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Basic Management Policies

As set forth in the Daido Steel Group’s management principle, we are committed to fostering a corporate culture of creativity and originality that will contribute to 21st century society based on our advanced technological capabilities in specialty steels. Under this principle, we aim to be a progressive corporate group worthy of the trust and expectations of our shareholders, business partners, employees, and society, by consistently strengthening the competitive power of our products, pursuing high profit-earning practices, and increasing corporate value.

Performance Indicators

The Daido Steel Group’s current medium-term management plan does not present specific management indicators, because the management environment has been changing so radically, but based on the above policy we are nonetheless taking concrete steps to address the below issues. Management targets that we aim to achieve in fiscal 2011 and beyond will be outlined in our consolidated medium-term management plan for the next term.

Medium- and Long-term Management Strategies and Issues to Address

Various social economic trends, such as economic globalization, the aggravation of environmental and energy issues, the expansion of information society, and the advancement of IT technologies, have brought a rush of changes to the business management environment. To solidify the Daido Steel Group’s status as a technologically advanced global supplier of specialty steels in the context of this changing environment, we will direct concerted efforts to promoting strategic investment and to strengthening our financial position, as we strive to maximize corporate value and shareholder value.

In the automotive parts business, we will specifically focus our efforts on deepening key technologies and promoting global market strategies, and in business segments related to infrastructure, energy, and environment, we will make active efforts to advance into expanding markets. Furthermore, in accord with these basic policies, we will address the below issues as important steps in increasing profitability and implementing growth strategies.

Rebuilding manufacturing competitiveness

In the automobile parts and industrial equipment segment, which is the Daido Steel Group’s principal business segment, we can expect to see major structural changes over the future. For example, domestic demand may decrease due to the shifting of manufacturing industries overseas, and the utilization of specialty steels may decline accompanying mechanical changes in response to recent trends toward compact cars and electric vehicles. At the same time, the growth of emerging economies might boost demand for specialty steels in the global market, and the growth of the Chinese and East Asian markets in particular might bring significant business opportunities to Japan owing to its geographical advantage. To respond promptly to such changes in the business environment, we will promote fundamental reforms in our business structure that would allow us to retain cost competitiveness at the global level and accommodate the expansion of global demand.

With emphasis on strengthening and rebuilding manufacturing competitiveness, we will strive to achieve a comparative advantage in the global market by promoting various new measures, such as designing an optimum production layout for our main factory in Chita, automating production processes with the aim of reducing costs and creating a comfortable work environment, and revamping management systems to increase the operational efficiency of managerial departments.

Strengthening ties with markets and customers

In the future, we can expect to see an expansion in global demand for eco-friendly products that help conserve the global environment, products related to the infrastructure, resource, and energy industries, and products that are designed in response to social changes, such as trends toward IT, globalization, and an ageing society. The Daido Steel Group is fully prepared to meet this growing demand with a wide-ranging lineup of promising products that are based on the Group’s unique technologies and development capabilities. They include soft magnetic powder for hybrid cars, next-generation automotive parts, aircraft engine shafts that already boast a high share in the global market, gas turbine materials for thermal power plants and other forged products, and neodymium magnets that contain no rare earth materials. We are placing large expectations on these strategic products also from the perspective of social contribution.

We will continue to cultivate new demands and deepen existing demands by further expanding our group of strategic products and high-value areas and strengthening our ties to expanding markets and customers.

Accelerating overseas expansion

The growth of emerging markets particularly in Asia will continue to drive the global economy in the future, and the resulting increase in demand for infrastructures and consumer durables such as automobiles is likely to also expand business opportunities for the Daido Steel Group. Therefore, we will respond to such growth in global demand by promoting various initiatives, which include strengthening our global supply capacity and expanding our overseas sales and procurement bases.

In November 2010, we signed a technical assistance agreement with Sunflag Iron and Steel Company, a major manufacturer of specialty steels in India, and have cultivated a cooperative relationship with the company that we hope would help us build a business foundation in the Indian market. In January 2011, we established Daido Steel (Shanghai) Co., Ltd. to serve as the center of our Group’s strategic activities in China. Additionally, with respect to our sales alliance with The Timken Company, a leading manufacturer of specialty steels in the United States through which we aim to expand sales of high-quality structural specialty steels in East Asia, we concentrated our efforts last fiscal year on expanding the scope of products we offer to the market. Through these types of initiatives, we will maximize our technical potential and continue to pursue global-scale strategies.

We firmly believe that the Daido Steel Group’s mission is to contribute to society by developing advanced products and technologies. To fulfill this mission, we will direct consistent efforts to the development and utilization of leading-edge technologies and strive to sustainably increase the corporate value of the Daido Steel Group as a whole.