April 26, 2018 / 11:22 AM / 7 months ago

UPDATE 1-Japan's JFE to spend $9 bln in three years, focus on plant upgrades

* Boosts domestic capex in next three years

* Overseas investment budget could rise from 100 bln yen

* JFE targets 280 bln bln in average annual recurring profit (Recasts with total investment plan and quotes)

By Yuka Obayashi

TOKYO, April 26 (Reuters) - JFE Holdings Inc, parent of Japan’s second-biggest steelmaker, will spend 1 trillion yen ($9.1 billion) in the next three years mainly to upgrade ageing local mills but it also plans to step up overseas investment, its president said.

JFE outlined its three-year plan to March 2021 on Thursday, saying it included 900 billion yen in domestic capital spending, up 6 percent from expenditure in the previous three years.

The higher budget follows a strategy unveiled by its bigger rival Nippon Steel & Sumitomo Metal in March that earmarked 1.7 trillion yen for domestic capital expenditures, up from 1.26 trillion yen in the previous three years.

Japanese steelmakers are investing heavily in ageing domestic plants. Glitches at the plants, some of which are more than 40 years old, have prevented them making as much steel as they would have liked in the last financial year.

JFE said it planned to invest 100 billion yen overseas in the next three years, amounting to 10 percent of total spending.

But JFE President Eiji Hayashida said the firm was ready to invest more than 100 billion yen if attractive overseas deals came up, adding that this could boost total spending.

“Given our balance sheet, we will be financially viable to spend over 1 trillion yen,” he told a news conference, adding the 900 billion yen budget to upgrade domestic plants would not be reduced as those plants needed to raise productivity and become more competitive.

His company could spend an extra 200 billion to 300 billion yen on top of the 100 billion yen for overseas deals without hurting its financial health, Hayashida told Reuters after the conference.

Under the new business plan, JFE aims to raise average annual recurring profit for the next three years to 280 billion yen, against 216.3 billion yen for the year ended March 31, and boost its dividend ratio to 30 percent, up from its current target of 25 percent to 30 percent.

$1 = 109.3500 yen Reporting by Yuka Obayashi Editing by Tom Hogue and Edmund Blair

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