NKK CORPORATION: Annual Report 2000
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Review of Operations
Steel Division

Percentage of Net Sales for Fiscal 2000

      NKK Group is the seventh largest steel manufacturer in the world, with an annual raw steel production capacity of approximately 20 million tons. In Japan, NKK operates two integrated steel works, the Fukuyama Works and Keihin Works. The Fukuyama Works is one of the largest and foremost integrated steel works in the world with an annual raw steel production capacity of approximately 10 million tons. It is also ranked top internationally in terms of overall competitiveness, including cost and quality. The Keihin Works, situated near Tokyo, produces three million tons of raw steel per annum and is the most modern integrated facility in Japan, featuring environment-friendly, state-of-the-art technology. NKK BARS & SHAPES, a wholly owned subsidiary, has an annual raw steel production capacity of approximately 1.5 million tons. In the United States, NKK maintains a 69.7% shareholding in NSC, headquartered in Mishawaka, Indiana. The annual raw steel production capacity of NSC is approximately 5.5 million tons. NSC is dedicated to manufacturing high-quality flat-rolled steel sheets for automotive, construction, container and other industries. NKK Group also has two steel sheet joint ventures in Thailand.

      Sales revenue of the Steel Division for fiscal 2000 was ¥1,235.9 billion, down 7.8% from the previous year, reflecting the decline in domestic steel demand. However, global demand for steel rose, despite faltering prices. NKK continued to expand sales worldwide and successfully reduce its costs. As a consequence, operating income jumped to ¥56.7 billion, from ¥9.1 billion in the previous year.

Sheets and Plates

      During fiscal 2000, domestic demand for sheets and plates declined due to decreased Japanese automobile production and curtailed private-sector capital investment. However, Asia's economic recovery was a definitive factor in increasing exports of sheets and plates, in particular hot-rolled sheets, to the Republic of Korea and Southeast Asia. A strong U.S. economy and fewer steel shipments flowing into the United States proved favorable for NSC. Global sheet and plate sales rose 6.7%, to ¥772.3 billion.

      Fiscal 2000 was a year of active strategic change. In Japan, the Company established NKK STEEL SHEET & STRIP CORP. in June 1999. NKK spun off this new company from its steel coating operations at Keihin Works, to fortify its steel sheet operations and thereby better serve the construction industry. In overseas operations, NKK Group instituted various measures to aggressively cultivate the U.S. and Southeast Asian markets. In the United States, the Company started supplying NSC with high-quality, semifinished steel slabs. This has enabled NSC to satisfy the needs of customers, such as automotive manufacturers. NKK and NSC also worked closely on a wide range of R&D activities, including new product development and for technological innovations to improve operations. In Southeast Asia, as a means of supporting an expansion in production, NKK increased substrate supplies to its two Thai joint ventures, THAI COLD ROLLED STEEL SHEET PUBLIC CO., LTD. (TCR), and THAI COATED STEEL SHEET CO., LTD. (TCS). Moreover, we also started shipping semifinished steel slabs to Sahaviriya Steel Industries Public Co., Ltd. (SSI), our investing partner in TCR and TCS, and Thailand's largest hot strip mill. We are confident that our activities for fiscal 2000 will support the Group's competitiveness and profitability worldwide.

      In response to customers' growing ecological concerns, NKK Group made significant advances in fiscal 2000 in its development of environment-friendly steel sheet products, such as ultra light-weight steel sheets for automobile bodies and chrome-free steel sheets.

      Focus 1 Global Steel Production
Focus 1 Global Steel Production

Cold-rolled sheets
The Fukuyama Works
From the control booth at National Steel
Rolling machines at Thai Cold Rolled Steel Sheet
Electrogalvanizing line at Fukuyama Works

Bars and Shapes

      Sales in this segment declined 8.1%, to ¥113.9 billion. Domestic construction-related demand shrank, reflecting the Japanese economy's delayed recovery, while offsetting gains from improved exports, a result of the economic rebound in Asia. The Group's bar steel business was reorganized under NKK BARS & SHAPES in April 1999. The new company obtained facilities from TOA STEEL CO., LTD., and Fukuyama Works. NKK BARS & SHAPES' full lineup of products, reliable delivery and detailed technical services are highly regarded by customers.

NKK steel piles

Pipes and Tubes

      Production of pipes and tubes declined, reflecting a drop in domestic demand for civil engineering and construction projects, which negated the positive impact of economic recovery in Southeast Asia. Sales for the period fell 19.4%, to ¥96.1 billion. NKK made the decision in November 1999 to spin off the Keihin Works' seamless steel pipe division as a manufacturing and sales joint venture with Siderca S.A., a member of the Techint Group that is headquartered in both Argentina and Italy. The Techint Group is the world's largest supplier of seamless pipes, and Siderca is its core company.

      From August 2000, under the name of NKKTUBES, NKK and Siderca aim to become the world's leading supplier of seamless pipe products by maximizing the synergies of this venture, notably the combination of high-quality NKK products with Siderca's multipurpose, highly cost-competitive seamless pipes. In addition, as a means of fully enhancing operations, Keihin Works spun off its welded pipe business in October 1999 as NKK WELDED PIPE MANUFACTURING CO., LTD.

      Focus 2 Cooperation with Kawasaki Steel Corp.
Cooperation with Kawasaki Steel Corp.

Siderca Executive Vice President Paolo Rocca (left) shakes hands with NKK President Yoichi Shimogaichi at contract signing

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