JFE Holdings, Inc. JFE GROUP REPORT 2018 2-2-3 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011 Website: http://www.jfe-holdings.co.jp/en/ Integrated Report View the Report on your Smartphone JFE GROUP JFE GROUP REPORT 2018 JFE CSR REPORT 2018 Issued in December 2018 REPORT 2018 005_9443787913010.indd 1 2018/12/15 9:29:26 Contents Value Creation Editorial Policy JFE Group has published JFE GROUP REPORT this year for the first time to replace JFE Group TODAY, which 03 COVER STORY had been released annually until last year. This new, integrated report is created and published with the aim 11 A Tradition of Value Creation of having all stakeholders, including shareholders and investors, understand the medium- to long-term value 13 Steel, Material for a New Future creation narrative within JFE Group. JFE GROUP REPORT provides information on JFE Group’s value creation process by including a 15 Process of Value Creation consolidated overview of medium- to long-term growth strategy together with financial information (such as 17 Business Model Steel Business and Trading Business results and management strategies), non-financial information (such as ESG) and the Group’s policy, which 19 Business Model Engineering Business is “creating new value through technologies and providing solutions for social and environmental issues with the aim of improving sustainable corporate value.” Our intention is to communicate more comprehensively with all our stakeholders, and then to use your Strategies to Realize Value Creation feedback to provide even better content in future reports. Management Strategies Corporate Vision Reporting period FY 2017 (April 1, 2017, to March 31, 2018) 21 Message from the CEO Reports on some activities undertaken outside this period are included Message from the CFO The JFE Group will contribute to society with 29 Organizations covered The holding company JFE Holdings, Inc. and its three operating companies JFE 31 Financial and Non-financial Highlights Steel Corporation, JFE Engineering Corporation and JFE Shoji Trade Corporation. the world’s most innovative technology. Additionally, some reports may include the equity-method affiliate Japan Marine 33 Feature Independent Executives Group Interview United Corporation and operating companies affiliated with Group companies Business Strategies (consolidated subsidiaries and equity-method affiliates). Corporate Values 39 Steel Business 45 Engineering Business Challenging Spirit, Flexibility & Sincerity 51 Trading Business Guidelines International Integrated Reporting Council (IIRC) Guidelines Established shipbuilding Business as equity-method affiliate 55 International Integrated Reporting Framework Ministry of Economy, Trade and Industry Foundations for Value Creation Guidance for Collaborative Value Creation GRI JFE GROUP REPORT is published Environment, Society and Governance (ESG) within JFE Group Sustainability Reporting Guidelines GRI Standards 57 ESG Initiatives for all stakeholders. 59 Provide quality products (Customer Satisfaction) Publication date 63 Global Environmental Protection Online publication: December 2018, pamphlet release: October 2018 JFE Group conducts its business by broadly leveraging the potential of Governance) initiatives in what we hope is an easy-to-understand way. 69 Occupational Safety and Health (Next issue (planned): December 2019) various materials, especially steel, in society. We operate globally Our intention is to help you to understand the Group’s medium- to 70 Recruitment and Development of Diverse Human Resources 71 Thorough Compliance across a broad range of fields centered around our steel business, long-term growth strategy and value creation narratives. Tool map 72 Corporate Governance which provides world-class production scale and leading technological Financial Information Non-financial Information 78 Messages from New Outside Executives development capabilities; the engineering business, which supports not JFE Group pledges that as we pursue our corporate vision to 79 Risk Management only people’s lives but also entire industries with products and services “contribute to society with the world’s most innovative technology,” we JFE Group Report (Integrated Report) 80 Awareness of and Respect for Human Rights based on leading-edge technologies; the trading business, which seeks will be “fair, just and transparent” at all times, in accordance with our 81 Stakeholder Relationships new markets for the Group and creates new value; and the shipbuilding principle of business management, and our activities will always reflect Financial results and 83 Management Organization Corporate governance investors’ meeting Securities report CSR report business (an equity-method affiliate), which has strengths in energy- our corporate values of “Challenging Spirit, Flexibility & Sincerity”. report Corporate Data documents saving technology. In promoting these activities and growing While we take this path toward contributing to medium- to long-term sustainable businesses to increase corporate value for all stakeholders, growth, enhancing corporate value and realizing a sustainable society, 85 Corporate Profile/Share Information we never lose sight of our policies of protecting the environment; we also seek long-term relationships of trust with all our stakeholders. 87 Operating and Main Group Companies coexisting in harmony with local communities; and thoroughly adhering 90 Financial Information Disclaimer to corporate ethical standards. All current plans, strategies and beliefs published in this report that are not historical facts contain forecasts about future performance, which are subject to risks and uncertainties. Actual results may greatly differ from those forecast due to various factors including future trends in the This year, we have published the integrated JFE GROUP REPORT, global and Japanese economies, and in related industries. Eiji Hayashida Accordingly, please note that we do not guarantee the reliability of such forward-looking information. which offers information on management strategies, business activities, JFE Holdings, Inc. the group’s financial condition and ESG (Environment, Society, and Representative Director, President and CEO 01 JFE Holdings, Inc. JFE GROUPJFE GROUPREPORT REPORT 2018 201802 118 090_9443787913010.indd005_9443787913010.indd 12 2018/12/11 13:52:08 sp010_9443787913010.indd090_9443787913010.indd 2 118 2019/04/092018/12/112018/12/15 18:10:12 13:52:08 9:29:26 COVER STORY JFE Steel Leveraging Our Manufacturing Power to Open Up New Horizons Under the Sixth Medium-term Business Plan, JFE Steel will make capital investments totaling 850 billion yen over three years, an increase over the previous plan. By establishing leading-edge facilities through renovation and new production processes, the company aims to increase production efficiency, reinforce cost competitiveness and realize the stable production of products with high added value. Maximized manufacturing capabilities will enable JFE Steel to triumph against global competition and ensure a solid earnings base for West Japan Works (Fukuyama) the future. Continuous casting machine 03 JFE Holdings, Inc. JFE GROUP REPORT 2018 04 sp010_9443787913010.indd 3 2019/04/09 18:10:13 sp010_9443787913010.indd 4 2019/04/09 18:10:13 COVER STORY JFE Engineering Increase revenue sources by developing operating business The Global Remote Center (GRC) offers 24-hour remote surveillance for plants constructed by JFE Engineering. Operating conditions of the plants around the world are monitored from Yokohama Head Office and from a branch of the GRC in Manila. Our experienced staff supports to ensure operational safety. The system provides a variety of services, including AI and Big Data diagnoses to prevent accidents, prompt support for troubleshooting. GRC serves as an operating business control center to contribute to the increase of earnings. 05 JFE Holdings, Inc. JFE GROUP REPORT 2018 06 sp010_9443787913010.indd 5 2019/04/09 18:10:14 sp010_9443787913010.indd 6 2019/04/09 18:10:14 COVER STORY JFE Shoji Trade Workforce diversity as a driving force We are now pursuing regional strategies under a four-region structure comprising Japan (main focus), China, the Americas and ASEAN, emphasizing cooperation between Japan and each other region. Employees are cooperating with each other on a global scale to pioneer new businesses by leveraging our global network spanning 19 countries as well as our workforce diversity, the true driving force behind this strategy. 07 JFE Holdings, Inc. JFE GROUP REPORT 2018 08 sp010_9443787913010.indd 7 2019/04/09 18:10:15 sp010_9443787913010.indd 8 2019/04/09 18:10:16 COVER STORY Japan Marine United Reinforcing competitive strengths through superior technologies Japan Marine United satisfies customer needs by applying superior research and development, technological and manufacturing capabilities to build the finest ships and other marine products noted for energy-savings and environmentallty friendly performance. Japan Marine United continues to contribute to industry and society as a whole as it strives to become a world-top-class shipbuilding company. Ariake Shipyard (Nagasu-machi, Tamana-gun, Kumamoto Prefecture) 09 JFE Holdings, Inc. JFE GROUP REPORT 2018 10 sp010_9443787913010.indd 9 2019/04/09 18:10:16 sp010_9443787913010.indd 10 2019/04/09 18:10:18 A Tradition of Value Creation JFE Holdings JFE Steel JFE Engineering JFE Shoji Trade Universal Shipbuilding Corporation becomes subsidiary Meeting Challenges (stock acquired from Hitachi Zosen Corporation