JFE Holdings,Inc. Q3 FY2026 earnings call

Long-term Vision (JFE Vision 2035)

• First 10-year long-term vision for the company, targeting more than 3x current profit by 2035
• Estimates 4 trillion yen of total capital expenditure required to implement carbon neutral technology between 2036 and 2050, requiring a 700 billion yen segment profit target to fund this investment
• Aims to become a top runner in carbon neutral steelmaking technology development, as the global steel industry has not yet commercialized fully carbon neutral production methods

8th Mid-Term Management Plan (2025-2027)

• Allocates 1 trillion yen (approximately 60% of total planned investment over the period) to growth-focused projects
• Core goal: balance economic sustainability and environmental/social sustainability for the steel business

Key Steel Business Initiatives

• Domestic production restructuring: Transition from 7 blast furnaces to a 5 blast furnaces + 1 innovative electric furnace structure to match declining domestic demand, while increasing the share of high value-added products to 60% by 2027. Targeted product expansions include:
  • Large heavy-thickness steel plates for offshore wind monopile foundations, supplied to JFE Engineering's domestic monopile manufacturing facility starting in 2025
  • Triple production capacity for high-performance electrical steel sheets for electric vehicles and data centers, which currently sees strong inbound inquiry levels
• Overseas business expansion: Follows an insider-model growth strategy with top-tier partners in high-growth regions:
  • India: Joint venture with JSW Steel (India's top steel producer) for high-performance electrical steel, with approved capacity expansion investment to become the leading domestic supplier of electrical steel for power applications. Recently agreed to form a joint venture for an integrated steel mill, which will be JFE's third integrated steelmaking hub (after its two Japanese facilities). The existing mill has an annual capacity of 4.5 million tons, with expansion plans to 10 million tons by 2030, and JFE will build a high-grade steel production facility leveraging its technical expertise
  • North America: Operates 2 joint ventures with Nucor (North America's top steel producer), with further collaboration currently under discussion
• Carbon neutral technology development: Running 3 pilot demonstration projects at JFE's Chiba site (innovative electric furnace, carbon cycle blast furnace, direct reduction ironmaking), targeting full technology establishment by 2035. The innovative electric furnace is scheduled to start commercial operation at the Kurashiki site in fiscal 2028, with annual production capacity of 2 million tons
• GX Steel (JGreeX) sales expansion: GX Steel is defined by the Japan Iron and Steel Federation as steel with drastically reduced GHG emissions, which JFE has sold commercially since 2023 (currently at low volumes). Key challenges to expansion: balancing environmental investment costs with economic viability, requiring continued government capital subsidies, and collaboration with national stakeholders to build low-cost, stable power and hydrogen supply chains. JFE is also working with industry and government to standardize and communicate the environmental value of GX Steel to justify its cost premium to end customers

Engineering Business Initiatives

• Leverages a diverse portfolio to strengthen its earnings base, targeting growth through advancing circular economy and environmental sustainability goals
• Completed construction of an offshore wind monopile manufacturing facility in Kasao, Okayama, which will start full production in H2 2025 to support Japan's offshore wind expansion targets
• Expands waste-to-energy business, offering end-to-end services including EPC and long-term operations and maintenance. Has a large domestic footprint and has launched full end-to-end services in Vietnam
• Repurposing of former Keihin area steel mill site: Focuses on converting the land to high public/公益性 use. A waste plastic recycling facility is already operational, construction has started on a national liquefied hydrogen receiving terminal and corporate R&D hub. Power generation and data center projects are under review, and a new首都高速 interchange is under discussion with national and local governments to improve site access

Shareholder Return

• Maintains a 30% payout ratio, and added a new 80 yen per share dividend floor in the 8th mid-term plan to secure stable dividend payments

Segment-level absolute financial results were not provided in the transcript. JFE Holdings operates three 100% owned core business segments: (1) Steel: the company's primary segment, targeting 365 billion yen of segment profit in 2027 (double its 2024 actual result) as part of the 8th mid-term plan. (2) Engineering: a focused growth segment centered on environmental and energy transition projects. (3) Trading: a segment focused on global supply chain development with a dedicated growth investment allocation for expansion and M&A. Revenue contribution percentages for each segment were not disclosed.

• Long-term: JFE Vision 2035 targets a more than 3x increase in current profit by 2035, with a 700 billion yen segment profit goal to fund 4 trillion yen of carbon neutral investment between 2036 and 2050
• Mid-term (2025-2027 8th mid-term plan): Targets 365 billion yen in segment profit for the steel business by 2027, double the 2024 actual result; 60% of total planned investment (1 trillion yen) is allocated to growth projects
• Domestic high value-added product target: 60% high value-added product share in domestic steel production by 2027, up from current levels
• Project-specific timeline: Innovative electric furnace commercial operation at Kurashiki scheduled for fiscal 2028; full carbon neutral steelmaking technology establishment targeted for 2035; the Indian JSW joint venture integrated steel mill is targeted to reach 10 million tons annual capacity by 2030
• Management confirmed it will not slow the pace of carbon neutral investment even amid global slowdowns in climate policy momentum, maintaining current forward-looking plans unchanged

• Downturn pressure: Persistent downward pressure on domestic steel selling prices from low-cost Chinese steel exports, combined with declining domestic demand, has worsened profitability and created a challenging near-term operating environment
• GX Steel commercialization risks: Large required capital investment for carbon neutral production creates cost increases that cannot be absorbed by JFE alone; the market has not yet fully recognized the environmental value of GX Steel to justify higher prices
• Supply chain infrastructure risks: Development of low-cost, stable power and hydrogen supply networks required for carbon neutral steelmaking cannot be delivered by JFE alone, relying on coordinated government and industry action to avoid delays
• Global policy headwinds: Global momentum for carbon neutral action has slowed recently, which could impact policy support and demand growth for low-emission steel

Q: Why did JFE release its first 10-year long-term vision JFE Vision 2035, and what are its core goals? / A: Management released the vision to plan for the very large 4 trillion yen capital expenditure required to implement carbon neutral technologies between 2036 and 2050. The 700 billion yen 2035 segment profit target was set to fund this investment, with a backcast 365 billion yen 2027 mid-term target. JFE also aims to become a global top runner in carbon neutral steelmaking development, which is a core industry mission given steel's 40% share of industrial CO2 emissions.

Q: Will JFE slow its carbon neutral efforts amid the global slowdown in climate policy momentum? / A: Management confirmed JFE will not slow progress, noting that global slowdowns stem primarily from the failure to balance environmental action and corporate economic viability. JFE is collaborating with the Japanese government and industry to implement policies that make decarbonization economically viable, and remains committed to its current timeline.

Q: How will JFE increase its high value-added product share to 60% by 2027, and what products will it expand? / A: Expansion is enabled by large domestic growth investments. JFE will supply large heavy-thickness steel plates for JFE Engineering's new offshore wind monopile factory starting in 2025, and will triple production capacity for high-performance electrical steel sheets for electric vehicles and data centers, which already sees very strong customer inquiry levels. These investments will be implemented as planned to hit the 60% target.

Q: What progress has been made on JFE's planned overseas expansion in India? / A: JFE already operates a joint venture high-performance electrical steel business with India's leading steel producer JSW Steel, and has approved capacity expansion investment to become India's top supplier of power-grade electrical steel. In December 2025, the firms agreed to form a joint venture for an integrated steel mill in India, which will be JFE's third full integrated production hub. The mill has existing 4.5 million ton annual capacity, will expand to 10 million tons by 2030, and JFE will add a high-grade steel facility leveraging its technical expertise to capture growing Indian steel demand.

Q: What are the core challenges to expanding GX Steel sales? / A: The main challenge is balancing environmental investment with economic viability. Large decarbonization capital expenditure requires government subsidies (already secured for the Kurashiki innovative electric furnace, but continued support is needed), and a national coordinated effort to build low-cost stable power and hydrogen supply networks, which cannot be done by JFE alone. GX Steel also has higher production costs, so JFE is working with government and industry to standardize and visualize GX Steel's environmental value to gain market acceptance for its price premium.