[PPT] - Mitsubishi Steel Mfg. Co., Ltd. Financial Results for the First PowerPoint Presentation

SLIDE 1

Mitsubishi Steel Mfg. Co., Ltd. Financial Results for the First Half of the Fiscal Year Ending March 2020

November 22, 2019

SLIDE 2

1

I. Message
II. FY2019 1st Half Results
III. Full-year Forecasts for FY2019

IV.Future Initiatives

I. Message

SLIDE 3

2

Message

Overview:

 As projected at the start of the fiscal year, we recorded operating income of zero for the first half of FY2019.  However, due to dramatic changes in the business environment and the murky future of the external environment, we recorded impairment losses in numerous regions totaling JPY14.8 billion.  Our full-year forecasts for FY2019 call for operating income of zero, a figure significantly below forecasts at the start of the fiscal year (JPY2 billion).  Despite our commitment to continuing dividend payments, due to expectations of ordinary and net losses, we have decided not to pay dividends for this period.  These results are due largely to internal factors, in addition to changes (worsening) in the business

environment. The following topics will be addressed later in this presentation.

 Business environment  Business trends (at JATIM and North American MSSC, in particular)  Impairment  Reconsideration of businesses  Toward a new Mid-term Business Plan  Urgent measures

I. Message

Overview of results for this period and future outlook:

SLIDE 4

3

I. Message
II. FY2019 1st Half Results
III. Full-year Forecasts for FY2019

IV.Future Initiatives

II. FY2019 1st Half Results

SLIDE 5

4

Summary

(JPY100M)  Net sales fell, due mainly to lower sales in the domestic Special Steel Bars business amid slow demand from makers of construction machinery, industrial machinery, and machine tools; lower sales for automotive uses at overseas subsidiaries in North America and elsewhere in the Springs business; and foreign exchange effects.  Operating income fell due to lower sales and increased costs attributable to production problems with new products at North American subsidiaries in the Springs business, and the large impact of lower sales volumes in the domestic Special Steel Bars business despite improved selling prices and increased production to build up inventory in preparation for blast furnace renovations in the next fiscal year.  Lower operating income pushed ordinary income into negative territory.  Due to impairment losses recorded as extraordinary losses, we posted a significant net loss this period.

FY2018 FY2019 1st H result Full-year result 1st H forecast* 1st H result

vs. initial

forecast Year-on-year change

Net sales

631 1,294 650 602 △48 △29

Operating income

8 11 1 1 △7

Ordinary income

3 1 △5 △4 1 △7

Net income attributable to

wners of parent

company

3 3 △7 △143 △136 △146

II. FY2019 1st Half Results

*Figures announced publicly with results on May 14, 2019

SLIDE 6

5

*4 Other Decreased sales volumes R&D expenses, depreciation

△1 △13 +7 △5 +5 +1 +8 △9

Raw material prices*2 (extraordinary factors related to Muroran) *3 JATIM added to consolidated subsidiaries Raw material prices (market conditions)

Selling prices

1 8

Effects of inventory buildup in preparation for renewal of blast furnace lining at Muroran

Factors contributing to changes in net sales and

perating income (YoY comparison)

FY2019 1st H result FY2018 1st H result

Operating income

631

Decreased sales volumes

△76 +7 +21 +6 △6 +19

Selling prices

602

Consolidation adjustments, etc. *1 Increased volume under contract JATIM Foreign exchange gains/losses

Net sales

(JPY100M) (JPY100M)

FY2018 1st H result FY2019 1st H result

*3 All factors related to changes in profits/losses due to JATIM are included under “JATIM added to consolidated subsidiaries.”

II. FY2019 1st Half Results

*2 Temporary expenses for coke oven repairs at Muroran in FY2018 *4 The “Other” category includes the following: △3 from production costs in the Special Steel Bars business; △2 from revaluation of product inventory; △2 from production costs in the Springs business; and △2 from startup costs for the mother plant in the Formed & Fabricated Products business. *1 Volume of OEM products and rolling piecework (subcontracted rolling) under contract to Nippon Steel Corporation

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6

 Net sales fell in the Special Steel Bars, Springs, and Formed & Fabricated Products businesses.  Operating income fell due to lower income in the Special Steel Bars business and increased losses in the Springs business.

Operating income

1 1 Consolidated adjustments

Net sales

△48 △42 6

Operating income

△0 Total

Net sales

631 602 △29

Operating income

8 1 △7

II. FY2019 1st Half Results

SLIDE 8

7

△5 +0.7 △0.9 △1.6 △6

Sales volumes Other

△0.6

Selling prices

+1.4

Product lineup Production costs Raw material prices

11

Revaluation of product inventory R&D expenses, depreciation Raw material prices (market conditions) Product lineup Raw material prices (extraordinary factors) Production costs (excluding effects of inventory buildup) Effects of inventory buildup in preparation for renewal

f blast furnace lining

△1 △9 +9 △9 +5 +2 △3 △2 △2 +8

Decreased sales volumes Other

9

Special Steel Bars business

Factors contributing to changes in operating income by segment

FY2018 1st H result FY2019 1st H result FY2018 1st H result Sales 297 Sales 317

(JPY100M)

 Net sales fell by JPY2 billion because the first two of the following factors failed to offset the effects of the third: ・ Improved selling prices prompted by measures accompanying rising raw material prices (unit prices of iron

re and ferroalloys)

・ Effects of increased sales due to higher volumes of materials processed under contract and growth in sales volumes at overseas businesses (JATIM) ・ The impact of lower sales due to lower sales volumes, due in turn to decreased production at major domestic customers and the accompanying inventory adjustments  Operating income fell by JPY0.2 billion because the second and third of the following factors failed to offset the effects of the first: ・ Decreases resulting from factors such as rising raw material prices, lower sales volumes, and decreases from inventory revaluation ・ Effects of improved selling prices and cost improvements after cost increases accompanying coke oven repairs in the previous period (extraordinary factors affecting raw material prices) ・ Effects of production increases due to inventory buildup in preparation for blast furnace renovations in the next fiscal year

Selling prices JATIM

(JPY100M)

Sales 34 Sales 28

<JATIM>  Net sales grew by JPY0.6 billion YoY for the following reason: Higher selling prices of flat bars and sales growth resulting from customer approval of round bars  Operating income fell by JPY0.1 billion YoY due to the impact of advance procurement during the period of rising scrap prices from the latter half of 2018 and increased production costs due to increased problems associated with the start of mass production of new types of steel at the steel works.

JATIM

FY2019 1st H result

II. FY2019 1st Half Results

Special Steel Bars business

SLIDE 9

8

△5

Raw material prices △2 Decreased sales volumes (N. America) Selling prices (market conditions) +1 Other Selling prices △3 +1 Tariff effects +1 Production costs △2 △1 Increased sales volumes (other than N. America)

△10 △5

Germany Other India Japan China

△10

△5 +1

N. America

△2 Mexico +1

FY2018 1st H result FY2019 1st H result

Springs business

Sales 247 Sales 234 R&D expenses, depreciation

Sales 247 Sales 234

Analysis of changes by region

FY2018 1st H result FY2019 1st H result

II. FY2019 1st Half Results

Springs business

Factors contributing to changes in operating income by segment ①

(JPY100M) (JPY100M)

＜Analysis of changes by region＞  Income was down JPY0.5 billion in North America and down JPY0.2 billion in Germany YoY. Income was up JPY0.1 billion in Japan and up JPY0.1 billion in other regions YoY. (See the next page for detailed information on the North American subsidiaries.)  In Germany, sales of brake springs for use in commercial vehicles slowed due to declining exports caused by an economic downturn in the European market and the slowing Chinese market. In addition, sales of aftermarket springs were weak due to the warm winter in 2018.  The increase in Japan was due to factors including an increase of JPY40 million resulting from the use of JATIM materials in leaf springs and an increase of JPY80 million attributable to revised selling prices for automotive coil springs.  Net sales declined due to lower sales for automotive uses in North America and foreign exchange effects, in addition to slow demand for use in construction machinery in Japan and internationally.  Operating income fell due to the significant impact made by North American subsidiaries, as described under <Analysis

f changes by region>.

(See the next page for detailed information on the North American subsidiaries.)

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9

△3

Raw material prices Tariff effects Revaluation of product inventory

+1

△5 decrease in income Production costs Other Decreased sales volumes

△1

Selling prices (market conditions) Selling prices

△2 +1 △2

Foreign exchange gains/losses

+1

FY2018 1st H result FY2019 1st H result

II. FY2019 1st Half Results

Springs business

Factors contributing to changes in operating income by segment ②

(JPY100M)

<Analysis of changes at North American subsidiaries>  The decrease in sales volume resulted from loss of orders during transition to new models.  Negotiations with customers concerning revised selling prices continue in the second half after failure to reach agreement in the first half. (Agreements have been reached with some customers.)  Although selling prices (market conditions) fell, along with materials market prices, the decline in income is due to factors such as the effects of rising raw material prices (subcomponents).  An increase in production costs due to rising labor costs and expenses resulting from problems with production startup for new stabilizer products had negative effects on income.

Analysis of changes at North American MSSC

SLIDE 11

10

0.7

Quality and cost improvements

Decreased sales volumes Raw material prices Other

Startup costs for the mother plant

△2.9 +2.9

+0.6 +0.4 △1.5

△0.5

R&D expenses, depreciation Selling prices

0.6

Increased sales volumes Product lineup

+1.0

1.4

△0.2

FY2018 1st H result FY2019 1st H result FY2018 1st H result FY2019 1st H result Sales 46 Sales 37 Sales 47 Sales 58

△0.3

(JPY100M) (JPY100M)

 Declining demand resulting from a slowdown in the Chinese market for special alloy powders significantly reduced net sales, as did lower alloy surcharge sale prices attributable to falling pricing for alloy raw materials.  Lower sales of powders attributable to the slowing Chinese market and higher costs resulting from the startup of the mother plant* reduced operating

income. The benefits of the falling prices of alloy

raw materials and stronger selling prices for cast steel failed to offset the negative factors.

* This refers to a model plant intended to deploy, primarily to

verseas plants, technical expertise and knowledge accumulated

using equipment such as a vacuum induction melting furnace (VIM) and various testing and trial production lines at the Chiba Works.

 Net sales increased due to higher sales of products related to the new field of offshore wind power generation.  Higher sales led to growth in operating income.

Formed & Fabricated Products business Machinery business

II. FY2019 1st Half Results

Formed & Fabricated Products and Machinery businesses

Factors contributing to changes in operating income by segment

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11

FY2018 FY2019 1st H result 1st H result Year-on-year change Operating income

8 1 △7

Non-operating income/loss

△5 △5

Translation (exchange profit and loss)

△3 △1 2

Interest paid

△5 △6 △1

Share of loss of entities accounted for using the equity method

△0 △0 △0

Ordinary income or ordinary loss

3 △4 △7

Extraordinary income/loss

3 △154 △157

Impairment losses

△148 △148

Gain/loss on disposal of fixed assets

2

*1

△3 △5

Gain on sale of equities

2 △2

Losses due to disasters

△0

*2

△1 △1

Revaluation losses on investment securities

△1 △1

Net income or net losses before income taxes and other adjustments

6 △158 △164

Tax expenses

△8 △12 △4

Net income or net losses attributable to non-controlling interests

4

*3

27 23

Net income or net losses attributable to owners of parent company

3 △143 △146

(JPY100M)

Impact of non-operating income/loss and extraordinary income/loss

*1 JATIM recorded equipment disposal costs following an electric furnace accident. Compensation from insurance proceeds is expected in the second half. *2 Reserves for losses were recorded due to typhoon damage at the Chiba spring plant. Compensation from insurance proceeds is expected in the second half. *3 Since JATIM and others recorded losses, final income or losses are adjusted for net losses attributable to non- controlling interests.

 Growing stability in the exchange rate for the Indonesian rupiah reduced foreign exchange losses.  Impairment losses at overseas subsidiaries led to significant net losses.  Tax expenses include △JPY1.2 billion for transfers from deferred tax assets at the Indonesian subsidiary (JATIM).

II. FY2019 1st Half Results

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12

Impairment losses (by region)

 Overseas subsidiaries recorded as extraordinary losses impairment losses of JPY14.8 billion.

II. FY2019 1st Half Results

Business Region Loss Special Steel Bars Indonesia

PT. JATIM TAMAN STEEL MFG.

△90 Springs US MSSC US INC. △14 Canada MSSC CANADA INC. △7 Mexico MSSC MFG MEXICANA, S.A. DE C.V. △7 Germany MSSC Ahle GmbH △16 China MSM NINGBO SPRING CO., LTD. △7 India MSM SPRING INDIA PVT．LTD. △4 Springs subtotal △55

Formed & Fabricated Products

Thailand MSM (THAILAND) CO., LTD. △4

Total △148

(JPY100M)

Breakdown of impairment losses by region

SLIDE 14

13 American subsidiary MSSC US INC. (manufacture and sale of automotive coil springs and stabilizers) Subject equipment Automotive coil spring and stabilizer production equipment Background of impairment Contributing factors included uncertainty in future orders awarded, recent sales decline, and delays in progress with improvements. Countermeasures Ensuring recovery of increases in material prices from customers; shutting down the coil spring production line (during the fourth quarter of this fiscal year); resolving problems in production of new products *See below for detailed information. Canadian subsidiary MSSC CANADA INC. (manufacture and sale of automotive coil springs, stabilizers, and torsion bars) Subject equipment Automotive coil spring, stabilizer, and torsion bar production equipment Background of impairment Contributing factors included uncertainty in future orders awarded, recent sales declines, and delays in introducing new equipment. Countermeasures Improving filling factors through transfer of coil spring production from the US plant and ensuring recovery of costs associated with increases in material prices from customers *See below for detailed information.

Impairment losses (conditions by region)

II. FY2019 1st Half Results

Indonesian subsidiary

PT. JATIM TAMAN STEEL MFG. (manufacture and sale of flat bars and round bars)

Subject equipment Flat bars and round bar production equipment Background of impairment Contributing factors included uncertainty in future orders awarded due to the unexpectedly negative impact

f the slowing Indonesian economy on volumes of orders awarded; rising production costs due to problems

with production startup for new ordered products; recent failures to achieve sales and income targets; and recent unfavorable economic trends. Countermeasures Improving costs, correcting procurement methods, and expanding sales *See below for detailed information.

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14

II. FY2019 1st Half Results

German subsidiary MSSC Ahle GmbH (manufacture and sale of automotive and commercial vehicle coil springs) Subject equipment Automotive and commercial vehicle coil spring production equipment Background of impairment Contributing factors included difficulties in securing planned revenue from new businesses due to the effects

f the contraction and closure of automakers’ European bases and low sales of existing products due to the

impact of lower demand for commercial vehicles in Europe and China. Countermeasures Freezing advances into new businesses and rebuilding existing businesses through cost cutting measures, such as staff reductions Chinese subsidiary MSM NINGBO SPRING CO., LTD. (manufacture and sale of automotive coil springs and stabilizers and of springs for use in construction machinery) Subject equipment Stabilizer and construction machinery spring production equipment Background of impairment Contributing factors included a downward revision in the company’s sales plans for large coil springs and stabilizers due to lower demand for construction machinery and passenger vehicles accompanying the economic slowdown in China. Countermeasures Promoting efforts to increase volumes of orders awarded for both large coil springs and stabilizers via the introduction of new technologies, improved plant utilization rates, and improved productivity

Impairment losses (conditions by region)

Mexican subsidiary MSSC MFG MEXICANA, S.A. DE C.V. (manufacture and sale of automotive stabilizers) Subject equipment Automotive stabilizer production equipment Background of impairment Contributing factors included delays in new entry of automakers in light of Trump administration policies; lower than initially expected auto production in Mexico; and delays in receipt of product orders expected under sales expansion plans. Countermeasures Switching to locally procured materials and improving production costs

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15

II. FY2019 1st Half Results

Thai subsidiary MSM (THAILAND) CO., LTD. (manufacture and sale of precision cast products and machined products) Subject equipment Production equipment for precision cast products used in turbocharger parts Background of impairment This impairment is attributable to decreased orders awarded for diesel turbocharger parts and the resulting failure to achieve sales expansion plan targets. Countermeasures Enhancing competitive strengths by utilizing the Chiba mother plant and focusing on expanding sales of parts for gasoline turbochargers

Impairment losses (conditions by region)

Indian subsidiary MSM SPRING INDIA PVT．LTD．(manufacture and sale of springs for use in construction machinery) Subject equipment Construction machinery spring production equipment Background of impairment Contributing factors included lower sales due to discontinuation of orders and delays in switchover involving the company’s large coil springs, which the company had delivered to construction machinery makers, as a result of lower demand for construction machinery in India. Countermeasures Enhancing efforts to expand export sales and thorough cost cutting measures: for example, switching to locally procured materials and cost containment

SLIDE 17

Net D/E ratio

(Times)

0.0 0.4 0.6

 The impairment losses recorded reduced total assets and net assets.  The equity capital ratio fell to 33.5%.

II. FY2019 1st Half Results

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17

I. Message
II. FY2019 1st Half Results
III. Full-year Forecasts for FY2019

IV.Future Initiatives

III. Full-year Forecasts for FY2019

SLIDE 19

18

Full-year performance forecasts

III. Full-year Forecasts for FY2019

 In light of the conditions described below, full-year forecasts of net sales and income were revised downward on November 12.  The decline in net sales is expected to accelerate in the third quarter and beyond due to a further decline in demand from the construction machinery industry.  Despite lower amortization costs following the recording of impairment losses, operating income is projected to break even over the full year, due to a further decline in sales volumes for steel materials in Japan and anticipated delays in recovery at the North American spring subsidiary and at the Indonesian special steel bar subsidiary, where performance had been expected to improve.  Due to the decrease in operating income, ordinary income is projected to be lower than initially forecast.  Due to impairment losses recorded in the first half, net income is projected to fall well short of initial forecasts. FY2018 FY2019 Result Initial forecast* Revised forecast

vs. initial forecast

Year-on-year change Net sales

1,294 1,370 1,200 △170 △94

Operating income

11 20 △20 △11

Ordinary income

1 7 △13 △20 △14

Net income attributable to

wners of

parent company

3 3 △160 △163 △163

*Figures announced publicly with results on May 14, 2019

(JPY100M)

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19

11 +8

Raw material prices *2 (extraordinary factors related to Muroran) Selling prices

+5 +4 △2 +1 +18 △10

Decreased sales volumes R&D expenses, depreciation

△33

Raw material prices (market conditions) *3 JATIM added to consolidated subsidiaries *4 Other

△2

Effects of inventory buildup in preparation for renewal of blast furnace lining at Muroran Decreased amortization costs due to impairment

1,294

*1 Increased volume under contract Consolidation adjustments, etc.

+33 +4 +90 △212 △3 △6

Selling prices

1,200

Decreased sales volumes JATIM

Factors contributing to changes in net sales and

perating income

FY2018 result FY2019 forecast

(JPY100M) (JPY100M)

FY2018 result FY2019 forecast

III. Full-year Forecasts for FY2019

*3 All factors related to changes in profits/losses due to JATIM are included under “JATIM added to consolidated subsidiaries.” Foreign exchange gains/losses

Operating income Net sales

*2 Temporary expenses for coke oven repairs at Muroran in FY2018 *4 The “Other” category includes the following: △2 from revaluation of product inventory in the Special Steel Bars business; △3 from production costs in the Springs business; and △4 from startup costs for the mother plant in the Formed & Fabricated Products business. *1 Volume of OEM products and rolling piecework (subcontracted rolling) under contract to Nippon Steel Corporation

SLIDE 21

20

(JPY100M)

Performance forecasts by segment

FY2018 FY2019

Result Initial forecast* Revised forecast

vs. initial

forecast Year-on-year change

Net sales

1,294 1,370 1,200 △170 △94

Operating income

11 20 △20 △11

 Net sales are projected to fall short of initial forecasts and to decline year on year in the Special Steel Bars, Springs, and Formed & Fabricated Products businesses.  Operating income had been projected to break even; losses in the Springs business are now expected to deepen. Operating income is projected to fall short of initial forecasts and decline year on year in the Special Steel Bars and Formed & Fabricated Products businesses.

III. Full-year Forecasts for FY2019

*Figures announced publicly with results on May 14, 2019

SLIDE 22

21

Effects of decrease in domestic sales volumes (△JPY19.6 billion) Effects of increased earnings due to increased volume under contract (JPY9.0 billion)

12

Revaluation of product inventory Raw material prices (extraordinary factors)

+4 12 △5 △7 △1 △4 △2 △4

Sales decrease Other

+10

JATIM Selling prices

+5

Product lineup Production costs (excluding effects of inventory buildup) R&D expenses, depreciation

+4

Effects of inventory buildup in preparation for renewal of blast furnace lining

12

Revaluation of product inventory Raw materialprices (extraordinary factors)

+5 9

Raw materialprices (market conditions)

+18 △8 △28 +9 △2 △1 △1 △4

Sales decrease

Other

+5

JATIM Selling prices

+4

Product lineup Production costs (excluding effects of inventory buildup) R&D expenses, depreciation Effects of inventory buildup in preparation for renewal of blast furnace lining

(JPY100M)

FY2018 result FY2019 forecast

III. Full-year Forecasts for FY2019

Sales 560 Sales 648

(JPY100M)

FY2018 result FY2019 forecast

Sales 700 Sales 648

Effects of increased earnings from JATIM (JPY3.3 billion) Effects of increased earnings due to increased volume under contract (JPY4.0 billion)

[Initial forecasts]  The following factors were expected to boost net sales:

Increased volume under contract, despite reduced volumes of our

products used by major customers due to inventory adjustments for construction machinery and industrial machinery in response to the slowing Chinese economy

Growth in sales volumes at overseas businesses (JATIM) as the

customer approval process advances  Operating income was projected to remain largely unchanged from last year for the following reasons:

Improvements at JATIM resulting from increased sales volume and

cost cutting

Increased amortization and other costs resulting from completion of

coke oven repairs (although the effects of such repairs would be ameliorated starting from the second half)

Additional factors leading to reduced profits, such as lower sales

volumes to manufacturers of construction machinery and industrial machinery [Revised forecasts]  Net sales are projected to decrease by JPY8.8 billion due mainly to the following factors: ・ Major reductions in sales volumes of our products due to decreased production for construction machinery and industrial machinery at major customers and accompanying increase in inventory adjustments in the second half ・ Increased volume under contract due to production of materials for inventory prior to blast furnace renovations ・ Lower sales volumes at overseas businesses (JATIM) (see p. 23 for detailed information)  Operating income: ・ Lower amortization costs due to impairment and other factors are expected to boost operating income at JATIM by JPY0.5 billion. ・ Operating income in domestic businesses in Japan is projected to decrease by JPY0.8 billion due to/despite the following factors:

Significantly lower income due to a major decline in sales volumes of
ur products
Compensation for rising raw material prices (unit prices of iron ore)

by increasing selling prices

Compensation for increased amortization costs by cost

improvements accompanying the completion of coke oven repairs (extraordinary factor affecting raw material prices)

The presence of factors with positive effects on operating income,

including the impact of increased production to build up inventory in preparation for blast furnace renovations next year

Initial forecast Revised forecast

*Initial forecasts: Figures announced publicly with results on May 14, 2019

Special Steel Bars business

Factors contributing to changes in operating income by segment

Includes lower amortization costs due to impairment (+JPY0.4 billion) Raw material prices (market conditions)

SLIDE 23

22

Domestic sales volumes in the Special Steel Bars business

Sales volumes are expected to mark a sizable drop in the second half of FY2019, declining 54% from the

first half of FY2018. As for the three main fields of domestic and overseas sales, while sales volumes are projected to remain largely unchanged in the fields of construction machinery and industrial machinery/machine tools, sales volumes are projected to recover in the truck and automotive field after bottoming out in the first half.

The scale of the decrease in sales volumes at MSM exceeds the decrease in numbers of units sold by the

leading construction machinery makers due to the impact of user inventory. Normalization of inventory is expected around March 2020. Demand is projected to return to real demand levels from next fiscal year.

図2

III. Full-year Forecasts for FY2019

Special Steel Bars business (reference)

図1

Fig. 1

MSM sales volumes

2018 H1 2018 H2 2019 2019 H1 2019 H2 (actual) (actual) (planned) (actual) (projected)

Fig. 2

MSM sales volumes: industrial machinery/machine tools

2018 H1 2018 H2 2019 2019 H1 2019 H2 (actual) (actual) (planned) (actual) (projected)

図3

Fig. 3

MSM sales volumes: construction machinery

2018 H1 2018 H2 2019 2019 H1 2019 H2 (actual) (actual) (planned) (actual) (projected)

図4

Fig. 4

MSM sales volumes: trucks, automotive

2018 H1 2018 H2 2019 2019 H1 2019 H2 (actual) (actual) (planned) (actual) (projected)

図5

Fig. 5 Compared to units sold by construction machinery makers

2018 H1 (actual) 2018 H2 (actual) 2019 H1 (actual) 2019 H2 (planned)

Company A Company B

建機関連在庫 (在庫/受注)比率建機主要 2019年 2020年ユーザー 11月 12月 1月 2月 3月 ① 5.9 5.1 4.3 3.5 2.7 ② 4.1 3.1 2.3 適正化 ③ 5.8 4.8 4.0 3.1 適正化 ④ 5.8 4.8 3.9 2.8 適正化 ⑤ 3.1 2.1 適正化 ⑥ 3.1 2.2 適正化 ⑦ 5.8 4.8 3.8 2.8 適正化平均 4.6 3.7 2.8 適正化

Table 1 Construction machinery-related inventory Ratio (inventory/orders awarded)

Main construction machinery users

Average Nov. Dec. Jan. Feb. Mar. Normalized Normalized Normalized Normalized Normalized Normalized Normalized

SLIDE 24

23

△12 Selling prices Increased sales volumes Product lineup △2 +7 +1 +2 Production costs Raw material prices △12 Selling prices Decreased sales volumes Product lineup △7 Lower amortization costs due to impairment △1.6 △0.9 +1.3 +4.3 △0.5 +2.4 Production costs Raw material prices Other (discontinuation of amortization of land)

III. Full-year Forecasts for FY2019

[Initial forecast]  Net sales were projected to increase by JPY3.3 billion due to transition to JATIM materials following customer approval of JATIM’s flat bars and sales expansion of round bars.  Operating income was projected to improve by JPY1 billion thanks to increased sales volumes and production cost improvements.  Including amortization of goodwill and other assets, consolidated results were projected to remain negative. While we planned to maintain a focus on cost improvements and sales expansion activities, concerns included the inflow of low-priced materials due to US- China trade friction and an economic downturn in South Korea. FY2018 result FY2019 forecast Sales 60 Sales 63 FY2018 result FY2019 forecast Sales 96 Sales 63

(JPY100M)

[Revised forecast]  Net sales are projected to decrease by JPY0.3 billion for the following reasons: Lower sales of flat bars for leaf springs due to decreased domestic truck sales in Indonesia and lack of progress on sales expansion due to discontinuation of low-priced retail sales of round bars and production limited to types of steel for which stable manufacture can be assured. Progress as planned on switching to JATIM materials failed to offset these factors.  Operating income: Increased selling prices for flat bars, lower amortization costs due to impairment, and discontinuation of amortization of land are projected to increase operating

income. However, due to factors such as the effects of

lower sales volumes and worsening costs resulting from increased production problems at steel works, the increase in operating income will be no more than JPY0.5 billion. Initial forecast Revised forecast

(JPY100M)

Special Steel Bars business (JATIM)

Factors contributing to changes in operating income by segment

*Initial forecasts: Figures announced publicly with results on May 14, 2019

SLIDE 25

24 Selling prices (discounts)

△2

Selling prices (market conditions) Lower amortization costs due to impairment

△2 △1 △3 △13

Selling prices (price revisions) Other

△9

R&D expenses, depreciation Tariff effects

△1

III. Full-year Forecasts for FY2019

FY2018 result FY2019 forecast

Sales 497 Sales 485 Raw material prices Decreased sales volumes (N. America)

+2 △2 +2 △2 +2 +3

Decreased sales volumes (other than N. America) Selling prices (discounts) Raw material prices

△1

Selling prices (price revisions) Other

△9

R&D expenses, depreciation Tariff effects Sales 497 Sales 515

Production costs

Decreased sales volumes (N. America)

+2 +1 △1 +3 +2 +4 △1

Increased sales volumes (other than N. America)

FY2018 result FY2019 forecast

Initial forecast Revised forecast

Springs business

Factors contributing to changes in operating income by segment

(JPY100M) (JPY100M)

*Initial forecasts: Figures announced publicly with results on May 14, 2019

[Revised forecasts]

 Net sales are projected to decline due to lower sales for automotive use in North America and foreign exchange effects, as well as low demand for construction machinery use in Japan and internationally.  Operating income is projected to fall dramatically due to the impact of lower sales and worsening production costs in North America. We do not expect lower amortization costs due to impairment to offset these factors.  Compared to initial forecasts, selling prices (price revisions) and production costs will fall far short of targets, resulting in increased losses. [Initial forecasts]  Net sales were projected to increase due to sales growth in ASEAN and India.  Operating income was projected to increase by JPY0.9 billion due to/despite the following factors: (North America) Reflecting last year’s material price increases in selling prices (+JPY0.3 billion); improved production costs (+JPY0.3 billion);

ther factors (△JPY0.3 billion)

(China) Increased sales and reduced production costs (+JPY0.1 billion) Increased volumes in new markets (e.g., India, Mexico) (+JPY0.2 billion) Although we expected to be profitable, we did not expect to return to FY2017 levels.

Production costs

SLIDE 26

25

△9

Germany Other India +1 Japan China

△13

△6

N. America

△1 +1 Mexico +1

Sales 497 Sales 485

FY2018 result FY2019 forecast

△9

Germany Other India +2 Japan China +3 +1

N. America

+1 Mexico +2 FY2018 result FY2019 forecast

Sales 497 Sales 515 Initial forecast Revised forecast

III. Full-year Forecasts for FY2019

Springs business (by region)

Factors contributing to changes in operating income by segment

*Initial forecasts: Figures announced publicly with results on May 14, 2019

(JPY100M) (JPY100M)

[Revised forecast]

 (North America) △JPY0.6 billion (See next page for detailed information.)  (Germany) Sales of brake springs for use in commercial vehicles are expected to slow due to declining exports caused by the economic downturn in the European market and the slowing Chinese market. In addition, despite reduced amortization costs due to impairment (+JPY0.1 billion), poor sales of aftermarket springs due to the warm winter in 2018 are expected to result in lower sales (△JPY0.2 billion). [Initial forecast]  We anticipated an improvement of a mere JPY0.3 billion for North America, plus improvements of JPY0.6 billion in

ther regions, for a total improvement of

JPY0.9 billion.  In Japan, we expected to cut costs in the face of rising procurement costs of leaf springs by switching to JATIM materials (approval already obtained). At the same time, we anticipated lower sales of large coil springs for use in construction machinery due to the slowing Chinese construction machinery market.  Effects of increased volumes were expected to appear gradually in newly entered regions.

SLIDE 27

26 △1 Decreased sales volumes Tariff effects Inventory revaluation

△1 +2

+3 increase in income

Raw material prices Other Production costs

△1

Selling prices (price revisions) Selling prices (market conditions)

+3 △1 +3

Foreign exchange gains/losses

△1 △2

Raw material prices Lower amortization costs due to impairment

+1

Tariff effects Inventory revaluation

+2

△6 decrease in income

Production costs Other Decreased sales volumes

△2

Selling prices (market conditions)

+1 △3 +1 △3

Foreign exchange gains/losses

△1

Selling prices (price revisions)

FY2018 result FY2019 forecast FY2018 result FY2019 forecast

III. Full-year Forecasts for FY2019

Springs business (North American MSSC)

Factors contributing to changes in operating income by segment

*Initial forecasts: Figures announced publicly with results on May 14, 2019

(JPY100M) (JPY100M)

Initial forecast Revised forecast [Revised forecast]  We anticipate lower sales volumes due to orders lost during the transition to new models.  Regarding selling prices (price revisions), projections incorporate as a risk the possibility that negotiations with customers on revised selling prices will fail to lead to agreement during this period. (Agreements have been reached with some customers.)  Although selling prices (market conditions) are projected to fall alongside market prices for materials, income is projected to decrease by JPY0.2 billion due to rising prices of raw materials (subcomponents).  Production costs are projected to worsen due to rising labor costs and expenses resulting from problems with production startup for new stabilizer products, delays in automating torsion bar processes, and other factors. [Initial forecast]  Materials prices had recently stabilized.  We continued to negotiate with manufacturers to reflect rising costs in prices paid by customers. However, we did not believe we would be able to offset 100% of cost increases (+JPY0.3 billion).  Discounts were at typical levels based on contracts with customers (△JPY0.1 billion).  We expected to resolve production problems by dispatching production improvement teams and to achieve the cost reduction effects targeted in our capital investment plans (+JPY0.3 billion).

SLIDE 28

27

4

Startup costs for the mother plant Decreased sales volumes Selling prices Other

△2 △4 +4 +1 △4 +1 +1

Quality and cost improvements Raw material prices R&D expenses, depreciation

1

Lower amortization costs due to impairment

4

Increased sales volumes Selling prices Other Startup costs for the mother plant

+1 +1 △5 +6 +2 △5

Quality and cost improvements Raw material prices R&D expenses, depreciation

4 [Revised forecast]  Net sales are projected to fall due to lower sales volumes following a slowdown in the Chinese market for special alloy powders and lower sales resulting from lower alloy surcharge sale prices, as well as slowing growth in turbocharger-related components for the European market.  Operating income is projected to fall due to lower sales and higher costs resulting from the startup

f the mother plant. We do not expect the positive

effects of lower amortization costs due to impairment and quality and cost improvements to

ffset these factors.

(JPY100M)

III. Full-year Forecasts for FY2019

FY2018 result FY2019 forecast

Sales 100 Sales 114

[Initial forecast]  We projected higher net sales based on increased sales volumes of defense-related ship hull products and turbocharger-related components. This was despite the negative effects of lower alloy surcharge sale prices on sales.  Due to increased sales volumes and cost improvements, we projected operating income would remain largely unchanged from last year, despite rising costs at the mother plant in Chiba. FY2018 result FY2019 forecast

Sales 115 Sales 114 Initial forecast Revised forecast

(JPY100M)

Formed & Fabricated Products business

Factors contributing to changes in operating income by segment

*Initial forecasts: Figures announced publicly with results on May 14, 2019

SLIDE 29

28

Machinery business

Factors contributing to changes in operating income by segment

2

Increased sales volumes

△1 +1

Profitability of

rders awarded

3

Electric power machinery inventory revaluation losses

△1

Product lineup

+2

Other

FY2018 result FY2019 forecast Sales 93 Sales 100 [Revised forecast]  We project higher net sales due to orders received for products for offshore wind power generation.  Even amid harsh market conditions, we project

perating income to increase by JPY0.1 billion due

to higher sales, the absence of the electric power machinery inventory revaluation losses recorded last year, and other factors. We expect these factors to more than offset decreased profitability and other negative factors.

III. Full-year Forecasts for FY2019

[Initial forecast]  Despite harsh market conditions, we projected higher net sales due to orders received for products for offshore wind power generation.  Due to higher sales of products for offshore wind power generation and other factors, we projected

perating income to remain largely unchanged from

the previous year. 2

Increased sales volumes

△1 +1

Profitability of

rders awarded

3

Electric power machinery inventory revaluation losses

△1

Product lineup

+2

Other Sales 100 Sales 93

(JPY100M)

FY2018 result FY2019 forecast

Initial forecast Revised forecast

(JPY100M)

*Initial forecasts: Figures announced publicly with results on May 14, 2019

SLIDE 30

29

Full-year performance forecasts

(impact of non-operating income/loss and extraordinary income/loss)  Despite improvement in foreign exchange losses with stabilizing Indonesian rupiah exchange rates, JATIM’s interest burden has increased.  Significant net losses are expected due to the impact of impairment losses recorded in the first half.

III. Full-year Forecasts for FY2019

(JPY100M)

FY2018 FY2019

Result Initial forecast*1 Revised forecast

vs. initial forecast

Year-on-year change Operating income

11 20 △20 △11

Non-operating income/loss

△10 △12 △13 △1 △3

Translation (exchange profit and loss)

△4 △1 △1 3

Interest paid

△10 △12 △12 △2

Ordinary income or ordinary loss

1 7 △13 △20 △14

Extraordinary income/loss

13 5 △152 △157 △165

Impairment losses

△148 △148 △148

Gain/loss on disposal of fixed assets

2 △2

Gain on sale of equities

20 5 △5 △20

Losses due to disasters Revaluation losses on investment securities

△8 △1 △1 7

Net income or net losses before income taxes and other adjustments

14 12 △165 △177 △179

Tax expenses

△20 △11 △21 △10 △1

Net income or net losses attributable to non-controlling interests

8 2

*2 26

24 18

Net income or net losses attributable to

wners of parent company

3 3 △160 △163 △163

*1 Figures announced publicly with results on May 14, 2019 *2 Since JATIM and others recorded losses, final income or losses are to be adjusted for net losses attributable to non-controlling interests.

SLIDE 31

Net D/E ratio

(Times)

0.3 0.3 0.7

 Forecasts of business performance for FY2019 call for ordinary losses and net losses attributable to

wners of parent company. Thus, regrettably, we have revised interim and year-end dividends for this

fiscal year to zero. We apologize to our shareholders for this result and ask for their continuing support as we strive to restore dividends as quickly as possible.

* We implemented a share consolidation (on the basis of 1 for every 10 shares) on October 1, 2017. Dividend figure for FY2017 above assumes the share consolidation took place at the start of the consolidated fiscal year.

III. Full-year Forecasts for FY2019

Dividends*

(JPY)

60.0 60.0 0.0

Dividend payout ratio

(%)

31.8 329.0 －

SLIDE 32

31

H1 21 H2 18

20 40 60 80 100

52 33 39

[R&D expenses] [Capital investment, Depreciation]

III. Full-year Forecasts for FY2019

H1 42 H2 29

Depreciation Capital investment

SLIDE 33

32

I. Message
II. FY2019 1st Half Results
III. Full-year Forecasts for FY2019

IV.Future Initiatives

IV. Future Initiatives

SLIDE 34

33

Business environment

Business environment:

 Low demand for construction machinery in Japan, Indonesia, and India <Muroran, JATIM, springs for construction machinery>  Low demand for commercial vehicles in Japan and Indonesia <JATIM, leaf springs>  Inflows of low-priced materials into ASEAN markets due to low domestic steel demand in China and South Korea <JATIM>  Rising prices in the materials market in North America, spurred by the invocation of Section 232 <North American MSSC>  Low automotive demand in the US and China <North American MSSC, Ningbo/springs, stabilizers, Hirota/powders>  Withdrawal of Japanese and American makers from Europe and the contraction of the North American small car market <MSSC Ahle, North American MSSC> Due to the impact of US-China trade frictions and the rise of protectionism, auto production volumes are declining not just in the North American and Chinese markets, but in Southeast Asia and Europe. Demand appears low in the construction machinery industry, due to reduced production and inventory adjustments at major customers in Japan and low demand in certain regions of Southeast Asia, including Indonesia. [Impact on our businesses]

IV. Future Initiatives

SLIDE 35

34

Formed & Fabricated Products business:

Business trends

 Difficulty in expanding sales in the powders business due to low demand in China.  Failure to grow sales due to delays in introducing new turbine wheels planned for diesel engines.  Withdrawal from the cast magnet business after positioning it as a non-core business.

Targeting installation in this second half and swift commercialization of equipment

for creating added value from materials. (VIM, gas atomizer equipment)

Accelerating new product development, quality improvements, and cost

improvements starting in the second half of this fiscal year based on mother plant startup.

Shifting toward expanding sales of gasoline turbocharger parts.

Continuing to advance efforts to make the Formed & Fabricated Products business into the third pillar of our businesses.

✓: Result ➢: Future initiative

IV. Future Initiatives

SLIDE 36

35

Special Steel Bars business：

Business trends

 Despite recovery of materials supply volumes at the Muroran Works, low customer demand and inventory reductions are expected to reduce orders awarded by 26% YoY and 30% from the first half to the second.  Inventory buildup is underway in preparation for blast furnace renovations.

We expect to face difficulties associated with low operation rates due to blast furnace

renovations in the next period. However, we anticipate results starting the following year.

Strengthening cooperation with Nippon Steel Corporation. (with results anticipated

starting in 2022)

While the gap between planned and actual results at JATIM is due largely to internal

factors, compounded by worsening external conditions, these factors are trending up.

Accelerating improvements at JATIM.

(See below concerning JATIM.)

IV. Future Initiatives

✓: Result ➢: Future initiative

SLIDE 37

36

Business trends

Springs business:

 Construction of a production line for automotive springs at a European base has been frozen due to successive withdrawals and contractions by American and Japanese automakers from production in Europe.  The volume of orders awarded in Mexico has been low due to delays in bringing new vehicle models to market.  The volume of orders awarded in China has been low due to unfavorable conditions for small cars made by Japanese brands.  Orders awarded for springs for construction machinery use have declined due to the impact of a lower market share for Japanese construction machinery makers in China.

Decisions made on orders awarded in the new leaf spring business. (realized through

synergies with JATIM)

Fundamental measures are needed at North American MSSC. The challenges there

are largely due to internal factors, compounded by trade issues and other problems.

Top priority: Stopping the flow of red ink at North American MSSC.

(See below concerning North American MSSC.)

IV. Future Initiatives

✓: Result ➢: Future initiative

SLIDE 38

37

Business trends

Special Steel Bars business: Indonesian steel bars subsidiary (JATIM)

[Gaps vs. plans] (Production)  Cost increases exceeded expectations due to startup problems associated with rapid sales expansion with lack of adequate mass production technologies when mass production of round bars began at the end of FY2018.  After we procured materials in advance based on the need to secure volumes as prices rose due to shortages of scrap and graphite electrodes, demand fell, resulting in excess inventory.  Factors such as defective electrodes and an electric furnace accident have had negative effects on operations. (Sales)  Flat bars: Poor sales by commercial vehicle makers (domestic sales in Indonesia, sales to us)  Round bars: Lower volumes due to worsening low-priced retail sales in competition with Chinese materials and delays in obtaining the required customer approval (Other)  Recent sudden enactment of restrictions on scrap imports

IV. Future Initiatives

SLIDE 39

38

Business trends

State of quality improvements

Reducing low-priced retail sales
Promoting quality and productivity improvements through structural reforms including large-scale

staff reductions and paring the steel types produced

Customer approval is advancing faster than planned. Even with decreasing demand, addressing

local procurement needs has led to expanding sales.

We expect swollen inventory (scrap, electrodes) attributable to a sudden drop in demand to return

to normal levels during this second half.

Securing orders awarded for the new leaf springs business by promoting cost savings and

achieving synergies with the Springs business Target types of steel Inventory trends

Achieving profitability rapidly through continuing improvements and sales expansion

IV. Future Initiatives
Jul. – Sept. Oct. – Dec. Jan. – Mar. Apr. – Jun.
Jul. – Sept.

Oct.

Flat bars Yield improvement (%)

Jan. – Mar.
Apr. – Jun.
Jul. – Sept.

Oct.

Round bars

High priced Low priced Japan-produced materials Korea- produced materials JATIM’s target China- produced materials Retail sales Motorcycles, construction machinery Automotive Low quality High quality

Special Steel Bars business: Indonesian steel bars subsidiary (JATIM)

SLIDE 40

39

Business trends

Springs business: North American springs subsidiary (North American MSSC)

[Distinguishing features of North American MSSC]  Operates plants in Canada and in the US in the Great Lakes region; provides excellent access to various automaker plants.  Operates the only suspension springs plant in Canada.  North American MSSC specializes in manufacturing (using hot forming) suspension springs and stabilizers for use in mid-sized and large vehicles.  Many automaker plants in the Great Lakes region produce chiefly mid-sized and large vehicles: e.g., SUVs and pickup trucks.  Many small and mid-sized vehicles, sold in large numbers, are produced in the US South. Competing suspension spring makers also operate plants mainly in the South. Competition in the North is relatively low.  Amid stable gasoline prices thanks to a rapid increase in US oil production following the shale oil revolution, mid-sized and large vehicles have maintained their grip on the US market.

IV. Future Initiatives

SLIDE 41

40

Business trends

[Current state of North American MSSC]

✓ North American MSSC has already achieved contracts based on progress on developing lightweight springs. However, due to the timing of model changes, there will be lag of several years before these are adopted and delivered. ✓ Harsh conditions persist. The filling factor has declined dramatically due to the recent decrease in orders awarded. ✓ Problems in launching new products (already addressed) generated additional costs. ✓ Issues aside from issues related to production have also emerged, including high tariffs and high material costs due to trade issues and protectionism. (The issue of tariffs has already been addressed.) ✓ Shifting high material costs onto product prices has been problematic. While we have won the understanding of certain customers, negotiations continue.

IV. Future Initiatives

Springs business: North American springs subsidiary (North American MSSC)

SLIDE 42

41

Business trends

 Despite worsening profits/losses in the first half of 2019, losses are expected to decrease in the second half.  The budget for the second half only incorporates JPY0.1 billion to reflect rising material costs in prices (base improvements) for portions already agreed upon by customers. In addition, we expect a JPY0.5 billion improvement in the second half with the resolution of problems with production startup for new products in the first half and problems with the negative effects of materials market conditions, resulting in a forecast for operating losses of JPY0.6 billion.  With one major customer, with whom negotiations have proven difficult, we are bolstering our approach by considering the idea of cancelling transactions. The results (equal to about JPY0.3 billion, including the retroactive portion) have not been incorporated into forecasts for the second half, due to the possibility that they could be delayed until next year.

2020 H1 H2 H1 forecast +JPY0.2 billion △JPY1.1 billion △JPY1.1 billion △JPY0.6 billion △JPY0.2-0.3 billion Base Base Base

Tariffs on steel bars

Problems with

new products 2019 2018 2017 ⇒Explained on next page

Materials market conditions Materials market conditions

Trends in operating income

IV. Future Initiatives

Springs business: North American springs subsidiary (North American MSSC)

SLIDE 43

42

Business trends

Profits/losses are expected to improve in 2020, thanks to plant productivity improvements and

ther factors.

[Plant productivity improvements]  Applies to both US and Canada plants: Roughly 50% operation for coil springs. (lost orders and decreased customer demand)

Suspending the US coil spring line and concentrating production to achieve full capacity in

Canada.  US plants: Investments to bring production in-house have failed to reduce costs.

Prospect of boosting the filling factor in cold drawing; consideration of outsourcing

painting processes.  Canada plant: Investments in productivity improvements

Adopting automated equipment in the upset forging process for torsion bars.

[Addressing high material prices]  With one major customer, with whom negotiations have proven difficult, we are bolstering our approach by considering the idea of cancelling transactions. A final decision will be made in first half of 2020 if no agreement is reached in this second half.  Resolving fluctuation risks in materials markets by making progress in negotiations to standardize reference indicators for purchases and sales. (minimizing fluctuation risks) Completing plant productivity improvements and rectifying selling prices while considering structural reforms, including plant closures and consolidation.

IV. Future Initiatives

Springs business: North American springs subsidiary (North American MSSC)

SLIDE 44

43

Impairment

 Worsening business performance at JATIM and North American MSSC led to impairment. In addition, based on a review of future business plans, including business plans for other regions in response to the worsening of the business environment referred to above, we carried out impairment in the amount of JPY14.8 billion with no prospects of achieving the profitability originally expected.  Details of impairment (all overseas bases)

Special Steel Bars business

: JPY 9.0 billion

Springs business

: JPY 5.5 billion

Formed & Fabricated Products business : JPY 0.4 billion

 We take seriously and will duly reflect on the implications of this large-scale impairment.

Details of impairment in this period:

IV. Future Initiatives

SLIDE 45

44

Reconsideration of businesses

In light of worsening business results for this period, we established a Management Reforms Project in July 2019 under the direct supervision of the President. The project’s reconsideration of businesses is summarized below.

In addition to the effects of changing and increasingly harsh environmental conditions, the following

internal factors should be reconsidered: the failure to move forward with plant construction, stable procurement, and technical development (including process reforms) at the same time as accelerating

perations at overseas bases, in addition to delays in resolving problems affecting stable procurement and

technical development. The consequences of these internal factors are described below.  Delays in production process reforms

Lax management of cost cutting and new product startup activities due to the dispersal of

engineers across multiple domestic and international bases. (North American MSSC, turbocharger components at the Thai subsidiary)

The considerable time required to apply the knowledge of engineers dispatched from Japan
verseas due to major differences between Japanese and local equipment specifications. (JATIM)

 Exposed vulnerabilities in procurement strategies

Despite countermeasures to address risks related to rising raw materials market prices and

changes in supplier supply capacities, no fundamental reforms, including structural reforms in procurement, were carried out (JATIM, North American MSSC).  Delays in bringing new products to market through technical development

Despite accelerated R&D activities with the opening of the Research and Development Center,
verseas bases have lost a series of orders (springs in general) due to a lag of about one year

behind the competition in the development of technologies that reduce spring and stabilizer weights.

Reconsideration of businesses:

IV. Future Initiatives

SLIDE 46

45

Reconsideration of businesses

[Business structural reforms already begun]  Review of procurement strategies

Adopting a structure whereby the Procurement Department at the Head Office

manages procurement at domestic and overseas bases as a whole; dispatching highly experienced senior procurement managers to certain overseas subsidiaries.

Shifting to a procurement structure that draws on external organizations, like

trading companies, rather than attempting to do everything in house.  Further development of technologies that reduce spring weights.

We are proposing a technology to reduce the weight of coil springs using general-

purpose materials. We have obtained approval from some customers for new stabilizer technologies.  Resolving the shortage of engineers through selection and concentration.

Reducing assemblies in the precision springs business; adding engineers for

automotive spring design and development.

Shifting engineers to the development of other products by withdrawing from the

cast magnet manufacture business at the Thai plant.

Responding to current conditions:

IV. Future Initiatives

SLIDE 47

46

Toward a new Mid-term Business Plan

Toward a new Mid-term Business Plan：

The current Mid-term Business Plan covers the five-year period from 2016 through

2020.

We recognize that we were late in implementing fundamental solutions to problems

emerging in a rapidly changing business environment. Before the end of this fiscal year, we plan to formulate a new three-year Mid-term Business Plan to take effect in

FY2020. This will be announced in May.
An overview of the new Mid-term Business Plan follows.
Plans for the coming three years, based on a vision 10 years into the future.
Starting by stopping losses (JATIM, North American MSSC) in the first year.
Implementing selection and concentration of businesses by advancing

withdrawals from and sales of non-core and low-income businesses.

Rather than opening new bases, prioritizing improvements in added value and

product capabilities based on technological development.

Implementing structural reforms in procurement of materials which account for

more than 50% of production costs.

Strengthening the organizational structure to enable rapid response to

environmental changes and to minimize risk.

IV. Future Initiatives

SLIDE 48

47

Urgent measures

 Suspending coil spring production at the US plant for consolidation at the Canada plant.  Freezing advancement into the automotive spring business in Europe.  Withdrawal from the cast magnet business positioned as a non-core business and contraction of the hinge business.  Partial return of executive compensation.  Reducing fixed costs and expenses.

Staff reductions of approximately 1,000 (including temporary staff), primarily at JATIM,

the Philippines, Thailand, and the US.

Careful selection of, reductions in, and reviews of capital investment.
Reducing non-urgent testing, research, repair, and other costs.
Major reductions in Head Office costs.

Urgent measures in this period:

IV. Future Initiatives

SLIDE 49

48

Conclusions

1. The business environment is undeniably challenging.
2. We recognize that delays in addressing issues caused by internal

factors are even more critical.

3. We will start by assigning top priority to stopping losses at JATIM

and North American MSSC.

4. We are considering fundamental measures, including the closure

and consolidation of bases and withdrawals from and the contraction and sale of businesses.

5. We will strengthen our advantages as a manufacturer by

improving added value and product capabilities based on technological development.

6. We will formulate a new Mid-term Business Plan incorporating

these measures before the end of the fiscal year. This Mid-term Business Plan will be announced in May.

IV. Future Initiatives

SLIDE 50

Note on forward-looking statements These materials are meant solely to provide investors with information and are not to be interpreted as

solicitations. The forecasts provided in these materials are based on targets and projections and do not

constitute promises or guarantees of future performance. Please refer to this information with the understanding that the Company’s future performance may differ from this business outlook. While these earnings materials were prepared based on data believed to be reliable, we cannot guarantee their accuracy

r reliability. The Company assumes no liability for these materials, regardless of the purpose for which they

are used by investors. We encourage all investors to make their final investment decisions based on their

wn judgment.