JFE : 1Q Financial Results Briefing for the Fiscal Year Ending March 2024

JFE Holdings, Inc.

1Q Financial Results Briefing for the Fiscal Year Ending March 2024

August 3, 2023

Presentation

Moderator: We will now begin the financial results briefing of JFE Holdings, Inc.

In attendance today are Masashi Terahata, Representative Director, Executive Vice President and CFO, and Toshihiro Tanaka, Senior Vice President.

It will take approximately 30 minutes for the presentation and 30 minutes for questions, which makes 60 minutes in total. The question-and-answer session will be held collectively after the presentation.

Mr. Terahata, Representative Director, Executive Vice President and CFO, will begin with an overview of the financial results and outlook announced today.

Terahata: This is Terahata. I will explain.

The financial results for 1Q of FY2023 were closed with JPY84.8 billion in business profit. In the previous year, it was JPY116.6 billion, so it is a decrease of JPY31.8 billion. In 1Q of the previous year, coal prices soared, so operating profit excluding inventory valuation differences was JPY0.6 billion in the previous year and JPY75.8 billion this year, which is an improvement of JPY75.2 billion. During this period, efforts to improve selling prices have resulted in a significant improvement in profit excluding inventory valuation differences.

1

For the full fiscal year, we are forecasting business profit of JPY290 billion, as previously forecasted. Since raw materials have been declining slightly, without the inventory valuation differences, it is improved by JPY35 billion from JPY280 billion to JPY315 billion. The profit per ton is JPY10,000.

Currently, the recovery of overseas steel market conditions and demand is slower than initially expected. In response to this, we have revised our previous forecast for non-consolidated crude steel production for FY2023 from 25 million tons to around 24.6 million tons.

In this business environment, we have improved our profit excluding inventory valuation differences and profit per ton from the previous year by promoting sales price improvement.

Based on these financial results, the Company announced that it will maintain its annual dividend of JPY100, which is about 30% of the payout ratio, as previously announced and will pay an interim dividend of JPY50.

Today, we will also explain our current efforts. One is the planned suspension of the upstream and hot rolling facilities in the Keihin District around September 16 of this year. In addition, we announced today as a news release on the establishment of a joint venture with JSW for grain-oriented electrical steel sheets in India. We also released in June that green steel products have been selected for large cargo ships.

That's all from me.

Tanaka: I will now explain the 1Q financial results.

2

As you can see in the middle of this table, the 1Q results show revenue of JPY1.262 trillion, business profit of JPY84.8 billion, and net income of JPY59.6 billion.

Compared to 1Q of FY2022 on the left, business profit is down JPY31.8 billion. However, as mentioned at the beginning, last year, a large amount of inventory valuation differences, etc., was included due to soaring coking coal prices, so excluding valuation differences, the improvement was JPY75.2 billion.

This table shows revenue and profit by segment. Down the middle are the profit by segment. The segment profit of the steel business was JPY68.1 billion, which, in line with the overall trend, is JPY24.9 billion less than that of last year.

Next, as for the engineering business, it was negative JPY0.1 billion the increase in sales and the promotion of cost reductions resulted in a JPY1.1 billion improvement.

The trading business recorded JPY14.7 billion, a JPY6.4 billion decrease from last year. This is due to a narrowing of the spread, mainly in North America. Last year's figure of JPY21.1 billion was extremely high, and we assess that JPY14.7 billion for this fiscal year is not a bad figure by any means.

3

The following is a breakdown of the increase or decrease in the steel business compared to last year.

First, crude steel production was reduced from 6.43 million tons last year to 6.05 million tons this fiscal year, a decrease of 380,000 tons. This was a factor in the decline in the "volume and mix", resulting in a decrease in profit of approximately JPY10 billion.

On the other hand, regarding sales prices and raw materials, that is spreads, efforts were made to improve domestic prices amid a significant decline in export prices compared to last year. On the other hand, coking coal dropped sharply, resulting in a significant JPY120 billion improvements in spreads.

Conversely, the inventory valuation differences, etc., which was a major positive factor last year due to the rise in raw materials, was almost zero this quarter, resulting in a negative JPY107 billion compared to last year.

Thus, item 3 and 4 largely increased and decreased, respectively. As a result, as shown in the upper right-hand, profit excluding inventory valuation differences, etc. was improved significantly by JPY82.1 billion from a loss of JPY23 billion last year to JPY59.1 billion this fiscal year.

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