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Kobe Steel targets profit growth in aluminum for lighter cars

Monday, Jun 19, 2017

Kobe Steel is expanding its capacity to supply aluminum materials to automakers in Asia and the U.S., seeking to raise this segment's pretax profit 70% in four years.

The Kobe-based group aims for a pretax profit of roughly 20 billion yen ($183 million) in aluminum and copper in fiscal 2020, up from 12 billion yen in the year ended in March.

Stiffer environmental regulations are increasing demand for aluminum in autos, as the lighter alternative to steel helps cut vehicle weight and raise fuel efficiency. Kobe Steel projects that Chinese and Japanese demand for automotive panel material will rise sixfold to sevenfold by 2025 from 2016 levels.

Kobe Steel's three mainstay businesses -- iron and steel, construction machinery and electric power -- have lost steam. Struggles in the first two of those segments sunk the group to a pretax loss of 19.1 billion yen in the year ended in March.

Seeking a new earnings pillar, the company is spending roughly 70 billion yen to strengthen its supply network for automotive aluminum in Asia. Semifinished aluminum rolled in South Korea will be processed into panel material and other automotive products in China and Japan. The Chinese facilities achieved full operation in May, and the added capacity at the Japanese plant in Tochigi Prefecture will be ready in 2020.

Separately, the steelmaker will boost U.S. production capacity for suspensions, bumpers and other aluminum parts starting next year.

Kobe Steel will aim for further growth in the aluminum segment's pretax profit to at least 30 billion yen by fiscal 2025.

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