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JFE Holdings, Inc.

2021 New Year’s Message to Employees

Koji Kakigi President and CEO, JFE Holdings

Koji Kakigi
President and CEO, JFE Holdings

Happy New Year and warmest greetings to everyone in the JFE Group as we begin 2021!

Looking at where we stand today, our external business environment is extremely harsh. The global COVID-19 pandemic has caused a sharp slowdown in economic activity both in Japan and abroad, unlike anything we have ever experienced before. People around the world are trying to stem infections while sustaining social and economic activity, but business strategies and measures cannot necessarily assume that conditions eventually will return to where they were before COVID-19. The steel business also faces long-term structural changes unrelated to COVID-19. In Japan, these include labor shortages and decreased steel demand due to a declining birthrate and aging population, while emerging economies overseas are expanding their steel production capacity and Chinese steelmakers continue to export aggressively.

Meanwhile, a growing emphasis on environmental, social and governance (ESG) investing is requiring us to responding accordingly, particularly in regard to climate change, making ESG a crucial factor in our business continuity. JFE has been taking a leading role in areas such as scenario analysis and the disclosure of CO2 reduction targets based on the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD), but we now need to work even harder to keep pace with the increasing global emphasis on carbon neutrality.

In the midst of such extreme change, we must view our challenges as exciting opportunities and make a determined effort to maximize our collective strengths in striving toward a new, post-COVID-19 paradigm.

2021 agenda

Due to COVID-19, changes that once seemed far off have quickly become urgent tasks, so we cannot respond at a pre-COVID-19 pace. We must maximize JFE’s collective strengths as a corporate group to respond flexibly and appropriately to rapid changes in our operating environment, pursuing both economic sustainability (providing economic value) and environmental and social sustainability (resolving ESG issues) ultimately to raise our value over the long term.

Specifically, we plan to build a more stable earnings base for our group. We also will pursue digital transformation (DX) to improve our profitability, achieve greater growth and enhance our overall business model. In addition, we will continue to address ESG issues by stepping up our efforts to reduce CO2 and take other measures to combat climate change.

We are determined to build a more solid revenue base for our group in the post-COVID-19 world with its new normal.

Critical issues

Bolstering profitability
Restoring profitability is a critical issue for our group. Guided by the concept of allocating corporate resources strategically, our operating companies and business divisions must carefully consider what needs to be done and then address the most pressing issues head-on. It is also important to build solid revenue systems capable of responding to various possible post-COVID-19 scenarios.

JFE Steel is our main revenue base, so it will focus on achieving solid profitability and engaging fully in necessary structural reform.

JFE Engineering, as a project-centric business, will strive to build a more stable revenue base, expand through M&A activity and capture demand in promising overseas markets.

JFE Shoji will aim to rapidly optimize its supply chains and diversify its geographic and procurement mixes on the assumption that the impact of COVID-19 will likely be long-lived.

And finally, JMU will work to fully harness mutual strengths in partnership with Imabari Shipbuilding to realize a substantial improvement in earnings.

ESG and sustainable growth
Addressing ESG issues, particularly climate change, will be a crucial part of our effort to ensure sustainable growth and strengthen the quality of our business. Last September, we charted a roadmap to carbon neutrality centered on CO2 emissions reduction, which we announced in our Integrated and CSR reports for 2020. Interest in this field continues to increase among investors and throughout society, so we are positioning ESG initiatives as a key to sustainable growth. I ask for everyone’s cooperation in carefully rethinking our business from the perspective of ESG.

Safety
While ESG is crucial, safety continues to be our top priority above all else. As you go about your individual duties, please continue to hone your awareness of the essential need for constant safety.

Conclusion

The current external environment is extremely challenging, making it exceedingly difficult to envision what lies ahead. To raise our corporate value and achieve sustainable growth in such a challenging environment, it is imperative that we fully leverage our world-leading technologies and other collective strengths to quickly restore profitability and build a solid revenue base. Please help us tackle these challenges by showing us your confidence and pride, guided by JFE’s enduring corporate values “Challenging Spirit, Flexibility and Sincerity.”

As we embark on another year together, I extend my very best wishes to you and your family for health and prosperity in 2021.