Mitsubishi Steel Mfg. Co., Ltd. Financial Results for the First Half of the Fiscal Year Ending March 2018 November 24, 2017
I. Message I. Message II. FY2017 1st H Results III. Full-year Forecasts for FY2017 IV. Progress with the 2016 Mid-term Business Plan 1
Executive organization I. Message Title Name Responsibilities President Motoyuki Sato In Charge of Accounting Department and Information Systems ☆ Executive Officer Hiroyuki Nagata Department ※ Director Masayuki Takashima ※ Director Akira Hishikawa In Charge of Corporate Planning Division, Special Steel Bars Director Hiroshi Sekine Business In Charge of Springs Business Director Hiroshi Amano In Charge of Formed & Fabricated Products Business, Director Jun Takayama Research and Development Center In Charge of General Affairs Department, Public Relations and Director Yasuhiko Iizuka Investor Relations Department, and Purchasing Department General Manager of Sales Division, Special Steel Bars ☆ Director Akira Yamao Division, and Parts Sales Division Full-time Audit and Supervisory ※ ☆ Hirokuni Sakamoto Committee Member Full-time Audit and Supervisory Yoshihiro Hayasaka Committee Member Certified Public Accountant Corporate Auditor Shuichiro Sekine ※ Registered Attorney at Law Corporate Auditor Certified Public Accountant ※ Fellow Teruhisa Hanamura General Manager of Spring Division Fellow Tsuyoshi Kuwahara President of PT. MSM Indonesia ☆ Fellow Atsushi Yamaguchi General Manager of Corporate Planning Division ☆ Newly appointed ※ Outside Director 2
II. FY2017 1st H Results I. Message II. FY2017 1st H Results III. Full-year Forecasts for FY2017 IV. Progress with the 2016 Mid-term Business Plan 3
Summary II. FY2017 1st H Results Net sales increased due to strong demand in the key customer industries of construction machinery and automotive industries. Operating income and ordinary income increased due to growth in sales of special steel bars and other factors. However, due to a delay in the sale of cross-shareholdings, net income fell short of expectations. (JPY100M) FY2016 FY2017 Year-on-year 1st H 1st H Full-year 1st H change forecast* 483 579 1,037 96 550 Net sales Operating 14 17 39 3 16 income Ordinary 7 15 32 8 14 income Net income attributable 14 8 35 △ 6 12 to owners of parent company *Figures announced during announcement of results on April 28, 2017 4
Factors contributing to changes in net sales and operating income II. FY2017 1st H Results Net sales (JPY100M) +15 +25 Foreign currency 579 translation adjustments +56 Improved selling for net sales of overseas prices Growth in sales 483 volume 1st H FY2016 1st H FY2017 Operating income (JPY100M) +25 △35 579 Improved +13 selling prices +4 △4 Cost of raw Sales growth materials R&D costs 14 17 Other Other Depreciation 1st H FY2016 1st H FY2017 5
Net sales/operating income by segment II. FY2017 1st H Results (JPY100M) FY2016 FY2017 1st H 1st H Year-on-year change 183 257 74 Net sales Special Steel Operating Bars 4 11 7 income 213 24 １ 28 Net sales Springs Operating 3 5 2 income 48 49 1 Formed & Net sales Fabricated Operating 2 0 △ 2 Products income 49 40 △ 9 Net sales Machinery Operating 3 0 △ 3 income 18 20 2 Net sales Other Operating 1 1 0 income △ 28 △ 28 0 Net sales Consolidated adjustments Operating 0 0 0 income 483 579 96 Net sales Total Operating 14 17 3 income 6
Factors contributing to changes in operating income in each segment II. FY2017 1st H Results Special Steel Bars Business (JPY100M) Both improved selling prices and sales Reflected at end of growth driven by strong demand in the previous period Inventory valuation △ 26.9 +9.7 construction machinery industry contributed of products to earnings growth. *Cost of raw materials In addition to increased volume, revaluation Depreciation, +9.0 R&D costs 0.0 gains on inventories, reflecting the rising cost Sales of raw materials, contributed to earnings 257 Selling △ 0.2 prices composition growth. Product Sales +11.1 +5.8 Other 183 △ 1.8 * Cost of raw materials ( △ 26.9) includes some use growth 11.1 Sales of inventory before the increase in cost of raw 4.4 materials. (+3) 1stH 1stH FY2016 FY2017 Q2 Springs Business Inventory valuation (JPY100M) of products Depreciation, R&D costs Sales growth Sales growth was driven by increased Other △ 6.0 +5.9 domestic sales and foreign currency translation adjustments on the sales of Sales Selling prices Cost of raw materials overseas subsidiaries. △ 2.5 +2.3 241 △ 1.3 Sales +3.2 Earnings also grew, thanks to sales growth 213 mainly attributable to recovering domestic 4.8 demand. 3.2 1stH 1stH FY2016 FY2017 7
Factors contributing to changes in operating income in each segment II. FY2017 1st H Results Formed & Fabricated Products Business (JPY100M) Cost of raw materials Selling prices While sales of defense-related products Sales growth fell, sales of special alloy powders, Depreciation, mainly for telecommunications devices, R&D costs remained strong. Sales +0.3 48 Other Operating income fell due to the strong Sales +0.8 △ 1.6 49 impact of the rising cost of key alloy △ 0.8 1.9 0.2 steels. △ 0.4 1st H 1st H FY2016 FY2017 Machinery Business (JPY100M) Revenues fell for several reasons, Lower sales including the impact of slow orders for composition Product gas turbine parts used in Sales thermoelectric power generation, a key 49 Sales 40 product line. △ 2.3 3.4 0.4 △0.7 Earnings fell due to lower sales. 1st H 1st H FY2016 FY2017 8
Impact of non-operating income/loss and extraordinary income/loss II. FY2017 1st H Results In addition to growth in ordinary income and operating income, translation gains on assets denominated in foreign currencies contributed to earnings growth. Net income fell due to lower gains on sales of cross-shareholdings. (JPY100M) FY2016 FY2017 1st H results 1st H results Year-on-year change 14 17 3 Operating income △ 7 △ 2 5 Non-operating income Translation (exchange profit △ 4 1 5 and loss) Share of loss of entitles △ 4 △ 3 1 accounted for using the equity method 7 15 8 Ordinary income 16 1 △ 15 Extraordinary income/loss 23 16 △ 7 Income before income taxes △ 8 △ 8 0 Tax expenses Net income attributable to owners of 14 8 △ 6 parent company March 31, 2016 September 30, 2016 March 31, 2017 September 30, 2017 Yen up Yen down JPY11.56 JPY0.54 9
Business indicators and financial conditions II. FY2017 1st H Results ROE fell due to a year-on-year decrease in net income. Since full-year performance forecasts remained unchanged, midyear dividends paid were JPY2.5 per share, as planned. FY2015 FY2016 FY2017 1st H 1st H 1st H 1,156 1,271 1,346 Total assets (JPY100M) 642 636 667 Net assets (JPY100M) 50.3 45.0 45.4 Equity capital ratio (%) 2.8 1.4 2.7 ROS (%) 2.0 4.7 2.7 ROE (%) 2.5 2.5 * 2.5 Dividends (JPY) 64.8 28.4 47.4 Dividend payout ratio (%) * Dividends have not been adjusted for the October 1, 2017, 10 share consolidation.
III. Full-year Forecasts for FY2017 I. Message II. FY2017 1st H Results III. Full-year Forecasts for FY2017 IV. Progress with the 2016 Mid-term Business Plan 11
Factors contributing to changes in operating income in 1stQ and 2ndQ III. Full-year Forecasts for FY2017 In Q1, the special steel bars business in part used inventory predating the rise in the cost of raw materials (molten iron). (+JPY300 million) In Q2, as customary, a North American subsidiary of the Springs business shut down (for planned summer maintenance). ( △ JPY200 million) Continuing favorable demand conditions helped secure earnings in the second half. (Earnings in the machinery business are forecast to grow for various reasons, including sales of products for maritime machinery and other new fields.) (JPY100M) FY2017 2nd H Full-year 1stQ 2ndQ forecast forecast Results (April–June) (July–September) Special Steel 7 4 11 10 21 Bars Operating income 4 1 5 7 12 Springs Formed & 1 △ 1 0 2 2 Fabricated Products 0 0 0 4 4 Machinery 0 1 1 0 1 Other 12 5 17 23 40 Total 12
Full-year performance forecasts III. Full-year Forecasts for FY2017 Demand conditions are positive for the construction machinery and automotive industries. With rising capital investment and R&D investment targeting future growth, operating income is projected to grow for various reasons, including growth in the sales of special steel bars. Current plans assume the company will achieve the net income announced at the start of the year based on the sale of cross-shareholdings and other factors. [Unchanged form figures (JPY100M) announced at start of year] FY2016 FY2017 Results Forecast Year-on-year change 1,037 1,100 63 Net sales R&D expenses （△ 43 ） （△ 50 ） （△ 7 ） Depreciation 39 40 1 Operating income 32 35 3 Ordinary income Net income 35 30 △ 5 attributable to owners of parent company 13
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