Overview of Financial Results for the Fiscal Year Ended March 2020 - PowerPoint PPT Presentation

Overview of Financial Results for the Fiscal Year Ended March 2020 and 2020 Mid-term Business Plan May May 29, 29, 2020 2020

Message As a measure to prevent novel coronavirus infection, the briefing on financial results has been canceled. Instead, related materials have been posted to the Company website. Please address any questions to the Public & Investor Relations Department or submit them via our website. ・ At the end of the first half, many overseas facilities recorded impairment losses, leading to a net loss for the period. For this reason, we have been forced to suspend dividends. ・ Results for the fiscal year ended March 2020 were slightly better than the revised profit plans announced with the results for the first half. ・ Progress has been made on restructuring overseas subsidiaries, a topic of concern for investors. The extent of losses has been trimmed recently both at North American MSSC in the Springs business and JATIM in Indonesia in the Special Steel Bars business. ・ In light of changes in the business environment and in recognition of delays in thoroughgoing response to emerging issues, we have formulated the 2020 Mid-term Business Plan one year early. The Plan is presented below. ・ As a three-year business plan reflecting our vision for a decade into the future, this Mid-term Business Plan is based on a framework that calls for progress in the first fiscal year on business revitalization at loss-making overseas businesses, as well as efforts targeting sustained growth through enhancing product strengths and growing the businesses that handle integrated production from the materials stage. ・ The future outlook remains uncertain due to effects of the global coronavirus pandemic. The planned figures do not incorporate the impact of the pandemic. Motoyuki Sato President 1

Overview of Financial Results for the Fiscal Year Ended March 2020 May May 29, 29, 2020 2020

I. FY2019 Results II. Full-year Forecasts for FY2020 3

Summary I. FY2019 Results  Net sales fell, due mainly to the following factors: ・ Lower sales in the domestic Special Steel Bars business to makers of construction machinery, industrial machinery, and machine tools ・ Lower sales for automotive uses at overseas subsidiaries, including North American MSSC, as well as lower domestic sales for construction machinery uses, in the Springs business  Operating income fell significantly due to lower sales, despite reduced amortization costs by recording of impairment losses and the effects of inventory buildup in preparation for blast furnace renovations at Muroran.  Lower operating income pushed ordinary income into negative territory.  Due to impairment losses recorded at numerous overseas facilities, we posted a significant net loss this period. (JPY100M) FY2019 FY2018 Previous Year-on-year Result Result vs. forecast forecast* change △ 29 △ 123 1,294 1,200 1,171 Net sales △ 7 11 0 4 4 Operating income △ 13 △ 3 △ 4 1 10 Ordinary income Net income attributable to △ 160 △ 141 △ 144 3 19 owners of parent company * Figures announced publicly with results on November 12, 2019 4

Factors contributing to changes in net sales and operating income I. FY2019 Results Net sales (JPY100M) △ 202 ＋ 26 △ 10 1,294 +61 +2 Foreign exchange Consolidation 1,171 gains/losses Decreased adjustments, etc. *1 Increased Selling prices sales volume under volumes contract FY2018 FY2019 result result *1 Volume of OEM products and rolling piecework (subcontracted rolling) under contract to Nippon Steel Corporation Operating income (JPY100M) Other 11 4 △ 1 Decreased +18 amortization Raw material △ 43 costs due to Raw prices impairment material *2 (extraordinary prices factors related Effects of inventory +8 (market to Muroran) +1 buildup in conditions) preparation for +8 blast furnace 0 +2 R&D renovations at expenses, Muroran Decreased FY2019 Selling depreciation FY2018 sales prices result result volumes *2 Temporary expenses for coke oven repairs at Muroran in FY2018 5

Net sales/operating income by segment I. FY2019 Results  Net sales fell in the Special Steel Bars, Springs, and Formed & Fabricated Products businesses.  Operating income was largely unchanged in the Special Steel Bars business; down in the Springs and Formed & Fabricated Products businesses; and up in the Machinery business. (JPY100M) FY2018 FY2019 Previous Year-on-year Result Result vs. forecast forecast* change △ 1 △ 89 648 560 559 Net sales Special Steel Bars 12 9 12 3 0 Operating income △ 33 △ 45 497 485 452 Net sales Springs △ 9 △ 13 △ 14 △ 1 △ 5 Operating income △ 4 △ 18 114 100 96 Formed & Net sales Fabricated △ 3 4 1 1 0 Operating income Products 93 100 102 2 9 Net sales Machinery 2 3 4 1 2 Operating income △ 6 42 35 36 1 Net sales Other △ 1 2 1 1 0 Operating income △ 99 △ 80 △ 74 Net sales 6 25 Consolidated adjustments 0 0 0 0 0 Operating income △ 29 △ 123 1,294 1,200 1,171 Net sales Total △ 7 11 0 4 4 Operating income 6 * Figures announced publicly with results on November 12, 2019

Results by segment (Special Steel Bars business) I. FY2019 Results (JPY100M) Previous forecast* (JPY100M) FY2018 FY2019 Effects of lower domestic Decreased sales volumes ( △ JPY19.6B) amortization costs buildup in preparation Effects of increased earnings Sales Effects of inventory Year-on- due to impairment for blast furnace Previous vs. due to increased volume under renovations 648 Result Result year (+JPY0.4B) contract (JPY9B) Sales forecast* forecast change (extraordinary factors)** (excluding effects of Raw material prices (market conditions) 560 inventory buildup) Production costs R&D expenses, Raw material prices product inventory depreciation +5 Product lineup Revaluation of Selling prices Net sales △ 1 △ 89 648 560 559 JATIM 12 9 Other △ 28 +18 △ 1 Operating +4 △ 1 △ 2 12 9 12 3 0 income △ 8 +9 △ 4 +5 Lower sales FY2018 FY2019 【 Result 】 result forecast  Net sales In domestic businesses, sales volumes of our products fell significantly. Contributing factors included continued decreases in production among Result major customers, including those in the construction machinery sector, and (JPY100M) accompanying inventory adjustments. Despite improved selling prices in response to rising raw material prices (iron Decreased Effects of inventory buildup ore) and effects of increased earnings due to higher volumes of materials amortization costs in preparation for blast processed under contract, net sales fell by JPY7.5 billion. furnace renovations due to impairment Sales Furthermore, sales volume decreased at JATIM in Indonesia, resulting in a (+JPY0.4B) (excluding effects of 648 inventory buildup) product inventory decrease of JPY0.1 billion in net sales in overseas businesses (see the next Production costs (extraordinary factors)** Sales Revaluation of Raw material prices page for details). This, combined with eliminations of intercompany R&D expenses, 559 Raw material prices depreciation transactions for consolidation, resulted in a total decline of JPY1.4 billion. (market conditions) Product lineup  Operating income +5 Selling prices Operating income was impacted strongly by lower sales volume in domestic Other businesses, resulting in a decline of JPY0.5 billion, despite improvements in JATIM 12 12 △ 2 selling prices, inventory buildup in preparation for blast furnace renovations +4 △ 27 +18 0 in FY2020, and cost improvements achieved from associated efficiency +4 improvements. △ 10 Operating income improved by JPY0.5 billion in overseas businesses +8 △ 8 +8 (JATIM), due to factors including lower amortization costs resulting from FY2018 FY2019 impairment losses (see the next page for details). result result As a result, operating income in the Special Steel Bars business as a whole Lower sales remained largely unchanged. * Figures announced publicly with results on November 12, 2019 7 ** Temporary expenses for coke oven repairs at Muroran in FY2018