FY2014 Earnings Summary

Transcription

1 5401: JP NSSMY: ADR (US) 1 FY2014 Earnings Summary Katsuhiko Ota Representative Director and Executive Vice President April 28, 2015 Notes on this presentation material NIPPON STEEL & SUMITOMO METAL CORPORATION is abbreviated as NSSMC All volume figures are presented in metric tons 2015 Unless NIPPON otherwise STEEL noted, & SUMITOMO all financial METAL figures CORPORATION are on a consolidated All Rights basisreserved.

2 Agenda 2 1. FY2014: Results 2. FY2015: Steel business environment & Our major themes 3. Overview: 2017 Mid-term plan 4. Appendix

3 3 1. FY 2014 : Results

4 Overview: FY2014 Results Business Environment Domestic: YoY steel demand decreased due to demand pull back after tax increase Operational Highlights Production : 0.71MMT reduction of crude steel production (YoY) in response to demand decline trend Leads to proper inventory level Financial Highlights Ordinary profit: bn ( YoY :+25%) In spite of negative one-off impacts, ordinary profit increased by 90.7 bn * 1 Forecast as of January 29, 2015 Overseas: Decline in Asian market price due to significant increase of exports from China and Korea Other Efforts: By end of FY2014, 14 downstream lines ceased operation as 2013 Mid-term planned 2017 Mid-term plan was released Accelerating ahead toward the best steelmaker Net income: bn ( bn from previous forecast) ROE: 7.6% Full-year dividend: 5.5 / share (+ 0.5 / share from previous forecast) Dividend pay out ratio: 24.3% 4 * 1 * 1

5 Supply & Demand Trend 5 Key Demand Indicators Public Works Orders in Japan ( in billion) Finished Auto production in Japan(million cars) Number of active Rigs in USA Steel Supply & Demand trend in Japan Steel Consumption in Japan (MMT) Crude Steel Production in Japan (MMT) 1,748 1,744 1,757 1,809 1,873 1,931 1, ,000 3, ,82 0 1,048 2,650 2, ,540 2, ,940

6 20.0% 15.0% 5.0% 0.0% -5.0% -10.0% -15.0% 60% 40% 30% 20% 10% FY2014 Results:Key Indicators 6 Crude Steel Production *1 Sales * Export ratio 46% 47% 50% 44% MMT 5, , ,610.0 bn 0% FY2012 FY2013 FY2014 FY2012 FY2013 FY % ROS Ordinary Profit * 1 Net Income *1 65% 6.5% % 8.1% bn ROE % bn 7.6% % * 2 FY2012 FY2013 FY2014 FY2012 FY2013 FY2014 * 1 FY2012/1H = NSC + SMI * 2 FY2012= 1H:NSC + 2H: NSSMC

7 NSSMC Operational Highlights FY14 (million tons) 1Q 2Q 1H 3Q 4Q 2H * [E] 2 Change FY13 FY13 FY14[E] 14/1H VS. VS. VS. FY14 FY14 14/2H 14/3Q VS. 14/4Q 7 Pig-iron production* 1 Consolidated Crude Steel Production Non-Consolidated Crude Steel Production Steel Shipments [45.10] [47.60] [45.20] [42.10] Seamless Pipe Shipments [1.20] Average Steel Selling Price (000 yen/ ton) [87] Steel Export Ratio (value basis (%)) [47] FOREX ( /$) [108] 109 Depreciate Depreciate Depreciate Depreciate * 1 * 2 Includes pig-iron production of Hokkai Iron & Coke corp. and NIPPON STEEL & SUMIKIN KOUTETSU WAKAYAMA CORP. Figures as of January 29 th, 2015

8 FY2014 Financial Results 8 FY14 Change ( in billion) FY13 * 1 1Q 2Q 1H 3Q 4Q 2H [E] FY13 VS. FY14 FY14[E] VS. FY14 14/1H VS. 14/2H 14/3Q VS. 14/4Q Net Sales Operating Profit Ordinary Profit Special Profit (Loss) Net Income 5, , , , , , ,831.5 [5,650.0] 5, [410.0] 0] (4.9) (4.9) (73.4) 2.7 (70.6) (75.5) [180.0] 0] [ EPS ] EBITDA EBITDA / Sales ROS ROE [ 26.7 ] [ 5.3 ] [ 7.0 ] [ 12.3 ] [ 4.5 ] [ 6.7 ] [ 11.2 ] [ 20.0 ] [ 23.5 ] [ -3.2 ] [+ 3.5 ] [ -1.1 ] [+ 2.2 ] % 10.0% 10.9% 10.4% 14.3% 12.5% 13.4% 11.9% +0.5% +1.5% -1.8% 65% 6.5% 55% 5.5% 72% 7.2% 63% 6.3% 11.9% 76% 7.6% 97% 9.7% ( 7.3% 3%) 81% 8.1% +1.5% +0.8% 08% +3.4% -4.3% 9.6% 7.2% 9.2% 8.2% 5.8% 8.3% 7.0% 7.6% -2.0% -1.1% +2.5% * 1 Figures as of January 29 th, 2015

9 Special Profit & Loss 9 ( in billion) FY13 FY14 1H 3Q 4Q 2H change FY13 VS. FY14 Gain on sales of investments in securities Special profit Loss on inactive facilitities Loss on on business of subsidiaries i and affiliates Special Loss Special Profit & Loss Impairment loss on VSB project bn * 1 * 1 VSB project: VSB is seamless pipe production company in Brazil. Established by NSSMC and Vallourec as JV.

10 Ordinary Profit Variance Analysis [ FY13 vs. FY14 ] 10 ( in billion) FY13 [A] FY14 [B] Change [A B] Ordinary Profit Steel Non-Steel Adjustment t * 1 Crude steel production-0.71mmt ( ) Steel shipments-0.14mmt ( ) Incl. carry over, sub-raw materials Price increase in logistics & electricity, etc. * 2 * 3 System integration expense:-15.0, etc. 4 5 FY13:-8.0 FY14:-32.0 * 6 Engineering+1.0, Chemical-3.2, New Materials+1.1, System Solution Positive Negative Volume Steel Prices & Product Mix * * 4 Raw Materials Cost Others Group Prices Reduction-9.0 FOREX * 1 Nagoya * 5 Procurement, etc. * 3 accidents Companies * 6 Non-Steel FY13 Exclude Inventory Evaluation Impact Exclude Inventory Evaluation Impact FY14

11 * Ordinary Profit Variance Analysis [ FY14 (E) vs. FY14 ] 11 ( in billion) FY14(E) (1/29) [A] FY14 [B] Change [A B] Ordinary Profit * 1 * 2 * 3 Crude steel production-0.24mmt ( ), Steel shipments-0.22mmt( ) Sub-raw materials, etc. Engineering+2.2, Chemical+0.8, New Materials+0.4, System Solution+1.0 Steel Non-Steel Adjustment t Positive Negative Volume * 1 * 2 Raw Materials Prices +3.0 ~ Steel Prices & Product Mix Cost Reduction ~ Others FOREX Group Companies Non-steel * FY14(E) (Jan.29) Exclude Inventory Evaluation Impact Exclude Inventory Evaluation Impact FY14 * Forecast as of January 29 th, 2015

12 Ordinary Profit Variance Analysis [ FY14/1H vs. FY14/2H ] 12 ( in billion) FY14/1H [A] FY14/2H [B] Change [A B] Ordinary Profit Steel Non-Steel * 1 Crude steel production-0.8mmt ( ), Steel shipments-0.33mmt( ) * 2 Incl. carry over, sub-raw materials * 3 Price increase in logistics & electricity, etc. * 4 Incl. blast furnace:+10.0 ( ) Nagoya accident:+2.0 ( ), System integration expense;+5.0 ( ), Amortization of goodwill+6.0 * 5 Engineering+9.0, Chemical-1.8, New Materials+0 2 System Solution+2 1 Adjustment New Materials+0.2, System Solution+2.1 Positive Negative Volume * 1 Steel Prices & Product Mix * 2 Raw Materials Prices Cost Reduction Procurement, * 3 etc..+50 * 4 Others Group Non-steel Companies * 5 FOREX FY14/1H Exclude Inventory Evaluation Impact Exclude Inventory Evaluation Impact FY14/2H

13 Ordinary Profit Variance Analysis [ FY14/3Q vs. FY14/4Q ] 13 ( in billion) FY14/3Q [A] FY14/4Q [B] Change [A B] Ordinary Profit Steel Non-Steel Adjustment * 1 Crude steel production-0.32mmt ( ), Steel shipments+0.12mmt ( ) * 2 Incl. carry over, sub-raw materials * 3 Incl. unevenly emerged items btw 3Q/4Q, such as DEP and disposal of facilities, etc. * 4 Engineering-1.8, Chemical-1.5, New Materials-0.2, System Solution+1.4 Positive Negative * Raw Materials 2 Prices ~ Volume * Steel Prices & Product Mix Cost Reduction +1.0 Others* 3 Uneven items btw 3Q/4Q FOREX Group Non-steel Companies *4 Exclude inventory evaluation impact & uneven items btw 3Q/4Q FY14 3Q Exclude Inventory Evaluation Impact Exclude Inventory Evaluation Impact FY14 4Q

14 Non-Steel Business: FY2014 Financial Results Sales & Ordinary Profit Trend (Non-steel business total) Sales Ordinary Profit 16.1 ( in billion) FY13/1H FY13/2H FY14/1H Engineering & Construction FY14/2H FY2012 FY2013 FY2014 Change in Ordinary Profit (FY13 FY14) Engineering & Construction Chemicals System Solutions New Materials Chemicals 14 : Profit increased by steady execution of project and cost reduction Increase : Sharp drop in styrene monomer market resulted in decline in margin Decrease : SG&A increased, but able to increase profit due to strong earnings of solution Increase business : Demand shift from gold to copper wire continued & sales decreased, but cost reduction efforts Increase worked effectively to increase profit ( in billion) FY2012 FY2013 FY2014 Sales Sales Ordinary Profit Ordinary Profit System Solutions FY2012 FY2013 FY2014 New Materials FY2012 FY2013 FY2014 Sales Sales Ordinary Profit Ordinary Profit

15 Balance Sheets 15 End of FY2013 End of FY2014 ( in Billion) ( in Billion) Current assets 2, ,333.8 Inventories 1, ,254.2 Fixed assets 4, ,824.1 Tangible fixed assets 2, ,597.8 Investments in Investments in Securities Subsidiaries & affiliates 1, ,079.5 End of FY2013 End of FY2014 Liabilities , ,610.8 Interest-bearing debt 2, ,976.5 Net assets 32, ,470 Equity Capital 2, ,978.6 Unrealized gains on available-for-sale securities Minority interest in consolidated subsidiaries Assets 7, ,157.9 Liabilities & net assets 7, ,157.9 End of FY 2013 End of FY 2014 Change Total assets ( in bn) 7, , Interest bearing debt 2, , ( in bn) Equity Capital ( in bn) 2, , DER

16 Cash Flows (CFs) FY 2014 ( in bn) Income before taxes & minority interests Depreciation & amortization Equity in net income of affiliates & unconsolidated subsidiaries Loss on business of subsidiaries & affiliates Income taxes Acquisition of tangible & intangible fixed assets Acquisition of securities & investment in subsidiaries Asset compression Others 59.9 Free Cash Flow Net increase (decrease) of debts Cash dividends Others Changes in Cash & Cash equivalents +7.5 Free Cash Flow ( in bn) CFs from operating activities CFs from investing activities Free cash flow FY 2013 FY

17 CAPEX and Depreciation 17 NSSMC (Upper : NSC Lower :SMI) C A P E X Depreciation ( in billion) FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY (310.0) (178.8) (300.0) (159.1) (330.0) (136.6) (290.0) (109.9) (265.0) (115.7) (244.0) (102.5) (273.7) (109.8) (284.0) (120.8) (291.5) (126.2) (280.9) (122.9) CAPEX SMI DEP SMI NSC NSC Major CAPEX plan Kimitsu: Relining No.4 Coke oven 29bn Kashima: Replacing Coke oven 18bn CAPEX DEP FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY14 見

18 Year-end Dividend 18 Based on the basic profit distribution policy described below and favorable performance since previous forecast, NSSMC plans to request approval of General Meeting of Shareholders to increase the planned dividend by 0.5 and distribute year-end dividend of 3.5 / share This would bring the full-year dividend distribution amount to 5.5 / share (Consolidated dividend payout ratio of 23.4%) [Cash Dividend Policy] Allocate profits according to earnings Factors below need to be considered as well Reserves for future investment Earnings forecast Consolidated and non-consolidated financial structure Target dividend payout ratio: approx. 20% (consolidated basis) 2017 Mid-term plan (Applying from FY2015 interim dividend) Dividend payout ratio (Consolidated basis) Around 20% ~ 30%

19 Change in the number of shares per share trading unit & Share consolidation 19 Number of shares Before After 1, / share trading unit shares / unit shares / unit Share consolidation 10 shares 1 shares Authorized shares 20.0 bn shares 2.0 bn shares ( Outstanding shares ) ( bn shares ) ( bn shares ) Effective date (Planned) October 1, 2015 Submitting a request for approval of the share consolidation to the General Meeting of Shareholders (June 24, 2015). For more details, refer to Notice of Change of the Number of Shares in a Unit of Shares, Share Consolidation, and Partial Amendment of Articles of Incorporation in Conjunction Therewith ( released on Apr. 28, 2015.

20 20 2. FY2015 : Steel business environment & Our major themes

21 FY 2015 Steel Business Environment 21 Japan 1Q :Temporary y decline in demand Construction sector (Seasonal) Auto sector (Inc. inventory adjustment) 2Q~:Demand D d will recover Overseas Recovery in construction & auto sector Increase in capital expenditure Steel price: Remain weak since volume of low priced exports from China continue to be high Some Chinese mills, however, showing improving trend of their margin Energy sector: Sluggish demand due to decline of active rigs & postponement of energy related projects < Reference 1 > Domestic steel inventory cycle Increase FY14/3Q 8.0 Excessive accumulation FY14/2Q 6.0 FY13/4Q 4.0 FY13/3Q 15/1 FY14/1Q Domestic 15/2 FY13/1Q ordinary 2.0 steel Inventory Adjustment Recovery 0.0 (YoY increase (%)) FY12/4Q -2.0 FY12/3Q FY13/2Q Decrease < Reference 2 > ~ Decrease Ordinary steel shipped domestically (YoY increase(%)) Increase Domestic steel consumption (MMT)

22 FY 2015: Our Major Themes 22 Effectively implement initiatives of 2017 Mid-term plan Enhance competitiveness of mother mills Output cuts in 1Q to adjust domestic steel inventory level (10% reduction of crude steel production) Intensively allocate resources to reinforce production bases during reduced production period Profit improvement of overseas bases Strengthen group companies

23 FY 2015: Factors Influence Our Business Performance 23 Affecting factors (vs. FY2014) Positives Cost reduction Oil related expense Overseas JVs Negatives Demand from energy sector Profit from raw material investment One-off factors (vs. FY2014) Output t cuts in 1 st half Inventory evaluation FOREX (stock) (to adjust inventory level) FY2015 guidance will be disclosed when reasonable estimate become possible

24 24 3. Overview: 2017 Mid-term plan

25 2017 Mid-Term Plan : Increase in Growth Investment 25 Allocation of cash generating from operating CFs & asset compression (FY14 year-end: 3.5) * Ideas of 2017 Mid-term * 1 FY * 1 plan Debt reduction, etc Dividends Business investment CAPEX CAPEX in Japan 1,350 * 2 Debt reduction, etc 706 Dividends ( in billion) CAPEX Business investment (FY12 year-end: 1, FY13 full year: 5, FY14 interim: 2) bn Newly employed* ( unconsolidated basis) In addition * Business investment bn R&D spending* 3 Approx % 1 Cash basis * 2 Decision making basis * 3 vs. FY (E) avg. per year

26 2017 Mid-Term Plan : Optimize Production Framework 26 Time line to cease operations ( unconsolidated basis ) Completed Schedule Products Works Action Equipment FY13 FY14 FY15 FY16 FY17 FY18 Upstream Process Sheet Kimitsu Close No.3 BF No5CC No.5 Yawata Close Kokura No.3BF, etc Wakayama Suspend No.2 BF Kashima Close No.1CS, * etc (6 lines) Wakayama Close No.1CS, * etc (4 lines) Nagoya Close No.4 CGL EGL 1Q 1Q 2Q 4Q Start preparation for switch 4Q 4Q 4Q Pipe & tube Kimitsu Close No.1 CAPL Kimitsu Close Butt welded pipe line 4Q 3Q * CS: Cold strip mill

27 2017 Mid-Term Plan : Improve Profitability of Overseas Bases 27 Shipment in volume + 20% for 3 years vs. FY2014(E) Profit improvement + 50 bn for 3 years vs. FY2014(E) New and growing major bases

28 Mid-Term Plan : Enhance Technological Superiority R&D spending Approx % vs. FY (E) avg. Okochi Award Production Award Invention of steel manufacturing process using multi-functional Integrated converter furnace method 2014 Top 100 Global Innovator Award NSSMC received particularly high rating in success rate * & global reach Ichimura Award Main Prize Development of eco-friendly ultra high tensile wire rods for bridge cable Conventional steel Developed steel Example of use: Copier Commendation by Minister of MEXT Science & technology Award(For 9 consecutive years) Development of eco- fi friendly low-carbon, non-leaded, d & free cutting steel * success rate :suggesting NSSMC s intellectual property activities are based on its high level of strategy and global reach

29 2017 Mid-Term Plan : Expand Group-wide Synergies 29 NSSMC to wholly-own its 2 core subsidiaries through share exchange NS-TEXENG ( Consolidated net sales: bn, 11,095 Employees) Core group company in fields of equipment technology & maintenance Also, domestically, one of the largest steelmaking equipment engineering companies Contribute t to 2017 Mid-term plan initiative iti of enhancing mother mills competitiveness Suzuki Metal Industry ( Consolidated net sales: 59.9 bn, 1,460 Employees) Corporate name to be changed to NIPPON STEEL & SUMIKIN SG WIRE Core group company in specialty steel wire with 6 world-wide production bases & world s largest valve spring manufacturing company Enhance competitiveness in specialty steel wire Practice coherent business strategy starting from raw materials (wire rod) to processing (wire) NSSMC will allocate own shares for the share exchange Circulating shares to be increased by 100 million shares (1%), but able to maintain ROE with synergy effects generating from wholly-owning of these companies * 1 Production bases : Japan, Sweden, USA, China, Thailand, UK * 1

30 2017 Mid-Term Plan : Targeted KPIs 30 ROS 8.1% 6.5% * 1.7% 1 ~ ROE 10 % 10 %or more or more 9.6% * 2-5.2% 52% 7.6% Target FY12 FY13 FY14 FY12 FY13 FY14 FY17 Target FY17 Cost reduction bn /yr bn or more per year D/E ratio Approx. 0.5 ベース FY12 FY13 FY14 Target FY17 FY12 FY13 FY14 Target FY17 * 1 FY2012/1H = NSC + SMI * 2 FY2012= 1H:NSC + 2H: NSSMC

31 31 4. Appendix

32 World Economic Outlook (GDP growth rate) <Released on April 14, 2015 by IMF> ( ): Outlook as of January. 20, outlook 2016 outlook World Total (3.3) 3.4 (3.5) 3.5 (3.7) 3.8 Developed Countries (1.8) 1.8 (2.4) 2.4 (2.4) 2.4 USA (2.4) 2.4 (3.6) 3.1 (3.3) 3.1 EU (0.8) 0.9 (1.2) 1.5 (1.4) 1.6 Japan (0.1) -0.1 (0.6) 1.0 (0.8) 1.2 Developing Countries (4.4) 4.6 (4.3) 4.3 (4.7) 4.7 China (7.4) 7.4 (6.8) 6.8 (6.3) 6.3 India (5.8) 7.2 (6.3) 7.5 (6.5) 7.5 * 1 ASEAN (4.5) 4.6 (5.2) 5.2 (5.3) 5.3 Russia (0.6) 0.6 (-3.0) -3.8 (-1.0) -1.1 Brazil (0.1) (0.3) (1.5) * ASEAN 5 : Thailand, Malaysia, Indonesia, Philippines, Vietnam (Source : IMF)

33 Worldwide Steel Demand Trend Worldwide Total 1.44 <CY12> (Source: WSA, Apparent finished steel consumption released in April, 2015) * <CY16(E)> <CY13> 1.53 <CY14> 1.54 <CY15(E)> 1.54 * * * 1.57 bn tons 33 (billion tons) ) China Others Japan/North America/Europe CY CY CY CY CY16 CY CY E

34 World Crude Steel Production 34 (million tons) World * 1 Total CY13 Jan - Mar Apr - Jun Jul - Sep CY14 Oct Nov Dec Oct - Dec [A] CY15 Jan Feb Mar Jan - Mar [B] Change (A B) 1, , (+4.0%) (+3.8%) (+3.8%) (+2.6%) (+1.6%) (+1.7%) (+0.1%) (+1.1%) (+3.4%) (-0.1%) (-0.9%) (-2.5%) (-1.2%) (-0.1%) Japan (RC)* 2 (RC)* 2 (+3.1%) (+3.5%) (-1.4%) (+0.6%) (-1.7%) (-1.1%) (-3.6%) (-2.1%) (+0.1%) (-4.0%) (-0.1%) (-4.5%) (-3.0%) (-2.9%) Korea (RC)* 2 USA EU28 Russia Brazil India China (RC)* 2 (-4.4%) (+6.6%) (+11.7%) (+10.3%) (+3.9%) (+4.7%) (-1.6%) (+2.3%) (+7.6%) (-2.0%) (-3.6%) (-11.0%) (-5.7%) (-6.1%) (+8.7%) (+4.9%) (+5.7%) (+3.9%) (+3.7%) (+4.0%) (+1.9%) (+3.2%) (+5.6%) (-0.2%) 02%) (-0.2%) 02%) (-1.1%) 11%) (05%) (-0.5%) (0.6%) * 1 Total of 65 countries * 2 Rate of Change from a year earlier period ( Source :World Steel Association)

35 Hot Rolled Sheets Prices by Region 35 ( Prices of Hot Rolled Sheets in local currency as of Apr. 2009=1.0 ) Cf.) The Latest Spot Price of Hot Rolled Sheets USA USA Guangzhou/ China April April EU Bao Steel Prevailing Listprice 1.0 Japan 0.5 ( Source : The Japan Iron and Steel Federation )

36 Key Indicators of Demand 36 FY13 FY14 FY15 Change [ Domestic ] Housing Starts (million houses) * 1H 3Q 4Q 2H 1 * * 2 [E] 1Q[E] 2 * 2 2Q[E] 1H[E] 14/1H VS. 14/2H FY13 VS. FY14 14/2H VS. 15/1H[E] [0.88] Non-residential (million m³) Construction Starts [54.78] Public Works Orders 10, ,752 2,538 2, ,988 [10,252] 10, ,900 2,713 4, ( in billion) Finished Auto Production (million cars) Export of Finished Auto (million cars) Overseas Auto Production ( 8 Japanese car makers) (million cars) Large & Middle sized Shovel Production (thousand units) Metal Machine Tool Production (thousand tons) Keel-laid New Ships (m. gross tons) [9.61] [4.65] [71] [452] Rig Count CY09 CY10 CY11 CY12 CY13 CY14 Latest USA 1,089 1,546 1,875 1,919 1,761 1, (April 24, 2015) Deep well ( 15,000ft) (February, 2015) World total (Except N. America, Russia & China) 997 1,094 1,167 1,234 1,296 1, ,251 (March, 2015) (Source: Baker Hughes, Smith international, NSSMC est.) * 1 Figures as of January 29 th, Estimates as of mid-march, 2015 *

37 Domestic Steel Consumption by Industrial Sector 37 (million tons) FY13 FY14 FY15 * 1 * 2 * 2 * 2 1H 3Q 4Q 2H [E] 1Q[E] 2Q[E] 1H[E] 14/1H VS. 14/2H Change FY13 VS. FY14 14/2H VS. 15/1H[E] Crude Steel Production in Japan [110.40] Domestic Steel Consumption (A + B) % for manufacturing sector Ordinary Steel Consumption (A) [64.29] [63.0] [51.20] Construction [22.58] Manufacturing Shipbuilding Automotive Industrial Machine [28.61] [4.48] [11.00] [5.11] Electronic Machine [3.09] Specialty Steel Consumption (B) [13.06] Steel Imports Steel Exports ( Source : NSSMC est.) * 1 Figures as of January 29 th, 2015 * 2 Estimates as of mid-march, 2015

38 Domestic Steel Consumption Trend Long Term 38 ( million tons) Consumption(Manufacturing Sector) Consumption(Construction and Civil Engineering Sector) Crude Steel Production 120 Crude Steel Production 122 Steel Exports Steel Exports Manufacturing Sector Construction and Civil Engineering Sector ( Source:JISF Steel Consumption/ NSSMC est.)

39 Domestic Crude Steel Production Trend 39 All Japan (million tons) (Domestic Crude Steel Production of 1Q (E), FY15 released by METI on April 2, 2015) (million tons) FY FY FY FY FY FY FY FY (million tons) FY15/1Q(E) SMI * 1 (Left axis) NSC * 2 (Left axis) All Japan (Right axis) FY14/4Q(E) FY14 (E) Total Production of Crude Steel ( NSC (non-consolidated)+smi ) 0.0 * 1 Includes Sumitomo Metals(Kokura), Sumitomo Metals(Naoetsu) and Sumikin Iron & Steel Co. Includes NIPPON STEEL & SUMIKIN KOUTETSU WAKAYAMA CORP * 2

40 Domestic Steel Products Prices 40 Plates & H-flange beams Hot-rolled sheets & Cold-rolled sheets ( thousand yen / ton ) ( thousand yen / ton ) H-flange beams ( )) Hot-rolled sheets (2.3xS) Plates(19mm) Cold-rolled sheets(1.0xs) April April

41 Domestic Steel Inventory Trends 41 Rolled Sheets Inventory * 2 H-flange beams Inventory (MMT) * Ordinary steel products inventory (Left axis) Rolled sheets * 1 inventory (Left axis) (Times) 1Hot-rolled, Cold-rolled and Coated sheets Ordinary steel products inventory turnover ratio (Right axis) (MMT) * 2 Inventories of the distributors dealing with H-flange beams manufactured by NSSMC Inventory Quantity (Left axis) Inventory Turnover Ratio (Right axis) (Times) ( Source : Japan Iron and Steel Federation )

42 Iron Ore & Coking Coal Price Trends Iron Ore (US$/dmt) FOB from Australia to Japan (US$/wmt) 400 Coking Coal FOB from Australia to Japan

43 Market Trends <Crude Oil & Scrap> 43 Crude Oil Scrap (US$/bbl) (US$/MMT) (US$/ton) (thousand yen/ton) Arabian Light Crude (Left axis) Bunker (Right axis) USA Scrap(No1HMS) (US$/t, CIF Korea)(Left axis) Iron Scrap Bid Prices in Kanto Region (thousand yen/ton, in terms of high grade scrap)(right axis) 0.0

44 Market Trends <Freight & Mold Pig Iron> 44 (US$/WMT, Cape size 170 thousand tons hull form) 35 Freight Mold Pig Iron (US$/T,CIF Korea) 600 Mold Pig Iron(US$/t,CIF Korea) From Brazil From Western Australia

45 FOREX Trend 45 ( /$) Apr. 1, 2008 Latest (Won /$) /$ 1, won/$ Apr. 24, /$ 1,080 won/$ Won /$ 1, , , , /$

46 46 This presentation does not constitute an offer or invitation to subscribe for or purchase any securities and nothing contained herein shall form the basis of any contract or commitment whatsoever. This presentation is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. No warranty is given as to the accuracy or completeness of the information contained herein. Investors and prospective investors in securities of any issuer mentioned herein are required to make their own independent d investigation and appraisal of the business and financial condition of such company and the nature of the securities. Any decision to purchase securities in the context of a proposed offering, if any, should be made solely on the basis of information contained in an offering circular published in relation to such an offering. By participating in this presentation, you agree to be bound by the foregoing limitations. This presentation contains statements that constitute forward looking statements. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of Nippon Steel & Sumitomo Metal Corp. or its officers with respect to its financial condition and results of operations, including, without limitation, future loan loss provisions and financial support to certain borrowers. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in such forward looking statements as a result of various factors. The information contained in this presentation, is subject to change, including but not limited, to change of economic conditions, financial market conditions, and change of legislation / government directives. Any statements in this document. other than those of historical facts, are forward-looking statements about future performance of Nippon Steel & Sumitomo Metal Corp. and its group companies, which are based on management s assumptions and beliefs in light of information currently available, and involve risks and uncertainties. Actual results may differ materially from these forecasts.