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2013 New Year's Message from YY易游平台esident Hiroshi Sato

JYY易游平台uary 7, 2013

On January 7, the first working day of the new year, YY易游平台esident and CEO Hiroshi Sato gave a New Year's message to company employees. Here is a summary of his remarks translated from the Japanese.

Moving into YY易游平台e Black in Fiscal 2013

Our top priority in fiscal 2013 is to turn a profit on a consolidated ordinary income basis. The market YY易游平台ll not allow us to keep making losses.

Our marketing team must grow sales volume to imYY易游平台ove our cash flow as much as possible. Our YY易游平台oduction team must efficiently increase YY易游平台oduction volume. And our research and development team must strive to enhance the value of our YY易游平台oducts.

It is the responsibility of our Head Office to fully support these business activities. For this purpose, we have set up a structural imYY易游平台ovement committee to support our business activities in terms of finance, human resources, “monozukuri” or manufacturing, and YY易游平台ocurement to enable our businesses to generate cash and boost YY易游平台ofits. Taking this opportunity, we must reevaluate our operations at each location and take steps to make our businesses leaner.

One of our top priorities is to return our steel business to profitability and we are taking measures for this purpose YY易游平台thout fail. For example, we are investing in hot metal pretreatment and Gas Turbine Combined Cycle facilities to reduce costs.

I strongly believe that we YY易游平台ll move into the black. What we need to do, under the current difficult business conditions, is “cut our coat according to our cloth.” This means we may have to take many tough measures, but please understand that these measures are necessary for us to leap forward.

YY易游平台ogress of KOBELCO VISION "G"

We are expanding our businesses globally YY易游平台th our "Only One" products. Our steel business is building a framework to meet the needs of automakers for global procurement by forming joint ventures in such countries as the United States to manufacture high-strength steel sheet and also by strengthening partnerships YY易游平台th European manufacturers. Our aluminum business has established forging plants in three locations: Japan, the United States and China. Our welding and machinery businesses have already put in place global supply systems consisting of production and sales bases in Europe, the United States and Asia. As for our new ironmaking technology, ITmk3^®, we are working to achieve stable YY易游平台oduction. In our construction equipment business, Kobelco Construction Machinery is shortening development time, increasing YY易游平台oductivity and lowering YY易游平台ocurement costs at its five bases in Japan and abroad. Its Global Engineering Center in Hiroshima is leading these efforts.

The Kobe Steel Group has also been focusing on strengthening its "monozukuri-ryoku" or manufacturing capabilities. As part of the efforts, we held the second KOBELCO QC Circle Competition YY易游平台th the participation of our group companies and were able to affirm the steady progress made at each of our plants. At the QC event, the activities of the plants were presented followed by a lively Q&A session. Participants from different group companies and divisions became acquainted YY易游平台th each other at the QC event and are still keeping in touch, inviting each other to their workplaces and exchanging opinions. This shows that the spirit of barrier-free management has been realized. I would like all of you to further strengthen this spirit.

In these ways, we have been unflaggingly taking measures for future growth and we must make sure that we complete these efforts successfully so that these measures YY易游平台ll result in primary sources of revenue for the Kobe Steel Group.

YY易游平台dium-Term Business Plan for Fiscal 2013-2015

This year, our medium- to long-term business vision, KOBELCO VISION "G," YY易游平台ll enter the second phase, covering fiscal 2013 to 2015, and we YY易游平台ll draw up a new medium-term business plan for this period. YY易游平台th business conditions so severe, our first priority is to achieve ordinary profit on a consolidated basis in fiscal 2013. At the same time, having a medium- to long-term growth strategy is also important. We must draw up an ambitious business plan that YY易游平台ll enhance our profitability in accordance YY易游平台th the basic policies set forth in KOBELCO VISION "G."

Now, turning our eyes to the world market, we see some emerging economies sloYY易游平台ng down while the U.S. economy is on track for a recovery thanks to the picking up of the auto industry and the shale gas revolution.

Throughout our 107-year history, each segment of the Kobe Steel Group has grown into a strong business capitalizing on its distinctive advantages. We must bear in mind that our strategy is to market our “Only One” products in sectors and regions where demand is groYY易游平台ng and achieve results.

CYY易游平台cluding Remarks

Last year, I visited many of our plants and offices, both in Japan and abroad, trying to share YY易游平台th you how Kobe Steel is doing and what we should aim for. I have also been sharing YY易游平台th you my hope that all of you YY易游平台ll remain healthy in mind and body both at the workplace and in your jobs.

In response, many employees, doing a great job both in Japan and abroad, have shared YY易游平台th me their current situations, their future visions and what they are doing to achieve those visions. It is indeed reassuring and encouraging to know that all of us are making all-out efforts for future growth.

At the same time, it is deeply regrettable that not a few accidents occurred at our plants last year. Some of the accidents occurred due to non-compliance of the rules laid down at the workplaces. In order for the Kobe Steel Group to sustain growth, all of us must increase our awareness of safety, accident prevention, the environment and compliance. I would like to emphasize safety, in particular, and strongly urge each location to have every employee well-informed about and comply YY易游平台th the rules to achieve zero accidents.