The Fifth Medium-Term Management Plan Explanatory Meeting

Transcription

1 1 The Fifth Medium-Term Management Plan Explanatory Meeting Maruichi Steel Tube Ltd. Chairman Hiroyuki Suzuki Index I Results and Reflections on the Fourth Medium-Term Management Plan P.2 II Overview of the Fifth Medium-Term Management Plan P.15 III (Reference) Business Environment Surrounding the Group P.34 March 28, 2018

2 2 I Results and Reflections on the Fourth Medium-Term Management Plan

3 3 I-1 Targets and Results of the Fourth Medium-Term Management Plan Final year of the Third Medium-Term Management Plan Results Targets achieved Final year of the Fourth Medium-Term Management Plan FY2014 Results FY2015 Results FY2016 Results FY2017 Projections FY2017 Targets Net sales (billion yen) Operating income (billion yen) Operating margin 11.6% 11.7% 17.8% 12.8% 12% ROE 3.9% 4.7% 7.4% 5.7% 6.5% and over Shareholder return ratio (3-year average) 52.2% (3-year average) 255.2% 49.6% 48.6% 81.6% (3-year average) 70% and over (3-year average) Return of profit to society (3-year average) 14 million (3-year average) 21 million 22 million 23.5 million million (3-year average) 21 million (3-year average)

4 Comparison of Domestic/Overseas Plans and Results FY2015 FY2016 FY2017 (billion yen) Targets Results Targets Results Targets Results Total net sales Domestic Overseas (U.S.) (Asia) Total operating income Domestic Overseas 2.5 (0.3) (U.S.) 1.1 (1.0) (Asia) Operating margin 11.8% 11.7% 11.8% 17.9% 12.2% 12.8% Domestic 17.4% 18.8% 17.3% 22.2% 17.6% 17.2% Overseas 3.5% -0.6% 4.5% 9.9% 4.5% 5.3% Exchange rate (yen) ) Net sales: There was a considerable target shortfall due to the less-than-planned sales volume and a considerable drop in steel price 2) Operating income: Although the target was achieved both domestically and overseas in FY2016, there was a shortfall in FY2015 and FY2017 3) Operating margin: The target was achieved in FY2016 and FY2017 due to a recovery in revenue from overseas 4) ROE: Although the target was achieved with 7.4% in FY2016, ROE for FY2017 ended at 5.7% due to a decrease in income 5) Targets for shareholder return ratio and social contribution were achieved 4

5 5 Capital Policy Targets and Progress Targets of final year of the Fourth Medium-Term Management Plan (FY2017) Average shareholder return ratio during the three years 70% and over; FY2017 ROE 6.5% and over 8.0% 7.0% 6.0% 5.0% ROE 5.0% Shareholder return ratio 6.1% 5.0% (Note) 255.2% 4.7% 7.4% 5.7% 300.0% 250.0% 200.0% 4.0% 3.0% 2.0% 1.0% 3.9% 70.3% 53.7% 3.6% 130.4% 61.5% 50.5% 150.0% 3.9% 100.0% Shareholder return ratio: 3-year average of 81.6% 46.9% 48.6% 50.0% 49.6% 0.0% FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 (Projections) 0.0% (Note) FY2015: A buyback of 2 million shares and a decrease in net income due to impairment of securities holdings raised the shareholder return ratio to 255%

6 6 I-2 Results and Reflections 1) Domestic Results i. Capital investments were made to streamline production and to strengthen the sales bases of Maruichi Kohan Ltd. (The total investment amount was 12.5 billion.) ii. The Osaka Plant was consolidated into the Sakai Plant. (March 2016) 2) Results and Reflections Overseas i. MOST launched operations in the upper west coast of the U.S. and Canada ii. Leavitt remained in the black due to the recovery in U.S. steel market conditions and other factors. iii. The three U.S. companies decided to replace facilities and establish new lines. iv. SUNSCO (HCM) had issues concerning sales capabilities and stable operation of facilities in Vietnam and was unable to keep the business in the black. v. KUMA started operations of the Bangalore Plant and greatly expanded sales by establishing additional large-diameter tube lines. vi. The launch of MPST s new plant for automobiles and motorcycles was decided. 3) Capital Policy and Social Contributions i. High dividend payout was made, and the shareholder return ratio target was achieved. ii. Social contributions were made in Japan and overseas to the fields of education, culture, sports, medical care, and others.

7 7 Capital Investment Results: Domestic: 12.5 billion; Overseas: 4.7 billion Trends in the amount of capital investment and depreciation (hundred million yen) Capital investment (Domestic) Capital investment (Overseas) Depreciation (Domestic) Depreciation (Overseas) Major capital investments during the Fourth Medium-Term Management Plan Domestic Relocation of Yokohama Sales Office of Maruichi Kohan: 1.9 billion Sakai Plant: Renovation of No. 1 Unit and terminal piers: 1.5 billion Shikoku Maruichi: Solar power generation equipment: 0.65 billion Tokyo Plant: Renewal of No. 1 Unit: 0.5 billion Relocation of Hokuriku Sales Office of Maruichi Kohan: 1.2 billion Construction of new Tokyo Plant (cutting-to-size plant): 0.35 billion Overseas MMX: No. 2 Plant: 0.8 billion MAC: Facilities renewal: 0.6 billion KUMA : 4-inch mill: 0.2 billion SUNSCO: 2-inch mill: 0.2 billion

8 8 Domestic Capital Investment October 2015 Relocation of Yokohama Sales Office of Maruichi Kohan March 2016 Completion of consolidation of Osaka plants into Sakai plant April 2016 Began selling power, solar power generation equipment at the Shikoku Plant August 2016 Completion of renewal construction of No. 1 Unit at Tokyo Plant August 2017 Completion of renewal construction of galvanizing line at the Takuma Plant (Implemented in three construction phases from 2015) November 2017 Relocation of Hokuriku Sales Office of Maruichi Kohan (Added new plans to the Fourth Medium- Term Management Plan. Began operation on November 13) January 2018 Completion of renewal construction of No. 1 Unit at the Sakai Plant (Mill, cutter, chamfering machine) (Implemented in three construction phases from 2015) January 2018 Completion of renewal construction of No. 1 Slitter at the Sakai Plant

9 9 MOST in the U.S.: Expanding sales on the U.S. West Coast and in Canada Acquired structural tube division of Evraz NA INC. in March 2015 Expanded business in the U.S. and Canada by further enhancing Production Where Demand Exists in the U.S. in cooperation with MAC (Los Angeles) and Leavitt (Chicago) MOST (Portland, Oregon) MOST MAC (Los Angeles, California) Leavitt (Chicago, Illinois)

10 10 SUNSCO (HCM) in Vietnam: Unable to keep business in the black i. FY2016: Although a significant surplus was posted due to a recovery in steel market conditions, a deficit was posted in FY2017 ii. Unable to keep the business in the black due to the impact of protectionism in the export markets (U.S., Indonesia, Thailand, Malaysia, etc.) and issues concerning the sales capabilities and stable operation of facilities in Vietnam Issues for the next Medium-Term Plan Trends in business performance (including HANOI) December 2012 December 2013 December 2014 December 2015 Net sales (Unit: million US$) Operating income 161 (3) (2) December 2016 Results Announced in November 2017 December 2017 Projections 226 (1) Fourth Medium-Term Plan (Dec. 2017) Targets 277 5

11 11 MMX in Mexico: Continuing necessary investment in motorcycle related business February 2015 No. 2 plant began operation August 2017 Purchased an adjacent 10,000m 2 -area to build a cutting plant No. 1 plant No. 2 plant Purchased area

12 12 KUMA in India: Continuing necessary investment in automobile and motorcycle related businesses June 2015 Bangalore Plant began operation February inch mill for largediameter tubes began operation Bangalore Plant 2-inch mill 4-inch mill for large-diameter tubes

13 13 Overseas Production Facilities : Began operation / expansion decided during the Fourth Medium-Term Plan Asia Americas Maruichi Metal Product Wuhan Branch (China) Maruichi Metal Product (Tianjin) Co., Ltd. (China) KUMA (India) Manesar Plant Maruichi Metal Product (Foshan) Co., Ltd. (China) SUNSCO (Hanoi) (Vietnam) MPST (Philippines) Scheduled to begin operation in 2019 MOST (the U.S.) MAC (the U.S.) Leavitt Chicago Plant (the U.S.) KUMA (India) Bangalore Plant SUNSCO (Vietnam) J-Spiral (Vietnam) ISTW Cikarang Plant (Indonesia) ISTW Jakarta Plant (Indonesia) ISTW Semarang Plant (Indonesia) AMX (Mexico) MARUICHIMEX (Mexico)

14 14 Social Contribution Providing approximately 0.5% of nonconsolidated net income after payment of dividends for cultural, educational, sports, environmental protection, and other activities in local communities in Japan and overseas Major initiatives in FY2017 ( Continuing New) Sponsoring the 69th Shōsōin Exhibition (from FY2012) Support for NPO Asia Prevention of Blindness Association (from FY2015) Sponsoring Osaka Philharmonic Association (from FY2015) Support for ips Cell Research Fund at the Center for ips Cell Research and Application, Kyoto University (from FY2015) Sponsoring the Theater of the Heart activities of Shiki Theatre Company (from FY2015) Sponsoring Heisei Osaka Amanogawa Legend 2017 (from FY2016) Sponsoring 2025 Japan World Expo Committee Support promotional activities for Osaka/Kansai to host the 2025 World Expo (Official Supporter) Support for students of Bal Niketan Senior Secondary School in India (KUMA) Provide scholarships equivalent to an annual tuition at a senior secondary school in the Pilani ward in the state of Rajasthan for 200 students recommended by the school on the basis of their marks and families financial situation Support for KANSAI Tourism Bureau Support activities to advance Kansai-wide initiatives to promote tourism, with the aim of revitalizing the industry in Kansai Support for relocation of RMH Osaka-Suita Support for relocation of an accommodation facility in Suita City, Osaka Prefecture, for families of children hospitalized at the National Cerebral and Cardiovascular Center, to Northern Osaka Health and Biomedical Innovation Town (KENTO)

15 15 II Overview of the Fifth Medium- Term Management Plan (April 2018 March 2020)

16 16 II-1 Business Environment Surrounding the Group i. Japan: While there will be no sharp decline in the economy, steel demand is not expected to increase. ii. Foreign countries: The U.S. economy will continue to remain strong and sustain a moderate growth. Emerging countries are expected to continue to achieve a high growth. iii. The shift to overseas will continue in the automobile industry. Preparations for the shift to electric vehicles need to be started. iv. Owing to the steady economy in each country, there will be no major downturn in the steel price. v. Increasing profitability, increasing labor productivity, and procuring human resources are the issues facing enterprises. vi. An exchange rate of 110 yen/us$ is assumed.

17 17 II-2 Targets of the Fifth Medium-Term Management Plan FY2017 (Projections) FY2018 FY2019 FY2020 Targets Net sales (billion yen) Operating income (billion yen) Operating margin 12.8% 11.5% 11.5% 13.7% ROE 5.7% 5.3% 5.5% 6.5% Shareholder return ratio 49.0% 50.0% 50.0% 50.0% Social contribution (million yen)

18 18 Consolidated Business Results Projections by segment [Unit: 単位 million 百万円 yen] 2018 年 3 月期予想第 5 次中計 2021 年 3 月期目標 Projections for Year Ending March 31, 2018 Fifth Medium-Term Management Plan Targets for Year Ending March 31, 2021 Operating income Operating income Net 売上高 sales 比 Ratio率営業利益比 Ratio率売 Net 上高 sales 比 Ratio率営業利益比 Ratio 率 日本 96, % 16, % 106, % 18, % Japan North America 北米 26, % 1, % 32, % 2, % ア Asia ジア 30, % 1, % 37, % 3, % 調整額 0 0.0% 0 0.0% 0 0.0% 0 0.0% Reconciliations 合 Total 計 153, % 19, % 175, % 24, %

19 19 Net sales target: FY2020: billion Net sales/foreign net sales ratio ( hundred million, %) Domestic net sales U.S. Asia Foreign net sales ratio Net sales: Increase net sales by expanding sales volume overseas and by recovering sales prices in Japan and overseas

20 20 Increase in overseas net sales related to building materials from 2009 Net sales for overseas building materials (Consolidated subsidiaries) (US$ thousand) 2.1-fold increase 1.8-fold increase

21 21 Increase in net sales related to overseas automobiles and motorcycles from 2009 Net sales for overseas automobiles and motorcycles (Consolidated subsidiaries) (US$ thousand) 8.8-fold increase 6.6-fold increase

22 22 Operating income target: 24.0 billion; Operating margin target: 13.7% Operating income/foreign operating income ratio ( hundred million, %) Overall Domestic operating income Japan U.S. Asia Foreign operating income ratio Trends in operating margin Overseas Operating income: Increase income by widening spread in Japan and overseas, and increase income by expanding operations overseas Operating margin: Maintain high profitability in Japan and increase margin overseas

23 23 ROE target: FY2020: 6.5% Shareholder return ratio (excluding share buybacks) target: 50% and over Shareholder return ratio (excluding share buybacks) and ROE (%) Shareholder return ratio (excluding share buybacks) Social contribution target: Provide approximately 0.5% of nonconsolidated net income after payment of dividends ( 30 million/year) for cultural, educational, medial care, sports, environmental protection, and other activities in local communities in Japan and overseas

24 24 II-3 Major Initiatives of the Fifth Medium-Term Management Plan

25 25 Major Initiatives (1) 1. Commitments in Japan i. Maintaining high profitability and further strengthening sales capabilities ii. Responding to the shortage of workers and increasing productivity Increasing production and clerical work efficiency using IoT and AI Adoption of IoT in production lines; Introduction of AI-based business software for accounting/personnel/administrative operations Replacement of facilities, and review of recruitment policy and work styles Promoting the acquisition of paid leave; Reducing overtime work Use of female human resources and foreigners

26 26z Capital Investment Plans for the Next 3 Years (Domestic: 13.0 billion; Overseas: 8.0 billion) Trends in the amount of capital investment and depreciation (hundred million yen) Capital investment (Domestic) Depreciation (Domestic) Capital investment (Overseas) Depreciation (Overseas) Major capital investment plans Japan: Sakai: Renewal of electrical substation facilities, renewal of SR; Tokyo: Renewal of slitter; Takuma: Renewal of rolling line; Nagoya: Renewal of 6-inch mill refining process/new installation of small-diameter tube mill; Maruichi Kohan Ltd.: Upgrade of warehouses at sales bases, etc. Overseas: The three U.S. companies: Renewal/establishment of 2-inch mill lines; MAC: Construction of warehouse; MOST: Construction of additional building; MMX and SUNSCO (HNI): Construction of additional building; KUMA: Enhancement of production capabilities; MPST in Philippines: Construction of a new plant; SUNSCO (HCM): Enhancement of cold-rolling facilities, etc.

27 27 Major Initiatives (2) 2) Commitments Overseas i. Three U.S. companies: Expanding operations using newly established or replaced facilities and by further strengthening marketing capabilities Leavitt/MAC: Enhancing quality and productivity of small-diameter pipes MOST: Begin production and sales of small-diameter pipes; Expand product lineup ii. SUNSCO(HCM): Keeping in the black is the foremost issue in the overseas business Reviewing unprofitable businesses; Strengthening domestic sales capabilities mainly for pipes that are unaffected by trade policies of export destinations; Reducing costs by improving facility operating rates and yield, and streamlining personnel in back-office divisions keeping in the black iii. Automobiles and motorcycles: Implementing capital investments and strengthening sales capabilities in line with the expanded production in each country iv. Procuring talented local human resources and further level enhancement. Facilitating the replacement of employees dispatched from the head office with local human resources v. Using overseas revenue to increase profit redistribution in Japan in the form of dividend, royalty, or the like

28 Three U.S. companies: Further strengthening marketing capabilities using replaced or newly established facilities i. Leavitt: Renewal of 2-inch mill line (operation scheduled to start in June 2018) ii. MAC: Construction of additional warehouse (4,600m 2 ) (to be completed in March 2018) Renewal of 2-inch mill line (to be completed in December 2018) iii. MOST: Construction of additional plant (3,250m 2 ) (to be completed in April 2018) and construction of additional 2-inch mill line (operation scheduled to start in October 2018) 28

29 SUNSCO (HCM) in Vietnam Keeping in the black is the foremost issue in the overseas business i. Reviewing unprofitable businesses ii. Strengthening domestic sales capabilities mainly for pipes that are unaffected by trade policies of export destinations iii. Reducing costs by improving facility operating rates and yield, and streamlining personnel in back-office divisions Keeping in the black No. 3: 2-inch mill Front: No. 1: 4-inch mill; Back: No. 2: 2-inch mill

30 Mexico, Vietnam (Hanoi), Philippines: Capital investments and construction of a new plant in line with the expanded production of automobiles and motorcycles i. MARUICHIMEX S.A. de C.V. (MMX) Construction of an additional cutting plant by acquiring an adjacent area: approx. 3,150m 2 ii. SUNSCO (HNI) MMX Construction of additional plant: approx. 2,700m 2 iii. Launch of Maruichi Philippines Steel Tube Inc. (MPST) in Philippines: operation scheduled to start in Spring 2019 Site area of the new plant:approx. 30,000m 2 ; Building: approx. 8,000m 2 MPST/planned site MPST Conceptual drawing 30 SUNSCO (HNI)

31 31 Using overseas revenue to increase profit redistribution in Japan in the form of dividend, royalty, or the like Dividends from overseas/royalty/sv Fee (US$ thousand) Royalty/SVFee Dividend FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2020

32 32 Major Initiatives (3) 3) Common Commitments in Japan and Overseas i. Increasing labor productivity per working hour and labor cost Domestic plants: Renewal of old facilities; Labor saving by automatic operation using IoT technology and optimum operation and maintenance Domestic administrative division: Efficient clerical work and labor saving by introducing new systems incorporating AI technology to accounting/personnel/administrative operations Overseas: Increasing productivity by enhancing the level of local human resources ii. Giving further consideration to the environment, enhancing energy efficiency, and strengthening safety measures (Reducing electricity consumption through a shift to LED lights; Chrome-free production, etc.) iii. Proactively considering M&A and other business investments in Japan and overseas

33 33 Major Initiatives (4) 4) Shareholder-Focused Policy and Social Contribution Policy i. Maintaining a high dividend payout ratio Continuing dividend policy of nonconsolidated ordinary income x (1- effective corporate tax rate) x 50% Returning the effect of the decrease in the effective corporate tax rate as dividends Maintain minimum dividend of 50 yen per share ii. Social Contribution:Continuing to provide approximately 0.5% of nonconsolidated net income after payment of dividends as social contribution Japan: Continuing contribution to the fields of culture, art, sports promotion, medical care, education, and natural environment protection Overseas/Emerging countries: Increasing contributions to poverty eradication, health care, medical care, and education promotion (Vietnam: Supporting the Asia Prevention of Blindness Association India: Offering scholarships to high school students in poor neighborhoods and creating jobs by expanding business)

34 34 III (Reference) Business Environment Surrounding the Group (1) Economic growth forecast by country Projections of economic growth rate Japan U.S. China India Vietnam Indonesia Philippines Mexico (Source: Prepared based on projections by IMF and others) The U.S. and emerging countries will maintain comparatively high growth rates. The Japanese economy will recover moderately. (However, the impact of a consumption tax hike is expected in 2020)

35 35 (2) Trends in domestic demand for steel Domestic production volume of crude steel / Demand for steel (10 thousand tons) Demand for steel Demand for steel in Japan is gradually decreasing over the long term Production volume of crude steel 2017 (projections) 2021 (projections) (Source: Prepared based on a report by The Japan Iron and Steel Federation, etc. Projections for 2021: Documents published by Mizuho Bank, Ltd.)

36 36 (3) Global steel market conditions US$/mt (Source: Prepared based on CRU Index report) The steel price will rise globally in line with the steel price hike in China

37 37 (4) Shift to overseas production by Japanese automobile manufacturers Automobile overseas production volume (10 thousand units) Domestic production Overseas production Overseas ratio (Source: Prepared based on a report by the Japan Automobile Manufacturers Association, Inc., etc.) Overseas production volume has nearly doubled from 2009

38 38 Maruichi Steel Tube Ltd. Disclaimer Plans and forward-looking statements herein are based on the Company s judgment drawn from currently available information. Please note that actual results may differ significantly from such plans and forward-looking statements due to various important factors.