Press Release Steel Partners Japan Strategic Fund Offshore L by siamesedream

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									Press Release
                              Steel Partners Japan Strategic Fund (Offshore), L.P.


Steel Partners Japan Urges Noritz to Include Value
Enhancement Steps in Business Plan

Cites Track Record of Declining Profits and Shrinking Profit Margins,
Failure to Achieve PFA Benchmarks

Tokyo, January 29, 2008 – Steel Partners Japan Strategic Fund (Offshore),
L.P. (“SPJSF”) sent a letter to Noritz Corporation (5943.JP) on January 25,
urging the Company to include steps to enhance operational performance and
corporate value in its upcoming mid-term business plan.

“We were very disappointed to review management’s publicly announced
summary of its new mid-term plan for the period ending December 31, 2010,”
wrote Warren Lichtenstein, managing partner of SPJSF. He noted that
according to the summary, the mid-term business plan does not even seek to
achieve the Japan Pension Fund Association’s ROE target of 8% for re-
electing incumbent board members.

“As the Company’s largest shareholder, we urge the Company to take steps
to remedy this and other apparent shortcomings revealed by the Plan
Summary before the detailed mid-term business plan is released on February
15, 2008,” Mr. Lichtenstein wrote.

The letter stated that the Company has to date refused to implement the
operational and value enhancing initiatives suggested by SPJSF, including
considering of discontinuing or selling the loss-making bath systems and
kitchen systems businesses and stock repurchases, and that Noritz
management refused to meet with an operational consultant recommended by
the Fund who has extensive experience advising world-class companies in
Japan and around the world.

“As management is not willing to take the necessary steps to increase
corporate value and it appears that our suggestions have fallen on “deaf
ears,” we reserve the right to consider nominating an alternate slate of
directors at either the Company’s upcoming annual meeting of shareholders
or at an extraordinary general meeting,” Mr. Lichtenstein wrote in the letter.

The letter noted that since 2000, Noritz has missed virtually every revenue
and operating budget it has set, has fallen behind competitors for international
sales and suffered a steady decline in profits and shrinking profit margin.

Text of the letter follows:




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January 25, 2008

Noritz Corporation
93 Edo-Machi, Chuo-ku
Kobe 650-0033 Japan
Attention: Toshiaki Kabe, Managing Director


                       Steel Partners Japan Strategic Fund (Offshore), L.P. (“SPJSF”)
                                          P.O. Box 2681 GT, Century Yard, 4th Floor
                                                       Cricket Square, Hutchins Drive
                                                        George Town, Grand Cayman

Dear Mr. Kabe,

As you know, on November 30, 2007, Steel Partners Japan Strategic Fund (Offshore),
L.P. (“Steel Partners”) submitted to Noritz Corporation (“Noritz” or the “Company”)
suggestions for improving corporate value. Our suggestions included rationalizing the
Company’s cost structure and considering discontinuing or selling the loss-making
bath systems and kitchen systems businesses. Our analysis indicates that certain
operational improvements along with a large share repurchase should help the
Company achieve a 10.2% return on equity (“ROE”), which would exceed the
Pension Fund Association’s (“PFA”) ROE target for re-electing incumbent board
members (8%). We also note that our suggestions should leave Noritz with ample
liquidity to successfully run its business.

Against that background, we were very disappointed to review management’s
publicly announced summary dated December 21, 2007 of its new mid-term plan for
the period ending December 31, 2010 (the “Plan Summary”). According to the Plan
Summary, the new mid-term business plan seeks ROE of 6% and does not even reach
the PFA’s ROE target rate of 8%. As you can see on Appendix A attached hereto, our
suggestions for improving corporate value are far more accretive than what can be
gathered from the Plan Summary. As the Company’s largest shareholder, we urge the
Company to take steps to remedy this and other apparent shortcomings revealed by
the Plan Summary before the detailed mid-term business plan is released on February
15, 2008. We note that the easiest method for improving ROE would be to utilize
excess cash to repurchase and cancel a large percentage of the Company’s outstanding
shares. Any such offers to repurchase shares should be made to all shareholders. As
Steel Partners has no present intention of selling the Company’s shares, we do not
anticipate participating in any such share repurchase program were one to be initiated.

Unfortunately, we have no reason to believe management can achieve its target results
as Noritz has missed virtually every revenue and operating budget it has set since
2000. Over this period, Noritz has fallen behind competitors for international sales,
mismanaged its highly inefficient ERP systems and failed to incorporate process
improvement systems throughout all levels of the Company on a consistent basis.
Additionally, management is forced to manage non-core businesses that require
considerable attention thereby reducing focus on Noritz’s core water heating business.
All of this has contributed to the Company’s decade long decline in profits and
shrinking profit margin. As the Company’s largest shareholder, Steel Partners,



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together with other stakeholders have borne the economic brunt of the Company’s
declining competitive position.

We made our constructive suggestions to improve corporate value as a friendly
stakeholder of Noritz. Our goal was to help the Company reach its full potential,
which is why we had our operational consultant attend the November 2007 meeting
and schedule site visits. We also recommended an operational improvement firm to
work with management so that Noritz can achieve margins in line with its Japanese
and global competitors. Steel Partners believes that operational excellence initiatives
must always be maintained. Unfortunately, management refused to take an
introductory meeting with the operational consultant who, incidentally, has extensive
experience with world-class companies in Japan and around the world. We firmly
believe that with the help of operational consultants, the Company’s management
team can lead Noritz to become the thriving company it has the potential to be,
capable of effectively competing against its global competitors.

Mr. Kabe, according to the Plan Summary, the new mid-term plan does not even seek
to achieve the minimum 8% ROE benchmark rate for PFA support. As management
is not willing to take the necessary steps to increase corporate value and it appears that
our suggestions have fallen on “deaf ears,” we reserve the right to consider
nominating an alternate slate of directors at either the Company’s upcoming annual
meeting of shareholders or at an extraordinary general meeting. We truly hope such
action will be unnecessary and that the Board of Directors and management of Noritz
will reconsider its positions, revise the new mid-term plan and take the necessary
steps to improve value for all stakeholders of Noritz.

We are prepared to discuss these matters with the Company at your convenience.

Best regards,



Warren Lichtenstein


Copy to:        Thomas J. Niedermeyer, Jr., managing partner
                Yusuke Nishi, representative director, Steel Partners Japan K.K.




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            Appendix A.


Review of SPJSF Suggestions and New Noritz Business Plan
                                SPJSF Suggestion                 Co's Actual      Co's Forecast              The Co's Midterm Plan
                           Pro Forma    w/ Share Buyback         FYE 12/'06A      FYE 12/'07E       FYE 12/'08E FYE 12/'09E FYE 12/'10E
              Sales          179.0           179.0                 182.1             179.0            186.0          200.0         215.0
   Operating Profit           13.6            13.6                   5.8               1.5             3.5            7.0           9.0
             OPM             7.6%                7.6%                3.2%              0.8%            1.9%            3.5%           4.2%

                 ROE         8.5%               10.2%               3.3%              -1.7%            2.2%            4.5%           6.0%
                 EPS         170.7              274.2               62.6               -31.4           41.9             85.8          115.2

                                SPJSF Suggestion                                           The Co's Midterm Plan
Cost Structure
                                                               Rationalize operation in salary expenses and other COGS/SG&A by improving
                       Rationalize operations (reduce salary   procurement, product developments and in-house manufacturing. Targeting total
Operation
                       expenses)                               ¥2B or 4.2% of SG&A savings in 2010 comp to 2007 and ¥1B of COGS savings
                                                               every year.


Loss-Making System                                             Continue segments and seek alliance with other operating company to make the
                   Discontinue
Bath & Kitchen                                                 segments profitable.



Grow Top Line                   SPJSF Suggestion                                           The Co's Midterm Plan
                       Negotiate price increases with gas
Price Increase         companies and general house builders    Not mentioned in the Midterm Plan.
                       immediately.

                                                               Strengthen overseas business especially in North America, China and Oceania.
                       Strengthen overseas business for top
Overseas                                                       Bring overseas sales to ¥30B or 14% of the forecasted consolidated sales in 2010
                       line growth.
                                                               from ¥14.1B or 8% in forecasted FYE 12/'07 figures.

                       Strengthen OEM business for top line
OEM                                                            Not mentioned in the Midterm Plan.
                       growth.

                               SPJSF Suggestion                                            The Co's Midterm Plan
                       Spend up to ¥34.7B to repurchase
Share Repurchase                                               Not mentioned in the Midterm Plan.
                       shares.

Consultants                      SPJSF Suggestion                                          The Co's Midterm Plan
                       Hire a management turnaround firm
Management
                       immediately to review the Co's          Not mentioned in the Midterm Plan.
Turnaround Firm
                       portfolio of operating businesses.

                       Hire consultants with experience in
Consultants                                                    Not mentioned in the Midterm Plan.
                       operational excellence programs.




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Disclaimer:

Please note that the figures in the column titled "SPJSF Suggestion" were calculated
on a pro forma basis using methods deemed reasonable by SPJSF, but do not
necessarily reflect widely adopted, accepted or established business practices and
these figures may not comply with Japan’s generally accepted accounting principles
(GAAP) and in some cases pro forma figures may differ greatly from the those
derived from GAAP. Furthermore, certain SPJSF calculations have been performed
on a theoretical basis and on the assumption that Noritz’s profitability will improve to
a certain extent. Certain pro forma figures in this table have been calculated based on
the fiscal 2007 estimated results previously announced by Noritz and based on the
assumption that Company’s “gross margin”, “SG&A as % of sales” and “Operating
margin” figures will equal its competitors’ average figures. SPJSF has not
independently verified the accuracy of Noritz’s estimated results, and the accuracy of
such figures cannot be assured. In addition, SPJSF does not warrant that the
assumption that the “gross margin”, “SG&A as % of sales” and “Operating margin”
figures, which were used in SPJSF’s calculations, will equal Noritz’s competitors’
average figures is accurate or that there is any certainty that such pro forma results
will actually be achieved. SPJSF’s full presentation was disclosed to the public on
December 13, 2007 and the disclaimer contained therein should both be referenced for
additional detail. Please also note that the figures in the columns titled “The Co’s
forecast” and “The Co’s Midterm Plan” were derived from Noritz’s Midterm Plan
Summary disclosed by the Company on December 21, 2007, and SPJSF therefore
makes no representation regarding their accuracy.




About SPJSF
Steel Partners Japan Strategic Fund (Offshore), L.P. is a long-term
relationship/active value investor that seeks to work with the management of
its portfolio companies to increase corporate value for all stakeholders and
shareholders.




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