NIPPON YAKIN KOGYO CO., LTD

Dear Shareholders

I would like to extend my heartfelt gratitude for the continued support and patronage of our shareholders. In presenting the Annual Report for our 142nd year (from April 1, 2023 to March 31, 2024), I would like to offer a few words.
In the fiscal year under review, Japan’s economy saw signs of recovery, including in private capital investment and inbound consumption, as the impact of the COVID-19 pandemic faded. However unstable conditions also persisted, such as delays in construction starts due to workforce shortages, rising material and other prices due to the depreciation of the yen, prolonged geopolitical risks in Europe and the Middle East, and the impact of the slowdown in China’s economy.
In the stainless and high nickel alloy industry, although there were signs of an increase in demand due to recovery in production of vehicles and other transportation equipment, overall demand remained sluggish given ongoing inventory adjustments in semiconductor manufacturing equipment and delays in construction starts.

President and
Representative Director
Shigemi Urata

With regard to the Group’s strategic field of highperformance alloys, sales remained strong in the environment and energy fields including flue gas desulfurization equipment for thermal power plants in India. Some progress in inventory adjustments was seen in durable consumer goods, including bimetals and sheathed heater materials for home appliances. Yet overall demand remained sluggish due to the postponement of projects given anticipation of further price declines on top of the fall in the price of nickel through the second half of the year and the slowdown in China’s economy.

In response to this type of external environment, the Group has steadily implemented measures set forth in the Medium-Term Management Plan 2024, while shifting to a production system aligned with demand, securing appropriate roll margins and implementing thorough cost reduction measures.

As a result, sales volume of the Company for the fiscal year under review decreased 23.3% year on year (a decrease of 15.1% in high-performance alloys and a decrease of 25.2% in stainless steel), and consolidated net sales were ¥180,341 million, a decrease of ¥18,983 million year on year. As for profits, consolidated operating profit was ¥20,010 million, a decrease of ¥9,245 million year on year, consolidated ordinary profit was ¥19,128 million, a decrease of ¥8,610 million year on year, and profit attributable to owners of parent was ¥13,565 million, a decrease of ¥6,138 million year on year.

On the subject of dividends of surplus, our basic policy is one of paying stable dividends while taking into account the investments necessary to maintain the business foundation and the outlook for business results, in addition to working to further improve the financial condition of the Company. With regard to the year-end dividend for the fiscal year under review, the dividend was ¥100 per share.

Accordingly, including the interim dividend with the record date of September 30, 2023 (¥100 per share), the annual dividend per share for the fiscal year totaled ¥200 per share. The business environment surrounding the Group remains uncertain given factors such as the prolonged fragmentation and turmoil in the global economy due to geopolitical risk in Europe and the Middle East, weak demand in the Group’s strategic field of high-performance alloys due to the slowdown in China’ s economy, the inf low and establishment of general stainless steel materials in the domestic market against the backdrop of overcapacity in East Asia, and delays in production and investment due to the rapidly transpiring workforce shortage in Japan.

The Group will steadily implement major initiatives in the Medium-Term Management Plan 2024 formulated last year, and will strive to strengthen its revenue base and financial base by working to expand sales of high-performance alloys in g rowth areas such as the envi ronment and decarbonization fields, and in target markets such as China and India, and by further increasing its cost competitiveness through diversification of raw materials, including expanded use of recycled materials.

We humbly request the continued support and cooperation of our shareholders as we move forward.

June 2024