Jfe Holdings, Inc. · TSE:5411

Jfe — Q3 FY2019 Earnings Presentation

59 slides from Jfe's earnings presentation, Feb 12, 2020

  1. Slide 1: Financial Results through Third Quarter of FY2019

    Financia Securities Code: 5411.T JFE Holdings, Inc. February 12, 2020

  2. Slide 2: Table of contents

    ~)) A table of contents JFE 1. JFE Holdings’ Financial Results through Third Quarter of Fiscal Year 2019 (April 1 to December 31, 2019) and Financial Forecasts for Fiscal Year 2019 (April 1, 2019 to March 31, 2020) @ JFE Steel @ JFE Engineering @ JFE Shoji Trade 2. Dividends This presentation materi

  3. Slide 3: Consolidated Results through Third Quarter of Fiscal Year 2019

    JFE Consolidated Results through Third Quarter of Fiscal Year 2019 (April 1 to December 31, 2019)

  4. Slide 4: Financial Results through Third Quarter of Fiscal Year 19

    )) Financial Results through Third Quarter of Fiscal Year 2019 JFE-HD FY2018 FY2019 . Change (billion yen) Through 3Q | Through 3Q Revenue 2,890.5 2,791.5 (99.0) Finance Income/Costs (9.5) (9.4) 0.1 Segment Profit 210.6 42.6 (168.0) Exceptional Items (5.8) - 5.8 Profit before Tax 204.8 42.6 (162.2)

  5. Slide 5: Financial Results through Third Quarter of Fiscal Year 19 (by Segment)

    )) Financial Results through Third Quarter of Fiscal Year 2019 (by Segment) JFE-HD a 2,890.5 (9.5) FY2018 FY2019 an: Change (billion yen) Through 3Q Through 3Q Steel Business 2,148.5 2,005.8 (142.7) Engineering Business 328.0 364.7 36.7 Trading Business 856.9 829.3 (27.6) Adjustments (443.0) (408.4)

  6. Slide 6: Consolidated Financial Forecasts for Fiscal Year 2019

    JFE Consolidated Financial Forecasts for Fiscal Year 2019 (April 1, 2019 to March 31, 2020)

  7. Slide 7: Financial Forecasts for Fiscal Year 2019

    e)) Financial Forecasts for Fiscal Year 2019 Bk JFE-HD FY2019 i FY2019 Forecast Nov. (Updated Forecast Feb. 12 2020) Change 12 2019) (billion yen) Full Year Apr-Dec Jan-Mar Full Year Full Year Revenue 3,730.0} 2,791.5 928.5} 3,720.0 (10.0) Owners of Parent Finance Income/Costs (13.0) (9.4) (3.6) (13

  8. Slide 8: Financial Forecasts for Fiscal Year 2019 (by Segment)

    Financial Forecasts for Fiscal Year 2019 (by Segment) oo = San JFE-HD 3,730.0 (13.0) 2,791.5 (9.4) (3.6) Forecast Now. (Updated Forecast Feb. 12 2020) 9 (billion yen) Full Year Apr-Dec Jan-Mar Full Year Full Year Steel Business 2,690.0 2,005.8 694.2 2,700.0 10.0 Engineering Business 520.0 364.7 155.

  9. Slide 9: Financial Forecasts for Fiscal Year 2019

    )) Financial Forecasts for Fiscal Year 2019 a) a | JFE-HD FY2018 FY2019 (Actual) (Forecast) Change (billion yen) Full Year Apr-Dec Jan-Mar Full Year Full Year Revenue 3,873.6] 2,791.5 928.5} 3,720.0 (153.6) Owners of Parent Finance Income/Costs (12.5) (9.4) (3.6) (13.0) (0.5) Segment Profit 219.5 42

  10. Slide 10: Financial Forecasts for Fiscal Year 2019 (by Segment)

    JFE-HD )) Financial Forecasts for Fiscal Year 2019 (by Segment) a) | FY2018 FY2019 (Actual) (Forecast) Change (billion yen) Full Year | Apr-Dec Jan-Mar Full Year Full Year Steel Business 2,830.6 2,005.8 694.2 2,700.0 (130.6) Engineering Business 485.8 364.7 155.4 520.0 34.2 Trading Business 1,125.8

  11. Slide 11: JFE Steel Financial Results through Third Quarter of Fiscal Year 2019

    JFE JFE Steel Financial Results through Third Quarter of Fiscal Year 2019 11 ll

  12. Slide 12: JFE Steel Production and Shipment

    JFE Steel )) Production and Shipment JFE eee FY2018 FY2019 Unit 1Q 2Q 3Q 4Q |Full Year} 1Q 2Q Crude Steel (Standalone) Mt 7.10 6.94 6.39 5.88} 26.31 7.00 6.79 Crude Steel (Consolidated) Mt 751 M33 6.79 6.25] 27.88 7.36 743 Shipment (Standalone) Export Ratio (Value Basis, % 42.4 44.2 43.5 36.0 41.7 3

  13. Slide 13: Segment profit through third quarter of 2019 was 11.3 billion yen

    Segment profit through third quarter of 2019 was 11.3 billion yen, decreased by 151.9 billion yen, compared to the previous year.  Cost: +23.0 billion yen Cost reduction: +12.0 billion yen: Cost effect of investment One-off effect in FY2018: +11.0 billion yen  Sales Volume and Mix: -12.0 billion y

  14. Slide 14: Financial Forecasts for Fiscal Year 2019 JFE Steel

    JFE Financial Forecasts for Fiscal Year 2019 JFE Steel 14 14

  15. Slide 15: Current Business Environment (Overview)

    JFE Stee Current Business Environment (Overview) Ba O Domestic environment > Exports and production are getting weaker amid the global economic slowdown. >» Domestic demand for the construction machinery, industrial machinery and building is still weak. > Although inventories of steel products are s

  16. Slide 16: Current Business Environment (Domestic)

    JFE Stee Current Business Environment (Domestic) JFE >» Domestic ordinary steel orders in this November continued to show significant decrease by 12.8% from the previous year. > Due to the raising consumption tax and the typhoons in 2019, the number of domestic auto production during Oct. to Nov. de

  17. Slide 17: Combined inventories of HR, CR and Coated Steel

    Combined inventories of HR, CR and Coated Steel as of the end of December 2019 were 4,314K tons. From November 2019 : 21K tons decrease From December 2018 : 142K tons increase Although domestic steel makers are adjusting their production volume, weak domestic demand for steel and a certain amount of

  18. Slide 18: Inventories of Plate and Wide Flange Shapes

    [Inventories of Plate (Plate Shear) Inventories of plate shear as of the end of November 2019 was 442K tons. From October 2019 : 5K tons decrease From November 2018: 67K tons increase Although the inventory has been decreasing for three months, the inventory level remains high. Demand for the buildi

  19. Slide 19: Volume of imported ordinary steel

    The volume of imported ordinary steel in December 2019 was 441K tons. From November 2019: 29K tons decrease From December 2018: 29K tons increase A certain amount of steel has been imported continuously. It will take time to for the domestic inventory level to be returned to the appropriate level. 1

  20. Slide 20: Current Business Environment (Overseas)

    JFE Stee Current Business Environment (Overseas) Fk a [Real GDP srowth forecast) — Forecast (ul-19) World —+— Porecast Qarr20) 2.9% ~~ (Year-on-year % change) oe Forecast (Oct-19) 201820192020 {Automobile Sales) China Year on Year Change &ecoaQ &-eand een &eaQ =- SSSSESHFSESTRESES fostesstessteass B

  21. Slide 21: Crude steel production in China

    Crude steel production in December 2019 in China was 84.3M tons (2.7M tons on daily basis, which increased by 0.4Mt compared to the previous month.) The figures show the high production quantity in China consecutively. From November 2019: 4.0M tons increase From December 2018: 8.2M tons increase (+1

  22. Slide 22: Inventories in China

    Inventories in China as of the end of January 2020 was 8.3M tons. From December 2019: 7.2% increase From January 2019: 26.1% decrease Inventories in China rebounded from a bottom in November, and after that, they show the signs of gradual recovery. After the beginning of 2020, the inventory level in

  23. Slide 23: Metal spread

    Metal spread, calculated based on Chinese spot market price of HRC and international spot market prices of iron ore and hard coking coal, dropped below $150/t in the first half of FY2019 due to the decrease of the HRC price and the rise of the iron ore price. Afterwards, metal spread rebounded in th

  24. Slide 24: Raw Materials Price

    JFE Stee Raw Materiaiel Raw Materials Price JFE [ Iron ore (iron ore fines from Australia) | | Coking Coal (Hard Coking Coal from Australia) | ($/DMT) ($/WMT) 400 $130 Sut Fon $ Spot FOB PO! =_=—Term-contract FOB $120 = _—Term-contract FOB $350 $110 300 $100 $ hes $90 $250 $80 ' $200 \ ' $70 a ~ $60

  25. Slide 25: Financial Forecasts for FY2019 of JFE Steel

    JFE Steel Financial Forecasts for FY2019 of JFE Steel JFE FY2018 FY2019 FY2019 . Full Full Full Unit Year 1H 2H year Year 3Q 4Q Previous Actual | Actual Actual | F Forecast | Forecast Forecast Revenue Billion 2,830.6] 1,353.1) 652.7} 694.2} 1,346.9]2,700.0}| 2,690.0 Crude Steel Approx. APPFOX, APPIO

  26. Slide 26: Segment profit forecast remains in line with previous forecast

    Segment profit forecast for FY2019 remains largely in line with the previous forecast.  Cost: -5.0 billion yen Cost increased due to the significant reduction in production and the impacts from natural disasters such as a typhoon.  Sales Volume and Mix: ±0.0 billion yen The volume of crude steel p

  27. Slide 27: Segment profit forecast for FY2019 is 0 billion yen

    Segment profit forecast for FY2019 is 0 billion yen, decreasing by 161.3 billion yen year on year.  Cost: +45.0 billion yen Cost reduction: +23.0 billion yen: Cost effects of investment One-off effect in FY2018: +22.0 billion yen  Sales Volume and Mix: ±0.0 billion yen Crude steel (Standalone) +0.

  28. Slide 28: JFE Engineering Financial Forecasts for Fiscal Year 2019

    JFE Engineering Financial Forecasts for Fiscal Year 2019 28 28

  29. Slide 29: Financial Forecasts in FY2019 of JFE Engineering

    Financial Forecasts in FY2019 of JFE Engineering Eee JFE Engineering As planned in the previous forecast (billion yen) FY2019 FY2019 (Previous Forecast) (Updated Forecast) Change 2H Full Year 2H Full Year 2H Full Year Orders 260.5 450.0 260.5 450.0) 0.0 0.0 Revenue 281.1 520.0 281.1 520.0) 0.0 0.0)

  30. Slide 30: Financial Forecasts in FY2019 of JFE Engineering

    Financial Forecasts in FY2019 of JFE Engineering Od | JFE Engineering Segment profit + 2.9 Increase with increase in revenue (billion yen) FY2018 FY2019 (Actual) (Forecast) Change 2H Full Year 2H Full Year 2H Full Year Orders 211.0 482.8 260.5 450.0) +49.5 (32.8) Revenue 283.7 485.8 281.1 520.0) (2.

  31. Slide 31: Orders by Business Field

    e)) Orders by Business Field ad | JFE Engineering (billion yen) Busi Field FY2018 | FY2019 Change Main Orders usINESS TEI | (Actual) |(Forecast) 9 *: New projects received in FY2019 Q3 Reconstruction of facility of the water purification plant Environment} 212.6 200.0 (12.6)> Improvement work of the

  32. Slide 32: JFE Shoji Trade Financial Forecasts for Fiscal Year 2019

    JFE Shoji Trade Financial Forecasts for Fiscal Year 2019 32 32

  33. Slide 33: Financial Forecast in FY2019 of JFE Shoji Trade

    JFE Shoji Trade Financial Forecast in FY2019 of JFE Shoji Trade a | (billion yen) FY2019 FY2019 (Previous Forecast) (Updated Forecast) Change 2H Full Year 2H Full Year 2H Full Year Revenue 562.5) 1,120.0 532.5) 1,090.0 (30.0) (30.0) Segment Profit 17.4 32.0 14.4 29.0) (3.0) (3.0) {Change} Decrease i

  34. Slide 34: Financial Forecast in FY2019 of JFE Shoji Trade

    JFE Shoji Trade Financial Forecast in FY2019 of JFE Shoji Trade a | (billion yen) FY2018 FY2019 (Actual) (Forecast) Change 2H Full Year 2H Full Year 2H Full Year Revenue 555.2) 1,125.8 532.5) 1,090.0 (22.7) (35.8) Segment Profit 16.4 35.7 14.4 29.0) (2.0) (6.7) (Change) Decrease in segment profit wi

  35. Slide 35: Japan Marine United Corporation Financial Forecasts

    Japan Marin United Corporation Financial Forecasts for Fiscal Year 2019 35 35

  36. Slide 36: Financial Forecast in FY2019 of Japan Marine United

    JFE-HD Financial Forecast in FY2019 of Japan Marine United a | @ Japan Marine United (JMU), an equity method affiliate, reported a net loss of 26.1 billion yen from April to December in FY2019 due to the delay of ship building caused by bad weather and natural disasters, material’s cost push and imp

  37. Slide 37: JFE Holdings Financial Forecasts for Fiscal Year 2019

    JFE Holdings Financial Forecasts for Fiscal Year 2019 37 37

  38. Slide 38: Financial Forecasts for Fiscal Year 2019

    )) Financial Forecasts for Fiscal Year 2019 a) a | JFE-HD FY2018 FY2019 (Actual) (Forecast) Change (billion yen) Full Year Apr-Dec Jan-Mar Full Year Full Year Revenue 3,873.6] 2,791.5 928.5} 3,720.0 (153.6) Owners of Parent Finance Income/Costs (12.5) (9.4) (3.6) (13.0) (0.5) Segment Profit 219.5 42

  39. Slide 39: Cash Flow Forecast for FY2019

    *)) Cash Flow Forecast for FY2019 sk Consolidated (billion yen) Net Income 13.0 | Dividends 40.0 Depreciation & Amortization CAPEX & Investments Asset Compression 40.0 Interest-bearing Debt . A Outstanding * 190.0 | Working Capital etc. 43.0 *Excluding the of application of IFRS 16 Lease : 110.0 bil

  40. Slide 40: Initiatives to Strengthen Profit Base

    JFE-HD )) Initiatives to Strengthen Profit Base a a | @ Enhance business competitiveness by consolidation of product facilities > Enhance Sheet product competitiveness Some of the production lines for cold-rolled steel sheets and hot-dip galvanized steel sheets (PLTCM, 3CGL) in Keihin district will

  41. Slide 41: Dividends

    Dividends 41 41

  42. Slide 42: Dividends

    °)) Dividends as | =@ Based on the current business condition, JFE Holdings decided not to implement its year-end dividend policy. Interim dividend: 20 yen per share Year-end dividend: (no dividend) Annual dividend: 20 yen per share = In view of the recent deterioration in business performance and c

  43. Slide 43: Initiatives for mid-and-long-term growth

    Initiatives for mid-and-long-term growth 43 43

  44. Slide 44: Initiatives to reinforce manufacturing capabilities in Japan

    JFE Steel @Initiatives to reinforce manufacturing capabilities in Japan Qin Operation . Planning to operate (in progress) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 © Chiba] Renewed No.6 coke ovenr.)| Establish self-sufficient structure for coke | © Conversion to cyber-physical systems at all steelwo

  45. Slide 45: Initiatives of overseas business

    e)) @lInitiatives of overseas business JFE © Done PI FY2018 FY2019 FY2020 FY2021 Oo [China-Iron powder] BJCMX started commercial production [China-Specialty steel for bars and wire rods] ° Signed contract of JV, BJSS @lMexico-Steel sheets for automobiles] NJSM to start commercial production Infra- s

  46. Slide 46: ESG Initiatives (1)

    JFE-HD @ 3. esc Initiatives (1) ak + Initiated disclosure following TCFD m - . ‘Example cane of acwanced the ot | recommendations -conducted scenario analysis- ey + Played a pivotal role in the development of Fr 1 He ~~ aad = the Japan Iron and Steel Federation's long- ae a — term vision for climate

  47. Slide 47: ESG Initiatives (2)

    JFE-HD @ 3. esc Initiatives (2) JFE + Analyzed and evaluated the effectiveness of Board of Directors by third party Major initiatives to strengthen governance system + Appointed the first female executive in Estable Ho Besic G 2019 (Audit & Supervisory Board Member) reeset i leh ei + Will appoint th

  48. Slide 48: Appendix

    Appendix 48

  49. Slide 49: Measures for Maintaining Financial Strength

    JFE-HD )) Measures for Maintaining Financial Strength Od Under the severe business environment, consider the following items to maintain financial strength Released on 12th November 2019 1. Generate cash flow by asset compression approx.150 billion yen + Compression of inventories ' During 6" medium

  50. Slide 50: Main Financial Data

    )) Main Financial Data Eee JFE-HD J-GAAP IFRS (Forecast) Fyi2 FYi3 FYi4 Fyis FY16 FY17 FY18 FY18 FY19 Ordinary Income 52.2 173.6 231.0 64.2 84.7 216.3 221.4 Business profit 232.0 45.0 EBITDA 260.6 | 368.9 | 421.5] 254.4| 279.9 | 388.8] 405.9 EBITDA *1 428.2 275.0 ROS 1.6% | 4.7% | 6.0% | 1.9% | 2.6%

  51. Slide 51: Market Price Trend of Import Steel

    Domestic waa e)) Market mest Price Trend of Import Steel JFE (000 yen/ton) 70 65 60 55 50 45 40 Dosa areueaareneaareneaareneaasenzuas BSBA GSS S BASS REBAKGSESEABSREBAGSHEREABS 2 2017 2018 2019 2014 2015 016 Data: The Japan Iron and Steel Federation Import Steel from S. Korea 51

  52. Slide 52: Alloy price trends

    JIFE Steel ak | Zn (U$/t) FeCr (¢ Mb) 3,800 3,300 180.0 160.0 140.0 2,800 2,300 120.0 1,800 100.0 1,300 800 80.0 60.0 T0202 L6T02 T6102 £8T02% T'stoz L210 T2102 L£9T0% T9T0z “LSt0e T’stoz Lvtoze Tptoz T'0z0z £6102 T'6T0z L8t02 T'st0z £2102 T2t0z £9T0% T9t0z “L£St0e Tstoz Lvtoz T'ptoz Mo (US/b) FeMn

  53. Slide 53: Trend of Sub Material's Market Price

    JFE Stee aT ‘ Trend of Sub Material’s Market Price (yen/t) Scrap (s/8) Spot Bulker 45,000 40,000 ao.nee. 35,000 35,000 30,000 30,000 25,000 25000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 a a a 0 ety o 6H RH GHB AAS > 5 t 8 te te te aa $5585 FS FT FTFECGKGTUGUCUCNCUCSlUS x Ss 288 «2838

  54. Slide 54: Trend of exchange rate

    (RMB/USD) (JPY/USD) Fk a )) Trend of exchange rate (USD against JPY RMB) T'0z02 OT'6T0~ L602 b'6T07 T'6T0~ OT'8T0Z Z£8T0¢ b'stoz T'8t0z OT Zt0c L£210¢ bp LT0c TZT0Z OT'9T0Z L907 b'9T07 T9107 OT'stod =——JPY/USD = =eRMB/USD LST07 b'Stoc 100 «---- 90 80 54 54

  55. Slide 55: Segment profit for 3Q of FY2019 was -6.4 billion yen

    Segment profit for 3Q of FY2019 was -6.4 billion yen, decreasing by 9.6 billion yen from 2Q of FY2019.  Cost: ±0.0 billion yen  Sales Volume and Mix: -7.0 billion yen The volume of both crude steel production and shipment went down due to the production adjustment along with the decrease in both d

  56. Slide 56: Segment profit forecast for 2H of FY2019 is -17.7 billion yen

    Segment profit forecast for 2H of FY2019 is -17.7 billion yen, decreasing by 35.4 billion yen from 2Q of FY2019.  Cost: +9.0 billion yen Cost reduction of +9.0 billion yen is estimated as a result of the cost effects of investments in West Japan works etc., including cost increase due to the impact

  57. Slide 57: Segment profit forecast for 4Q of FY2019 is -11.3 billion yen

    Segment profit forecast for 4Q of FY2019 is -11.3 billion yen, decreasing by 4.9 billion yen from 3Q of FY2019.  Cost: +10.0 billion yen Cost effects of investments in West Japan works etc.  Sales Volume and Mix: +10.0 billion yen Crude steel production is estimated to recover in 4Q as a result of

  58. Slide 58: Links to the reports published during FY2019

    JFE-HD )) Links to the reports published during FY2019 Report URL JFE Group REPORT https://www.jfe- 2019 holdings.co.jp/en/investor/library/gro up-report/index.html | JFE Group CSR https: //www. jfe- REPORT 2019 holdings.co.jp/en/csr/pdf/csr2019e.p df | JFE Group CSR https://www.jfe- REPORT 2019 hol

  59. Slide 59: JFE

    JFE Copyright © 2020 JFE Holdings, Inc. All Rights Reserved 59 59

JFE Holdings — Q3 FY2019 Earnings Presentation on 6ix