Hitachi Metals : Consolidated Financial Report for the 6-month period ended September 30, 2022 (IFRS)

Consolidated Financial Report [IFRS]

For the 6-month period ended September 30, 2022

October 26, 2022

Listed Company: Hitachi Metals, Ltd. (URL https://www.hitachi-metals.co.jp/e/index.html)

Listed Stock Exchanges: Tokyo Stock Exchange, Inc. (Prime Market, Code Number 5486)

Representative: Mitsuaki Nishiyama, Chairperson, President, and CEO

Contact: Izumi Tsubouchi, General Manager, Corporate Communications Dept. Tel: +81-50-3664-9519

Note: In order to give a true view of the condition of the whole Group's business without the effects of business restructuring etc., the Hitachi Metals Group (the "Group") shows "adjusted operating income" which is the operating income recorded in the consolidated statement of income, excluding non-operating income and expenses, and extraordinary income and losses. Adjusted operating income is a unified profit indicator for the Hitachi Group, including Hitachi, Ltd.

2. Dividends

3. Business results forecast for the year ending March 31, 2023 (April 1, 2022 to March 31, 2023)

Note: 1. Revision of the latest forecasts of results: No

2. In order to give a true view of the condition of the Group's business without the effects of business restructuring etc., the Group shows "adjusted operating income" which is the operating income recorded in the consolidated statement of income, excluding non-operating income and expenses, and extraordinary income and losses. Adjusted operating income is a unified profit indicator for the Hitachi Group, including Hitachi, Ltd.

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※ Other Notes

*This quarterly consolidated financial report is not subject to the quarterly review procedure by the scope of audit.

*The forecast figures, with the exception of actual results, are based on certain assumptions and predictions of the management at the time of preparation. Changes in business conditions or underlying assumptions may cause actual results may differ from those projected. Please refer to "(3) Forecasts for the Fiscal Year Ending March 31, 2023, including Consolidated Operating Forecasts" on page 7 for precondition and assumption as the basis of the above forecasts.

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• Table of Contents

1. Qualitative Information Regarding Financial Results for the Six Months Ended September 30, 2022………………………… 4

1. Information Regarding Operating Results……………………………..………………………………………………... 4
2. Analysis of Financial Condition………………………………………………………………….…………………….... 6
3. Forecasts for the Fiscal Year Ending March 31, 2023, including Consolidated Operating Forecasts…………………... 7

2. Condensed Interim Consolidated Financial Statements and Notes to Condensed Interim Consolidated Financial Statements… 8

1. Condensed Interim Consolidated Statement of Financial Position……………………………………………………… 8
2. Condensed Interim Consolidated Statement of Income and Condensed Interim Consolidated Statement of Comprehensive Income………………………………………………………………………………………….……… 10 [ Condensed Interim Consolidated Statement of Income ]……………………………………………………………… 10 [ Condensed Interim Consolidated Statement of Comprehensive Income ]……………………………………………. 11
3. Condensed Interim Consolidated Statement of Changes in Equity……………………………………………………... 12
4. Condensed Interim Consolidated Statement of Cash Flows…………………………………………………………...... 13
5. Segment Information…………………………………………………………………………………………………….. 15

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1. Qualitative Information Regarding Financial Results for the Six Months Ended September 30, 2022

1. Information Regarding Operating Results

The Group's operating results for the six months ended September 30, 2022 were as followings.

During the six months ended September 30, 2022, the global economy continued to slow down due to the impact of factors such as the supply shortages of components and materials, disruptions in international logistics, lockdowns resulting from China's zero-COVID policy, and the situation in Ukraine. In the business fields of the Group, the automotive-related area was affected by the impact of production adjustments implemented by automobile manufacturers mainly during the first quarter of this year, and demand of the first half declined year on year. On the other hand, in the FA/robot-related area, capital investment demand related to the manufacture of automobiles and semiconductors increased. While a decline in demand was also witnessed in some of the electronics-related area since the beginning of the second quarter ended September 30, 2022, demand for use in telecommunications devices and automobiles increased from the same period of the previous fiscal year. Furthermore, reflecting the impact of the rise in raw material prices (sliding-scale raw material price system) and the depreciation of the yen, revenues increased by 24.6% year on year to ¥568,707 million.

In terms of profit, while there was a negative impact of increases in expenses and energy costs due to soaring material prices, the Group promoted various cost reduction measures and revised the sales prices in the areas where the cost increases exceeded the level that could be absorbed through its corporate efforts. Adjusted operating income* increased by ¥9,875 million year on year to ¥25,145 million, due to an increase in profit as a result of the depreciation of the yen, additionally. Operating income increased by ¥6,415 million year on year to ¥21,196 million due to an increase of adjusted operating income. Income before income taxes increased by ¥23,134 million year on year to ¥38,416 million and net income attributable to shareholders of the parent company increased by ¥18,013 million year on year to ¥29,289 million.

A tender offer (the "Tender Offer") commenced by K.K. BCJ-52 (the "Tender Offeror") on September 27, 2022 for the common shares of the Company (the "Company Shares") ended on October 25, 2022. The total number of share certificates tendered in the Tender Offer was not less than the minimum number of shares to be purchased, and so the Tender Offer is successfully completed. As for the detailed results of the tender offer, please refer to "Announcement of Results of the Tender Offer by K.K. BCJ-52 for the Shares of Hitachi Metals, Ltd., and Change in a Major Shareholder and an Other Affiliate" dated October 26, 2022. BCJ-52 intends to make the Company its wholly owned subsidiary through a series of transactions thereafter. As a result, the Company's common shares will be delisted, and the Company will be independent from the Hitachi Group. The Company aims to regain its competitiveness and profitability and achieve sustainable growth and increase corporate value by responding to rapid changes in the market environment more speedily at a higher level through the search for investment opportunities, the acquisition of funds, and the formulation and execution of growth strategies, taking advantage of the global insights and networks of the new partner.

The results by business segment are as followings. Note that revenues for each segment include intersegment revenues. There were no significant changes to the businesses of the Group during the six months ended September 30, 2022.

Specialty Steel Products

Revenues in the Specialty Steel Products segment for the six months ended September 30, 2022 were ¥149,603 million, an increase of 17.4% as compared with those for the six months ended September 30, 2021.

Breaking down the revenues by business, while demand for molds and tool steel plunged year on year in Japan, sales increased year on year reflecting the impact of the rise in raw material prices (sliding-scale raw material price system) among other factors. Despite a decline in demand for mainstay products related to automobiles, sales of materials for industrial equipment remained virtually unchanged year on year as demand for materials for other industrial equipment remained on a par with the same period of the previous fiscal year, on top of the impact of the rise in raw material prices (sliding-scale raw material price system) among other factors. Sales of aircraft and energy-related materials increased year on year as demand for energy-related materials remained firm in addition to the fact that demand related to small- and medium-sized passenger aircraft rebounded markedly among mainstay aircraft-related materials. Sales of electronic materials increased year on year as sales of organic EL panel- related components increased and demand for semiconductor package materials remained brisk compared with the same period of the previous fiscal year, despite the decline in demand since the beginning of the second quarter ended September 30, 2022. While sales of injection molding machine parts remained virtually unchanged year on year, sales of various rolls and steel-frame joints for construction increased year on year. As a result, sales of rolls on the whole increased on a year-on-year basis.

Adjusted operating income increased by ¥7,421 million year on year to ¥14,685 million, due in part to an increase in demand for aircraft and energy-related materials and electronic materials; additionally, the depreciation of the yen and the promotion of

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various cost reduction measures etc. contributed to increasing the income. Operating income increased by ¥7,552 million to ¥14,766 million year on year.

Functional Components and Equipment

Revenues in the Functional Components and Equipment segment for the six months ended September 30, 2022 were ¥214,019 million, an increase of 39.9% year on year.

Breaking down the revenues by business, among automotive casting component sales, sales of heat-resistant exhaust casting components saw a year-on-year decrease owning to the changes in the product mix and the impact of production adjustments implemented by automobile manufacturers. Sales of cast iron products were impacted by production adjustments carried out by automobile manufacturers during the first quarter ended June 30, 2022. Nonetheless, due to the recovery in demand since the beginning of the second quarter ended September 30, 2022, on top of the impact from the rise in raw material prices (sliding- scale raw material price system) and the depreciation of the yen as well as an increase in demand for components for commercial vehicles and construction and agricultural equipment in the North American market, revenues were higher than in the same period of the previous fiscal year. As a result, sales of automotive casting components as a whole increased year on year.

Among piping components, sales of mainstay pipe fittings decreased in Japan compared with the same period of the previous fiscal year when there was a rush in demand before the price revision but increased in the U.S. on a year-on-year basis as housing starts remained at a high level. Consequently, sales of piping fittings as a whole expanded year on year. Sales of equipment for semiconductor manufacturing devices increased year on year as capital investment demand remained brisk. As a result, sales of piping components as a whole increased year on year.

Adjusted operating income improved by ¥3,890 million year on year to ¥1,586 million as a whole, due in part to an increase in demand for components used in commercial vehicles and construction and agricultural equipment in the North American market, despite downward pressure on profit such as a decrease in demand for heat-resistant exhaust casting components in addition to the fact that raw material and sub-material prices as well as energy and transportation costs, etc., soared. Operating income was ¥1,169 million, an improvement of ¥4,211 million year on year.

Magnetic Materials and Applications / Power Electronics

Revenues in the Magnetic Materials and Applications / Power Electronics segment for the six months ended September 30, 2022 were ¥79,967 million, an increase of 21.4% year on year.

Breaking down the revenues by business, in magnetic materials, demand for rare earth magnets for the use in automotive electronic components decreased and demand related to industrial equipment such as FA/robots also remained sluggish. In addition, demand for ferrite magnets used in automotive electronic components also raw a decline. However, sales of magnetic materials on the whole increased year on year due to the impact from the rise in raw material prices (sliding-scale raw material price system) for both rare earth magnets and ferrite magnets.

Among power electronics materials, soft magnetic materials, and their applied products saw brisk demand for use in telecommunications applications such as smartphones, tablets, and server equipment. Demand for amorphous metals for transformers also increased in Asia and Americas. As a result, sales of soft magnetic materials, and their applied products as a whole increased year on year. Sales of ceramic components increased year on year due to an increase in demand for use in automobiles as well as for server equipment and strength in demand for use in medical devices from the same period of the previous fiscal year. As a result, sales of power electronics materials as a whole increased year on year.

Adjusted operating income remained virtually unchanged from the same period of the previous fiscal year at ¥6,653 million (a decrease of ¥23 million year on year), due partly to a rise in demand for power electronics materials as well as the depreciation of the yen, despite a drop in demand for magnetic materials. Operating income decreased by ¥133 million year on year to ¥6,878 million.

Wires, Cables, and Related Products

Revenues in the Wires, Cables, and Related Products segment for the six months ended September 30, 2022, were ¥125,233 million, an increase of 14.1% year on year.

Breaking down the revenues by business, among electric wires and cables, sales of wires and cables for rolling stock increased year on year reflecting mainly a rise in demand among users in China. In wires and cables for medical devices, revenues overall increased due to the demand increase year on year. Sales of magnet wires increased year on year due to the impact from the rise in raw material prices (sliding-scale raw material price system), despite a decline in demand for use in automobiles and industrial equipment. Sales of electronic wires increased year on year due to an increase in demand for FA/robot applications. As a result, sales of electric wires and cables as a whole increased year on year.

Sales of automotive components rose year on year as demand has started to recover since the beginning of the second quarter

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