JFE : Financial Results Briefing for the Fiscal Year Ended March 2023

JFE Holdings, Inc.

Financial Results Briefing for the Fiscal Year Ended March 2023

May 8, 2023

Presentation

Moderator: Hello, everyone. Thank you very much for your patience. We will now begin the financial results briefing for the fiscal year ended March 31, 2023 investors meeting of JFE Holdings, Inc.

Today's participants are Representative Director, President, and CEO Koji Kakigi, and Senior Vice President Toshihiro Tanaka. The time allotted for the meeting will be approximately 30 minutes for presentation and 30 minutes for Q&A, for a total of 60 minutes. The question and answer session will be held collectively after the presentation.

First, Mr. Kakigi, Representative Director, President, and CEO, will give an overview of the business highlights announced today and the status of the 7th Medium-Term Business Plan.

Kakigi: My name is Kakigi of JFE Holdings. I will explain the progress of the 7th Medium-Term Business Plan in line with the investors meeting's materials posted on our website today.

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Please see page three. This is the highlight of our business performance.

The leftmost page is the financial results for FY2022, and Executive Director Mr. Tanaka will give you more detailed information later. Business profit was JPY235.8 billion, and the annual dividend was JPY80 per share, which is roughly in line with the forecast announced in February.

The middle part is the forecast for FY2023. We will continue to improve sales prices and promote a shift from quantity to quality through structural reforms scheduled for September of this year. Overall group business profit is expected to be JPY290 billion, which will surpass by JPY54.2 billion compared to the previous year. The annual dividend is planned to be JPY100 per share. As you will see later, segment profit for the steel business is planned to be JPY200 billion.

On the far right are the initiatives in the 7th Medium-Term Business Plan. As I will explain later, we are making good progress with the priority measures.

The steel business profit per ton, excluding inventory valuation, is expected to reach JPY9,000 per ton in FY2023. Since the mid-term target is set at JPY10,000, this represents a progress rate of 90%. For FY2024, the final year of the mid-term plan, in order to further increase profit, we are aiming for JPY260 billion or more, exceeding our mid-term plan of JPY230 billion.

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Next is the summary of our mid-term key earnings targets and business results.

Mr. Tanaka will explain the details of these, but as for the actual results for FY2022, the middle part, consolidated business profit was JPY235.8 billion. In the steel business, the segment profit was JPY146.8 billion. The profit per ton was JPY7,000, but if inventory valuation is excluded, the profit per ton was only at the JPY3,000 level.

In the engineering business, the business fell sharply to JPY13.4 billion due to the soaring cost of materials and equipment, as well as the worsening P&L of individual construction projects in Europe. In the trading business, on the other hand, the level is high at JPY65.1 billion, partly because the measures we have taken so far have borne fruit, and partly because the market for steel products has remained at a high level.

As for the forecast for FY2023, as written there, consolidated business profit is JPY290 billion, ROE is 8.7%, profit per ton is JPY9,000, and segment profit excluding inventory valuation difference is JPY190 billion.

The engineering business is expected to recover in P&L and is forecasting JPY25 billion, as the deterioration in P&L from individual construction projects in Europe will be eliminated. The trading business is expected to exceed the mid-term target of JPY48 billion, partly because the steel market is expected to soften somewhat.

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I will now explain the initiatives of the 7th Medium-Term Business Plan.

First, these are the main initiatives of the steel business. I will explain our efforts to improve selling prices and upgrade the product mix.

In FY2022, the spread improved significantly by JPY74 billion over the previous year by shifting various costs, including the early reflection of raw material costs, reviewing extras, and correcting price levels. In FY2023 as well, we plan to improve the spread by continuing to appropriately reflect the sales price in the face of rising electricity and other costs, aiming for an increase of JPY83 billion over the previous fiscal year.

The right-hand side shows the ratio of high value-added products, which will be approximately 47% in FY2022. In particular, we aim to increase the ratio of high value-added products by expanding sales of high-tensile steel sheets for automobiles, electrical steel sheets for energy, and infrastructure construction materials, which are our priority fields, to further improve sales prices and spreads.

In order to achieve our goal of 2024, we will make a major shift in quality, especially by shutting down upstream facilities in Keihin in September this year. Also, in November of this year, we will start reinforcing extra-thick steel plate production lines for offshore wind-power applications in Kurashiki. In addition, in 1H of next fiscal year, we will complete the first phase of the reinforcement of non-oriented electromagnetic steel sheet manufacturing facilities. Through these efforts, we are making steady progress in raising the ratio of high value-added products to our target of 50%.

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