2020 Mid-term Business Plan (FY2020 to FY2022) May May 29, 29, - PowerPoint PPT Presentation

2020 Mid-term Business Plan (FY2020 to FY2022) May May 29, 29, 2020 2020

Message During FY2016 to FY2020, the Company implemented various measures in line with the 2016 Mid-term Business Plan. However, due to delays in implementing thoroughgoing solutions in the rapidly changing business environment, we have decided to conclude that plan one year ahead of schedule. We have formulated the new 2020 Mid-term Business Plan as a three-year plan for the years through FY2022. Amid major changes in the business environment, such as US-China trade friction and rising trade protectionism, business results have worsened, chiefly at overseas facilities. Last year, we recorded significant impairment losses and were regrettably unable to pay dividends. We apologize to our shareholders. This Mid-term Business Plan is a three-year plan reflecting our vision for 10 years into the future. Its framework calls, first of all, for progress on energizing loss-making overseas businesses in the first fiscal year, enhancing our product strengths, and expanding integrated production businesses from the raw materials stage. These initiatives target sustained growth. While this plan gets underway at a time of profound challenges in the business environment, including the global novel coronavirus pandemic, the Group will work as one to steadily implement the measures called for in the plan, further contribute to society, and resume dividend payments at an early date. We appreciate your continuing support. Motoyuki Sato President 1

I. Introduction II. Review of the 2016 Mid-term Business Plan III. The 2020 Mid-term Business Plan IV. Initiatives in Individual Divisions 2

Reasons for revising the Mid-term Business Plan I. Introduction Both external and internal Declining strengths in Worsening business conditions have changed manufacturing and environment significantly since the time the products 2016 Mid-term Business Plan Slowing automotive and construction machinery demand was drafted… Slow sales and profits because due to the rise of trade progress on overseas business protectionism, alongside development has failed to lead to automakers’ change in global technological development and procurement policies stable procurement Worsening business results Impairment losses totaling JPY15 billion Deviation from planned figures In recognition of the delays in achieving thoroughgoing solutions in response to dramatic changes in the business environment, we have formulated a new three-year Mid-term Business Plan starting in FY2020, one year ahead of schedule. <Key points underlying the formulation of the new Mid-term Business Plan> • Start in the first year by stopping the hemorrhage (JATIM* in • Implementing structural reforms in material procurement, which accounts Indonesia, North American MSSC) for 50% or more of manufacturing costs • Formulating a plan for the coming three years that reflects our vision • Strengthening organizational structures capable of responding swiftly to for 10 years into the future environmental changes to minimize risks • In technological development, establishing the new Sales Strategy Office to implement systematic enhancements ranging from grasping and analyzing information through new product development and mass production * PT. JATIM TAMAN STEEL MFG. 3

Recent progress <North American MSSC> I. Introduction Improvements in operating losses  Reducing operating losses 2019 2020  Problems with the startup of mass production have largely been April-September 4-9 月 10-12 月 January-March 1-3 月 October-December resolved.  Integration of coil spring production lines in Canada: Completed on schedule △ JPY0.2 △ JPY0.4  Negotiations on price increases with a major customer, a topic of billion billion concern, have largely been concluded as planned (new pricing to take effect in June 2020). △ JPY1.1  Reduced amortization costs due to impairment are reflected from billion the second half. Progress in gaining orders for stabilizers, which account for 70% of North American sales  Progress on receipt of stabilizer orders Production capacity (6-day operation)  Progress on receipt of orders in 2019 through the introduction of lightweight products (5-day operation) (5-day operation)   US Expected to contribute to net sales starting with the introduction of In Canada: production  Anticipated new vehicle models in 2022 orders received  Transfers from While product strengths and manufacturing are improving… the US  Finalized orders We plan to strive to achieve profitability early by shifting and received consolidating production of stabilizers in Canada and Mexico and ceasing production in the US for further cost improvements. 2020 2021 2022 2023 2020 年 2021 年 2022 年 2023 年 Ability to manufacture at planned costs ➡ Achieving profitability by increasing utilization rates  Quickly realizing a profitability structure by integrating North American facilities in addition to winning new orders 4

Recent progress <Regions other than the US and Canada> I. Introduction Survival of other automotive suspension spring production facilities  Projections of order reception for automotive springs at each facility  Numbers of coil springs and stabilizers for which receipt of orders is finalized or confidently projected (indexation by setting 2019 levels to 100)  While overseas facilities were enhanced under the Mid-term Business Plan, securing of orders was delayed.  The introduction of lighter weight products led to a buildup of new orders received in FY2019. Deliveries are expected to increase with the next model changes. Japan sales Mexico sales 244% 110% 104% 211% 100% 98% 133% 100% 2019 2020 2021 2022 2019 2020 2021 2022 China sales Philippines sales* Figures for the newly launched plant 149% not subject to indexation 129% 115% Projections through FY2023 are 100% shown below. 2019 2020 2021 2022 2023 2019 2020 2021 2022  Adopting a six-region structure consisting of Canada, Japan, China, Mexico, the Philippines, and India (JV) * Mass production of automotive springs is to begin in FY2020 in 5 the Philippines.

Recent progress <JATIM in Indonesia> I. Introduction Operating income in the black  Operating income has been in the black since JPY70M JPY70M October-December, thanks to greater emphasis on profitability and cost cutting than sales volumes. △ JPY140M △ JPY210M  Yield improvements resulted in lower manufacturing costs. → New fiscal  Fixed costs are down thanks to a large-scale staff reduction and △ JPY380M year other measures. January- April- July- October- January-  Low-profit orders received have been reviewed. March June September December March  Results for the third quarter and beyond reflect lower amortization 2019 2020 costs resulting from impairment. Manufacturing cost improvement initiatives Yield improvement rate  Significant cost improvements were realized in 127 (With January-March 2019 level set to 100) 124 round bars for which yields had been poor. 丸鋼 Round bars 118  Yields improved by narrowing down mass produced product lineup for 平鋼 Flat bars 109 round bars. 105 104 104  A review of suppliers made it possible to cut materials costs and 100 102 maintain appropriate inventories.  Cost cutting has made products more price competitive. JATIM → New fiscal received new orders for leaf springs. This will lead to improvements in year utilization rates. April- July- October- January- January- 1 － 3 月 4 － 6 月 7 － 9 月 10-12 月 1-3 月 June September December March  March JATIM is currently adopting equipment to improve the dimensional 2019 年 2020 年 2019 2020 precision of round bars, a step intended to achieve yield improvements and sales growth. 6

I. Introduction II. Review of the 2016 Mid-term Business Plan III. The 2020 Mid-term Business Plan IV. Initiatives in Individual Divisions 7

Trends in business results II. Review of the 2016 Mid- term Business Plan  Despite increases attributable to the acquisition of Ahle in Europe and making JATIM in Indonesia a consolidated subsidiary, the declining business environment led to net sales far below plans.  Due to pressure on profits from manufacturing difficulties in overseas businesses, the gap between planned and actual results was greater for operating income than for net sales. ROE/ operating income/ 2,500 net sales % (JPY100M) 10.0 ROE % % 8.0 7.7 6.4 % % 6.3 % 6.2 % 5.9 1,700 % 4.7 % 4.2 2016 Mid-term Business Plan 1,294 2.1 % targets ’ 1 6 年中計 1,171 ’ 1 6 年中計 1,187 Net sales 目標値 % 目標値 0.5 1,037 111 93 90 Results 49 47 43 ▲ 28 % 39 32 29 Operating 11 4 income 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2025 8