Sumitomo Metals to Double Cost Cut in F2011

Sumitomo Metal Industries targets around 40 billion yen of cost reduction for fiscal 2011 started April while the reduction was around 20 billion yen in fiscal 2010. The firm tries to realize additional 24 billion yen of emergency cost cut on 16 billion yen of regular cost cut effort. The firm tries to secure 100 billion yen of fund in 2 years for recovery plan from the major earthquake damage. The firm manages to cumulate money saving across the board efforts including cost cut and capital expenditure postponing.

The quake damaged Kashima steel works normalized the operation. Sumitomo Metals expects the raw steel output increases to around 13 million tonnes for fiscal 2011, which is slightly more than fiscal 2010 level, when demand recovers for seamless steel pipe and automotive steel.

The firm estimates the damage was 64 billion yen for fiscal 2010 and is around 20 billion yen for fiscal 2011. The firm tries to secure around 100 billion yen of extra money to cover the damage including around 20 billion yen of repair expenditure.

Sumitomo Metals plans to secure 55 billion yen by cost reduction, 30 billion yen by capital expenditure postponing and 14 billion yen by lower dividend for 2 years through fiscal 2011 as the recovery plan. The vice president Fumio Hombe said the firm will cut cost in every aspects including research and development budget.

The firm secures more than 50 billion yen including 24 billion yen from additional cost cut, 9 billion yen from capital expenditure postponing and 14 billion yen from lower dividend at March end and September end. The firm will announce the detailed plan in late July.

Sumitomo Metals’ raw steel output was 12.9 million tonnes for fiscal 2010. The output at Kashima steel works was 7 million tonnes against 8.3 million tonnes of annual output capacity due to operation trouble at blast furnace in second half of the year and the quake damage in March. After the quake, the works’ shipment decreased by 340,000 tonnes in March. The iron making operation recovered just more than 90% of the normal level by end of May. The firm expects the iron making operation normalize in July depending on the demand.