FY2016 Earnings Summary and Progress of Mid-term Business Plan

Transcription

1 FY2016 Earnings Summary and Progress of Mid-term Business Plan May. 23, 2017 President Kenji Hiwatari 1

2 Agenda 1. FY2016 Results & FY2017 Forecast 2. The Commencement of Discussion for the Partial Acquisition of the Steel Products Business of the Mitsui & Co. group by NSSB, and for the Additional Purchase of NSSB Shares by Mitsui & Co., Ltd. 3. Progress of Mid-term Business Plan Appendix 2

3 1. FY2016 Results & FY2017 Forecast 3

4 Highlight: FY2016 Results Sales declined: Mainly caused by ASP dropped in 1 st half of the Steel business. Profit increased: Due to increased income from the Steel, Textiles and Food Stuff business, covering the decline in industrial machinery and infrastructure business Sales 2, ,930.8 billion 1,841.3 Ordinary Profit billion Net Income* billion 30.9 *Profit attribute to owners of parent , st half st half st half 8.7 1, nd half 2 nd half nd half 9.4 FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 4

5 Trends by Quarter Sales and ordinary profit tend to recover with the rise in steel prices in the 2 nd half. ASP of Steel ( thousands per ton) Sales ( billion) , , ,708 4, ,185 4, , ,242 Ordinary Profit ( billion) 8.8 FY FY FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q 5

6 Segment Results Sales Steel Trading of Steel, Raw Materials and Steel service centers billion FY15 FY16 Change Steel 1, % 1, % I & I % % -6.8 Textiles % % Foodstuffs % % -4.8 Total 1, % 1, % Overseas Sales <26.1%> Ordinary Profit <26.1%> billion FY15 FY16 Change <+0.0%> Steel % % 1.2 I & I 3.2 7% % Textiles % % 1.1 Foodstuffs % % 0.5 Total % % 1.9 Sales declined: Impact of decline in ASP in the 1H Profit increased: Due to higher ASP in the 2H and improved profitability of overseas group companies Industrial Supply & Infrastructure Sales declined: Decline in sales to Russia Profit declined: Reflecting the absence of temporary factors Textiles Sales declined: The environment in the apparel industry remained severe Profit increased :Efforts of cost-cutting activities and liquidating group company with losses Foodstuffs Industrial machinery and machine tools, automotive parts, railway car parts, aluminum products and infrastructure business OEM & ODM production for apparel & retail, solution business (logistics, etc.) Import of meat and processed foods and chain restaurant business Sales declined: Weak meat market prices Profit increased: Improvement in profit margins of beef and broilers 6

7 Ordinary Profit Variance Analysis [FY15 vs. FY16] Ordinary Profit increased 19 billion due to increased income from the Steel, Textiles and Food Stuff business, covering the decline in industrial machinery and infrastructure business billion FY15 FY Steel I & I Textiles Foodstuffs Volume 0.8 Price / Mix -1.1 FOREX Group Companies 29.0 Group Companies 30.9 Group companies Sales -0.1 FOREX -0.1 Group Companies Absence of Temporary profit -0.4 Cost / Margin 0.5 FOREX Margin 0.4 FOREX 121 /$ 109 /$ FY billion FY16 7

8 Ordinary Profit Variance Analysis [FY15/2H vs. FY16/2H] Profit of Steel Business increased by 3 billion Due to higher ASP in the 2H and improved profitability of overseas group companies Other businesses also keep improving profitability billion FY15/2H FY16/2H Steel I & I Textiles Foodstuffs Volume -0.0 Price / Mix 0.3 FOREX 0.6 Group companies 2.1 Absence of Temporary loss 0.4 Cost / Margin 0.4 FOREX -0.2 Group Companies -0.2 Margin 0.1 Group Companies FY15/2H FOREX 120 /$ 110 /$ 3.6 billion FY16/2H 8

9 Group Performance FY15 FY16 Profit of the subsidiary has improved significantly Equity method gains declined mainly in the Thai industrial park business FY15 64% 40% FY16 NSSB *EM: Affiliated company accounted for by the equity method Ordinary Profit Breakdown (FY16) * NSSB includes elimination Subsidiary 19.6 billion E.M. Ordinary Profit 29.0 billion 30.9 billion NSSB (YoY) Number In the Black In the Red Change in OP Total Steel (+5) 60 (-3) 13 (+2) 73 I & I (+2) 21 (-1) 1 (+1) 22 Textiles (+1) 11 (-2) 4 (-1) 15 Foodstuffs (-) 2 (-) 0 (-) 2 Overseas office (-1) 8 (+1) 4 (-) 12 Totals for Group Companies (+7) 102 (-5) 22 (+2) 124 Steel I & I Textiles Foodstuffs *EM Subsidiary *EM Subsidiary Subsidiary NSSB Subsidiary NSSB NSSB Change in Group Earnings 9 Main factor for the change 2.6 (Except FOREX 1.7) Sales / Cost Market Stable Operation -0.8 (Except Temporary factors -0.4) Absence of Temporary profit Sales of Industrial Park 4 Uniform rental business Liquidation of unprofitable business 1

10 Equity Balance Sheets Inventory decreased caused by the steel stock inventory volume reduction effect exceeded the unit price increase effect. Total assets billion Other current assets Other liabilities Debt Other current assets Other liabilities Debt Equity ratio Net - DER ROE 11.2% billion 16/3E 17/3E Change 26.3% 28.2% +1.9% % 10.0% Inventories Fixed assets Total equity Mar Inventories 91.6 Fixed assets Total equity Mar /3 16/3 17/3

11 Cash Flow billion FY15 FY16 Operating CFs Depreciation 5.6 billion Investment CFs CAPEX & Investments 6.2 billion Free CF CAPEX 4.2, Investments 2.0 Net increase (decrease) of debts Cash dividends Others Changes in cash & cash equivalents

12 Guidance for FY2017 Ordinary Profit will increase, reflecting the stable performance of the steel business billion FY16 Sales Operating Profit Ordinary Profit Net Income FY17 (e) YoY <1,880.0> 1, , <29.0> <30.0> <17.5> EPS ( ) Dividend ( ) <Previous Forecast> <150> *Based on after share consolidation Sales & Ordinary Profit forecast by segment billion FY16 FY17 (e) YoY Steel 1, , I & I Textiles Foodstuffs Sales 1, , Steel I & I Textiles Foodstuffs Ordinary Profit

13 Returns to Shareholders Dividend for FY (Pay out ratio 30.5%) Interim 75 Year-end 105 Dividend forecast for FY (Pay out ratio 28.5%) 13 Previous Forecast 150 Pay out ratio 26.5% *Based on after share consolidation Policy of cash dividend NSSB s most important management goal is to improve profit returns to our shareholders. Our basic dividend policy is to realize dividends that are in line with business results while balancing profit trends and financial condition. Targeting payout ratio in this mid-term business plan is 25%-30%. Targeting financial condition ROE over 10% Equity Net DER over 200 billion under 1.0 times Results for FY2016 ROE 10.0% Equity Net DER billion

14 2. The Commencement of Discussion for the Partial Acquisition of the Steel Products Business of the Mitsui & Co. group by NSSB, and for the Additional Purchase of NSSB Shares by Mitsui & Co., Ltd. 14

15 Reorganization of Steel Industry in Japan Consolidation of Blast Furnace Companies Nippon Sumitomo Nisshin Kobe NKK Kawasaki 2002 Alliance 2002 Merger JFE HD 2012 Merger NSSMC Steel Trading Company Reorganization also Activated Nippon Steel Trading Sumikin Bussan Kawasho NKK Trading Mitsubishi Corp. Gr Sojitz Gr Merger JFE Shoji 2003 Integrating steel business Metal One 2017 Subsidiaries acquisition 2013 Merger NSSB MM&KENZAI *FY2016 Consolidated Crude Steel Production 4,877 万トン *Including Nisshin 721 万トン *Non-Consolidated 3,041 万トン *FY2016 Consolidated Sales 1,841 billion 1,671 billion *FY2015 1,974 billion Mitsui & Co.Gr 2001 Integrating steel business Itochu Gr Marubeni Itochu Steel Marubeni Gr Marubeni Itochu TS Sumitomo Corp. Gr 15 *Source: WEB 2014 Integrating Construction Materials & row materials business Marubeni Itochu Sumisho TS 2016 Integrating Construction Materials business 1,797 billion

16 Purpose of the Transaction Further Improvement in Customer Satisfaction Aiming to provide better services to our customers, by using our comprehensive power and the value chains. Improvement and Enhancement of Competitiveness in the Steel Business Expanding our steel businesses and increasing our competitive power by utilizing the combined strength and the synergy. Acceleration of Global Strategies Aiming to be the most suitable partners for one another, capable of planning and proposing total solutions that meet the global needs of customers all over the world. 16

17 Overview of the Transaction Partial Acquisition of the Steel Products Business of the Mitsui & Co. group by NSSB Agenda ; The specific business operations to be acquired, The acquisition method, The consideration to be provided Additional Purchase of NSSB Shares by Mitsui & Co., Increase ownership ratio to 11% to 20% < to be equity-method investee > Method: Combine Acquisition from current shareholders and Allocation of shares< Upper limit of Issued Share: 2,500,000 shares > Schedule March 22, 2017 : Execution of the basic agreement for the Discussion September 2017 (planned) : Execution of the final agreement for the Business Acquisition April 2018 (planned) : Effective date of the Business Acquisition 17

18 3. Progress of Mid-term Business Plan

19 NSSB Goes to the Next Stage 13/10 Merger ~ Complete Post Merger Integration Integrated Personnel Management System Integrated Enterprise System / New Integrated Data Centers(FY18) Integrated Group Companies Ordinary Profit FY13 Improvement in profitability FY14 FY15 FY Synergy Responding to Environmental Changes New Management Issues FY17 estimated 33.0 billion 3.0 billion Go to the next stage for growth Mid-Term Management Plan 2017 Planning Next Plan 19

20 Progress in Financial Targets Achieved Target FOREX /$ Sales ( billion) 2, , , ,000 2,300 Equity Ratio 24.1% 26.3% 28.2% 25~30% Ordinary Profit ( billion) FY14 FY15 FY16 FY17e FY17MTP Over Seas Sales ( billion) Equity ( billion) NET D/E FY14 FY15 FY16 Over 200 FY17MTP below 1.0 ROE 11.2% 10.2% 10.0% Over 10% Pay out Ratio 21.3% 26.8% 30.5% 25~30% Net Income ( billion) Dividend ( ) FY14 FY15 FY16 FY17e FY17MTP FY14 FY15 FY16 FY17e *Based on after share consolidation FY17MTP

21 Steel Business FY17 (e) Sales: (YoY) Profit: Sales( billion) 1,679.6 Ordinary Profit ( billion) Previous Forecast <1,470> 1, ,448.4 (18.2) , , FY16 Performance Ordinary Profit exceeded expectations due to strong price improvement Forecast for FY17 Stable Demand Continue focusing on sales increase, price improvement, optimization of processing / distribution FY14 FY15 FY16 FY17e ASP ( thousands per ton) 91 Sales volume (million tons) Export Domestic FY14 FY15 FY16 FY17e 21 Sales volume: Includes semi-finished products, ASP; excludes semi-finished products 14.0+α FY17 MTP 15.0 FY17 MTP Business Environment The excess capacity problem in China will continue. Construction-related steel demand for TOKYO 2020, which got off to a slow start, will begin picking up. Major Initiative Efforts to increase sales Strengthen respond for New Demand field Optimization of Processing Capturing construction work demand Organization revision corresponding to environmental change

22 Steel Demand Trend in Japan Stable Demand is expected to continue Increasing Sector Nonresidential Auto FY16/1H 上 16 2H 下 FY17/1H 上 17 2H 下 FY16/1H 上 162H 下 FY17/1H 上 172H 下 Public works Construction Machinery 16 上 16 下 17 上 17 下 16 上 16 下 17 上 17 下 Decreasing Sector Residential Ship Builders FY16/1H 上 16 2H 下 FY17/1H 上 17 2H 下 FY16/1H 上 16 2H 下 FY17/1H 上 17 2H 下 22

23 Over view of Global Market ASIA North America Demand Overall Demand is increasing except some countries and sectors Demand US demand is expected to expand due to policies such as tax reduction, infrastructure investment, deregulation etc. Supply FHS* integrated steel mill will started operation *FHS: Formosa Ha Tinh Steel Supply The operation of local mills is expected to continue to perform well owing to US protectionist policy effects Demand Forecast by Region (WSA Apr. 2017) China Asia / Oceania (except China) NAFTA (Million tons) 135 Rest of the World

24 16/ / / / /1 14/1 15/ / /1 3 5 Steel Market Trend Recovery trends due to solid domestic demand, inventory reduction, price increases of manufacturers $/t Raw Material Price Trend $/t thousands per ton Hot Rolled Coil Price Trend Domestic Export Hard Coking Coal (SPOT) 20 0 Iron Ore (SPOT) Source: NSSB Source: Japan Metal Daily, Custom 24

25 Improvement of Competitiveness in Processing Merger of Coil Center in East Japan Area Relocation of processing equipment Reduction in management cost Relocation of Coil Center in West Japan Area Relocate CC to inner of NAKAYAMA steel works Enable to Utilize facilities of NAKAYAMA NSM CC GUNMA SSC KITAKANTOH NSSB CC NSM CC YOKOHAMA NSM CC ARIAKE 25 NSM CC KIMITSU NAKAYAMA steel works

26 Strengthen Respond for Increasing Demand field Capturing construction work demand in Japan Integration of distribution company, Subsidiary of Nippon Steel & Sumikin Metal Products. Establishment of subsidiary for steel framework construction Organization revision Strengthen planning function for Overseas M&A etc. Strengthening sales organization for large development projects Organization change corresponding to reorganization of Steel Industry in Japan 26

27 Industrial Supply & Infrastructure Business FY17 (YoY) Sales: Profit: Sales( billion) Previous Forecast <85.0> FY16 Performance Sales declined: Decline in sales to Russia Profit declined: Reflecting the absence of temporary factors Ordinary Profit( billion) FY14 FY15 FY16 FY17 e Sales of headrest stays ( billion) 15.3 <2.7> FY13 FY14 FY15 FY FY17 MTP 28.0 FY17 MTP *Temporary Profit in FY15: Transitory profits related to the merger with the Thailand-based entity accounted for using equity method < 0.8 billion> Forecast for FY17 Keep underlying profit Business Environment Slump in emerging economies (Russia, Thailand, etc.) Major Initiatives Preparation for the recovery period Expansion of industrial park in Thailand Increase production capacity for headrest stays in Mexico Development of the industrial park business in Mexico Strengthening of response to highperformance materials 27

28 Development of the Industrial Park Business in Mexico NSSB executed the exclusive sales representative agreement with Lintel, the top Mexican industrial park developers. By December 2017, we aim to sell 50 ha in total for 15 to 20 companies out of 1,200 ha sales area. Industrial Park business of Lintel 9 industrial park, including projects under development Total development area :2,300ha Tenanted Many Japanese companies Invitation seminar held in Tokyo this February 1-6 Industrial Park Under Construction Automobile Plant 28

29 Textiles Business FY17 (YoY) Sales: Profit: Sales( billion) Ordinary Profit( billion) FY14 FY15 FY16 FY17 e Ratio of ODM Business In Gross Profit in Net Sales 36% 27% <5.8> 41% 48% 32% 34% FY14 FY15 FY16 Ratio of Loss (FY14=100) 37% 100 Previous Forecast <170.0> FY17 MTP 50% FY17 MTP FY14 FY15 FY16 FY17e FY16 Performance Sales declined: The environment in the apparel industry remained severe Profit increased :Efforts of cost-cutting activities and liquidating group company with losses FY17 Forecast Enhance profit management for each customer Maintain profitability by improving operational efficiency and improving loss rate. Business Environment Long depressed market for apparel in Japan Major Initiatives Expand new business domain utilizing our capability Evolve OEM to ODM (Original Design Manufacturing) Increase overseas sales Develop solutions business

30 Strengthen Profitability of Textiles Business Strengthen production facilities in Myanmar Install wash treatment facilities for Damaged Denim. Clear stringent environmental standards for western customers Development of new materials Developed a new yarn with a soft bulge and strongly crimp properties. We will adopt this materials that make the best use of the original goodness of knitting to expand our OEM / ODM business. 30

31 Foodstuffs Business FY17 Sales: (YoY) Profit: Sales( billion) Ordinary Profit( billion) FY14 FY15 FY16 FY17 e Overseas sales ( billion) Previous Forecast <155.0> < 3.3> FY17 MTP FY16 Performance Sales declined: Weak meat market prices Profit increased: Improvement in profit margins of beef and broilers FY17 Forecast Achieving target Profit of MTP Developing local blue-chip meat packers globally Expand tri-nation trade transactions Business Environment Gradual contraction of the domestic market FY13 FY14 FY15 FY16 FY13: NS + SB 7.0 FY17 MTP Major Initiatives Expand tri-nation trade transactions Beef / pork to China and ASEAN region Chicken to China Expand export of wagyu beef Developing the restaurant chain business in ASEAN region and Taiwan 31

32 Developing the Meat Business Live cattle imports from Australia To compensate for the decrease in domestic cattle due to the aging of Wagyu feeder, to secure a stable amount Started a new business to sell imported Wagyu raised with highly nurturing skills in Japan for overseas buyers Expansion of Wagyu export business through investment partners The Kanpai Group operates a restaurant chain in the yakiniku category which focuses on wagyu (Japanese beef). In Dec. 2015, NSSB underwrote an increase in capitalization of the Kanpai group to raise its share to about 15% to expand its beef business By establishing a central kitchen, Kanpai will expand the number of new store openings and secure supply capacity for their wholesale business. 32

33 4.Appendix 33

34 FY2016 Results 34 <Previous Forecast> Change 2H 1H 2H FY16 YoY HoH billion FY15 Sales , <1,880.0> 1, (per sales) Gross Profit Operating Profit (7.0%) 65.7 (6.8%) (7.1%) 60.8 (6.9%) 67.2 (7.0%) <29.0> Equity Method Income Ordinary Profit Extraordinary Profit (Loss) <30.0> (0.8) (1.9) (0.2) (1.7) (2.0) Net Income <17.5> ROE 10.2% 10.0% -0.2% EPS ( ) Dividend( ) <150> *NSSB carried out a share consolidation at a ratio of 10 shares to 1 share effective Oct. 1, In accordance with this, EPS is calculated based on the assumption that the share consolidation had been carried out at the beginning of FY15.

35 Extraordinary Profit (Loss) billion FY15 FY16 YoY Remarks Gain on Sales of Investment Securities Others Total Extraordinary Profit Impairment Loss (0.2) (1.9) 1.6 Loss on Sales of Investment Securities Loss on Liquidation of Subsidiaries and Associates (0.0) (0.1) 0.1 (1.8) (0.2) -1.6 Others (0.3) (0.2) -0.0 Total Extraordinary Profit (2.4) (2.5) 0.0 FY15: Loss on withdrawal from unprofitable business (Textiles) Net Extraordinary Profit (Loss) (1.9) (2.0)

36 Sales and Ordinary Profit by Quarter billion FY2014 FY2015 FY2016 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Steel I & I Textiles Foodstuffs Others Sales Steel I & I Textiles Foodstuffs Others Ordinary Profit

37 Overseas Sales Net Sales billion 1,841.3 billion Overseas 26% 26% Domestic 74% 74% 18% FY16 Sales by Region China RoW Americas 14% 3% Asia (except China) 65% FY15 Overseas Sales Trend FY % 27.2% 27.9% 27.8% 29.0% 26.1% 24.3% 25.8% 24.8% 24.2% 25.4% 25.7% 22.7% 22.5% 23.2% 24.0% 23.7% FY /1H 2H 14/1Q 2Q 3Q 4Q 15/1Q 2Q 3Q 4Q 16/1Q 2Q 3Q 4Q 37 *FY10~FY13/1H NS+SB

38 Sales Volume and ASP of Steel by Quarter FOREX( /$) ASP ( thousands per ton, excluding semi-finished product) Sales Volume(million tons, including semi-finished product) Export Domestic FY13/3Q 4Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q 38

39 Steel Products Export Volume by Region Million Tons Row (Europa, ) Middle East Americas Other Asia ASEAN Taiwan India China Korea 14/1H 14/2H 15/1H 15/2H 16/1H 16/2H 39

40 Domestic Demand Trend for Steel 1, Thousand units Automobile Production ,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5, (Source: JAMA) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Thousand m2 (Source: MLIT) Building Construction Started (Non-wooden) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

41 Steel Market in China US$/t Imported iron ore price (62% fine) Apr Sep Oct Nov Dec 16-Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 17-Jan Feb Mar Apr Latest (Source: CISA) ,100 3,600 3,100 2,600 RMB/t HRC Market Price (including tax) 2,100 (Source: CISA) 1,600 Apr-15 Sep Dec Dec Jan-16 Mar Apr May Jun Jul Aug Sep Nov Dec Jan-17 Mar Apr May 2,400 Thousand tons 2,300 Daily Crude Steel Production 2,200 2,100 2, (Source: National Bureau of Statistics of China ) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 41

42 Steel Demand in Japan thousands per ton Bid Prices of Export Scrap Steel (Source: Kanto-Tetsugen Cooperative Association) Apr May Jun Jul Aug Sep Oct Nov Dec 16-Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 17-Jan Feb Mar Apr May Million tons per annum Sales Volume of Ordinary Steel Domestic Export Apr-15 May Jun Jul Aug Sep Oct Nov Dec Jan-16 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-17 Feb Mar (Source: JISF, 3-month moving average)

43 Steel Market in Japan (Million tons) Jan -15 (Thousand tons) Inventory (left axis) Market price (right axis) (Source: Japan Metal Daily) Jan Rolled Steel Inventory and HRC Market Price Rolled steel* inventories (left axis) Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan HRC market price (right axis) Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May (Source: Japan Metal Daily *Rolled steel: Hot-rolled, cold-rolled and coated sheets) H-beam Inventory and Market Price ( thousands per ton) Feb Mar Apr May ( thousands per ton)

44 $ million 8,000 6,000 4,000 2,000 Indicators related I&I Business 5.0% 5.4% 4.2% 1.7% 7.5% GDP growth rate in Thailand and direct investment of Japan 7.2% 5.2% 2.7% 2.5% 0.5% (Net Flows, Annualized) 1.0% 1.1% Dirct Investment o Japan 2.1% GDP 3.1% 2.9% 3.0% 2.7% 3.1% 3.6% 3.2% 3.0% 8.0% 6.0% 4.0% 2.0% 0 (2,000) 0.8% CY /1Q 2Q 3Q 4Q 14/1Q 2Q 3Q 4Q 15/1Q 2Q 3Q 4Q 16/1Q 2Q 3Q 4Q -0.7% -0.5% 0.0% -2.0% thousands per ton Aluminum ingot market trends Source: Nikkei

45 Domestic Market Trend of Apparel Retail Industries ( trillion) (Source: YANO research, NSSB estimate) Others Specialty stores/ Select shops General merchandising stores Department stores CY Specialty stores / Select shops Others 11% trillion 42 % 16% GMS Department stores 31% Specialty stores / Select shops Others 15% trillion 53 % 22% Department stores 10% GMS 45

46 Import Price and Volume Trend of Meats (1) Beef (Thousand tons) /kg 800 Pork (Thousand tons) 400 /kg Import Price (right axis) Import Price (right axis) 124 Import Volume by Country (left axis) Others 119 USA Others Spain Denmark Canada Australia Import Volume by Country (left axis) USA (Source: Custom) (Source: Custom)

47 Import Price and Volume Trend of Meats (2) 47 Broilers (Thousand tons) Thailand (Source: Custom) Import Price (right axis) Import Volume by Country (left axis) USA Brazil /kg Estimated Marketing Quantity of Beef Domestic % 63% Imported FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Estimated Marketing Quantity of Pork 1,642 1,673 1,637 1,661 1,688 1,675 1,674 1,674 1,722 1,763 Domestic % 47% Imported FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Estimated Marketing Quantity of (Thousand tons) Broilers 1,729 1,753 1,786 1,821 1,829 1,8941,9151,9852,0432,097 Domestic 1,3701,3601,4051,3871,3881,4651,4791,5081,5251,550 21% 26% Imported FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 (Source: Agriculture & Livestock Industries Corporation ) (Thousand tons) (Thousand tons)

48 Outline of Mid-term Business Plan 2017 Announced May 2015 Key measures Accelerating NSSB s Distinctiveness Steel Expanding Market Share with NSSMC Developing Auto-parts Business and Industrial Parks I & I Strengthening ODM and Solutions Businesses Expanding Out to Out Business in Asian Market Investment Target 45 billion (+25%) Progressing NSSB s Competitiveness Pursue customer safety, reliability and quality Improve productivity and operational efficiency Integrate Management System Textiles Foodstuffs FY17 target (vs. FY14) Net Sales 2,300 billion (+9%) Overseas Sales 680 billion (+23%) Ordinary Profit 36 billion (+18%) Net Profit 36 billion (+18%) Financial Goals ROE over 10% Equity Net DER P/L Targets over 200 billion below 1.0 times Payout Ratio 25% 30% 48 Utilize Merger Synergies

49 Corporate Philosophy 1. Continuing to be a corporate group driven by the aspiration of providing goods and services that offer new value to the larger society. 2. Putting trust and reliability first, and by doing so developing together with our customers. 3. Aiming to become the kind of organization that increasingly cultivates, utilizes, and values human resources and their talents. The current material is not subject to the audit procedures based on the Financial Instruments and Exchange Law and it does not guarantee the accuracy and the completeness of the material. Forecasts regarding future performance in these materials are based on assumptions judged to be valid and information available to the Company at the time the materials were created. These materials are not promises by the Company regarding future performance. Actual performance may differ significantly from these forecasts for a number of reasons. Nothing in this document shall be considered as an offer to sell or solicitation of an offer to buy any security, commodity or other instrument. No responsibility or liability can be accepted for errors or omissions or for any losses arising from the use of this information. 49