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March 9, 2006
JFE Holdings, Inc.

  JFE Group Unveils Second Medium-Term Business Plan

TOKYO — The JFE Group has formulated its second medium-term business plan that sets management guidelines for the three fiscal years from April 1, 2006 through March 31, 2009. Details are as follows.

Consolidated Financial Plan

Consolidated financial targets
FY ending March 31, 2006
FY ending March 31, 2009
Ordinary Income 500 billion yen Approx. 500 billion yen

At the end of March 2006
At the end of March 2009
interest-bearing debt
1,200 billion yen Approx. 800 billion yen
Debt-to-equity ratio 96% Below 50 %

Cash flow utilization plan (fiscal years from April 1, 2006 through March 31, 2009 cumulative)
Source   Use
Net income 800 billion yen
Dividends 200 billion yen
(payout ratio: Approx. 25%)
Repayment of
Interest-bearing debt
400 billion yen
Investing and financing 780 billion yen
Depreciation 580 billion yen
(1,380 billion yen)


I. Basic policies

The first medium-term business plan (covering fiscal years from April 1, 2003 through March 31, 2006) included a wide range of policies and measures to maximize the benefits of the consolidation and the establishment of the JFE Group, almost all of which were successfully implemented.

The Group's cash flow exceeded initial goals, which resulted in a significant improvement in its financial position*1 and enabled it to invest and finance more than originally planned*2 so as to achieve steady gains in profitability.

* 1   Outstanding interest-bearing debt (as of end of March 2006):
Initial target 1,600 billion yen vs. Current estimate 1,200 billion yen
* 2   Investing/financing (FYs from April 1, 2003 through March 31, 2006 cumulative):
Initial target 425.0 billion yen vs. Current estimate 530.0 billion yen (payment based)

1. Establishment of higher profit-earning structures

The second medium-term business plan further promotes management policies to obtain the solid support and trust of customers and society on the strength of high-quality products and sophisticated services.

It will actively invest management resources to further reinforce its strength as a manufacturing-driven corporate group, particularly in the areas of technology, product development, quality improvement, cost reduction, on-time delivery and global environmental protection.

The Group will also continue to make progress on its most basic and enduring task of improving the productivity and efficiency of its people, facilities and financial resources.

In the steel business, JFE will emphasize expanding production and sales of high value-added products.

In the engineering business, JFE will rigorously select areas upon which to focus its resources in order to quickly rebuild the business into a highly profitable one.

Through these measures, the JFE Group will establish a business structure capable of earning consistently high profit (ordinary income of approximately 500 billion yen per year).

2. Establishment of sustainable structures

1) Growth strategy

The JFE Group will move boldly and flexibly, carefully timing when to go on the offensive and make strategic investments, in line with improvements in the financial position.

The JFE Group will reorganize and strengthen its R&D organizations (R&D divisions of operating companies, JFE R&D Corp.) and continue to prioritize strategic development projects.

2) Corporate social responsibility, corporate governance

The JFE Group will make concerted efforts to build strong relationships of trust with the communities and societies it serves by rigorously enforcing compliance, proactively working on environmental issues (contributing to conservation both on the local and global level) and maintaining worker safety.

JFE Holdings is the focal point for shareholder-oriented group management and sound corporate governance. Its functions will be enhanced and its operations made more efficient.

3) Improvements to financial structure

The JFE Group will continue to improve its financial structure so as to be able to respond dynamically to large, growth-oriented investment opportunities. The debt-to-equity ratio will be below 100% at the end of March 2006 and the Group will work to achieve a level of less than 50% as early as possible.

3. Increased returns to shareholders

JFE considers returning profits to shareholders to be one of its top priorities. During the first medium-term business plan, the consolidated payout ratio was approximately 18%. JFE is studying ways to increase it to approximately 25%.

JFE will consider even more aggressive returns to shareholders when the debt-to-equity ratio is below the 50% level.

II. Basic policies and measures for operating companies

1. JFE Steel Corporation (steel business)

Basic policies
1. Expand sales of high value-added products* that take advantage of JFE's superior technologies and become "a trusted supplier of the world's top value-added products."

2. Achieve both future-oriented growth (develop and expand sales of high value-added products) and financial structure improvement.

*   JFE Steel defines high value-added products as products that take advantage of the company's superior technologies, not only in terms of product functionality, but also quality, on-time delivery, product development capacity and ability to propose solutions to customers' problems.

1. Expand production and sales of high value-added products and establish stable production structure

1)   Maintain and improve world-class technology development capacity
JFE Steel will emphasize the development of Only One and Number One products, respond to social and customer demands for improved quality, make production more efficient and develop technologies to reduce CO2 emissions so as to improve customer satisfaction and raise cost competitiveness.
2)   Expand volume of high value-added products (by 3 million tons/year compared to FY ending March 2006)
In response to increasing demand from the high-end market segment (automotive, energy, etc.), JFE Steel will expand sales of high value-added products by further improving customer satisfaction with technology, quality, on-time delivery and greater production capacity.
3)   Reinforce alliance strategy
JFE Steel will seek alliances in high value-added areas so as to expand its base of stable customers throughout the world. In addition to strengthening its relationships with core alliance partners, it will also build new partnerships and cooperative relationships.
4)   Reinforce domestic production base
JFE Steel will emphasize improving the soundness of its production facilities, training employees and passing down skills of veteran workers, improving labor productivity and procuring inexpensive, stable supplies of raw materials. These measures will enable it to further the cost and quality competitiveness of the two flagship steel mills, the East Japan Works and the West Japan Works, the core strengths of the company. JFE Steel will also take appropriate environmental measures, including steps to reduce CO2 emissions.

2. Stronger group-wide profitability
JFE Steel as well as its subsidiaries and affiliates will seek to raise competitiveness of the group as a whole and maximize consolidated profits by enhancing production base, training employees and passing down skills, improving labor productivity and strengthening cost competitiveness.

3. Take advantage of new growth opportunities
JFE Steel has established the joint venture Guangzhou JFE Steel Sheet Co., Ltd. as a base from which to supply automotive steel to the Chinese market and will work hard to successfully start up operations in anticipation of increasing demand.

It is crucial that JFE Steel capture the growing demand for high-end steel, particularly in the East Asian market. JFE Steel will prepare itself to respond quickly to potential business opportunities whenever they materialize.

2. JFE Engineering Corporation (engineering business)

Basic policies
JFE Engineering will rebuild its corporate group by establishing earning bases with top-class profitability in each of its business areas.

1. Rebuild earning bases
1)   Rigorously select business areas to focus on.
2)   Substantially reduce fixed costs and drastically lower the breakeven point, primarily in the steel structure engineering and water plant businesses.

Complete the above restructuring in accordance with the changing business environment by the end of FY ending March 2007 in order to rebuild the earning base as quickly as possible.

2. Steadily build a base for growth
In light of JFE Engineering's wealth of experience and technology in the energy and environment areas, the company will seek to capture expanding private-sector and overseas demand for plant engineering, procurement and construction (EPC) projects as well as operations and maintenance projects in areas such as new energies, energy conservation and recycling.

3. JFE Urban Development Corporation (urban development business)

1. Continue to pursue development projects that will increase the value of the JFE Group's real estate holdings.

2. Establish a strong reputation in the market as a medium-sized developer and seek sustainable growth.

4. Kawasaki Microelectronics, Inc. (LSI business)

1. Target sustainable growth by expanding transactions with major customers in key business areas such as LCD panels and by developing demand in new LSI application markets such as telecommunications equipment.

2. Conduct an initial public offering as early as possible to enhance the business base for further growth.


For further information, please contact:

Shuichiro Hayashi, Manager
Public Relations Sec., General Administration Dept.
JFE Holdings, Inc.
Tel: +81-3-3217-4030, Fax: +81-3-3214-6111


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