Annual Report

Message from the President

Image: Hisashi Kubota President

Hisashi Kubota
President

I would like to extend my heartfelt gratitude for the continued support and patronage of our shareholders. In presenting the Annual Report for our 139th year (from April 1, 2020 to March 31, 2021), I would like to offer a few words.

In the fiscal year under review, the Japanese economy was weak throughout the period as result of the spread of novel coronavirus infectious disease (hereinafter, “COVID-19”).

Economic activity in Japan was severely affected by two successive declarations of a state of emergency, with capital investment by domestic private-sector companies and consumer spending recording significant declines.

In the stainless and specialty steel industry, the first half saw demand fall considerably in both the consumer and industrial sector applications, but in the second half there was a pickup in capital investment mainly in the automobile-related and industrial machinery fields, leading to a moderate recovery in demand. With regard to the Group’s strategic field of high-performance alloys, in China, which bounced back from COVID-19 relatively early, demand for certain applications (such as solar photovoltaic power) recovered rapidly. In addition, we saw signs of new demand in areas related to decarbonization, such as hydrogen energy, centered on Europe. However, the spread of COVID-19 led to the prolongation of lockdowns in various countries, primarily in Europe, resulting in a lull in demand for large projects overseas, particularly those related to materials used in flue gas desulfurization systems and SOx scrubbers for ships, which have been mainstay products for the Company, as well as materials for applications in the oil and gas industry.

In addition to taking steps to ensure that it captured the movement towards a partial recovery in demand, the Group worked to secure roll margins commensurate with raw material prices by enhancing productivity and reducing lead times for high-performance alloys, while maintaining a level of production appropriate to overall demand, as well as by implementing thoroughgoing cost-reduction measures.

As a result, sales volume of the Company for the fiscal year under review decreased 18.0% year on year (a decrease of 16.8% in high-performance alloys and a decrease of 17.9% in standard grade stainless steel), net sales were ¥112,482 million, a decrease of ¥23,891 million year on year, ordinary profit was ¥4,990 million, a decrease of ¥1,352 million year on year, and profit attributable to owners of parent was ¥3,764 million, a decrease of ¥1,561 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 will be ¥30 per share. Accordingly, including the interim dividend with the record date of September 30, 2020 (¥15 per share), the annual dividend per share for the fiscal year will total ¥45 per share.

With regard to the stainless and specialty steel industry going forward, the domestic standard grade stainless steel market is in the process of recovering from the downturn of the first half of FY2021, but we assume that this will not develop into a full-scale recovery in demand until FY2023 and beyond. In relation to structural changes caused by the penetration of the domestic market by imported materials, we recognize that this is a trend that we must continue to monitor.

Conversely, in the Company’s strategic field of highperformance alloys, we expect robust overseas demand in the medium to long term, despite the structural change in demand in the environmental and energy industry as part of the global shift to carbon neutrality. Taking into account the changes in these markets, the Company will follow the three-year Medium-Term Management Plan 2021, which began in FY2021, steadily executing strategic capital investments, while reinforcing sales capabilities, moving forward with various measures, including cost reductions, and working to strengthen profitability.

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

June 2021

Hisashi Kubota

Hisashi Kubota
President

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