Nippon Steel, Japan’s largest steelmaker, views the weak performance at its newly acquired U.S. Steel unit as temporary and remains committed to investing $11 billion to boost the subsidiary’s annual profit contribution to around 250 billion yen ($1.6 billion) by 2028, Vice Chairman Takahiro Mori said.

Acquisition and Revised Outlook:

• Nippon Steel completed its $14.9 billion acquisition of U.S. Steel in June after an 18-month regulatory process.
• Last month, it widened its full-year net loss forecast to 60 billion yen (from 40 billion yen) and cut U.S. Steel’s expected profit contribution to zero (from 80 billion yen).

Turnaround Strategy and Confidence:
Despite the near-term setbacks, Mori stated that the company’s long-term plans remain intact.

• Investment Rationale: The $11 billion capital investment aims to address high variable costs and underinvestment. "The investment will definitely produce results," Mori affirmed.
• Profit Target: The goal for U.S. Steel to contribute ~250 billion yen in underlying profit (excluding inventory effects) by 2028 remains "largely unchanged."

Causes of Recent Weakness:
Mori attributed the poor performance to several factors:

• Unexpected drop in U.S. steel prices due to uncertainty over tariffs and interest rate policy.
• An explosion at U.S. Steel's Clairton Coke Works.
• The unit’s high variable cost structure.

Financing and Strategic Focus:

• To fund the acquisition, Nippon Steel secured a 2 trillion yen bridge loan, of which 500 billion yen has already been repaid via a subordinated loan.
• The company does not expect recent earnings revisions to affect financing for the acquisition or its growth investments in India and Thailand, which are identified as core growth regions alongside the U.S.
• “Short-term fluctuations in Nippon Steel's earnings do not change our growth strategy in India,” Mori emphasized.

Outlook:
Mori anticipates a market recovery as policy uncertainty fades and operations at the new Big River 2 plant ramp up. “Things will move in a good direction next year,” he said.

(Exchange rate: $1 = 156.3400 yen)