolidated Business Plan by sharing strategies with the group companies. The results by business segment are outlined below. The following business segments are based on the new segments adopted after corporate reorganization (please refer to the note on ”；the changes in business sectors and in companies belonging to each business sector”； on page 2).

Outline of business results in fiscal 2000 by business segment
(Billion yen)

	Sales	Operating profit or loss
	FY2000	FY1999	FY2000	FY1999
Steel	1，962	1，877.5	115.5	73.2
Engineering	280.9	300.0	7.2	12.2
Urban development	141.9	164.4	16.3	20.7
Chemical &； nonferrous materials	359.1	338.6	11.5	8.3
Electronics &； information systems	143.6	136.1	9.7	5.3
Other businesses	59.4	56.4	0.7	-0.9
Total	2，947.1	2，873.3	161.2	119.0
Eliminated or company-wide	(196.7)	(192.7)	1.3	1.2
Consolidated	2，750.4	2，680.6	162.6	120.2

(Steel Business)

Nippon Steel*s crude steel production in fiscal 2000 was 27.83 million tons， up 2.21 million tons from the previous term. This was a result of the stepped up efforts in the increasingly fierce competition， securing orders taking advantage of the growing demand in Asian markets in the first half as well as realizing greater domestic shipments than in the previous term. Consequently， although prices fell， increases in production and shipment， particularly in the first half， resulted in the sales of ￥1，962.0 billion，￥84.4 billion above the ￥1，877.5 billion in the previous term. As a result， despite negative factors like higher crude oil prices， the operating profit grew ￥42.2 billion from the previous ￥73.2 billion to ￥115.5 billion， thanks to the stepped-up efforts for cost reduction and profit securement.
In April 2000， the company introduced the product divisions system to strengthen the earning power and financial structure on a product-by-product basis. As part of this move， regarding hot-rolled stainless steel and other products， the company concluded in May 2000 a product-supply agreement with Sumitomo Metal Industries， Ltd. and a mutual supply agreement with Nisshin Steel Co.， Ltd. The regular supply under these agreements started in April 2001. At the end of March 2001， the medium- and small-diameter seamless pipe mill at Yawata Works was shut down as planned.

Overseas， Nippon Steel positively promoted business tie-ups with other companies to meet the needs of customers operating globally. In August 2000， the company concluded a strategic alliance agreement with Pohang Iron and Steel Company Ltd. (POSCO) of the Republic of Korea regarding basic technological development， joint ventures in third countries and IT-related matters. Consultations are already underway about the creation of concrete cooperative relations. Mutual purchases of the respective companies* shares are also in progress.

The joint venture with USIMINAS for the manufacture of hot-dip galvanized steel sheets in Brazil started commercial operations in October 2000 as scheduled. In January 2001， Nippon Steel concluded a global strategic alliance agreement with USINOR of France with an aim to improve respective customer services， effective utilization of mutual managerial resources， enhancement of R&；D capabilities， etc. Under this tie-up， concrete consultations in the area of automotive steel sheets have started.

Nippon Steel has positively pursued new product development in such areas as automotive， home electric appliances， building construction and housing. It has always paid close attention to environmental issues in all of its activities. To further contribute to the establishment of a recycling-oriented society， the company has been promoting the effective use of waste plastics in coke ovens at Nagoya and Kimitsu Works since August 2000.

With an aim to strengthen the business structure of the Nippon Steel group， Kurosaki Corporation and Harima Ceramic Co.， Ltd.， both affiliate companies accounted for by the equity method， merged in April 2000 to become Kurosaki Harima Corporation. In January 2001， Nippon Steel Transportation Co.， Ltd.， a subsidiary， and Yawata Shipping Co.， Ltd.， an affiliate accounted for by the equity method， amalgamated.

(Engineering Business)

Regarding the engineering business， in an environment where domestic and foreign demand remained inactive and competition grew fiercer， the company carried out positive marketing and succeeded in achieving a marked recovery in order receipts from the low level in the previous term. Particularly， efforts were paid in the environmental protection area， securing orders for a record-making six waste-direct-melting furnace projects (cumulative number of projects: 20). In the energy area， the company received its first order for a natural gas liquefaction plant from Tomakomai City， Hokkaido， as a result of the marketing tailored to customers* needs.

The sales were ￥280.9 billion， down ￥19.1 billion from the previous ￥300.0 billion， reflecting the low level of order receipts during fiscal 1999. The operating income declined by ￥4.9 billion to ￥7.2 billion (￥12.2 billion previously) despite efforts for profit securement by thorough cost reduction in project execution.

(Urban Development)

Nippon Steel is vigorously promoting the urban development business such as the Yawata-Higashida Comprehensive Development Project in Kitakyushu City and the Hanada Development Project in Sakai City. Furthermore， the company supplied condominiums mainly in the Tokyo metropolitan area， such as the sale of large-scale housing projects in Koto-ku and Nerima-ku， Tokyo， and Kawaguchi City， Saitama Prefecture， precisely seizing the robust housing demand. The sales and operating profit amounted to Y141.9 billion (￥164.4 billion previously) and ￥16.3 billion (￥20.7 billion previously)， respectively.

In April 2001， to further solidify the business foundation， Nippon Steel*s Urban Development Division and the fully-owned subsidiary， Nippon Steel Life Planning Co.， Ltd.， started preparations to integrate their businesses in a new company called Nippon Steel City Create Inc. The two partners have decided to market their condominiums under the new brand name of Livio.

(Chemical and Nonferrous Materials Business)

The environment for the chemical business remained severe， with raw material prices which soared in the first half staying high and the demand and market for chemicals easing in the second half and onward. Under the circumstance， the company endeavored to restore prices and increase sales. In particular， it stepped up marketing efforts for the functional product business which is a growth area. Specifically， it started to increase the production capacity of two-layer copper-lined laminates for which demand is brisk and refurbished the business promotion set-up for organic electroluminescence (EL) material.

The company*s chemical group as a whole is implementing further profit enhancing measures， such as divesting in July 2000 its compound business subsidiaries in Europe and America to focus efforts in Asia and launching a joint venture with Sumitomo Metal Industries， Ltd. in rockwool business in October 2000.

Regarding the new materials business， Nippon Steel succeeded in steadily increasing sales of fine ceramics， semiconductor bonding wires and power supply units for electronic apparatus， seizing the robust IT-related demand.

In the titanium business， the company solidified its position as one of the leading wrought product suppliers and endeavored to stabilize and strengthen the business foundation， by accurately meeting the growing demand for motorcycle parts and IT-related components， in addition to the conventional areas like chemical， structural and household applications.

As for the silicon wafer business， Nippon Steel decided to tie up with Wacker-Chemie GmbH (”；Wacker”；) of Germany to prepare for the future technical sophistication and the commercialization of 12-inch wafers. Thus， in November 2000， Wacker acquired 55% of the equity of NSC Electron Corporation， a 100% subsidiary of Nippon Steel， changing the name to Wacker NSC Corporation.

In all， the total sales of the chemical and nonferrous materials business sector increased ￥20.4 billion to ￥359.1 billion from the previous ￥338.6 billion， while the operating profit rose ￥3.1 billion to ￥11.5 billion from the previous ￥8.3 billion.

(Electronics and Information Systems Business)

The electronics and information systems business attained excellent results continuing from the previous term， mainly in the supply chain management area for manufacturing companies， which is the strong feature of Nippon Steel*s solutions business， and the derivative business area for financial firms. The sales increased ￥7.4 billion from the previous ￥136.1 billion to ￥143.6 billion， while the operating profit increased ￥4.4 billion from the previous ￥5.3 billion to ￥9.7 billion.
On the basis of such a favorable business performance， the Electronics &； Information Systems Division of Nippon Steel and Nippon Steel Information &； Communications Systems Inc. (ENICOM， a 100% subsidiary of Nippon Steel) were integrated to become Nippon Steel Solutions Corporation in April 2001. The objective of the integration is to fuse the Division*s capability for proposing advanced solution services and ENICOM*s technical expertise as a user-friendly systems integrator. Nippon Steel intends to have the new company listed on the stock exchange at the earliest possible date.

(Other Businesses: Power Supply， Services， etc.)

Regarding the power supply business， Nippon Steel started the wholesale supply of 149，000 kW from Kamaishi Works to Tohoku Electric Power Co.， Ltd. in July 2000. With Hirohata and Yawata Works which had already started commercial operations， all three works operate power plants smoothly.

Muroran and Oita Works too are making preparations for starting power supply. Nippon Steel also promotes power retail and LNG supply， taking them as new business opportunities. Total sales and operating profit from other businesses in fiscal 2000 came to Y59.4 billion (previously ￥56.4 billion) and ￥0.7 billion (previously a loss of ￥0.9 billion)， respectively.

As a result， Nippon Steel*s consolidated sales in fiscal 2000 totaled ￥2，750.4 billion， an increase of ￥69.8 billion from the ￥2，680.6 billion in fiscal 1999， the consolidated operating profit ￥162.6 billion， up ￥42.3 billion from the previous ￥120.2 billion， and the consolidated ordinary profit ￥111.3 billion， up ￥46.6 billion from the previous ￥64.6 billion.

Regarding special profit and loss， a total special loss of ￥173.9 billion was registered for the following reasons: expenses involved in the closure of the medium- and small-diameter seamless pipe mill at Yawata Works (￥26.2 billion)， lump-sum amortization regarding the shortage of reserve for retirement benefit obligations as a measure to respond to the change in the accounting system (￥107.4 billion) and appraisal loss of investment securities (￥10.3 billion). On the other hand， a total special profit of ￥111.9 billion was registered comprising profit from the establishment of retirement benefit trust (￥68.7 billion)， profit from the sale of investment securities (￥26.4 billion) and profit from the sale of fixed assets (￥15.8 billion). As a result， the net income before tax and other adjustments for fiscal 2000 amounted to ￥49.4 billion， an increase of ￥47.2 billion from the previous ￥2.1 billion.

After deduction of the corporation taxes， inhabitant taxes and business taxes totaling ￥55.3 billion (previously ￥12.8 billion)， addition of the corporation and other tax adjustments totaling ￥35.8 billion (previously ￥19.7 billion) and subtraction of a minority shareholders* profit of ￥3.3 billion (previously an addition of ￥2.1 billion)， the consolidated net income for fiscal 2000 amounted to ￥26.4 billion (previousy ￥11.1 billion).

Nippon Steel decided on the front-loaded application of the system of directly including all securities in the capital at their market prices starting from the term under review in order to make its financial statements comply with global standards at an early date.

Regarding the non-consolidated account settlement， sales increased to ￥1，848.7 billion， up ￥37.8 billion from the previous level， due particularly to the greater steel product output and shipments in the first half， although steel product prices fell. Ordinary profit increased by ￥36.1 billion to ￥78.7 billion， reflecting cost cutting and other efforts， despite such negative factors as higher crude oil prices.

Regarding special profit and loss， a total special loss of ￥141.3 billion was registered for the following reasons: expenses involved in the closure of the medium- and small-diameter seamless pipe mill at Yawata Works (￥26.2 billion)， lump-sum amortization of the balance of retirement benefit obligations at the change in the accounting system to reduce future cost burden (￥93.8 billion) and appraisal loss of investment securities (￥7.5 billion). On the other hand， a total special profit of ￥94.2 billion was registered comprising profit from the establishment of retirement benefit trust (￥67.1 billion) and profit from the sale of investment securities (￥21.3 billion). As a result， the net income for fiscal 2000 came to ￥18.3 billion， an increase of ￥18.0 billion from the previous result.

Regarding the dividend payment for the term under review， we greatly regret that the amount per share will be the same as in the previous term， namely，￥1.50， in consideration of the aforementioned business results and future prospects.

(Cash Flow in Fiscal 2000)

Regarding the cash flow by business activities in fiscal 2000， receipts totaled ￥302.1 billion by accounting a net income of ￥49.4 billion before tax and other adjustments and depreciation expenses of ￥206.9 billion.

Regarding the cash flow by investment activities， payments totaled ￥163.3 billion because ￥172.0 billion and ￥39.7 billion respectively were paid to acquire tangible and intangible fixed assets and investment securities， while ￥26.0 billion and ￥32.7 billion respectively were received by selling tangible and intangible fixed assets and investment securities. In addition to the above， other increases and decreases were also taken into account.

Regarding the cash flow by financial activities， payments totaled ￥193.6 billion as a result of reducing the total net amount of loans and bonds by ￥182.8 billion and paying ￥10.4 billion as dividends.

As a result， the total amount of cash and cash equivalent at the end of the term under review decreased by ￥48.7 billion to ￥123.9 billion.

(2) Outlook on Fiscal 2001

For fiscal 2001， the concern for business slowdown is growing as a result of the faster deceleration of the U.S. economy than expected， in addition to the flagging personal consumption and private sector capital investment in Japan. The business environment surrounding the steel industry is thus getting increasingly difficult. Therefore， it is certain that the already fierce competition for order acquisition will further aggravate， while customers will intensify their strict selection of supply sources. Similar difficult situations are expected to prevail for engineering and other businesses.

In April 2000， Nippon Steel started and is currently implementing the new three-year Medium-Term Consolidated Business Plan to attain the goals in the Plan. In the steel business， the company will do its utmost to realize strong competitiveness in each product area and improve profitability based on the product divisions system. The company will energetically promote its association with POSCO and USINOR to meet the needs of customers operating globally.

In engineering and other businesses also， Nippon Steel will strive to build solid business foundations by increasing sales and securing high profitability. In each of its business areas， the company will pursue common business strategies with the group companies even more closely than before to improve consolidated profitability and strengthen financial structures in order to firmly establish its presence in the industry.

Sharing common strategies， Nippon Steel and its group companies will do their respective best to achieve the objectives in the Medium-Term Consolidated Business Plan， namely， consolidated sales of approx. ￥2，720.0 billion (of which approx. ￥1，240.0 billion in the first half)， consolidated ordinary profit of approx. ￥115.0 billion (approx. ￥30.0 billion) and net income of approx. ￥60.0 billion (approx. ￥15.0 billion).

The non-consolidated targets are: sales of approx. ￥1，800.0 billion (of which approx. ￥820.0 billion in the first half)， ordinary profit of approx. ￥80.0 billion (approx. ￥20.0 billion) and net income of approx. ￥45.0 billion (approx. ￥10.0 billion).

End

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Nippon Steel Corporation
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