Toyo Tanso : Medium-Term Management Plan (2024-2028)

Medium-Term Management Plan

2024-2028

February 20, 2024

Toyo Tanso Co., Ltd.

Copyright © Toyo Tanso Co., Ltd. All Rights Reserved

1. Medium-Term Management Plan

2024-2028

Summary of the Medium-Term Management Plan (FY2024-FY2028)

Point 1 Aim for further business growth, driven by semiconductor applications FY2028 targets - net sales: 88.0 billion yen, operating profit: 22.0 billion yen, operating profit margin: 25%, ROE: 12%

Demand for SiC semiconductor applications, in particular, will remain elevated and profitability will expand

Percentage of net sales from all semiconductor applications to rise to 60% in FY2028 (FY2023 result: 40%)

Sales for FY2027 under the plan to rise by approximately 20% over the levels of the previous plan* in real terms, excluding the impact of exchange rates

SiC semiconductor applications - For SiC wafers: special graphite products for electronics applications

For SiC epitaxial: compound materials SiC-coated graphite products

Point 2 Capital investment to total 76.5 billion yen over five years

Continue to invest aggressively and strengthen production capacity throughout the entire Toyo Tanso Group to capture vigorous demand for semiconductor applications and maintain a top- level market share

Point 3 Set a standard for the dividend payout ratio of at least 30% under our shareholder returns policy

Enhance the return of profits to shareholders more stably, taking into consideration the funds required for capital investment

Point 4 Use financial leverage

Implement borrowings in addition to cash on hand and operating cash flow during the term of the plan to fund enhanced shareholder returns and a high level of capital investment

Targets for the Medium-Term Management Plan (2024-2028)

Exchange rate

FY2023:¥140.6/US$, ¥152.0/€, ¥19.8/RMB

FY2024/FY2028:¥135/US$, ¥149/€, ¥19/ RMB

FY2027 (at the time of the previous plan): ¥124/US$, ¥136/€, ¥18/ RMB

EBITDA*2 of approx. 31.0 billion yen in FY2028 (EBITDA margin of approx. 35%)

*1 Medium-term Management Plan (2023-2027) announced February 2023 *2 Operating profit ＋depreciation

Outlook for the Semiconductor Market

• High growth is forecast to continue for the SiC device market, with CAGR of around 40%.
• The Si (silicon) wafer market is expected to grow at 5% or more per year (based on the number of wafers produced).

SiC device market

(Unit: Yen, millions)

Source: Our estimate based on Fuji Keizai (2022, 2023) data

The growth in the SiC semiconductor market has led to a continuing rise in the inquiries we receive, with expanding demand for SiC epitaxial applications in particular.

Net sales for SiC semiconductor applications are forecast to rise to four times FY2023 levels by FY2028, with SiC semiconductor applications accounting for around 30% of total net sales.

Business Portfolio

• Identify businesses as growth, stable, and differentiation businesses to implement flexible and appropriate strategy.

Strategies by Product/Application: Special Graphite Products

Strategy

Pursue greater competitive strength and secure profitability through stronger sales expansion in high-added-value domains

■ Electronics applications

・Our global top market share has been maintained for Si wafers (products for single-crystal silicon manufacturing), and we aim to further increase the share through strategies appropriate to each region.

・For SiC wafers (products for compound semiconductor applications), we will leverage our global sales network to build a firm position in Europe, the US, and China. We will also consider strengthening production systems to prepare for rising demand.

・For products for solar cell manufacturing applications, we will pursue differentiation from Chinese graphite manufacturers, including in the sale of value-added products, firmly premised on securing profitability.

■ General industry applications

We aim to differentiate ourselves from other companies and expand profits through high-added-value sales (materials grade and processing).

Strategies by Product/Application: Carbon Products for General

Industries [Carbon Products for Mechanical Applications]

Strategy

Strengthen technological and production initiatives as a Group, including overseas subsidiaries, through measures such as enhancing manufacturing techniques (materials, processing, etc.), the automation of manufacturing, and cost reductions

・We anticipate market growth of 5% or higher* in automotive applications, and higher for applications related to the shift to EVs, and we will position these as a focus to offset a reduction in internal combustion engine-related applications.

・We will also raise the proportion of overseas sales from its current low level, and strengthen the processing capabilities of local subsidiaries.

・Pursue appropriate resource allocation and pioneer new applications with a focus on profitability and market trends.

*Our estimate