JFE Holdings to Invest 1 Trillion Yen to Spur Overseas Expansion

JFE Holdings Inc. (5411), Japan’s second- largest steelmaker, will spend 1 trillion yen ($12 billion) over three years on expansion, with a focus on Asian countries where demand growth is faster than the domestic market.

Half of the investment will be allocated to countries outside Japan by March 2015, doubling the proportion of overseas spending from the previous three years, as the company adds plants and eyes acquisitions, according to a statement today by Tokyo-based JFE, which reported a profit in the fourth quarter.

Japanese steelmakers, including JFE and Nippon Steel Corp. (5401) are targeting markets in Southeast Asia, India and China to counter stagnating demand at home. JFE has set a goal of 4 trillion yen in annual sales by March 2015, a 26 percent increase from the level in the fiscal previous year, according to the statement.

“We will seek new growth on the stage of global markets as we concentrate our spending in emerging markets,” Executive Vice President Shinichi Okada said today at a press conference in Tokyo.

The company’s annual sales may grow to 40 million metric tons in five years, according to the statement. It sold 24.7 million tons in the year ended March 31, excluding affiliates.

JFE didn’t provide a profit and sales outlook for the current business year, saying it has yet to settle price talks with customers.

JFE fell 3.3 percent to 1,557 yen in Tokyo. The value of the stock has gained 12 percent since the beginning of this year.

The company reiterated it will start a feasibility study to build integrated steelworks in Vietnam, in which it is the majority stakeholder with Taiwan’s E United Group.

Quarterly Profit

The steelmaker swung to a profit last quarter as sales arrested a decline and the yen fell from a postwar high. Net income was 625 million yen in the fourth quarter ended March 31, compared with a loss of 5.9 billion yen a year earlier, according to Bloomberg calculations based on the full-year result released today.

Japan’s currency declined about 9 percent against the dollar at the end of March, compared with a record high of 75.35 yen on Oct. 31, helping restore the competitiveness of Japanese mills against rivals in South Korea and China.

Steelmakers will likely boost sales this year as carmakers plan to ramp up production and post-quake reconstruction helps demand, SMBC Nikko Securities Inc. said in an April 16 report.

For the full-year ended March 31, JFE reported a loss of 36.6 billion yen, its first annual loss since it was created through the merger of Kawasaki Steel Corp. and NKK Corp. in 2002. Operating profit fell 76 percent to 44.8 billion yen for the past year, while sales declined 0.9 percent to 3.17 trillion yen.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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