News Release
May 8, 2020
Marubeni-Itochu Steel Inc.
Nihonbashi 1-chome Bldg.
4-1 Nihonbashi, 1-chome, Chuo-ku
Tokyo 103-8247
Results for FY2019
Marubeni-Itochu Steel Inc. (MISI; headquartered in Chuo-ku, Tokyo; Tatsuhiko Toshita,
President and CEO) is pleased to announce the following results for FY2019 (April 2019
through March 2020).
Economic Environment
The global economy during FY2019 saw markets such as the United States and someSoutheast Asian nations display generally robust trends. However, strengthened
protectionist trade policies in numerous countries, China’s sluggish economic growth(linked to trade friction with the U.S.), the slowdown in European economies as theUK’s Brexit withdrawal from the European Union approached and other factors
contributed to a lackluster performance overall. Toward the end of the fiscal year, thespread of the novel coronavirus, major declines in crude oil prices and other causes forconcern grew in scale.
After enjoying relatively stable progress supported by solid personal consumption
during the first half of the fiscal year, the Japanese economy suffered from the impact ofa series of natural disasters during the summer months, declining capital investment
demand as overseas economic conditions stagnated, a transitional period forconstruction demand and other worrisome developments. This led a more pronounced
deceleration during the fiscal year’s second half, with the novel coronavirus delivering atruly serious blow to the economy as the fiscal year ended.
Turning to the steel industry, worldwide crude steel production in 2019 (January toDecember) was tracked at 1.87 billion tons, up 3.4 percent from the previous year basedon World Steel Association figures. Among these results, crude steel production in
China rose 8.3 percent over the previous year to an all-time high of 996.34 million tons.
The heightened sense of global economic uncertainty was a key force in the slump in
market conditions for steel products through early autumn, followed by a temporarymarket upsurge. A further downward trend ensued, however, under the influence of thenovel coronavirus pandemic first reported in China.
In Japan, the steel market faced a slowdown in demand, and export growth suffered
as a result of the global supply glut. Reflecting this, output from domestic steel
manufacturers fell by 4.8 percent from the previous year to 99.28 million tons according
to Japan Iron and Steel Federation figures. This marked the third consecutive year-onyear decline for Japanese steel production.
Results of Operations for the Term under Review
In this harsh environment, MISI experienced decreases in both revenue and earnings
compared to the previous fiscal year. While the company’s construction material businessin the United States performed well during FY2019, negative developments affecting thefinal results included falling profits linked to issues such as sluggish market conditions inJapan and overseas as well as declining demand. Moves to reorganize or withdraw from
unprofitable businesses also had a negative effect.
In summary, the MISI Group’s consolidated financial settlement for FY2019 showeda total trading transaction volume of ¥2,408.6 billion, operating income of ¥43.8 billion,and profit attributable to owners of the parent of ¥22.3 billion.
Consolidated Statement of Income (Unaudited, IFRS basis)
MISI’s consolidated statement of income figures for FY2019 are as follows:(Billions of yen)
Category
Total volume of tradingtransactions

Results for
FY2019Results for
FY2018

Increase/decrease

2,408.6

2,437.3-28.7

Gross profit

135.0

135.9

-0.9

Operating income

43.8

45.3

-1.6

Profit before tax

34.8

37.6

-2.8

Profit attributable to ownersof the parent

22.3

24.2

-1.9

Comprehensive income
attributable to owners of theparent

6.2

19.3

-13.1

Please direct any inquiries about this news release to the Corporate Communications Team,Marubeni-Itochu Steel Inc. Tel: 03-5204-3342

02 2-0 1.20-.

1.

..1 2-Copyright© 2020 Marubeni-Itochu Steel Inc.

FY2019 Financial Results Summaryn Despite a strong performance by our U.S. construction material business, revenues declined due to factors such as sluggish
market conditions in both Japan and overseas and an overall decline in demand. Moves to reorganize or withdraw from
unprofitable businesses also prompted decreases in both revenue and earnings from the previous fiscal year.

FY2018FY2019Over previousfiscal year

Consolidated
net income¥ 24.2 billion¥ 22.3 billion− ¥1.9 billion

Total assets¥ 1.2 trillion¥ 1.1 trillion− ¥0.1 trillion

ROA

2.1%

1.9%

−0.2%

Ratio of shareholders’(*1)
equity

24.2%

26.0%

+1.8%

Net debt equity ratio
(*2)
(DER)

1.46 times

1.38 times−0.08 times

PL rate ¥/US$

110.91108.74

2.17

BS rate ¥/US$

110.99108.83

2.16

Factors affecting
financial results

ImpactSteel price declines
Export transactions increase
Domestic demand declines
Robust construction material
business in U.S.
North American rig countdecreases
Automobile unit production falls*1: Ratio of shareholders’ equity = equity attributable to owners of the parent/total assets*2: Net debt equity ratio (DER) = net interest-bearing liabilities/equity attributable to owners of the parentCopyright© 2020 Marubeni-Itochu Steel Inc.

Unprofitable businessreorganizations/withdrawals

2Summary of Group Companies
n The liquidation and asset sales of low-revenue businesses brought a decline in red-ink companies from 20 at the end ofFY2018 to 12 during FY2019.
n Considering the impact of the spread of COVID-19, strengthening the management of unprofitable businesses will remain akey theme into FY2020.
Number of Deficit GroupCompanies

No. of Companies

End of FY2019

Change from theEnd of FY2018

Percentage of Deficit Group
Companies

Change from theEnd of FY2018

End of FY2019

End of FY2019

Change from theEnd of FY2018

Domestic

20-0-0.0%-Overseas51

14

27.8%

3.7%

No. of subsidiaries

71

14

25.6%

2.7%

Domestic

14-1+17.1%+7.1%

Overseas26

27

726.9%23.1%

No. of associates and jointventures

40

28

620.0%15.7%

Total

111

312

810.8%

6.7%
3Copyright© 2020 Marubeni-Itochu Steel Inc.

Profit and Loss Statement(Unaudited, IFRS basis)
Operating Result

Total volume of trading transactions (*1)

(Unit: Millions of yen)
FY2019Results

FY2018Results

2,408,621

2,437,345

Change28,724

Gross profit

134,951

135,862

911

Selling, general and administrative expenses(90,239)(88,858)

1,381(956)(1,665)+709

Operating income (*1)

43,75645,339

1,583

Net interest expenses(8,809)(8,141)

668

Dividend income

1,532

1,442

+90

Gain (loss) on investments

(153)

(742)

+589

Gain (loss) on property, plant and equipment(162)(82)80717

93+624

Share of profits (losses) of associates and joint ventures(2,040)(272)

1,768

Profit before tax

34,841

37,637

2,796

Income taxes(9,218)(10,889)+1,671

Profit25,623

26,748

1,125

Profit attributable to owners of the parent

22,32024,204

1,884

Profit attributable to non-controlling interests

3,303

2,544

+759

Provision for doubtful accounts

Other non-operating income (loss)     
Despite the steel price decline, shrinking domestic demand,decreased North American rig count, falling automobile unit
production and other negatives, the robust U.S. construction
material business and increased export transactions helped
limit the loss in this category from the previous fiscal year to¥28.7 billion.

  
Impact included rising interest rates

Gain (loss) on investments
Affected by a reaction to previous fiscal year’s impairment lossof equity investment in affiliates, etc.
Other non-operating income (loss)
Impact of foreign exchange gains/losses, etc.
Share of profits (losses) of associates and joint ventures
Impact included lower performance of affiliates that adopted theoverseas equity method*1 Total volume of trading transactions includes all transactions involving the Company and its consolidated subsidiaries regardless of transaction type. Total volume of trading transactions
and operating income are presented in accordance with Japanese accounting practice for investors’ convenience and are not required by IFRS. Ordinary income reflecting the Japanese
GAAP basis has been provisionally calculated at ¥35.4 billion.
Copyright© 2020 Marubeni-Itochu Steel Inc.

4

Balance Sheet(Unaudited, IFRS basis)
Financial Position

FY2019 Results

FY2018 Results

900,755

1,013,184

112,429

Cash and cash equivalents

41,837

46,3954,558

Trade receivables

560,363637,729

77,366Inventories

263,462

289,805

26,343Other

35,09339,255

4,162

215,743

214,889+854

Property, plant and equipment

88,012

74,419+13,593

Intangible assets

15,837

18,031

2,194

Current assets

Non-current assets

Investments and other assets

ChangeComprehensive Income

111,894

122,439

10,545

1,116,498

1,228,073

111,575

Current liabilities

635,434

725,868

90,434

Trade payables

275,819346,225

70,406

Short-term debts

304,943

318,254

13,311Other54,672

61,3896,717

Non-current liabilities

165,226

180,657

15,431Long-term debts

137,522160,983

23,461

Other

27,704

19,674+8,030Total liabilities

800,660

906,525

105,865

Equity attributable to owners of the parent

290,790

297,300

6,510

Capital/Capital surplus

51,082

51,10220

Retained earnings

216,086

206,607+9,479

Accumulated other comprehensive income

23,622

39,591

15,96925,04824,248+800

Non-controlling interests
Total equity
Total liabilities and equity(Unit: Millions of yen)

(Unit: Millions of yen)

315,838321,548

5,710

1,116,498

1,228,073

111,575

FY2019Results

FY2018Results

ChangeProfit25,623

26,7481,125

Net unrealized gain (loss) on FVTOCI
Exchange differences on translating
foreign operations
Other(9,851)(7,398)2,453(5,649)

3,559

9,208

(777)

(1,418)+641

Comprehensive income

9,346

21,491

12,145

6,230

19,337

13,107

3,116

2,154

+962

Comprehensive income attributable toowners of the parent
Comprehensive income attributable tonon-controlling interests

Total assets¥1,116.5 billion (down ¥111.6 billion from the end of previousfiscal year)→ A contraction in trade receivables due to a decline in unit
prices and decreased demand, efforts to reduce inventories
Ratio of shareholders’ equity
26.0% (plus 1.8 percent from the end of previous fiscal year)→ Contribution by total asset downscaling
Net DER
1.38 times (down 0.08 from the end of previous fiscal year)→ Improvements through reductions in net interest-bearing
liabilities accompanying downscaled working capital

5Copyright© 2020 Marubeni-Itochu Steel Inc.