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ANNUAL REPORT 2011

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DISCOVERING OUR POTENTIAL
Operations

Metals Group - Group CEO Message

Jun Kinukawa - Executive Vice President, Group CEO, Metals Group

The Metals Group handles a broad range of products in the fields of steel products, ferrous raw materials and non-ferrous metals. Based on the two pillars of resource investment and trading, we aim to stably and continuously supply world markets with quality raw materials and products.

Midterm Corporate Strategy 2012 Targets and Progress

In the year ended March 2011, the Metals Group posted net income of ¥230.1 billion, representing an increase of ¥92.2 billion year on year. This was a record result for this group. The main reasons were higher earnings at an Australian resource-related subsidiary as well as gains on a share transfer at a Chilean iron ore-related subsidiary and higher equity-method earnings of related business investees.

Under Midterm Corporate Strategy 2012, the Metals Group will buttress two main pillars—resource investment and trading— as it aims to steadily contribute to MC's bottom line.

In terms of resources, we are making substantial investments in six significant mineral resource fields where robust demand is expected in step with world economic growth: coal, iron ore, copper, aluminum, stainless steel raw materials, and uranium. We are expanding existing projects and developing projects to which we have already committed ourselves. At the same time, we are targeting new projects that will drive future growth. Additionally, we are exploring possibilities in the new fields of platinum and palladium. In trading, we are bolstering our supply framework for materials, semi-finished products and other products, all underpinned by high-quality services and functions, as we seek to tap into expansion in growth markets. We have amassed considerable business expertise in resources over many years, and have an information network that is rooted in key markets. Leveraging these advantages, we aim to expand business as a true industrial player. We are not simply an investor or a trader.

Human resources are vital to developing our business in this way. That's why the Metals Group is also concentrating its efforts on developing human resources. In particular, as we promote multiple resource projects, ongoing human resource development will increase the number of specialists who are so vital to mine development and management. Over the medium and long terms, we aim to evolve to a level where we can take the lead in mine management. This should strengthen our business base.

Business Environment and Outlook for Year Ending March 2012

Our business environment in the year ending March 2012 is clouded with instability and uncertainty. Tension in the Middle East, financial unease in Europe and measures to rein in inflation by China and other emerging nations are shaping our business environment. The impact of the March 11 Great East Japan Earthquake is another factor we have to contend with. That said, we expect to see healthy growth in both demand and prices across the board in metals, driven by economic growth in China, India, Brazil and other emerging markets.

In this business environment, we will work to achieve the goals of Midterm Corporate Strategy 2012. To this end, we will continue to steadily execute our strategies in both resource investment and trading.

In the year ending March 2012, the Metals Group is projecting net income of ¥230.0 billion, largely on a par with the past fiscal year. This forecast assumes higher sales volumes and prices at our Australian resource-related subsidiary, which should offset the absence of gains on a share transfer at a Chilean iron ore-related subsidiary recorded in the year ended March 2011.

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