mitsubishi steel mfg. co., ltd. financial results for the first half … · 2019-12-24 · blast...

Mitsubishi Steel Mfg. Co., Ltd.Financial Results for the First Half of the Fiscal Year Ending March 2020

November 22, 2019

1

I. Message

II. FY2019 1st Half Results

III. Full-year Forecasts for FY2019

IV.Future Initiatives

I. Message

2

MessageOverview:

As projected at the start of the fiscal year, we recorded operating income of zero for the first half of FY2019.

However, due to dramatic changes in the business environment and the murky future of the external environment, we recorded impairment losses in numerous regions totaling JPY14.8 billion.

Our full-year forecasts for FY2019 call for operating income of zero, a figure significantly below forecasts at the start of the fiscal year (JPY2 billion).

Despite our commitment to continuing dividend payments, due to expectations of ordinary and net losses, we have decided not to pay dividends for this period.

These results are due largely to internal factors, in addition to changes (worsening) in the business environment. The following topics will be addressed later in this presentation.

Business environment Business trends (at JATIM and North American MSSC, in particular) Impairment Reconsideration of businesses Toward a new Mid-term Business Plan Urgent measures

I. Message

Overview of results for this period and future outlook:

3

I. Message





4

Summary

(JPY100M)

Net sales fell, due mainly to lower sales in the domestic Special Steel Bars business amid slow demand from makers of construction machinery, industrial machinery, and machine tools; lower sales for automotive uses at overseas subsidiaries in North America and elsewhere in the Springs business; and foreign exchange effects.

Operating income fell due to lower sales and increased costs attributable to production problems with new products at North American subsidiaries in the Springs business, and the large impact of lower sales volumes in the domestic Special Steel Bars business despite improved selling prices and increased production to build up inventory in preparation for blast furnace renovations in the next fiscal year.

Lower operating income pushed ordinary income into negative territory. Due to impairment losses recorded as extraordinary losses, we posted a significant net loss this period.

FY2018 FY20191st Hresult

Full-yearresult

1st H forecast*

1st H result

vs. initial forecast

Year-on-yearchange

Net sales 631 1,294 650 602 △48 △29Operating

income 8 11 0 1 1 △7

Ordinary income 3 1 △5 △4 1 △7

Net income attributable to

owners of parent company

3 3 △7 △143 △136 △146


*Figures announced publicly with results on May 14, 2019

5

*4 Other

Decreased sales volumes

R&D expenses,

depreciation

△1△13+7 △5 +5 +1

+8 △9

Raw material prices*2

(extraordinary factors related

to Muroran)

*3 JATIM added to

consolidated subsidiaries

Raw material prices

(market conditions)

Selling prices

18

Effects of inventory buildup in

preparation for renewal of

blast furnace lining at Muroran

Factors contributing to changes in net sales and operating income (YoY comparison)

FY20191st Hresult

FY20181st Hresult

Operating income

631 Decreased sales

volumes

△76+7 +21 +6 △6 +19

Selling prices 602Consolidation adjustments,

etc.*1 Increased volume under

contract

JATIM Foreign exchange gains/losses

Net sales (JPY100M)

(JPY100M)

FY20181st Hresult

FY20191st Hresult

*3 All factors related to changes in profits/losses due to JATIM are included under “JATIM added to consolidated subsidiaries.”


*2 Temporary expenses for coke oven repairs at Muroran in FY2018

*4 The “Other” category includes the following: △3 from production costs in the Special Steel Bars business; △2 from revaluation of product inventory; △2 from production costs in the Springs business; and △2 from startup costs for the mother plant in the Formed & Fabricated Products business.

*1 Volume of OEM products and rolling piecework (subcontracted rolling) under contract to Nippon Steel Corporation

6

Net sales fell in the Special Steel Bars, Springs, and Formed & Fabricated Products businesses. Operating income fell due to lower income in the Special Steel Bars business and increased losses in

the Springs business.(JPY100M)

Net sales/operating income by segment

FY2018 FY20191st H result 1st H result Year-on-year change

Special SteelBars

Net sales 317 297 △20Operating income 11 9 △2

SpringsNet sales 247 234 △13

Operating income △5 △10 △5Formed &FabricatedProducts

Net sales 58 47 △11Operating income 1 △0 △1

MachineryNet sales 37 46 9

Operating income 1 1 0Other

Net sales 20 20 0Operating income 1 1 0

Consolidatedadjustments

Net sales △48 △42 6Operating income △0 0 0

TotalNet sales 631 602 △29

Operating income 8 1 △7


7

△5+0.7

△0.9△1.60

△6

Sales volumes

Other

△0.6

Selling prices

+1.4

Product lineup

Production costs

Raw

materialprices

11

Revaluation of product

inventory

R&D

expenses, depreciation

Raw

material prices

(market conditions)

Product lineup

Raw

material prices

(extraordinary factors)

Production costs (excluding effects of inventory buildup)

Effects of inventory buildup in preparation for renew

al of blast furnace lining

△1

△9 +9 △9+5

+20

△3

△2△2

+8

Decreased sales

volumes

Other 9

Special Steel Bars businessFactors contributing to changes in operating income by segment

FY20181st H result

FY20191st H result

FY20181st H result

Sales297

Sales317

(JPY100M) Net sales fell by JPY2 billion because the first two of the following factors failed to offset the effects of the third:・ Improved selling prices prompted by measures

accompanying rising raw material prices (unit prices of iron ore and ferroalloys)

・ Effects of increased sales due to higher volumes of materials processed under contract and growth in sales volumes at overseas businesses (JATIM)

・ The impact of lower sales due to lower sales volumes, due in turn to decreased production at major domestic customers and the accompanying inventory adjustments

Operating income fell by JPY0.2 billion because the second and third of the following factors failed to offset the effects of the first:・ Decreases resulting from factors such as rising raw material

prices, lower sales volumes, and decreases from inventory revaluation

・ Effects of improved selling prices and cost improvements after cost increases accompanying coke oven repairs in the previous period (extraordinary factors affecting raw material prices)

・ Effects of production increases due to inventory buildup in preparation for blast furnace renovations in the next fiscal year

Selling prices

JATIM

(JPY100M)

Sales34Sales

28<JATIM>

Net sales grew by JPY0.6 billion YoY for the following reason:Higher selling prices of flat bars and sales growth resulting from customer approval of round bars

Operating income fell by JPY0.1 billion YoY due to the impact of advance procurement during the period of rising scrap prices from the latter half of 2018 and increased production costs due to increased problems associated with the start of mass production of new types of steel at the steel works.

JATIM

FY20191st H result


Special Steel Bars business

8

△5

Raw

material prices

△2

Decreased sales volum

es (N

. America)

Selling prices(m

arket conditions)

0

0 +1

Other

Selling prices

△3 +1

Tariff effects

+1

Production costs

△2 △1

Increased sales volumes

(other than N. Am

erica) △10

△5 Germ

any

Other

India

0

Japan

China

△10△5

+1 0

N. Am

erica

△2 0M

exico+1

FY20181st H result

FY20191st H result

Springs business

Sales247 Sales

234

R&D


Sales247 Sales

234

Analysis of changes by region

FY20181st H result

FY20191st H result

II. FY2019 1st Half ResultsSprings businessFactors contributing to changes in operating income by segment ①

(JPY100M)

(JPY100M) ＜Analysis of changes by region＞ Income was down JPY0.5 billion in North America and down

JPY0.2 billion in Germany YoY. Income was up JPY0.1 billion in Japan and up JPY0.1 billion in other regions YoY.(See the next page for detailed information on the North American subsidiaries.)

In Germany, sales of brake springs for use in commercial vehicles slowed due to declining exports caused by an economic downturn in the European market and the slowing Chinese market. In addition, sales of aftermarket springs were weak due to the warm winter in 2018.

The increase in Japan was due to factors including an increase of JPY40 million resulting from the use of JATIM materials in leaf springs and an increase of JPY80 million attributable to revised selling prices for automotive coil springs.

Net sales declined due to lower sales for automotive uses in North America and foreign exchange effects, in addition to slow demand for use in construction machinery in Japan and internationally.

Operating income fell due to the significant impact made by North American subsidiaries, as described under <Analysis of changes by region>.(See the next page for detailed information on the North American subsidiaries.)

9

△3

Raw

material

prices

Tariff effects


inventory

0+1

△5decrease in

income

Production costs

Other

Decreased sales

volumes

△1

Selling prices(m

arket conditions)

Selling prices

0△2 +1 △2

Foreign exchange gains/losses

+1

FY20181st Hresult

FY20191st Hresult

II. FY2019 1st Half ResultsSprings businessFactors contributing to changes in operating income by segment ②

(JPY100M) <Analysis of changes at North American subsidiaries> The decrease in sales volume resulted from loss of orders

during transition to new models. Negotiations with customers concerning revised selling

prices continue in the second half after failure to reach agreement in the first half. (Agreements have been reached with some customers.)

Although selling prices (market conditions) fell, along with materials market prices, the decline in income is due to factors such as the effects of rising raw material prices (subcomponents).

An increase in production costs due to rising labor costs and expenses resulting from problems with production startup for new stabilizer products had negative effects on income.

Analysis of changes at North American MSSC

10

0.7

Quality and cost

improvem

ents

Decreased sales

volumes

Raw

material prices

Other

Startup costs for the m

other plant

△2.90

+2.9+0.6 +0.4

△1.5△0.5

R&D

expenses,depreciation

Selling prices

0.6

Increased sales volum

es

Product lineup

+1.01.4

△0.2

FY20181st H result

FY20191st H result

FY20181st H result

FY20191st H result

Sales46Sales

37

Sales47

Sales58

△0.3

(JPY100M)

(JPY100M) Declining demand resulting from a slowdown in the Chinese market for special alloy powders significantly reduced net sales, as did lower alloy surcharge sale prices attributable to falling pricing for alloy raw materials.

Lower sales of powders attributable to the slowing Chinese market and higher costs resulting from the startup of the mother plant* reduced operating income. The benefits of the falling prices of alloy raw materials and stronger selling prices for cast steel failed to offset the negative factors.

* This refers to a model plant intended to deploy, primarily to overseas plants, technical expertise and knowledge accumulated using equipment such as a vacuum induction melting furnace (VIM) and various testing and trial production lines at the Chiba Works.

Net sales increased due to higher sales of products related to the new field of offshore wind power generation.

Higher sales led to growth in operating income.

Formed & Fabricated Products business

Machinery business

II. FY2019 1st Half ResultsFormed & Fabricated Products and Machinery businessesFactors contributing to changes in operating income by segment

11

FY2018 FY20191st H result 1st H result Year-on-year change

Operating income 8 1 △7Non-operating income/loss △5 △5 0

Translation (exchange profit and loss) △3 △1 2Interest paid △5 △6 △1Share of loss of entities accounted for using the equity method △0 △0 △0

Ordinary income or ordinary loss 3 △4 △7Extraordinary income/loss 3 △154 △157

Impairment losses 0 △148 △148Gain/loss on disposal of fixed assets 2 *1 △3 △5Gain on sale of equities 2 0 △2Losses due to disasters △0 *2 △1 △1Revaluation losses on investment securities 0 △1 △1

Net income or net losses before income taxes and other adjustments 6 △158 △164

Tax expenses △8 △12 △4Net income or net losses attributable to non-controlling interests 4 *3 27 23

Net income or net losses attributable to owners of parent company 3 △143 △146

(JPY100M)

Impact of non-operating income/loss andextraordinary income/loss

*1 JATIM recorded equipment disposal costs following an electric furnace accident. Compensation from insurance proceeds is expected in the second half.

*2 Reserves for losses were recorded due to typhoon damage at the Chiba spring plant. Compensation from insurance proceeds is expected in the second half.

*3 Since JATIM and others recorded losses, final income or losses are adjusted for net losses attributable to non-controlling interests.

Growing stability in the exchange rate for the Indonesian rupiah reduced foreign exchange losses. Impairment losses at overseas subsidiaries led to significant net losses. Tax expenses include △JPY1.2 billion for transfers from deferred tax assets at the Indonesian subsidiary

(JATIM).


12

Impairment losses (by region) Overseas subsidiaries recorded as extraordinary losses impairment losses of JPY14.8 billion.


Business Region Loss

Special Steel Bars Indonesia PT. JATIM TAMAN STEEL MFG. △90

Springs

US MSSC US INC. △14

Canada MSSC CANADA INC. △7

Mexico MSSC MFG MEXICANA, S.A. DE C.V. △7

Germany MSSC Ahle GmbH △16

China MSM NINGBO SPRING CO., LTD. △7

India MSM SPRING INDIA PVT．LTD. △4

Springs subtotal △55Formed & Fabricated Products

Thailand MSM (THAILAND) CO., LTD. △4

Total △148

(JPY100M)Breakdown of impairment losses by region

13

American subsidiary MSSC US INC. (manufacture and sale of automotive coil springs and stabilizers)

Subject equipment Automotive coil spring and stabilizer production equipment

Background of impairment Contributing factors included uncertainty in future orders awarded, recent sales decline, and delays in progress with improvements.

CountermeasuresEnsuring recovery of increases in material prices from customers; shutting down the coil spring production line (during the fourth quarter of this fiscal year); resolving problems in production of new products *See below for detailed information.

Canadian subsidiary MSSC CANADA INC. (manufacture and sale of automotive coil springs, stabilizers, and torsion bars)

Subject equipment Automotive coil spring, stabilizer, and torsion bar production equipment

Background of impairment Contributing factors included uncertainty in future orders awarded, recent sales declines, and delays in introducing new equipment.

Countermeasures Improving filling factors through transfer of coil spring production from the US plant and ensuring recovery of costs associated with increases in material prices from customers *See below for detailed information.

Impairment losses (conditions by region) II. FY2019 1st Half Results

Indonesian subsidiary PT. JATIM TAMAN STEEL MFG. (manufacture and sale of flat bars and round bars)

Subject equipment Flat bars and round bar production equipment

Background of impairment

Contributing factors included uncertainty in future orders awarded due to the unexpectedly negative impact of the slowing Indonesian economy on volumes of orders awarded; rising production costs due to problems with production startup for new ordered products; recent failures to achieve sales and income targets; and recent unfavorable economic trends.

Countermeasures Improving costs, correcting procurement methods, and expanding sales *See below for detailed information.

14


German subsidiary MSSC Ahle GmbH (manufacture and sale of automotive and commercial vehicle coil springs)

Subject equipment Automotive and commercial vehicle coil spring production equipment

Background of impairmentContributing factors included difficulties in securing planned revenue from new businesses due to the effects of the contraction and closure of automakers’ European bases and low sales of existing products due to the impact of lower demand for commercial vehicles in Europe and China.

Countermeasures Freezing advances into new businesses and rebuilding existing businesses through cost cutting measures, such as staff reductions

Chinese subsidiary MSM NINGBO SPRING CO., LTD. (manufacture and sale of automotive coil springs and stabilizers and of springs for use in construction machinery)

Subject equipment Stabilizer and construction machinery spring production equipment

Background of impairmentContributing factors included a downward revision in the company’s sales plans for large coil springs and stabilizers due to lower demand for construction machinery and passenger vehicles accompanying the economic slowdown in China.

Countermeasures Promoting efforts to increase volumes of orders awarded for both large coil springs and stabilizers via the introduction of new technologies, improved plant utilization rates, and improved productivity

Impairment losses (conditions by region)Mexican subsidiary MSSC MFG MEXICANA, S.A. DE C.V. (manufacture and sale of automotive stabilizers)

Subject equipment Automotive stabilizer production equipment

Background of impairmentContributing factors included delays in new entry of automakers in light of Trump administration policies; lower than initially expected auto production in Mexico; and delays in receipt of product orders expected under sales expansion plans.

Countermeasures Switching to locally procured materials and improving production costs

15


Thai subsidiary MSM (THAILAND) CO., LTD. (manufacture and sale of precision cast products and machined products)

Subject equipment Production equipment for precision cast products used in turbocharger parts

Background of impairment This impairment is attributable to decreased orders awarded for diesel turbocharger parts and the resulting failure to achieve sales expansion plan targets.

Countermeasures Enhancing competitive strengths by utilizing the Chiba mother plant and focusing on expanding sales of parts for gasoline turbochargers

Impairment losses (conditions by region)Indian subsidiary MSM SPRING INDIA PVT．LTD．(manufacture and sale of springs for use in construction machinery)

Subject equipment Construction machinery spring production equipment

Background of impairmentContributing factors included lower sales due to discontinuation of orders and delays in switchover involving the company’s large coil springs, which the company had delivered to construction machinery makers, as a result of lower demand for construction machinery in India.

Countermeasures Enhancing efforts to expand export sales and thorough cost cutting measures: for example, switching to locally procured materials and cost containment

16

Business indicators and financial conditions

FY20171st H result

FY20181st H result

FY20191st H result

Total assets (JPY100M) 1,346 1,471 1,322

Net assets (JPY100M) 667 702 500

Equity capital ratio (%) 45.4 41.8 33.5

ROS (%) 2.7 0.5 －

ROE (%) 2.7 0.9 －

Net D/E ratio (Times) 0.0 0.4 0.6

The impairment losses recorded reduced total assets and net assets. The equity capital ratio fell to 33.5%.


17

I. Message





18

Full-year performance forecasts III. Full-year Forecasts for FY2019

In light of the conditions described below, full-year forecasts of net sales and income were revised downward on November 12.

The decline in net sales is expected to accelerate in the third quarter and beyond due to a further decline in demand from the construction machinery industry.

Despite lower amortization costs following the recording of impairment losses, operating income is projected to break even over the full year, due to a further decline in sales volumes for steel materials in Japan and anticipated delays in recovery at the North American spring subsidiary and at the Indonesian special steel bar subsidiary, where performance had been expected to improve.

Due to the decrease in operating income, ordinary income is projected to be lower than initially forecast. Due to impairment losses recorded in the first half, net income is projected to fall well short of initial forecasts.

FY2018 FY2019

Result Initial forecast* Revised forecast vs. initial forecast Year-on-yearchange

Net sales 1,294 1,370 1,200 △170 △94Operating

income 11 20 0 △20 △11

Ordinary income 1 7 △13 △20 △14

Net income attributable to

owners of parent company

3 3 △160 △163 △163


(JPY100M)

19

11

+8

Raw materialprices *2

(extraordinary factors

related to Muroran)

Selling prices

+5+4 △2+1

+18△10

Decreased sales

volumes

R&D expenses,

depreciation△33

Raw material prices

(market conditions)

*3 JATIM added to

consolidated subsidiaries

*4 Other

0

△2Effects of

inventory buildup in preparation for renewal of blast furnace lining at

Muroran

Decreased amortization costs due to impairment

1,294 *1 Increased volume under

contract

Consolidation adjustments,

etc.

+33

+4+90

△212 △3 △6

Selling prices1,200Decreased

sales volumes

JATIM

Factors contributing to changes in net sales and operating income

FY2018result

FY2019forecast

(JPY100M)

(JPY100M)

FY2018result

FY2019forecast


*3 All factors related to changes in profits/losses due to JATIM are included under “JATIM added to consolidated subsidiaries.”


Operating income

Net sales

*2 Temporary expenses for coke oven repairs at Muroran in FY2018

*4 The “Other” category includes the following: △2 from revaluation of product inventory in the Special Steel Bars business; △3 from production costs in the Springs business; and △4 from startup costs for the mother plant in the Formed & Fabricated Products business.

*1 Volume of OEM products and rolling piecework (subcontracted rolling) under contract to Nippon Steel Corporation

20

(JPY100M)

Performance forecasts by segment

FY2018 FY2019

Result Initial forecast* Revised forecast vs. initial forecast

Year-on-yearchange

Special SteelBars

Net sales 648 700 560 △140 △88Operating

income 12 12 9 △3 △3Springs


income △9 0 △13 △13 △4Formed &FabricatedProducts


income 4 4 1 △3 △3Machinery

Net sales 93 100 100 0 7Operating

income 2 3 3 0 1Other


income 2 1 1 0 △1Consolidatedadjustments

Net sales △99 △98 △80 18 19Operating

income 0 0 0 0 0

TotalNet sales 1,294 1,370 1,200 △170 △94Operating

income 11 20 0 △20 △11

Net sales are projected to fall short of initial forecasts and to decline year on year in the Special Steel Bars, Springs, and Formed & Fabricated Products businesses.

Operating income had been projected to break even; losses in the Springs business are now expected to deepen.Operating income is projected to fall short of initial forecasts and decline year on year in the Special Steel Bars and Formed & Fabricated Products businesses.



21

Effects of decrease in domestic sales volumes (△JPY19.6 billion)

Effects of increased earnings due to increased volume under contract

(JPY9.0 billion)

12

Revaluation of

product inventory

Raw

material prices


+4

12

△5

△7

0 △1△4△2

△4

Sales decrease

Other

+10

JATIM

Selling prices

+5

Product lineup

Production costs(excluding effects of inventory buildup)

R&D


+4

Effects of inventory buildup in preparation

for renewal of blast

furnace lining

12


inventory

Raw

materialprices


+5

9

Raw

materialprices

(market conditions)

+18

△8

△28

+9△2△1△1

△4

Sales decrease

Other

+5

JATIM

Selling prices

+4

Product lineup

Production costs(excluding effects of inventory buildup)

R&D


Effects of inventory buildup in preparation

for renewal of blast

furnace lining

(JPY100M)

FY2018result

FY2019forecast


Sales560

Sales648

(JPY100M)

FY2018result

FY2019forecast

Sales700Sales

648

Effects of increased earnings from JATIM (JPY3.3 billion)Effects of increased earnings due to increased volume under

contract (JPY4.0 billion)[Initial forecasts] The following factors were expected to boost net sales:

• Increased volume under contract, despite reduced volumes of our products used by major customers due to inventory adjustments for construction machinery and industrial machinery in response to the slowing Chinese economy

• Growth in sales volumes at overseas businesses (JATIM) as the customer approval process advances

Operating income was projected to remain largely unchanged from last year for the following reasons:• Improvements at JATIM resulting from increased sales volume and

cost cutting• Increased amortization and other costs resulting from completion of

coke oven repairs (although the effects of such repairs would be ameliorated starting from the second half)

• Additional factors leading to reduced profits, such as lower sales volumes to manufacturers of construction machinery and industrial machinery

[Revised forecasts] Net sales are projected to decrease by JPY8.8 billion due mainly to the

following factors:・ Major reductions in sales volumes of our products due to decreased

production for construction machinery and industrial machinery at major customers and accompanying increase in inventory adjustments in the second half

・ Increased volume under contract due to production of materials for inventory prior to blast furnace renovations

・ Lower sales volumes at overseas businesses (JATIM) (see p. 23 for detailed information)

Operating income:・ Lower amortization costs due to impairment and other factors are

expected to boost operating income at JATIM by JPY0.5 billion.・ Operating income in domestic businesses in Japan is projected to

decrease by JPY0.8 billion due to/despite the following factors:- Significantly lower income due to a major decline in sales volumes of

our products- Compensation for rising raw material prices (unit prices of iron ore)

by increasing selling prices- Compensation for increased amortization costs by cost

improvements accompanying the completion of coke oven repairs (extraordinary factor affecting raw material prices)

- The presence of factors with positive effects on operating income, including the impact of increased production to build up inventory in preparation for blast furnace renovations next year

Initial forecast

Revised forecast

*Initial forecasts: Figures announced publicly with results on May 14, 2019

Special Steel Bars businessFactors contributing to changes in operating income by segment

Includes lower amortization costs due to impairment (+JPY0.4 billion)

Raw

materialprices

(market conditions)

22

Domestic sales volumes in the Special Steel Bars business●Sales volumes are expected to mark a sizable drop in the second half of FY2019, declining 54% from the

first half of FY2018.As for the three main fields of domestic and overseas sales, while sales volumes are projected to remain largely unchanged in the fields of construction machinery and industrial machinery/machine tools, sales volumes are projected to recover in the truck and automotive field after bottoming out in the first half.

●The scale of the decrease in sales volumes at MSM exceeds the decrease in numbers of units sold by the leading construction machinery makers due to the impact of user inventory. Normalization of inventory is expected around March 2020. Demand is projected to return to real demand levels from next fiscal year.

図2

III. Full-year Forecasts for FY2019Special Steel Bars business (reference)

図1Fig. 1 MSM sales volumes

2018 H1 2018 H2 2019 2019 H1 2019 H2 (actual) (actual) (planned) (actual) (projected)

Fig. 2 MSM sales volumes: industrial machinery/machine tools


図3Fig. 3 MSM sales volumes: construction machinery


図4Fig. 4 MSM sales volumes: trucks, automotive


図5Fig. 5

Com

pare

d to

uni

ts so

ld b

y co

nstru

ctio

n m

achi

nery

mak

ers

2018 H1 (actual) 2018 H2 (actual) 2019 H1 (actual) 2019 H2 (planned)

Company A

Company B

建機関連在庫 (在庫/受注)比率建機主要 2019年 2020年ユーザー 11月 12月 1月 2月 3月

① 5.9 5.1 4.3 3.5 2.7② 4.1 3.1 2.3 適正化③ 5.8 4.8 4.0 3.1 適正化④ 5.8 4.8 3.9 2.8 適正化⑤ 3.1 2.1 適正化⑥ 3.1 2.2 適正化⑦ 5.8 4.8 3.8 2.8 適正化平均 4.6 3.7 2.8 適正化

Table 1Construction machinery-related inventory Ratio (inventory/orders awarded)

Main construction

machinery users

Average

Nov. Dec. Jan. Feb. Mar.

NormalizedNormalizedNormalized

NormalizedNormalized

NormalizedNormalized

23

△12

Selling prices


es

Product lineup

△2

+7

0+1

0 +2

Production costs

Raw

material prices

△12

Selling prices

Decreased sales

volumes

Product lineup

△7

Lower am

ortization costs due to im

pairment

△1.6 △0.9+1.3 0 +4.3 △0.5 +2.4

Production costs

Raw

materialprices

Other (discontinuation of am

ortization of land)


[Initial forecast] Net sales were projected to increase by JPY3.3 billion due

to transition to JATIM materials following customer approval of JATIM’s flat bars and sales expansion of round bars.

Operating income was projected to improve by JPY1 billion thanks to increased sales volumes and production cost improvements.

Including amortization of goodwill and other assets, consolidated results were projected to remain negative. While we planned to maintain a focus on cost improvements and sales expansion activities, concerns included the inflow of low-priced materials due to US-China trade friction and an economic downturn in South Korea.

FY2018result

FY2019forecast

Sales60

Sales63

FY2018result

FY2019forecast

Sales96Sales

63

(JPY100M)

[Revised forecast] Net sales are projected to decrease by JPY0.3 billion for

the following reasons:Lower sales of flat bars for leaf springs due to decreased domestic truck sales in Indonesia and lack of progress on sales expansion due to discontinuation of low-priced retail sales of round bars and production limited to types of steel for which stable manufacture can be assured. Progress as planned on switching to JATIM materials failed to offset these factors.

Operating income:Increased selling prices for flat bars, lower amortization costs due to impairment, and discontinuation of amortization of land are projected to increase operating income. However, due to factors such as the effects of lower sales volumes and worsening costs resulting from increased production problems at steel works, the increase in operating income will be no more than JPY0.5 billion.

Initial forecast

Revised forecast

(JPY100M)

Special Steel Bars business (JATIM)Factors contributing to changes in operating income by segment


24

Selling prices (discounts)

△2

Selling prices(m

arket conditions)

Lower am


pairment

△2△1 △3

△13

Selling prices(price revisions)

Other△9

R&D


Tariff effects△1


FY2018result

FY2019forecast

Sales497 Sales

485

Raw

material prices


es(N

. America)

+2 △2+2△2 +2 +3


es(other than N

. America)

Selling prices (discounts)

0

Raw

material prices

△1

0

Selling prices (price revisions)

Other

△9

R&D


Tariff effects

Sales497

Sales515

Production costs


es(N

. America)

+2+1

△1

+3

+2+4

△1


(other than N. Am

erica)

FY2018result

FY2019forecast

Initial forecast

Revised forecast

Springs businessFactors contributing to changes in operating income by segment

(JPY100M)

(JPY100M)


[Revised forecasts] Net sales are projected to decline due to lower sales for

automotive use in North America and foreign exchange effects, as well as low demand for construction machinery use in Japan and internationally.

Operating income is projected to fall dramatically due to the impact of lower sales and worsening production costs in North America. We do not expect lower amortization costs due to impairment to offset these factors.

Compared to initial forecasts, selling prices (price revisions) and production costs will fall far short of targets, resulting in increased losses.

[Initial forecasts] Net sales were projected to increase due to sales growth in

ASEAN and India. Operating income was projected to increase by

JPY0.9 billion due to/despite the following factors:(North America) Reflecting last year’s material price

increases in selling prices (+JPY0.3 billion); improved production costs (+JPY0.3 billion); other factors (△JPY0.3 billion)

(China) Increased sales and reduced production costs (+JPY0.1 billion)

Increased volumes in new markets (e.g., India, Mexico) (+JPY0.2 billion)Although we expected to be profitable, we did not expect to return to FY2017 levels.

Production costs

25

△9 Germ

any

OtherIndia

+1

Japan

China

△13

△6

0 0

N. Am

erica

△1 +1

Mexico

+1

Sales497 Sales

485

FY2018result

FY2019forecast

△9

Germ

any

OtherIndia

+2

Japan

China

0

+3+10

N. Am

erica

0+1

Mexico

+2

FY2018result

FY2019forecast

Sales497

Sales515

Initial forecast

Revised forecast

III. Full-year Forecasts for FY2019Springs business (by region)Factors contributing to changes in operating income by segment


(JPY100M)

(JPY100M)

[Revised forecast]

(North America) △JPY0.6 billion(See next page for detailed information.)

(Germany) Sales of brake springs for use in commercial vehicles are expected to slow due to declining exports caused by the economic downturn in the European market and the slowing Chinese market.In addition, despite reduced amortization costs due to impairment (+JPY0.1 billion), poor sales of aftermarket springs due to the warm winter in 2018 are expected to result in lower sales (△JPY0.2 billion).

[Initial forecast]We anticipated an improvement of a mere JPY0.3 billion

for North America, plus improvements of JPY0.6 billion in other regions, for a total improvement of JPY0.9 billion.

In Japan, we expected to cut costs in the face of rising procurement costs of leaf springs by switching to JATIM materials (approval already obtained).At the same time, we anticipated lower sales of large coil springs for use in construction machinery due to the slowing Chinese construction machinery market.

Effects of increased volumes were expected to appear gradually in newly entered regions.

26

△1


es

Tariff effects

Inventory revaluation

△1+2

+3 increase in

income

Raw

materialprices

Other

Production costs

△1

Selling prices (price revisions)

Selling prices(m

arket conditions)

+3△1 0 +3


△1

△2

Raw

material prices

Lower am


pairment

+1

Tariff effects

Inventory revaluation

0+2

△6decrease in

income

Production costs Other

Decreased sales

volumes

△2

Selling prices(m

arket conditions)

+1 △3 +1△3


△1

Selling prices(price revisions)

FY2018result

FY2019forecast

FY2018result

FY2019forecast

III. Full-year Forecasts for FY2019Springs business (North American MSSC)Factors contributing to changes in operating income by segment


(JPY100M)

(JPY100M)

Initial forecast

Revised forecast

[Revised forecast]We anticipate lower sales volumes due to orders lost

during the transition to new models.Regarding selling prices (price revisions), projections

incorporate as a risk the possibility that negotiations with customers on revised selling prices will fail to lead to agreement during this period. (Agreements have been reached with some customers.)

Although selling prices (market conditions) are projected to fall alongside market prices for materials, income is projected to decrease by JPY0.2 billion due to rising prices of raw materials (subcomponents).

Production costs are projected to worsen due to rising labor costs and expenses resulting from problems with production startup for new stabilizer products, delays in automating torsion bar processes, and other factors.

[Initial forecast]Materials prices had recently stabilized.We continued to negotiate with manufacturers to reflect

rising costs in prices paid by customers. However, we did not believe we would be able to offset 100% of cost increases (+JPY0.3 billion).

Discounts were at typical levels based on contracts with customers (△JPY0.1 billion).

We expected to resolve production problems by dispatching production improvement teams and to achieve the cost reduction effects targeted in our capital investment plans (+JPY0.3 billion).

27

4

Startup costs for the m

other plant

Decreased sales

volumes

Selling prices

Other

△2 0△4 +4

+1△4

+1+1

Quality and cost

improvem

ents

Raw

material prices

R&D


1

Lower amortization costs due to impairment

4


Selling prices

Other

Startup costs forthe m

other plant

+1+1

△5 +6

+2△5

0

Quality and cost

improvem

ents

Raw

material prices

R&D


4

[Revised forecast] Net sales are projected to fall due to lower sales

volumes following a slowdown in the Chinese market for special alloy powders and lower sales resulting from lower alloy surcharge sale prices, as well as slowing growth in turbocharger-related components for the European market.

Operating income is projected to fall due to lower sales and higher costs resulting from the startup of the mother plant. We do not expect the positive effects of lower amortization costs due to impairment and quality and cost improvements to offset these factors.

(JPY100M)


FY2018result

FY2019forecast

Sales100

Sales114

[Initial forecast] We projected higher net sales based on increased

sales volumes of defense-related ship hull products and turbocharger-related components. This was despite the negative effects of lower alloy surcharge sale prices on sales.

Due to increased sales volumes and cost improvements, we projected operating income would remain largely unchanged from last year, despite rising costs at the mother plant in Chiba.FY2018

resultFY2019forecast

Sales115Sales

114

Initial forecast

Revised forecast

(JPY100M)

Formed & Fabricated Products businessFactors contributing to changes in operating income by segment


28

Machinery businessFactors contributing to changes in operating income by segment

2


es

△1+1

Profitability of orders aw

arded

30

Electric power m

achinery inventory revaluation losses

△1

Product lineup

+2

Other

FY2018result

FY2019forecast

Sales93

Sales100

[Revised forecast] We project higher net sales due to orders received

for products for offshore wind power generation. Even amid harsh market conditions, we project

operating income to increase by JPY0.1 billion due to higher sales, the absence of the electric power machinery inventory revaluation losses recorded last year, and other factors. We expect these factors to more than offset decreased profitability and other negative factors.


[Initial forecast] Despite harsh market conditions, we projected

higher net sales due to orders received for products for offshore wind power generation.

Due to higher sales of products for offshore wind power generation and other factors, we projected operating income to remain largely unchanged from the previous year.2


es

△1+1

Profitability of orders aw

arded

30

Electric power m

achinery inventory revaluation losses

△1

Product lineup

+2

Other

Sales100Sales

93

(JPY100M)

FY2018result

FY2019forecast

Initial forecast

Revised forecast

(JPY100M)


29

Full-year performance forecasts(impact of non-operating income/loss and extraordinary income/loss)

Despite improvement in foreign exchange losses with stabilizing Indonesian rupiah exchange rates, JATIM’s interest burden has increased.

Significant net losses are expected due to the impact of impairment losses recorded in the first half.


(JPY100M)FY2018 FY2019

Result Initial forecast*1 Revised forecast vs. initial forecast Year-on-yearchange

Operating income 11 20 0 △20 △11Non-operating income/loss △10 △12 △13 △1 △3

Translation (exchange profit and loss) △4 0 △1 △1 3Interest paid △10 △12 △12 0 △2

Ordinary income or ordinary loss 1 7 △13 △20 △14Extraordinary income/loss 13 5 △152 △157 △165

Impairment losses 0 0 △148 △148 △148Gain/loss on disposal of fixed assets 2 0 0 0 △2Gain on sale of equities 20 5 0 △5 △20Losses due to disasters 0 0 0 0 0Revaluation losses on investment securities △8 0 △1 △1 7

Net income or net losses before income taxes and other adjustments 14 12 △165 △177 △179

Tax expenses △20 △11 △21 △10 △1Net income or net losses attributable to non-controlling interests 8 2 *2 26 24 18

Net income or net losses attributable to owners of parent company 3 3 △160 △163 △163

*1 Figures announced publicly with results on May 14, 2019*2 Since JATIM and others recorded losses, final income or losses are to be

adjusted for net losses attributable to non-controlling interests.

30

Business indicators and financial conditions

FY2017 FY2018 FY2019full-year result full-year result full-year forecast

Total assets (JPY100M) 1,534 1,533 1,444Net assets (JPY100M) 722 674 483

Equity capital ratio (%) 40.9 38.5 29.4ROS (%) 2.4 0.1 －

ROE (%) 4.7 0.5 －

Net D/E ratio (Times) 0.3 0.3 0.7

Forecasts of business performance for FY2019 call for ordinary losses and net losses attributable to owners of parent company. Thus, regrettably, we have revised interim and year-end dividends for this fiscal year to zero.We apologize to our shareholders for this result and ask for their continuing support as we strive to restore dividends as quickly as possible.

* We implemented a share consolidation (on the basis of 1 for every 10 shares) on October 1, 2017. Dividend figure for FY2017 above assumes the share consolidation took place at the start of the consolidated fiscal year.


Dividends* (JPY) 60.0 60.0 0.0

Dividend payout ratio (%) 31.8 329.0 －

31

H121

H218

0

20

40

60

80

100

5233

39

減価償却費設備投資

4460

0

5

10

15

20

FY2016 result FY2017 result FY2018 result FY2019 forecast

1511

1516

H17

H28

R&D expenses, Capital investment, Depreciation

減価償却費

FY2017 resultFY2016 result FY2018 result FY2019 forecast

5336

(JPY100M)

*Includes R&D-related depreciation.

As an urgent measure to improve business results, R&D expenses and capital investment will be reduced to the necessary minimum. R&D expenses will be revised downward from the initial forecast of JPY2.0 billion to JPY1.5 billion, with a focus on projects that will help

strengthen sales and cut costs. We are formulating capital investment plans suited to a changing environment, including freezing expansion of facilities in Europe in

response to changing customer global strategies. We will pare capital investment from an initial forecast of JPY8.6 billion to JPY7.1 billion. Amortization costs are projected to decrease by JPY1.0 billion from the initial forecast of JPY4.9 billion. Amortization costs (excluding

goodwill) have been reduced JPY0.6 billion due to the recording of impairment losses, JPY0.2 billion due to reduced amortization of land by JATIM, and JPY0.2 billion due to a review of investments.

(JPY100M)

71

(JPY100M)

[R&D expenses]

[Capital investment, Depreciation]


H142

H229

DepreciationCapital investment

32

I. Message




IV. Future Initiatives

33

Business environment

Business environment:

Low demand for construction machinery in Japan, Indonesia, and India <Muroran, JATIM, springs for construction machinery>

Low demand for commercial vehicles in Japan and Indonesia <JATIM, leaf springs> Inflows of low-priced materials into ASEAN markets due to low domestic steel demand in

China and South Korea <JATIM> Rising prices in the materials market in North America, spurred by the invocation of Section

232 <North American MSSC> Low automotive demand in the US and China

<North American MSSC, Ningbo/springs, stabilizers, Hirota/powders> Withdrawal of Japanese and American makers from Europe and the contraction of the North

American small car market <MSSC Ahle, North American MSSC>

Due to the impact of US-China trade frictions and the rise of protectionism, auto production volumes are declining not just in the North American and Chinese markets, but in Southeast Asia and Europe. Demand appears low in the construction machinery industry, due to reduced production and inventory adjustments at major customers in Japan and low demand in certain regions of Southeast Asia, including Indonesia.

[Impact on our businesses]


34

Formed & Fabricated Products business:

Business trends

Difficulty in expanding sales in the powders business due to low demand in China.

Failure to grow sales due to delays in introducing new turbine wheels planned for diesel engines.

Withdrawal from the cast magnet business after positioning it as a non-core business.

Targeting installation in this second half and swift commercialization of equipment for creating added value from materials. (VIM, gas atomizer equipment)

Accelerating new product development, quality improvements, and cost improvements starting in the second half of this fiscal year based on mother plant startup.

Shifting toward expanding sales of gasoline turbocharger parts.

Continuing to advance efforts to make the Formed & Fabricated Products business into the third pillar of our businesses.

✓: Result ➢: Future initiative


35

Special Steel Bars business：

Business trends

Despite recovery of materials supply volumes at the Muroran Works, low customer demand and inventory reductions are expected to reduce orders awarded by 26% YoY and 30% from the first half to the second.

Inventory buildup is underway in preparation for blast furnace renovations.

We expect to face difficulties associated with low operation rates due to blast furnace renovations in the next period. However, we anticipate results starting the following year.

Strengthening cooperation with Nippon Steel Corporation. (with results anticipated starting in 2022)

While the gap between planned and actual results at JATIM is due largely to internal factors, compounded by worsening external conditions, these factors are trending up.

Accelerating improvements at JATIM.

(See below concerning JATIM.)



36

Business trendsSprings business:

Construction of a production line for automotive springs at a European base has been frozen due to successive withdrawals and contractions by American and Japanese automakers from production in Europe.

The volume of orders awarded in Mexico has been low due to delays in bringing new vehicle models to market.

The volume of orders awarded in China has been low due to unfavorable conditions for small cars made by Japanese brands.

Orders awarded for springs for construction machinery use have declined due to the impact of a lower market share for Japanese construction machinery makers in China.

Decisions made on orders awarded in the new leaf spring business. (realized through synergies with JATIM)

Fundamental measures are needed at North American MSSC. The challenges there are largely due to internal factors, compounded by trade issues and other problems.

Top priority: Stopping the flow of red ink at North American MSSC.

(See below concerning North American MSSC.)



37

Business trendsSpecial Steel Bars business: Indonesian steel bars subsidiary (JATIM)

[Gaps vs. plans]

(Production) Cost increases exceeded expectations due to startup problems associated with rapid

sales expansion with lack of adequate mass production technologies when mass production of round bars began at the end of FY2018.

After we procured materials in advance based on the need to secure volumes as prices rose due to shortages of scrap and graphite electrodes, demand fell, resulting in excess inventory.

Factors such as defective electrodes and an electric furnace accident have had negative effects on operations.

(Sales) Flat bars: Poor sales by commercial vehicle makers (domestic sales in Indonesia,

sales to us) Round bars: Lower volumes due to worsening low-priced retail sales in competition

with Chinese materials and delays in obtaining the required customer approval

(Other) Recent sudden enactment of restrictions on scrap imports


38

Business trends

State of quality improvements

Reducing low-priced retail sales Promoting quality and productivity improvements through structural reforms including large-scale

staff reductions and paring the steel types produced Customer approval is advancing faster than planned. Even with decreasing demand, addressing

local procurement needs has led to expanding sales. We expect swollen inventory (scrap, electrodes) attributable to a sudden drop in demand to return

to normal levels during this second half. Securing orders awarded for the new leaf springs business by promoting cost savings and

achieving synergies with the Springs businessTarget types of steel

Inventory trends

Achieving profitability rapidly through continuing improvements and sales expansion


Jul. – Sept. Oct. – Dec. Jan. – Mar. Apr. – Jun. Jul. – Sept. Oct.

Flat bars

Yield

impr

ovem

ent (

%)

Jan. – Mar. Apr. – Jun. Jul. – Sept. Oct.

Round bars

High priced

Low priced

Japan-produced materials

Korea-produced materials

JATIM’s target

China-produced materials

Retail salesMotorcycles, construction machinery

AutomotiveLow quality High quality

Special Steel Bars business: Indonesian steel bars subsidiary (JATIM)

39

Business trendsSprings business: North American springs subsidiary (North American MSSC)

[Distinguishing features of North American MSSC]

Operates plants in Canada and in the US in the Great Lakes region; provides excellent access to various automaker plants.

Operates the only suspension springs plant in Canada.

North American MSSC specializes in manufacturing (using hot forming) suspension springs and stabilizers for use in mid-sized and large vehicles.

Many automaker plants in the Great Lakes region produce chiefly mid-sized and large vehicles: e.g., SUVs and pickup trucks.

Many small and mid-sized vehicles, sold in large numbers, are produced in the US South. Competing suspension spring makers also operate plants mainly in the South. Competition in the North is relatively low.

Amid stable gasoline prices thanks to a rapid increase in US oil production following the shale oil revolution, mid-sized and large vehicles have maintained their grip on the US market.


40

Business trends

[Current state of North American MSSC]

✓ North American MSSC has already achieved contracts based on progress on developing lightweight springs. However, due to the timing of model changes, there will be lag of several years before these are adopted and delivered.

✓ Harsh conditions persist. The filling factor has declined dramatically due to the recent decrease in orders awarded.

✓ Problems in launching new products (already addressed) generated additional costs.

✓ Issues aside from issues related to production have also emerged, including high tariffs and high material costs due to trade issues and protectionism. (The issue of tariffs has already been addressed.)

✓ Shifting high material costs onto product prices has been problematic. While we have won the understanding of certain customers, negotiations continue.


Springs business: North American springs subsidiary (North American MSSC)

41

Business trends

Despite worsening profits/losses in the first half of 2019, losses are expected to decrease in the second half.

The budget for the second half only incorporates JPY0.1 billion to reflect rising material costs in prices (base improvements) for portions already agreed upon by customers. In addition, we expect a JPY0.5 billion improvement in the second half with the resolution of problems with production startup for new products in the first half and problems with the negative effects of materials market conditions, resulting in a forecast for operating losses of JPY0.6 billion.

With one major customer, with whom negotiations have proven difficult, we are bolstering our approach by considering the idea of cancelling transactions. The results (equal to about JPY0.3 billion, including the retroactive portion) have not been incorporated into forecasts for the second half, due to the possibility that they could be delayed until next year.

2020H1 H2 H1 forecast

+JPY0.2 billion△JPY1.1 billion △JPY1.1 billion △JPY0.6 billion △JPY0.2-0.3 billion

Base Base Base

Tariffs on steel bars Problems with new products

201920182017

⇒Explained on next page

Materials market conditions

Materials market conditions

Trends in operating income



42

Business trends

Profits/losses are expected to improve in 2020, thanks to plant productivity improvements and other factors.

[Plant productivity improvements] Applies to both US and Canada plants: Roughly 50% operation for coil springs. (lost orders

and decreased customer demand)• Suspending the US coil spring line and concentrating production to achieve full capacity in

Canada. US plants: Investments to bring production in-house have failed to reduce costs.

• Prospect of boosting the filling factor in cold drawing; consideration of outsourcing painting processes.

Canada plant: Investments in productivity improvements• Adopting automated equipment in the upset forging process for torsion bars.

[Addressing high material prices] With one major customer, with whom negotiations have proven difficult, we are bolstering our

approach by considering the idea of cancelling transactions. A final decision will be made in first half of 2020 if no agreement is reached in this second half.

Resolving fluctuation risks in materials markets by making progress in negotiations to standardize reference indicators for purchases and sales. (minimizing fluctuation risks)

Completing plant productivity improvements and rectifying selling prices while considering structural reforms, including plant closures and consolidation.



43

Impairment

Worsening business performance at JATIM and North American MSSC led to impairment.In addition, based on a review of future business plans, including business plans for other regions in response to the worsening of the business environment referred to above, we carried out impairment in the amount of JPY14.8 billion with no prospects of achieving the profitability originally expected.

Details of impairment (all overseas bases)• Special Steel Bars business : JPY 9.0 billion• Springs business : JPY 5.5 billion• Formed & Fabricated Products business : JPY 0.4 billion

We take seriously and will duly reflect on the implications of this large-scale impairment.

Details of impairment in this period:


44

Reconsideration of businesses

In light of worsening business results for this period, we established a Management Reforms Project in July 2019 under the direct supervision of the President. The project’s reconsideration of businesses is summarized below.In addition to the effects of changing and increasingly harsh environmental conditions, the following internal factors should be reconsidered: the failure to move forward with plant construction, stable procurement, and technical development (including process reforms) at the same time as accelerating operations at overseas bases, in addition to delays in resolving problems affecting stable procurement and technical development.The consequences of these internal factors are described below. Delays in production process reforms

• Lax management of cost cutting and new product startup activities due to the dispersal of engineers across multiple domestic and international bases. (North American MSSC, turbocharger components at the Thai subsidiary)

• The considerable time required to apply the knowledge of engineers dispatched from Japan overseas due to major differences between Japanese and local equipment specifications. (JATIM)

Exposed vulnerabilities in procurement strategies• Despite countermeasures to address risks related to rising raw materials market prices and

changes in supplier supply capacities, no fundamental reforms, including structural reforms in procurement, were carried out (JATIM, North American MSSC).

Delays in bringing new products to market through technical development• Despite accelerated R&D activities with the opening of the Research and Development Center,

overseas bases have lost a series of orders (springs in general) due to a lag of about one year behind the competition in the development of technologies that reduce spring and stabilizer weights.

Reconsideration of businesses:


45

Reconsideration of businesses

[Business structural reforms already begun]

Review of procurement strategies• Adopting a structure whereby the Procurement Department at the Head Office

manages procurement at domestic and overseas bases as a whole; dispatching highly experienced senior procurement managers to certain overseas subsidiaries.

• Shifting to a procurement structure that draws on external organizations, like trading companies, rather than attempting to do everything in house.

Further development of technologies that reduce spring weights.• We are proposing a technology to reduce the weight of coil springs using general-

purpose materials. We have obtained approval from some customers for new stabilizer technologies.

Resolving the shortage of engineers through selection and concentration.• Reducing assemblies in the precision springs business; adding engineers for

automotive spring design and development.• Shifting engineers to the development of other products by withdrawing from the

cast magnet manufacture business at the Thai plant.

Responding to current conditions:


46

Toward a new Mid-term Business PlanToward a new Mid-term Business Plan：

The current Mid-term Business Plan covers the five-year period from 2016 through 2020.

We recognize that we were late in implementing fundamental solutions to problems emerging in a rapidly changing business environment. Before the end of this fiscal year, we plan to formulate a new three-year Mid-term Business Plan to take effect in FY2020. This will be announced in May.

An overview of the new Mid-term Business Plan follows.• Plans for the coming three years, based on a vision 10 years into the future.• Starting by stopping losses (JATIM, North American MSSC) in the first year.• Implementing selection and concentration of businesses by advancing

withdrawals from and sales of non-core and low-income businesses.• Rather than opening new bases, prioritizing improvements in added value and

product capabilities based on technological development.• Implementing structural reforms in procurement of materials which account for

more than 50% of production costs.• Strengthening the organizational structure to enable rapid response to

environmental changes and to minimize risk.


47

Urgent measures

Suspending coil spring production at the US plant for consolidation at the Canada plant. Freezing advancement into the automotive spring business in Europe. Withdrawal from the cast magnet business positioned as a non-core business and

contraction of the hinge business. Partial return of executive compensation. Reducing fixed costs and expenses.

• Staff reductions of approximately 1,000 (including temporary staff), primarily at JATIM, the Philippines, Thailand, and the US.

• Careful selection of, reductions in, and reviews of capital investment.• Reducing non-urgent testing, research, repair, and other costs.• Major reductions in Head Office costs.

Urgent measures in this period:


48

Conclusions

1. The business environment is undeniably challenging.

2. We recognize that delays in addressing issues caused by internal factors are even more critical.

3. We will start by assigning top priority to stopping losses at JATIM and North American MSSC.

4. We are considering fundamental measures, including the closure and consolidation of bases and withdrawals from and the contraction and sale of businesses.

5. We will strengthen our advantages as a manufacturer by improving added value and product capabilities based on technological development.

6. We will formulate a new Mid-term Business Plan incorporating these measures before the end of the fiscal year. This Mid-term Business Plan will be announced in May.


Note on forward-looking statementsThese materials are meant solely to provide investors with information and are not to be interpreted as solicitations. The forecasts provided in these materials are based on targets and projections and do not constitute promises or guarantees of future performance. Please refer to this information with the understanding that the Company’s future performance may differ from this business outlook. While these earnings materials were prepared based on data believed to be reliable, we cannot guarantee their accuracy or reliability. The Company assumes no liability for these materials, regardless of the purpose for which they are used by investors. We encourage all investors to make their final investment decisions based on their own judgment.

mitsubishi steel mfg. co., ltd. financial results for the first half … · 2019-12-24 · blast...

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