JFE GROUP REPORT 2019 — Integrated Report — Contents Value Creation Strategies to Realize Value Creation

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JFE GROUP REPORT 2019 — Integrated Report — Contents Value Creation Strategies to Realize Value Creation JFE GROUP REPORT 2019 — Integrated Report — Contents Value Creation Strategies to Realize Value Creation 03 COVER STORY Management Strategies 11 Meeting Challenges throughout JFE’s 21 Message from the CEO History Financial Strategies 13 The Value of Steel 29 Message from the CFO 15 Process of Value Creation 31 Financial Highlights 17 Business Model Business Strategies Steel Business and Trading Business 33 Steel Business 19 Business Model 37 Engineering Business Engineering Business 39 Trading Business 40 Shipbuilding Business 41 Feature 01 Business Strategies for the Automotive Market Establish a strong presence through leading- edge technology and global supply network in the face of changing market needs The JFE Group will contribute to society with Corporate Management for Value Creation Vision the world’s most innovative technology. ESG Management 49 Material CSR Issues of the JFE Group 55 Non-financial Highlights 57 Feature 02 JFE Group’s Initiatives for Climate Change Issues 65 Human Resource Development for Sharing and Practicing Group Philosophy Challenging Spirit, Corporate 67 Feature 03 Outside Executives Group Values Interview Outside executives share perspectives on Flexibility & Sincerity the features and effectiveness of JFE’s governance system 76 Message from a New Executive 77 Corporate Governance 83 Thorough Compliance 84 Risk Management 85 Stakeholder Relationships 87 Management Organization Corporate Data 89 Company Profile / Share Information 91 Operating and Main Group Companies Annual Highlights Editorial Policy 93 The JFE GROUP REPORT 2019 (Integrated Report) has been created and published with the aim of having all stakeholders, including shareholders and investors, understand the medium- to long-term value creation narratives within JFE Group. 96 Financial Information While providing a consolidated overview of the medium- to long-term growth strategy together with financial information (such as results and management strategies) and non-financial information such as ESG (Environment, Society, and Governance), from this year’s report, we have included special feature articles focused on specific strategic themes, clearly presenting the company’s unique initiatives. Through this report, we hope to foster a better understanding of JFE Group's approach toward sustainable enhancement of corporate value. This report is utilized to communicate comprehensively with all our stakeholders, and our intention is to use your feedback to provide even better content in future reports. Reporting period FY 2018 (April 1, 2018, to March 31, 2019). Reports on some activities undertaken outside this period are included. Organizations covered The holding company JFE Holdings, Inc. and its three operating companies JFE Steel Corporation, JFE Engineering Corporation and JFE Shoji Trade Corporation. Additionally, some reports may include the equity-method affiliate Japan Marine United Corporation and Group companies under the operating companies (consolidated subsidiaries and equity-method affiliates). All JFE Group personnel are required to faithfully adhere to the following Standards of Conduct in all corporate activities. These standards embody the JFE Group's Corporate Vision and Guidelines Tool map JFE Group Report International Integrated Reporting Council (IIRC) Guidelines: (Integrated report) go hand-in-hand with its Corporate Values. Senior managers are responsible for communicating International Integrated Reporting Framework these standards to employees of Group companies and their supply chain partners, Standards of Ministry of Economy, Trade and Industry: Guidance for Financial Information Non-financial Information and creating effective systems and mechanisms to ensure adherence to ethical standards. Collaborative Value Creation Conduct GRI: Sustainability Reporting Guidelines GRI Standards Senior managers are also responsible for measures to prevent the recurrence of any violation of Financial Stability Board: the final report of the Task Force on these standards. Additionally, they must report violations promptly and accurately to internal and external Climate-related Financial Disclosures (TCFD) Financial stakeholders, determine the persons of relevant authority and accountability, and resolve matters rigorously. Corporate Publication date results and Securities report CSR report governance IT REPORT November 2019 investors’ meeting report (Next issue (planned): November 2020) documents Disclaimer IR Library CSR Report 2019 1 Provide quality products and services 2 Be open to society 3 Work with communities 4 Globalize All current plans, strategies and beliefs published in this report that are not historical facts https://www.jfe-holdings.co.jp/en/investor/ https://www.jfe-holdings.co.jp/en/csr/data/index.html contain forecasts about future performance, which are subject to risks and uncertainties. library/index.html Corporate governance report 5 Exist harmoniously with the global environment 6 Maintain proper relations with governments and political authorities Actual results may greatly differ from those forecast due to various factors including future https://www.jfe-holdings.co.jp/en/company/info/pdf/corporate-governance.pdf trends in the global and Japanese economies, and in related industries. IT REPORT 7 Maintain crisis readiness 8 Respect human rights 9 Provide challenging work environments 10 Comply with laws and ordinances Accordingly, please note that we do not guarantee the reliability of such forward-looking https://www.jfe-holdings.co.jp/en/investor/library/itreport/index.html information. 01 JFE Holdings, Inc. JFE GROUP REPORT 2019 02 COVER JFE Steel STORY JFE Engineering JFE Shoji Trade Japan Marine United Leveraging our manufacturing power to open up new horizons Under the Sixth Medium-term Business Plan, we are currently undertaking capital investments totaling 1 trillion yen over 3 years (IFRS). By establish- ing leading-edge facilities through renovation and new production process- es utilizing advanced AI/IoT, the company aims to stabilize facility operation, increase production efficiency, reinforce cost competitiveness and realize the stable production of products with high added value. Maximized manu- facturing capabilities will enable JFE Steel to triumph against global compe- tition and ensure a solid earnings base for the future. Converter (Fukuyama) 03 JFE Holdings, Inc. JFE GROUP REPORT 2019 04 COVER JFE Engineering STORY JFE Steel JFE Shoji Trade Japan Marine United Expanding the engineering business that “Ni·na·u*” the foundations for life, from planning to operation. The geothermal power plant in Matsuo-Hachimantai constructed by JFE Engineering Corporation has started full-scale operations. JFE Engineering has participated in the project from the survey stage, and remains responsi- ble for the construction of the entire set of ground facilities including steam production facilities and power generation facilities, while engaging in oper- ations management as an investor. The generated electricity is supplied to local customers via Urban Energy Corporation, a new electric power com- pany wholly owned by JFE Engineering. We aim to expand a stable source of earnings by proposing integrated services that cover business planning to management. Geothermal power plant in Matsuo-Hachimantai (Iwate Prefecture) * “Ni·na·u” is a Japanese word meaning supporting and remaining responsible. We aim to provide solutions with our engineering and manufacturing know-how. 05 JFE Holdings, Inc. JFE GROUP REPORT 2019 06 COVER STORY JFE Shoji Trade JFE Steel JFE Engineering Japan Marine United Developing steel processing centers globally with a focus on Asia Every day we strive to improve our technology and quality with a great sense of pride in the important role of connecting each JFE Group’s steel- works with customers. In 2010, we established the Steel Alliance Service Center in Thailand to process steel materials for automotive steel sheets. National staff, who initially had no experience, have become reliable on-site employees. They are the power behind the scene supporting the frontline of our business. National staff at Steel Alliance Service Center 07 JFE Holdings, Inc. JFE GROUP REPORT 2019 08 COVER STORY Japan Marine United JFE Steel JFE Engineering JFE Shoji Trade Meeting all needs using the latest environmental and energy-saving technologies This Suezmax tanker, developed by Japan Marine United after the merger, is the largest crude oil carrier that can transit the Suez Canal. Born out of a combination of long-amassed expertise and cutting-edge technologies in tanker development, this next-generation Suezmax tanker is energy efficient and environmentally friendly, and is optimally designed to satisfy the entry conditions of the world’s major ports and meet the current mainstream market requirements. Suezmax tanker PATRIOTIC 09 JFE Holdings, Inc. JFE GROUP REPORT 2019 10 Meeting Challenges throughout JFE’s History ■■■ Net sales / Revenue (left axis) Ordinary income / Business profit (right axis) (billion yen) Establishment of JFE Holdings Collapse of Lehman Brothers Japanese Generally Accepted International Financial (billion yen) Accounting Principles Reporting Standards 4,500.0 800.0 (JGAAP) (IFRS) 3,908.2 3,961.7 Great East Japan 3,850.3 3,873.6 Earthquake 3,666.8 3,678.6 517.3 513.5 Average-based target of 3,500.0 3,539.8 3,431.7 Sixth Medium-term 540.0 460.6 3,260.4 3,308.9 Business Plan 3,195.5 3,166.5 3,189.1 3,098.3 502.9 400.5 Business profit: 290 billion yen/year 2,803.6
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