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

Mitsubishi Steel Mfg. Co., Ltd. Financial Results for the First Half of the Fiscal Year Ending March 2019 November 22, 2018

I. Message I. Message II. FY2018 1st H Results III. Full-year Forecasts for FY2018 IV. Concise Overview of the Formed & Fabricated Products Business V. Progress with the 2016 Mid-term Business Plan 1

II. FY2018 1st H Results I. Message II. FY2018 1st H Results III. Full-year Forecasts for FY2018 IV. Concise Overview of the Formed & Fabricated Products Business V. Progress with the 2016 Mid-term Business Plan 2

Summary II. FY2018 1st H Results  Net sales grew, due mainly to increased domestic sales volumes and rising selling prices in the Special Steel Bars business and the addition of the Indonesian steel joint venture Jatim and German spring manufacturing company Ahle to the ranks of consolidated subsidiaries.  Operating income fell due to losses in the Springs business and losses at the newly consolidated subsidiary Jatim.  Foreign exchange losses at Jatim, attributable to the devaluation of the Indonesian rupiah, significantly affected ordinary income.  Lower operating income and lower ordinary income resulted in lower net income.  Net sales fell short of expectations due to Jatim’s results. Operating income failed to reach the target due to poor performance at Jatim and in the Springs business. (JPY100M) FY2017 FY2018 Full-year 1st H vs. initial Year-on-year 1st H result 1st H result result forecast* forecast change 579 1,187 650 631 △ 19 52 Net sales Operating 17 32 13 8 △ 5 △ 9 income Ordinary 15 28 9 3 △ 6 △ 12 income Net income attributable to 8 29 7 3 △ 4 △ 5 owners of parent company * Figures announced during announcement of results on April 27, 2018 Certain forecasts of business performance were revised on July 30, 2018. (Operating income: JPY900M; ordinary income: JPY300M; net income 3 attributable to owners of parent company: JPY400M)

Factors contributing to changes in net sales and operating income (YoY comparison) II. FY2018 1st H Results Net sales (JPY100M) △ 27 +24 +16 +39 Consolidation Selling prices Increased sales adjustments, etc. volumes Jatim and Ahle 631 added to consolidated subsidiaries 579 1st H FY2017 result 1st H FY2018 result Operating income (JPY100M) +25 △ 28 579 △ 5 +2 △ 1 +1 △ 3 17 Selling Increased sales Jatim added to Raw material Cost 8 prices volumes R&D expenses, consolidated Other prices improvements depreciation subsidiaries* 1st H FY2017 result 1st H FY2018 result * All factors related to changes in profits/losses due to Jatim are included under “Jatim added to consolidated subsidiaries.” 4

Net sales/operating income by segment II. FY2018 1st H Results  Net sales grew in the Special Steel Bars business. Operating income in the Special Steel Bars business remained more or less unchanged from the previous year, as earnings from domestic businesses offset Jatim’s operating losses. Income in the Springs business fell significantly.  A comparison to initial forecasts shows operating income exceeded expectations in the Special Steel Bars business but fell well short of expectations in the Springs business. (JPY100M) FY2017 FY2018 Difference Year-on-year 1st H result 1st H forecast 1st H result from forecast change 257 317 60 334 △ 17 Net sales Special Steel Bars 11 11 0 6 5 Operating income 24 １ 247 6 243 4 Net sales Springs 5 △ 5 △ 10 5 △ 10 Operating income 49 58 9 54 4 Formed & Net sales Fabricated 0 1 1 △ 0 1 Operating income Products 40 37 △ 3 43 △ 6 Net sales Machinery 0 1 1 2 △ 1 Operating income 20 20 0 Net sales 19 1 Other 1 1 0 Operating income 1 0 △ 28 △ 48 △ 20 Net sales △ 43 △ 5 Consolidated adjustments 0 0 △ 0 Operating income 0 0 579 631 52 * 650 △ 19 Net sales Total 17 8 △ 9 * 13 △ 5 Operating income * Figures announced during announcement of results on April 27, 2018 5 Certain forecasts of business performance were revised on July 30, 2018 (operating income: JPY900M).

Factors contributing to changes in operating income in each segment (YoY comparison) II. FY2018 1st H Results Special Steel Bars  Net sales grew thanks to the addition of Jatim as a (JPY100M) subsidiary and rising selling prices and sales volume Business growth, driven by strong demand in the domestic Increase in revenues attributable construction machinery industry. to Jatim becoming a subsidiary previous period Not reflected in (JPY3.1B)  Operating income  Domestically, factors such as increased volumes and adjustments to selling prices to reflect the rising prices of Sales +20 △ 19 raw materials (including auxiliary materials) not reflected 317 Jatim Sales in the previous year, led to increased earnings (up 257 JPY500M domestically). The effects of the Hokkaido +2 △ 2 △ 0 △ 1 +4 Eastern Iburi Earthquake resulted in operating losses of improvements Inventory valuation △ 5 R&D expenses Depreciation, Other JPY140M and extraordinary losses of JPY30M. of products +1 C ost 11 原材料価格 Raw material 11 売価 Product lineup  Jatim, made a consolidated subsidiary this period, Selling Increased prices prices volumes sales recorded operating losses ( △ JPY500M) due to its failure to achieve sales targets. 1st H FY2017 1st H FY2018 result result  Due to lower sales at North American subsidiaries and other factors, sales grew only slightly despite the Springs Business (JPY100M) contributions of new subsidiary Ahle to overall sales figures. Increase in revenues attributable to Ahle (Other than N. America) Higher sales volumes becoming a subsidiary (JPY800M)  Operating income fell for the following reasons: Product lineup  Tariff effects: Tariffs rose due to the imposition of Raw material Cost improvements supplemental tariffs in North America (under Section 232 prices Sales Sales (N. America) of the US Trade Expansion Act and retaliatory tariffs by R&D expenses 241 247 Depreciation, Canada). △ 1 △ 1 + 1 improvements Procurement Tariff effects  Prices of raw materials: A change in suppliers made 5 △ 4 Decreased sales necessary by the withdrawal of a producer of materials for (N. America) volumes solid stabilizers in North America and the effects of rising Other △ 1 △ 1 prices of materials for hollow stabilizers ▲ 5 ± 0 △ 2  Cost improvements: Rising costs due to difficulty in △ 1 obtaining raw materials and the resulting production 1st H FY2017 1st H FY2018 disruptions, as well as rising costs due to problems with result result startup of production facilities 6

Factors contributing to changes in operating income in each segment (YoY comparison) II. FY2018 1st H Results Formed & Fabricated Products Business (JPY100M) Raw material  Sales grew due to progress with prices improvements in selling prices and Selling prices expanded sales, including new sales Quality and cost improvements expansion efforts. R&D expenses Depreciation, Increased sales Sales volumes Sales +4.9 △ 4.5 58 Other  Operating income grew. Measures to 49 reflect alloy surcharges in selling prices 0.7 △ 0.1 △ 0.3 △ 0.1 and other factors did more than offset 0.2 +0.6 rising costs attributable to factors such 1st H FY2017 1st H FY2018 as rising raw material prices. result result Machinery Business (JPY100M)  Lower sales of forming machinery resulted in lower sales. This was despite increased sales of products in new Decreased sales R&D expenses Sales Depreciation, Raw material Sales business fields, such as ultra-high- volumes 40 Product lineup prices 37 pressure pipes for use in polyethylene production. 0.6 0.4 +0.3 △ 0.1 △ 0.4 + 0.4 1st H FY2017 1st H FY2018  Operating income grew thanks to sales of result result products in new business fields. 7

Impact of non-operating income/loss and extraordinary income/loss II. FY2018 1st H Results  The addition of Jatim as a consolidated subsidiary improved the share of loss of entities accounted for using the equity method, but its interest burden increased. In addition, the devaluation of the Indonesian rupiah led to exchange losses.  Cross-shareholdings and land were sold.  Since Jatim recorded losses, net losses attributable to non-controlling interests were added to final gains/losses. (JPY100M) FY2017 FY2018 1st H result 1st H result Year-on-year change Operating income 17 8 △ 9 △ 2 △ 5 △ 3 Non-operating income Share of loss of entities accounted △ 3 0 3 for using the equity method △ 2 △ 5 △ 3 Interest paid Translation (exchange profit and 1 △ 3 △ 4 loss) Ordinary income 15 3 △ 12 1 3 2 Extraordinary income/loss Gain on sale of equities 0 2 2 Gain on disposal of fixed assets 1 2 1 - △ 0 △ 0 Losses due to disasters Net income before income taxes and other 16 6 △ 10 adjustments △ 8 △ 8 0 Tax expenses Net income or net losses attributable to △ 1 4 5 non-controlling interests* Net income attributable to owners of parent 8 3 △ 5 company * Amount corresponding to gains/losses recorded by Jatim and others attributable 8 to non-controlling interests We own 56.2% of shares of Jatim’s stock.