Annual Report 2018

Message from the President

Image: Hajime Kimura President

Hajime Kimura

I would like to extend my heartfelt gratitude for the continued support and patronage of our shareholders. In presenting the annual report for our 136th year (from April 1, 2017 to March 31, 2018), I would like to offer a few words.

In the fiscal year under review, the Japanese economy was supported by strong corporate earnings, by increases in capital investment centered around rationalization and labor-saving measures, and by the recovery trend in personal consumption, all of which led to a continuation of moderate growth throughout the fiscal year. Overall, the global economy also remained firm, with relatively high economic growth continuing in the United States, and with the expansion of external demand and investments in infrastructure etc. supporting stable business conditions in China.

In the stainless and specialty steel industry, the trend of moderate expansion in the domestic economy led to strong demand, and production within Japan remained at a high level. Overseas, although we have not seen a significant improvement in the state of excess capacity in Asian regions, including China, the balance between supply and demand has generally been stable, against a backdrop of rising prices for raw material such as nickel.

In the Company's strategic field of high-performance alloys (high-nickel alloy products in sheet and coil forms with a nickel content of 20% or more), demand centered on overseas markets was strong. In addition to robust demand in consumer durables in regions such as the US and China, we saw an increase in demand from applications in the oil and gas industries, continued expansion of applications in environmental and energy fields, for example in solar photovoltaic power, and also saw recoveries in applications in chemicals and fertilizers.

Amid these business conditions, in addition to expanding sales in the strategic field of high-performance alloys, we began maintenance work on our production capability for standard grade stainless steel, including such measures as bringing idle facilities back online, in order to capture as much demand as possible. In addition, January 2018 saw the formal beginning of NISCO Nippon Yakin Kogyo Nanjing Co., Ltd., our joint venture with Nanjing Iron and Steel Co., Ltd., a move which is aimed at broadening sales of high-performance alloys in the Chinese market. However, due to the fire that occurred in the hot-rolling shop of the Company's Kawasaki Plant on May 14, 2017, coil-rolling operations at the shop were suspended for more than four months. During this period we continued operations at the Kawasaki Plant, while receiving the support of other manufacturers in the industry in the form of substitute production, but we were unable to avoid a reduction in production volumes as a result of the accident, and our sales volumes declined by 7.4% year on year (highperformance alloys: down 8.6%, standard grade stainless steel: down 7.2%). As a result of the Group's continued efforts to achieve more appropriate selling prices and to further reduce production costs, despite the increase in costs caused by the fire, net sales for the fiscal year under review reached ¥119,091 million, an increase of ¥6,128 million year on year, while ordinary profit was ¥3,386 million (up ¥537 million year on year), and profit attributable to owners of parent came to ¥4,575 million (up ¥2,226 million year on year).

On the subject of dividends of surplus, our basic policy is one of paying stable dividends while taking into account the investments necessary to maintain the business foundation and the outlook for business results, in addition to working to further improve the financial condition of the Company. With regard to the year-end dividend for the fiscal year under review, we will raise the dividend by ¥1.5 per share to ¥4.

As for the Group, we will continue to work to achieve more appropriate selling prices, while steadily and surely implementing measures based on the Medium-Term Management Plan 2017, such as expanding sales of highperformance alloys and reducing costs. At the same time, we will establish an accurate picture of demand trends, seeking the right timing for increasing production capacity in order to strengthen profitability.

In addition, we will take very seriously the lessons learned from the fire that occurred on May 14, 2017 at the hotrolling shop of the Kawasaki Plant, making doubly sure that this does not recur, and striving to regain and strengthen the trust of society. We again offer our sincere apologies for the difficulties and concerns that we have caused to shareholders, while expressing our gratitude to all those concerned for their support.

We humbly request the continued support and cooperation of our shareholders as we move forward.

June 2018

Hajime Kimura

Hajime Kimura

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