Jfe Holdings, Inc. · TSE:5411
Jfe — Q1 FY2019 Earnings Presentation
52 slides from Jfe's earnings presentation, Aug 9, 2019
Slide 1: Financial Results in First Quarter of Fiscal Year 2019
Securities Code: 5411.T JFE Financia. Fiscal Year 2 JFE Holdings, Inc. August 9, 2019
Slide 2: Table of contents
)) A table of contents JFE 1. JFE Holdings’ Financial Results in First Quarter of Fiscal Year 2019 (April 1 to June 30, 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 material is for
Slide 3: Consolidated Results in First Quarter of Fiscal Year 2019
JFE Consolidated Results in First Quarter of Fiscal Year 2019 (April 1 to June 30, 2019)
Slide 4: Financial Results in First Quarter of Fiscal Year 2019
JFE-HD Financial Results in First Quarter of Fiscal Year 2019 Sk | FY2018 FY2019 _ Change (billion yen) 1Q (Apr-Jun) | 1Q (Apr-Jun) Revenue 927.8 927.4 (0.4) Financial Income/Costs (3.2) (3.2) 0.0 Segment Profit 80.1 27.5 (52.6) Exceptional Items - = 0.0 Profit before Tax 80.1 27.5 (52.6) Pred iar n
Slide 5: Financial Results in First Quarter of Fiscal Year 2019 (by Segment)
nd a | Financial Results in First Quarter of Fiscal Year 2019 (by Segment) JFE-HD FY2018 FY2019 _ Change (billion yen) 1Q (Apr-Jun) | 1Q (Apr-Jun) Steel Business 693.0 666.6 (26.4) Engineering Business 92.8 113.2 20.4 Trading Business 287.2 286.6 (0.6) Adjustments (145.3) (139.2) 6.1 Revenue 927.8 9
Slide 6: Consolidated Financial Forecasts for Fiscal Year 2019
JFE Consolidated Financial Forecasts for Fiscal Year 2019 (April 1, 2019 to March 31, 2020)
Slide 7: Financial Forecasts for Fiscal Year 2019
)) Financial Forecasts for Fiscal Year 2019 0 | JFE-HD FY2018 (Actual) FY2019 (Forecast) Change ane Full Full Full * (billion yen) 1H Year 1H Year 1H Year Revenue 1,892.3| 3,873.6] 1,870.0] 3,960.0] (22.3) 86.4 Owners of Parent Previous Forecast (May 14, 2019) Business Profit of Full year: 180.0 Fin
Slide 8: Financial Forecasts for Fiscal Year 2019 (by Segment)
JFE-HD Financial Forecasts for Fiscal Year 2019 (by Segment) SE eeeeeeaaaeaeeaeaeannannn ny FY2018 (Actual) FY2019 (Forecast) Change a: Full Full Full * (billion yen) 1H Year 1H Year 1H Year Steel Business 1,402.5 2,830.6 1,400.0 2,900.0 (2.5) 69.4 Engineering Business 202.1 485.8 230.0 520.0 27.9 3
Slide 9: JFE Steel Financial Results in First Quarter of Fiscal Year 2019
JFE JFE Steel Financial Results in First Quarter of Fiscal Year 2019
Slide 10: Production and Shipment
JFE Steel )) Production and Shipment 0 | FY2018 FY2019 Unit 1Q 2Q 3Q 4Q val 19 one aes Mt 7.10! 694; 639| 5.88} 2631| 7.00 cosas) Mt 7.51} 7.33} 6.79] 6.25| 27.88] 7.36 ener Mt 6.13} 5.93} 6.24) 5.48| 23.78| 5.85 (Value Boost sat etone)| % 42.4; 442] 43.5! 360] 41.7] 39.9 Average Sales Price | 000 |
Slide 11: Segment profit in 1Q of FY2019 was 14.5 billion yen
Segment profit in 1Q of FY2019 was 14.5 billion yen, decreased by 49.6 billion year-on-year. Cost : ＋6.0 billion yen Sales Volume and Mix : -6.0 billion yen Crude steel production and shipment decreased slightly year-on-year. Thanks to blast furnaces resuming normal operations, crude steel productio
Slide 12: Financial Forecasts for Fiscal Year 2019 JFE Steel
JFE Financial Forecasts for Fiscal Year 2019 JFE Steel 12 12
Slide 13: Current Business Environment (Domestic)
JFE Stee! Current Business Environment (Domestic) JFE > Domestic ordinary steel consumption is expected to decrease slightly by 0.4% form the previous year. > Although overall domestic steel demand remains solid mainly in manufacturing, strength of demand differs by sector. Signs of slowdown are obs
Slide 14: Combined inventories of HR, CR and Coated Steel
Combined inventories of HR, CR and Coated Steel as of the end of June 2019 were 4,570K tons. From May 2019 : 53K tons decrease From June 2018: 163K tons increase Although overall domestic steel demand remains solid, strength of demand differs by sector, which needs to be watched cautiously. The inve
Slide 15: Inventories of Plate and Wide Flange Shapes
[Inventories of Plate (Plate Shear) Inventories of plate shear as of the end of June 2019 was 437K tons. From May of 2019 : 2K tons increase From June of 2018: ,41K tons increase The inventories have kept upward due to delay of construction and slowing demand in construction machinery sector, which
Slide 16: Volume of imported ordinary steel in June 2019
The volume of imported ordinary steel in June 2019 was 373K tons. From May 2019: 37K tons decrease From June 2018: 3K tons decrease The volume of imported ordinary steel decreased in recent 2 months, but a certain amount is still imported due to fall in steel prices in overseas market, which needs t
Slide 17: Current Business Environment (Overseas)
JFE Stee! Current Business Environment (Overseas) EE {Automobile Sales) (Market Trend of Steel in China) ($/t) 40.0% Year on Year Change 700 600 Shape _— India 500 HRC 400 -40.0% Chins. India 2.0 a8 3 Indonesia 0.4 412.0% 300 Thailand 06 +6.7% | -60.0% eS eee SSReSgaaw§ PRO RBAs RR aAs F am tN oo t+
Slide 18: Crude steel production in China in June 2019
Crude steel production in June 2019 in China was 87.5M tons (2.92M tons on daily basis: record high). From May 2019: 1.6M tons decrease From June 2018: 7.3M tons increase It is necessary to watch cautiously the trend of expansion of production in China. Export of steel from China in June 2019 was 5.
Slide 19: Inventories in China as of end of July 2019
Inventories in China as of the end of July 2019 was approximately 12.5M tons. From May 2019: 9.5% increase From July 2018: 26.6% increase The volume of inventories had continued to decrease after Chinese New Year, but it bottomed out and remains higher than usual. It needs to be watched cautiously a
Slide 20: Metal spread trend
Metal spread, calculated based on Chinese spot market price of HRC and international spot market prices of iron ore and hard coking coal, had shown upward trend since the beginning of 2019, but turned to decrease again and keeps fluctuating due to the influence of trade friction and iron ore price h
Slide 21: Raw Materials Price
) Raw Materialall Raw Materials Price JFE | Iron ore (iron ore fines from Australia) [ Coking Coal (Hard Coking Coal from Australia) ($/DMT) ($/WMT) $120 + $400 + —— Spot FOB ——Spot FOB $110 + === Term-contract FOB --- Term-contract FOB $350 + $100 $300 | $90 $80 $250 }+ $70 $200 + f 1 60 H : $150 |
Slide 22: Financial Forecasts for FY2019 of JFE Steel
Financial Forecasts for FY2019 of JFE Steel JFE en eee JFE Steel FY2018 FY2019 Full Full Unit | Year 1Q 2Q 1H 2H Year (Actual) (Actual) (Forecast) | (Forecast) | (Forecast) | (Forecast) Revenue pynon 2,830.6 666.6) 733.4 1,400.0) 1,500.0) 2,900.0) | Previous Forecast (May 14, 2019) Segment Profit of
Slide 23: Segment profit forecast for FY2019 is 70.0 billion yen
Segment profit forecast for FY2019 is 70.0 billion yen, decreasing by 35.0 billion yen from the previous forecast. Sales Volume and Mix : -20.0 billion yen Crude steel production is forecast to decrease by 1Mt from the previous forecast through production adjustment based on recent slowing steel dem
Slide 24: Segment profit forecast for FY2019 decreasing year on year
Segment profit forecast for FY2019 is 70.0 billion yen, decreasing by 91.3 billion yen year on year. Cost : ＋60.0 billion yen Cost reduction : +38.0 billion yen: Cost effects of investment in West japan works etc. One-off effect in FY2018 : +22.0 billion yen Sales Volume and Mix : +30.0 billion yen
Slide 25: Segment profit forecast for 2H of FY2019
Segment profit forecast for 2H of FY2019 is 44.0 billion yen, increasing 18.0 billion yen from 1H of FY2019. Cost : +14.0 billion yen Cost effects of investment in West japan works etc. Sales Volume and Mix : ±0.0 billion yen Crude steel (Standalone) ±0.00Mt（14.00⇒14.00Mt） Sales Prices and Raw mater
Slide 26: JFE Engineering Financial Forecasts for Fiscal Year 2019
JFE Engineering Financial Forecasts for Fiscal Year 2019 26 26
Slide 27: Financial Forecasts in FY2019 of JFE Engineering
Financial Forecasts in FY2019 of JFE Engineering Od | JFE Engineering (billion yen) FY2018 (Actual) FY2019 (Forecast) Change 1H* Full Year 1H Full Year 1H Full Year Orders 271.8 482.8 180.0 450.0 (91.8) (32.8) Revenue 202.1 485.8 230.0) 520.0) 27.9) 34.2 segment 7.7 20.1 9.0 23.0 1.3 2.9 Profit - Or
Slide 28: Classification of placed orders
) Classification of placed orders Od | JFE Engineering (billion yen) Category petit) aes, Change Main Orders (FY2019 1Q) (Actual) |(Forecast) Environment 212.6 190.0, (22.6) > hele of a facility of the water purification > Reconstruction of the geothermal power plant Energy 132.8 110.0 (22.8), Const
Slide 29: JFE Shoji Trade Financial Forecasts for Fiscal Year 2019
JFE Shoji Trade Financial Forecasts for Fiscal Year 2019 29 29
Slide 30: Financial Forecast in FY2019 of JFE Shoji Trade
JFE Financial Forecast in FY2019 of JFE Shoji Trade 0 | Shoji Trade (billion yen) FY2018 (Actual) FY2019 (Forecast) Change 1H* Full Year 1H Full Year 1H Full Year Revenue 570.6} 1,125.8 553.0) 1,200.0) (17.6) 74.2 Segment Profit 19.3) 35.7, 15.0 36.0 (4.3) 0.3 (Change: FY2018 to FY2019) Full year se
Slide 31: JFE Holdings Financial Forecasts for Fiscal Year 2019
JFE Holdings Financial Forecasts for Fiscal Year 2019 31 31
Slide 32: Financial Forecasts for Fiscal Year 2019
)) Financial Forecasts for Fiscal Year 2019 0 | JFE-HD FY2018 (Actual) FY2019 (Forecast) Change ane Full Full Full * (billion yen) 1H Year 1H Year 1H Year Revenue 1,892.3| 3,873.6] 1,870.0] 3,960.0] (22.3) 86.4 Owners of Parent Previous Forecast (May 14, 2019) Business Profit of Full year: 180.0 Fin
Slide 33: Debt / EBITDA Multiple
JFE-HD )) Debt / EBITDA Multiple JFE (billion yen) (times) Debt/EBITDA Multiple ® Target of 6th Mid-term Plan Approximately 3.6 Calculated from 3 times . annualized EBITDA e@ forecast for 1H FY2019 WA 500.0 3.0 EBITDA (left axis) | 332.0 | ‘(2019 1Hx2)! Interest-bearing 23 debt outstanding 1,523.8 1
Slide 34: Measures for Maintaining Financial Strength
JFE-HD )) Measures for Maintaining Financial Strength Under the severe business environment, consider the following items to maintain financial strength. @ Asset Compression -Reduction of inventories *Sale of holding shares (Implemented asset compression of 240 billion yen from FY2015 to FY2018) @ R
Slide 35: Dividends
Dividends 35 35
Slide 36: Dividends
JFE-HD ) Dividends a | mJFE Holdings has decided to pay an interim dividend of 20 yen per share at its Board of Directors. = The company is withholding its decision regarding the year-end dividend to carefully observe performance going forward. 36 36
Slide 37: 37
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Slide 38: Progress of Sixth Medium-Term Business Plan: Overseas Business Development
Progress of Sixth Medium-Term Business Plan JFE-HD ~Overseas Business Development~ a | @ sre steel @ 3FE Engineering QO 3IFE Shoji Trade <Germany> Received order of large scale <Mexico> Establishment of a steel service gas fired boiler center JSSB > Standardkessel Baumgarte GMBH (SBG) received > Est
Slide 39: ESG initiatives
ESG initiatives 39
Slide 40: JFE Endorses TCFD
JFE-HD )) JFE Endorses TCFD JFE JFE Holdings, Inc. announced that it has endorsed the final report of the TCFD* in May 2019. TCFbD JFE, which views action to address climate change as a critical business issue, is committed to disclosing information on its responses to climate change risks and oppor
Slide 41: Water-related initiatives
)) Water-related initiatives ad | O Securing water: - -Steel making process requires a large amount of fresh water JFE-HD = JFE Steel recycles about 94% at Steel works. O Preparing for flood damage --+Heavy rain risk beyond drainage capacity expected rainfall. * JFE Steel identifies, evaluates, and
Slide 42: Appendix
Appendix 42 42
Slide 43: Financial indicators FY12 to FY19 forecast
J-GAAP IFRS (Forecast) FY19 Fy12 FY13 FY14 FY1iS FY16 FY17 FY18, FY18 4H Ordinary Income 52.2 173.6 231.0 64.2 84.7 216.3 221.1 Business profit 232.0 55.0 EBITDA 260.6 | 368.9 | 421.5 | 254.4 | 279.9] 388.8 | 405.9 EBITDA *1 428.2 166.0 ROS 1.6% | 47% | 6.0% | 1.9% | 2.6% | 5.9% | 5.6% ROS *2 6.0% 2
Slide 44: Domestic steel prices
D ti JFE Stee omestic . JFE 000 t 40 ( yen/ton) 65 60 55 50 45 2018 ied 2019 2014 2015 2016 2017 Data: Japanese 2 Association Import Steel from S. Korea 44
Slide 45: Trend of Metal's Market Price
JFE Steel] Trend of Metal’s Market Price 0 | (ug/t) ZN 3,800 (¢/Ib) FeCr 180.0 3,300 160.0 2,800 140.0 2,300 120.0 1,800 100.0 1,300 80.0 800 60.0 £6107 T'6TO7 £°8t0z T'8T0z ££007 T'L£T07 £9T07 T'9T0% £°sto0z T'stOz £vtoz T'pt oz L6T07 T'6TO7 L’BT0z T'8t0z LLT07 TLTO% L9Toz T'9TO7 “Stow T’STOZ Lptoz
Slide 46: Trend of Raw and Sub Material Market Prices
Raw Ma JFE (yen/t) Scrap 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 i) es gee ads 8B 8 8 8 8 8B RRR RR Freight Index oe Data: Japan Tracking Association (Jan, 2014=100) 120 115 110 105 100 95 2014.1 2014.7 2015.1 2015.7 2016.1 2016.7 2017.1 2017.1 2017.7 2017.7 2018.1 2018.1 2018.
Slide 47: Segment profit forecast for 1H of FY2019 vs 1H FY2018
Segment profit forecast for 1H of FY2019 is 26.0 billion yen, decreasing 91.3 billion yen year-on-year. Cost : +18.0 billion yen Cost reduction : +15.0 billion yen One-off effect in FY2018 : +3.0 billion yen Sales Volume and Mix : +3.0 billion yen Crude steel (Standalone) -0.04Mt（14.04⇒14.00Mt） Ship
Slide 48: Segment profit forecast for 1H of FY2019 vs 2H FY2018
Segment profit forecast for 1H of FY2019 is 26.0 billion yen, decreasing 18.0 billion yen from 2H of FY2018. Cost : +28.0 billion yen Cost reduction : +9.0 billion yen One-off effect in FY2018 : +19.0 billion yen Sales Volume and Mix : +27.0 billion yen Thanks to blast furnaces resuming normal opera
Slide 49: Segment profit forecast for 2Q of FY2019
Segment profit forecast for 2Q of FY2019 is 11.5 billion yen, decreasing 3.0 billion yen from 1Q in FY2019. Cost : +3.0 billion yen Sales Volume and Mix : +3.0 billion yen Crude steel (Standalone) ±0.00Mt（7.00⇒7.00Mt） Shipment（Standalone）+0.55Mt（5.85⇒6.40Mt） Sales Prices and Raw materials (Metal spr
Slide 50: Segment profit in 1Q of FY2019 vs 4Q of FY2018
Segment profit in 1Q of FY2019 was 14.5 billion yen, increased by 16.3 billion yen from 4Q of FY2018. Cost : +13.0 billion yen Sales Volume and Mix : +16.0 billion yen Thanks to blast furnaces resuming normal operations, crude steel production increased. Crude steel (Standalone) +1.12Mt（5.88⇒7.00Mt）
Slide 51: Trend of exchange rate (USD against JPY, RMB)
)) Trend of exchange rate (USD against JPY RMB) nd an | (JPY/USD) 130 —JPY?USD —-—-RMB?USD 120 110 100 90 80 2015.4 2015.7 2015.10 2016.1 2016.4 2016.7 2016.10 2017.1 2017.4 2017.7 2017.10 2018.1 2018.4 2018.7 2018.10 2019.1 2019.4 (RMB/USD) 8 7.9 2019.7 51 51
Slide 52: JFE
JFE Copyright © 2019 JFE Holdings, Inc. All Rights Reserved 52 52