The Fifth Medium-Term Management Plan Explanatory Meeting Maruichi - PowerPoint PPT Presentation

The Fifth Medium-Term Management Plan Explanatory Meeting Maruichi Steel Tube Ltd. Chairman Hiroyuki Suzuki Index I Results and Reflections on the Fourth Medium-Term Management Plan P.2 II Overview of the Fifth Medium-Term Management Plan P.15 III (Reference) Business Environment Surrounding the Group P.34 March 28, 2018 1

I Results and Reflections on the Fourth Medium-Term Management Plan 2

I-1 Targets and Results of the Fourth Medium-Term Management Plan Final year of the Third Targets Final year of the Fourth Results Medium-Term Medium-Term achieved Management Plan Management Plan FY2014 FY2015 FY2016 FY2017 FY2017 Results Results Results Projections Targets Net sales 152.7 144.9 137.2 153.4 185.0 (billion yen) Operating income 17.7 17.0 24.5 19.6 22.5 (billion yen) 11.7 ％ Operating margin 11.6% 17.8% 12.8% 12% 5.7 ％ 4.7% 6.5% and over ROE 3.9% 7.4% 255.2% 49.6% 48.6% 52.2% Shareholder return 70% and over (3-year ratio (3-year (3-year average) 81.6 ％ (3-year average) average) average) ¥14 million ¥21 million ¥22 million ¥23.5 million Return of profit to ¥21 million (3-year society (3-year (3-year average) average) average) ¥22.16 million (3-year average) 3

Comparison of Domestic/Overseas Plans and Results FY2015 FY2016 FY2017 Targets Results Targets Results Targets Results (billion yen) 174.2 145.0 180.5 137.2 185.0 153.4 Total net sales 103.5 91.4 107.3 88.7 108.5 96.3 Domestic Overseas 70.7 53.6 73.2 48.5 76.5 57.1 (U.S.) 36.1 25.8 36.7 22.4 39.6 26.6 (Asia) 34.6 27.7 36.5 26.1 36.9 30.5 Total operating 20.5 17.0 21.9 24.5 22.5 19.6 income Domestic 18.0 17.3 18.6 19.7 19.1 16.6 2.5 (0.3) 3.3 4.8 3.4 3.0 Overseas (U.S.) 1.1 (1.0) 1.7 2.2 1.7 2.0 (Asia) 1.4 0.6 1.6 2.6 1.7 1.0 11.8% 11.7% 11.8% 17.9% 12.2% 12.8% Operating margin 17.4% 18.8% 17.3% 22.2% 17.6% 17.2% Domestic 3.5% -0.6% 4.5% 9.9% 4.5% 5.3% Overseas 115 121.05 115 108.84 115 112.37 Exchange rate (yen) 1) Net sales: There was a considerable target shortfall due to the less-than-planned sales volume and a considerable drop in steel price 2) Operating income: Although the target was achieved both domestically and overseas in FY2016, there was a shortfall in FY2015 and FY2017 3) Operating margin: The target was achieved in FY2016 and FY2017 due to a recovery in revenue from overseas 4) ROE: Although the target was achieved with 7.4% in FY2016, ROE for FY2017 ended at 5.7% due to a decrease in income 5) Targets for shareholder return ratio and social contribution were achieved 4

Capital Policy Targets and Progress Targets of final year of the Fourth Medium-Term Management Plan (FY2017) Average shareholder return ratio during the three years → 70% and over; FY2017 ROE → 6.5% and over 8.0% 300.0% (Note) ROE Shareholder return ratio 7.4% 255.2% 7.0% 250.0% 6.1% 6.0% 5.7% 200.0% 5.0% 5.0% 5.0% 4.7% 4.0% 150.0% 3.9% 3.9% 3.6% 130.4% 3.0% 100.0% Shareholder return ratio: 3-year average of 81.6% 61.5% 2.0% 70.3% 50.5% 53.7% 50.0% 46.9% 48.6% 49.6% 1.0% 0.0% 0.0% FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 (Projections) (Note) FY2015: A buyback of 2 million shares and a decrease in net income due to impairment of securities holdings raised the shareholder return ratio to 255% 5

I-2 Results and Reflections 1) Domestic Results i. Capital investments were made to streamline production and to strengthen the sales bases of Maruichi Kohan Ltd. (The total investment amount was ¥12.5 billion.) ii. The Osaka Plant was consolidated into the Sakai Plant. (March 2016) 2) Results and Reflections Overseas i. MOST launched operations in the upper west coast of the U.S. and Canada ii. Leavitt remained in the black due to the recovery in U.S. steel market conditions and other factors. iii. The three U.S. companies decided to replace facilities and establish new lines. iv. SUNSCO (HCM) had issues concerning sales capabilities and stable operation of facilities in Vietnam and was unable to keep the business in the black. v. KUMA started operations of the Bangalore Plant and greatly expanded sales by establishing additional large-diameter tube lines. vi. The launch of MPST’s new plant for automobiles and motorcycles was decided. 3) Capital Policy and Social Contributions i. High dividend payout was made, and the shareholder return ratio target was achieved. ii. Social contributions were made in Japan and overseas to the fields of education, culture, sports, medical care, and others. 6

Capital Investment Results: Domestic: ¥12.5 billion; Overseas: ¥4.7 billion Trends in the amount of capital investment and depreciation (hundred million yen) Capital investment (Domestic) Depreciation (Domestic) Capital investment (Overseas) Depreciation (Overseas) 2015 2016 2017 2012 2013 2014 Major capital investments during the Fourth Medium-Term Management Plan Domestic Overseas  Relocation of Yokohama Sales Office of Maruichi Kohan: ¥1.9 billion  MMX: No. 2 Plant: ¥0.8 billion  Sakai Plant: Renovation of No. 1 Unit and terminal piers: ¥1.5 billion  MAC: Facilities renewal: ¥0.6 billion  Shikoku Maruichi: Solar power generation equipment: ¥0.65 billion  KUMA : 4-inch mill: ¥0.2 billion  Tokyo Plant: Renewal of No. 1 Unit: ¥0.5 billion  SUNSCO: 2-inch mill: ¥0.2 billion  Relocation of Hokuriku Sales Office of Maruichi Kohan: ¥1.2 billion  Construction of new Tokyo Plant (cutting-to-size plant): ¥0.35 billion 7

Domestic Capital Investment October 2015 Relocation of Yokohama Sales Office of Maruichi Kohan March 2016 Completion of consolidation of Osaka plants into Sakai plant April 2016 Began selling power, solar power generation equipment at the Shikoku Plant August 2016 Completion of renewal construction of No. 1 Unit at Tokyo Plant August 2017 Completion of renewal construction of galvanizing line at the Takuma Plant (Implemented in three construction phases from 2015) November 2017 Relocation of Hokuriku Sales Office of Maruichi Kohan (Added new plans to the Fourth Medium- Term Management Plan. Began operation on November 13) January 2018 Completion of renewal construction of No. 1 Unit at the Sakai Plant (Mill, cutter, chamfering machine) (Implemented in three construction phases from 2015) January 2018 Completion of renewal construction of No. 1 Slitter at the Sakai Plant 8

MOST in the U.S.: Expanding sales on the U.S. West Coast and in Canada ・ Acquired structural tube division of Evraz NA INC. in March 2015 ・ Expanded business in the U.S. and Canada by further enhancing “Production Where Demand MOST (Portland, Exists” in the U.S. in cooperation with MAC Oregon) (Los Angeles) and Leavitt (Chicago) Leavitt (Chicago, MOST Illinois) MAC (Los Angeles, California) 9

SUNSCO (HCM) in Vietnam: Unable to keep business in the black i. FY2016: Although a significant surplus was posted due to a recovery in steel market conditions, a deficit was posted in FY2017 ii. Unable to keep the business in the black due to the impact of protectionism in the export markets (U.S., Indonesia, Thailand, Malaysia, etc.) and issues concerning the sales capabilities and stable operation of facilities in Vietnam ⇒ Issues for the next Medium-Term Plan Trends in business performance (including HANOI) (Unit: million US$) Net sales Operating income 161 (3) December 2012 205 2 December 2013 256 (2) December 2014 196 5 December 2015 202 17 December 2016 Results Announced in December 2017 Projections 226 (1) November 2017 277 5 Fourth Medium-Term Plan (Dec. 2017) Targets 10

MMX in Mexico: Continuing necessary investment in motorcycle related business • February 2015 No. 2 plant began operation • August 2017 Purchased an adjacent 10,000m 2 -area to build a cutting plant No. 1 plant No. 2 plant Purchased area 11

KUMA in India: Continuing necessary investment in automobile and motorcycle related businesses • June 2015 Bangalore Plant began operation • February 2017 4-inch mill for large- diameter tubes began operation Bangalore Plant 2-inch mill 4-inch mill for large-diameter tubes 12

Overseas Production Facilities : Began operation / expansion decided during the Fourth Medium-Term Plan Asia Americas Maruichi Metal Product (Tianjin) Co., Maruichi Metal Ltd. (China) Product Wuhan Branch (China) Maruichi Metal MOST KUMA (India) Product (Foshan) (the U.S.) Manesar Plant Co., Ltd. (China) Leavitt MPST Chicago Plant (Philippines) (the U.S.) Scheduled to SUNSCO (Hanoi) begin operation (Vietnam) in 2019 MAC (the U.S.) KUMA (India) J-Spiral SUNSCO Bangalore Plant (Vietnam) (Vietnam) MARUICHIMEX (Mexico) AMX ISTW Semarang (Mexico) ISTW Cikarang Plant ISTW Jakarta Plant Plant (Indonesia) (Indonesia) (Indonesia) 13