October 28, 2022
To whom it may concern,
Company name:
Representative:

Contact:

PACIFIC METALS CO., LTD.
Aoyama Masayuki, President
and Representative Director(Securities code: 5541
TSE Prime Market)
Matsuyama Terunobu,
Managing Executive Officerand Director(Telephone: +81-3-3201-6681)

Notice Concerning Recording of Operating Loss (Write-down of Inventories), Recording ofNon-operating Income (Share of Profit of Entities Accounted for Using Equity Method),
Revisions to Financial Results Forecast, and Revisions to Dividend Forecast
PACIFIC METALS CO., LTD. (the “Company”) hereby announces that it has recorded write-down of
inventories under operating losses and share of profit of entities accounted for using the equity method under
non-operating income for the six months ended September 30, 2022 (April 1, 2022 through September 30,2022). The Company also announces that, in light of the most recent performance trend, it has decided to revise
the financial results forecast for the six months ended September 30, 2022 (April 1, 2022 through September 30,2022) and the financial results forecast for the fiscal year ending March 31, 2023 (April 1, 2022 through March31, 2023) announced on July 29, 2022.
● Details of operating loss (write-down of inventories)
In the nickel business, the LME nickel price applicable to the Company is higher than that of nickel pigiron, which is mass-produced overseas and supplied to the market, and producers of stainless steel are
shifting some of their procurement to nickel pig iron, which has a price advantage including with respect toproduction costs. Therefore, in light of this environment, the selling prices of the Company’s products are set
at the price level partially based on the price of nickel pig iron. In addition, with regard to inventories, the rateof the increase in production costs has been increasing because of sharp rises in prices of raw materials andfuel used in the manufacturing process and the cost of electricity and other factors, which collectively have agreat impact on the book value of inventories. As a result, a decline in profitability of inventories(merchandise and finished goods, work in process, raw materials and supplies) has been recognized, and theCompany expects to record a write-down of inventories amounting to 5,963 million yen under cost of sales
for the six months ended September 30, 2022..
● Details of non-operating income (share of profit of entities accounted for using the equity method)
The Company plans to record share of profit of entities accounted for using the equity method of 3,699
million yen for the six months ended September 30, 2022 mainly from the entities accounted for using theequity method in the Philippines, supported primarily by strong demand.

1● Revisions to financial results forecast
1. Revisions to consolidated financial results forecast for the six months ended September 30, 2022 (April 1,2022 through September 30, 2022)
ProfitBasic
OperatingOrdinary
attributable toNet sales
earnings perprofit
profitowners ofshareparentMillion yen

Million yen

Million yen

Million yen

Yen(Announced on July 29, 2022)

25,068

(78)

2,705

2,294

117.62

Revised forecast (B)17,642(4,464)

605

229

11.75

Change (B–A)(7,425)(4,386)(2,099)(2,064)

Change (%)(Reference) Actual results for thesix months ended September 30,2021(29.6)

─(77.6)(90.0)

24,098952

3,9953,405

Previously announced forecast (A)

174.61

2. Revisions to consolidated financial results forecast for the fiscal year ending March 31, 2023 (April 1,2022 through March 31, 2023)
ProfitBasic
Operating
Ordinary
attributable toNet sales
earnings per
profitprofitowners ofshareparentMillion yen

Million yen

Million yen

Million yen

Yen(Announced on July 29, 2022)

60,744(1,516)

2,508

2,167

111.11

Revised forecast (B)35,548(9,997)(3,493)(3,711)(190.28)

Change (B–A)(25,196)(8,481)(6,001)(5,878)(41.5)

───

57,1294,806

12,99911,368Previously announced forecast (A)Change (%)(Reference) Actual results for theprevious fiscal year ended March
31, 2022

582.93

3. Reason for revisions
With regard to the consolidated financial results forecast, the economic outlook remains highly
uncertain as COVID-19 and the situation in Ukraine continue to affect the domestic and overseas
economies.
On the volume front, the Company expects a challenging business environment with results expected tofall short of the previously announced forecast. In addition to the impact of the molten material leakage
accident at an electric furnace that occurred in one of the three ferronickel manufacturing facilities justbefore the end of the previous fiscal year, this is because the Company changed its policy with theobjective of strategically controlling volume to a certain level so as not to impair profitability. Thisdecision reflects easing of the nickel supply-demand balance due to mounting uncertainty triggered by
the impact of restriction of economic activities and the sluggish real estate market in China attributable to
the resurgence of COVID-19 in that country, concerns about the protracted situation in Ukraine, and otherfactors. It was also taken because producers of stainless steel are shifting some of their procurement tonickel pig iron, which has a price advantage, including with respect to production costs, and the price ofnickel pig iron is also affecting the selling price of the Company’s products. Regarding restoration of theelectric furnace which has suspended operation owing to the leakage accident, resumption of operation,
which was expected to be in the third quarter of the fiscal year ending March 31, 2023, has beenpostponed until the fiscal year ending March 31, 2024, because of the shift of the Company’s policy tovolume control, as mentioned above. While closely monitoring the business environment, the Company
will resume operation of the said electric furnace once the volume control policy is lifted. During the third2

quarter of the fiscal year ending March 31, 2023, production facilities are expected to be repaired to astate such that resumption of their operation will be possible.
On the selling price front, the LME nickel price applicable to the Company, which is used as anindicator for determining the selling price of the Company’s ferronickel products, has been relatively
high. On the other hand, the price of nickel pig iron, which has a price advantage, is affecting the selling
price of the Company’s products. Therefore, the Company also refers to the price of nickel pig iron in
addition to the applicable LME nickel price and the applicable exchange rate in setting the selling price of
the Company’s products, and thus an impact on net sales is expected.
On the procurement front, while the volume of nickel ore and other materials necessary to meetproduction needs is expected to be secured, prices of nickel ore remain high. Moreover, the rate of theincrease in production costs is accelerating because of sharp rises in prices of raw materials and fuel usedin the manufacturing process and the cost of electricity and other factors. These factors are expected tohave a significant impact on profit.
Although the impacts of COVID-19 and the situation in Ukraine are expected to continue during thefiscal year ending March 31, 2023, response measures to address such business environment areconsistent with activities to be undertaken under the basic policies set forth in the Group’s Medium-termManagement Plan, and the Company will continue to strongly push forward with these measures.
Accordingly, the consolidated financial results forecast has been revised as described in the previouspage. For the underlying assumptions, please refer to “(Reference) Revisions to underlyingassumptions.”● Revisions to dividend forecast
1. Details of revisions
Annual dividendsFirstquarter-end

Secondquarter-end

Thirdquarter-end

Previous forecast(Announced on July 29, 2022)

Yen

Yen

Yen

YenYen─0.00

─35.0035.00

Revised forecast───0.000.00

Actual results for the current fiscalyear─Actual results for the previous fiscalyear (Fiscal year ended March 31,2022)

──

155.00175.00Year-end

Total

0.00

20.00

2. Reason for revisions
With regard to dividends of surplus, the Company has positioned the return of profits to shareholders as
one of the important management issues in its Medium-term Management Plan. The Company will aim toachieve a consolidated dividend payout ratio of 30% while enhancing and strengthening its corporate
structure.
As a result of revisions to the consolidated financial results forecast, the Company has revised thedividend forecast to 0 yen for the full year, with a year-end dividend of 0 yen per share, in accordance withthe above dividend policy.
(Note) The forward-looking statements including the financial results forecast contained herein are based on information
currently available to the Company, as well as certain assumptions deemed reasonable by the Company. Actual
results may differ significantly from these forecasts due to various factors.

3

(Reference) Revisions to underlying assumptions
Sales volume (t)Production volume (t)Applicable LME nickel priceApplicable exchange rate($/lb)

(¥/$)

1st

2nd

Full

1st

2nd

Full

1st

2nd

Full

1st

2nd

Full

half

half

year

half

half

year

half

half

year

half

half

year

Previously
announced
forecast(July 29, 2022)

8,516

11,98420,500

9,008

11,573

20,581

11.92

11.00

11.38

122.46119.03120.46

Revisedforecast

5,668

7,332

13,000

8,079

5,857

13,936

12.12

10.03

10.94

131.49134.12132.98(Reference)
Actual results
for the previous
fiscal year
ended March
31, 2022

12,957

14,10327,06011,874

14,37526,249

8.12

9.33

8.75

109.16113.97111.674