Main

PACIFIC METALS CO., LTD.
Final Results Briefing Session for Fiscal Year Ended
March 31, 2023
May 17, 2023

PACIFIC METALS Website:
https://www.pacific-metals.co.jp/en/

Inquiries:
General Administration Dept. (IR Group) TEL: +81-3-3201-6681

Table of Contents

2

1. Business Environment(1) Trends in LME nickel prices and nickel inventory volumes(2) Outlook for global stainless steel production and nickel supply and demand(3) Outlook for stainless steel production and nickel supply and demand by region(4) Trend in nickel pig iron (NPI) production

4
5
6
7

2. Full-Year Financial Results for Fiscal Year Ended March 31, 2023
(1) Full-year financial results (Summary)(2) Full-year financial results (Topics)(3) Sales results by country(4) Consolidated ordinary profit and loss analysis

9
10
11
12

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024
(1) Full-year financial results forecast (Summary)(2) Full-year financial results forecast (Topics)(3) Trend in sales destination by country(4) Outlook for sales by country(5) Consolidated ordinary profit and loss analysis

14
15
16
17
18

4. Progress of Medium-term Business Plan PAMCO-2024(1) Summary of progress on major priority measures(2) Progress on investment plan(3) Ore procurement

20
22
23

(Reference) Medium-term Business Plan Numerical Data24

3

1. Business Environment

4

1. Business Environment(1) Trends in LME nickel prices and nickel inventory volumes
LME nickel price(Unit: $/t)

LME nickel inventory

SHFE nickel inventory* Surveyed by Pacific Metals
LME/SHFE nickel inventory(Unit: 1,000 Ni tons)

LME nickel price

40,000600

Indonesia banned nickel ore
exports, and the Ukraine
situation destabilized

Due to the situation
related to Russia andUkraine500

30,000Indonesia announced thebringing forward of thereintroduction of a nickelore export ban

Moves of reopening
economic activities incountries expanded in some
areas

400

20,000300
Indonesia relaxed thenickel ore export ban withconditions

200
10,000100

Mainly due to USChina tradetensions

Steady demand forstainless steel in China

Widespread
COVID-19 infections

0

0
2014

Trend inoperatingresults2015

Fiscal year ended
March 31, 2014

2016

Fiscal year ended
March 31, 2015

Fiscal year ended
March 31, 2016

2017

2018

Fiscal year ended
March 31, 20172019

Fiscal year ended
March 31, 20182020

Fiscal year ended
March 31, 20192021

Fiscal year ended
March 31, 2020

2022

Fiscal year ended
March 31, 2021

2023

Fiscal year ended
March 31, 2022

Fiscal year
ended March 31,
2023

Net sales(million yen)

56,40861,22547,64938,697

41,21049,062

44,13332,217

57,12934,852

Operatingprofit(million yen)

-4,079-7,787-15,357-3,070-3,239176-1,879

-493

4,806

-12,588

Ordinary
profit(million yen)

-1,838-91-12,283

-515

-203

3,451

972

3,344

12,999-4,9605

1. Business Environment(2) Outlook for global stainless steel production and nickel supply and demand* Surveyed by Pacific Metals

Nickel supply and demand(Unit: 1,000 Ni tons)

Stainless steel production(Unit: 1,000 tons)

4,200

80,0004,000

For
nonSUS
37%

3,800
3,600

75,000
Ni user(2023)

For
SUS
63%

70,00065,0003,400

60,0003,200

55,0003,000

50,0002,800

45,0002,600

40,0002,400

35,0002,200

30,0002,000

25,0001,800

20,000

1,600
2013

2014

2015

2016

2017

Nickel supply

2018

2019

Nickel demand

2020

2021

2022

2023

Stainless steel production

2024

15,0002025

6

1. Business Environment(3) Outlook for stainless steel production and nickel supply and demand by region* Survey by Pacific Metals
Outlook for stainless steel production

Other
Indonesia
China
TaiwanSouth Korea
US
India
EuropeJapan

60,400(Unit: 1,000 tons)

65,500
900
5,600

2,500
5,300

Outlook for nickel demand
Other
Indonesia
China
TaiwanSouth Korea
US
India
EuropeJapan(Unit: 1,000 Ni tons)

3,800
90

3,280

420

90

Outlook for nickel supply(Unit: 1,000 Ni tons)
Other
AfricaEuropeNorth America and Latin America
Russia and the Middle East
Oceania
Indonesia (NPI)
3,920
China (NPI)
China
Asia (excluding China)
80

3,420

210

80
190

270
120
180

250
110
150

400

1,290

38,20033,000

2,300

1,180

1,920
260

900
2,300
2,100
3,900

900
2,500
2,200
4,300

7,500

7,800

300
40
80
140
70
350

40
90
170
80

740
620

400
540

2,900

3,100

190

210

2023

2025

2023

2025

2023

770

2025

7

1. Business Environment(4) Trend in nickel pig iron (NPI) production* Survey by Pacific Metals

Nickel pig iron (NPI) production
Production volume(Unit: 1,000 Ni tons)

Nickel ore procurement by China

LME nickel price(Unit:$/t)

1,600

40,0001,400

Procurement volume(Unit: 1,000 tons)

LME nickel price(Unit:$/t)

80,00040,00070,0001,200

30,0001,000

60,00030,00050,000800

20,000600

40,00020,00030,000400

10,00020,00010,00010,000

200

0

0

0

0

(Year)

NPI in China

NPI in Indonesia

LME nickel price(Year)

Philippines

Indonesia

Others

LME nickel price8

2. Full-Year Financial Results for Fiscal
Year Ended March 31, 2023

9

2. Full-Year Financial Results for Fiscal Year Ended March 31, 2023
(1) Full-year financial results (Summary)
Results for the fiscal
year ended
March 31, 2022

Forecast for the fiscal
year ended
March 31, 2023
(Announced on Feb. 8)

Results for the fiscal
year ended
March 31, 2023

AmountProfit rate

AmountProfit rate

AmountProfit rate

(million yen)(%)(million yen)(%)(million yen)(%)

Year-on-year(%)

Vs
Forecast
announced
on Feb. 8(%)

Net sales

57,129―35,318―34,852

―

-39.0

-1.3

Operating profit (loss)

4,806

8.4

-9,736-27.6-12,588(*)

-36.1

―

―

Ordinary profit (loss)

12,99922.8-2,664-7.5-4,960(*)

-14.2

―

―

Profit (loss) attributable toowner of parent

11,36819.9-3,061-8.7-5,026(*)

-14.4

―

―

(Investment)

686

―

―

―

1,232

―

79.6

―

(Depreciation)

256

―

―

―

289

―

12.9

―

(*) Profit (loss) excluding inventory write-down of 8.9 billion yen (results for the fiscal year ended March 31, 2023):
operating profit (loss): -3.6 billion yen, ordinary profit: 4.0 billion yen, profit: 3.9 billion yen

Results for the fiscal
year ended
March 31, 2022

Forecast for the fiscal
year ended
March 31, 2023
(Announced on Feb. 8)

Results for the fiscal
year ended
March 31, 2023

Year-on-year(%)

Vs
Forecast
announced
on Feb. 8(%)

Production volume (Ni t)

26,24913,484

13,380

-49.0

-0.8

Sales volume (Ni t)

27,06012,50012,393

-54.2

-0.9

Applicable LME nickel price (US$/t)

19,29025,30925,507[Applicable LME nickel price(US$/lb.)]

32.2

0.8

[ 8.75 ][ 11.48 ][ 11.57 ]Applicable exchange rate (¥/US$)

111.67135.53135.2621.1-0.2

2. Full-Year Financial Results for Fiscal Year Ended March 31, 2023

10(2) Full-year financial results (Topics)
1) On the procurement front• Nickel ore price Procurement prices remained high• Energy costs (raw fuel/electricity) The scope of production cost increases
expanded due to surging prices caused by
the global rise in resource prices3) On the production front (regarding moltenmaterial leakage accident at an electric furnace)•

Resumption of operation of the affected
production facility (1 unit) Operation is projected to resume in the fiscal
year ending March 31, 2024
 While keeping an eye on the businessenvironment, we plan to resume operation at
the stage when the volume reduction policy
has been lifted

2) On the sales volume front Impact from the molten material leakage
accident at an electric furnace
 Slack nickel supply and demand Overseas stainless steel producers are
partially shifting procurement to nickel pig iron
(NPI), which is seen as having a priceadvantage even when production costs areincluded4) On the selling price front• Impact from nickel pig iron (NPI) price Selling price levels are set by referring in partto nickel pig iron prices along with ourapplicable LME nickel price and ourapplicable exchange rate, and the selling
environment is rapidly becoming difficult, withsluggish income growth2. Full-Year Financial Results for Fiscal Year Ended March 31, 2023
(3) Sales results by country

11(Unit: Ni tons)

Results of previous year

Results of current year
27,060

India

1,854

China

TaiwanSouth Korea

7,162

Japan

14,103
12,957
636

6,236

1,218
3,228

3,934

1,509

3,480
2,756
604

905

5,028

5,273

Results for 1H ofthe fiscal year ended
March 31, 2022

Moving to strategic system of decrease inproduction due to factors such as slack nickel
supply and demand and overseas stainlesssteel producers partially shifting procurement tonickel pig iron, which is viewed as having a
price advantage

Results for 2H ofthe fiscal year ended
March 31, 2022

10,300Results forthe fiscal year ended
March 31, 2022

5,668
151
101
1,203
802

6,725
0

3,412

2,879

Results for 1H ofthe fiscal year ended
March 31, 2023

Results for 2H ofthe fiscal year ended
March 31, 2023

12,500151

12,393
151

2,705

2,689

1,656
802

1,658
1,605

2,588

455
803

7,187

Forecast for
the fiscal year ended
March 31, 2023
(Announced on Feb. 8)

6,290

Results forthe fiscal year ended
March 31, 2023

12

2. Full-Year Financial Results for Fiscal Year Ended March 31, 2023
(4) Consolidated ordinary profit and loss analysis-17.9 billion yen(Unit: Billion yen)

18.0
16.0
14.0

12.0
10.0

-13.3

8.0
6.0
4.0

Results forthe fiscal year
ended
March 31, 2023
-5.0 billion yen

+25.9

2.0
0.0
-2.0
-4.0

Results forthe fiscal year
ended
March 31, 2022
13.0 billion yen

-8.9

-30.4

-0.0

-6.0

+1.1

+0.2

-0.8

-8.0

-10.0
-12.0

Impact of decreased income due to volume
reduction and effect of nickel pig iron on our
selling price and price increase due tosurging raw fuel prices

+7.5

-14.0
-16.0
-18.0

+0.8
Results for the
fiscal year
ended March
31, 2022

Sales volume

LME price, etc. Exchange rates

Factors in ferronickel sales-22.1 billion yen

Sales volume

Raw material
prices, etc.

Evaluation of
inventory

Ferronickel
depreciation

Factors in ferronickel cost of sales+3.7 billion yen

Ferronickel
selling generalandadministrative
expenses

Equity gains

Other+0.5 billion yen

Other

Results for the
fiscal year
ended March
31, 2023

13

3. Full-Year Financial Results Forecast for
the Fiscal Year Ending March 31, 2024

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

14(1) Full-year financial results forecast (Summary)
Results for the fiscal year ended
March 31, 2023

Forecast for the fiscal year ending
March 31, 2024

AmountProfit rate

AmountProfit rate

(million yen)(%)(million yen)(%)

Year-on-year (%)

Net sales

34,852―

20,899―-40.0

Operating profit (loss)-12,588-36.1-7,299-34.9―

Ordinary profit (loss)-4,960-14.2-4,569-21.9―Profit attributable to ownerof parent (loss)-5,026-14.4-4,778-22.9―(Investment)

1,232

―

2,536

―

105.8

(Depreciation)

289

―

371

―

28.4

Results for the fiscal year ended
March 31, 2023
1st half

2nd half

Full year

Forecast for the fiscal year ending
March 31, 2024
Forecast for the
1st half

Forecast for the
2nd half

Forecast for thefull year

Year-on-year(%)

Production volume (Ni t)

8,079

5,301

13,380

3,543

3,540

7,083

-47.1

Sales volume (Ni t)

5,668

6,725

12,393

3,450

4,750

8,200

-33.8

Applicable LME nickel price (US$/t)

26,72024,49325,50723,54522,046

22,686[Applicable LME nickel price(US$/lb.)][ 12.12 ][ 11.11 ][ 11.57 ][ 10.68 ][ 10.00 ][ 10.29 ]Applicable exchange rate (¥/US$)

131.49138.44135.26134.06134.10134.08

-11.1

-0.9

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

15(2) Full-year financial results forecast (Topics)
1) On the production and sales volume
front•

Maintaining policy of strategic volume
reduction
 Slack nickel supply and demand Stainless steel producers are partially shifting
procurement to nickel pig iron (NPI), which
has a price advantage, including production
costs3) On the procurement price front• Rising energy costs
 Nickel ore prices and raw fuel costs andelectricity prices, driven by the global rise inresource prices, remain at a high level This is expected to have a significant impact
on the price front2) On the selling price front• Impact from nickel pig iron (NPI) price We set selling price level based on the LME
nickel price applicable to the Company, theexchange rate applicable to the Company,
and in addition, the nickel pig iron price asa partial reference3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

(3) Trend in sales destination by country[China]Production remains flat due tosoftening demand[Japan]Trend in production rapidlychange from recovery to
downward[India]Surge in transportation costs has
paused and production isincreasing, but demand is mainly for
NPI[South Korea]
Major mills have finished recovering andproduction is heading toward recovery[Taiwan]The system of decrease in production iscontinuing, and ferronickel demand istrending downward16

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

(4) Outlook for sales by country(Unit: Ni tons)

Current fiscal year results

Forecast for the next year announced on May 9

India

12,393

China

151

TaiwanSouth Korea

2,689

Japan

Going forward, the outlook does notsee any trend toward changes in thebusiness environment from the fiscal
year ended March 2023.
The reduced volume system will bemaintained.
8,200

1,658
6,725
5,668
151
101

0

0
1,200
1,605
600
0

2,588

1,203

802

455
803

3,412

Results for 1H ofthe fiscal year ended
March 31, 2023

17

6,290

3,450
0
600
200
0

4,750
0
600
400
0

6,400

3,750
2,879

Results for 2H ofthe fiscal year ended
March 31, 2023

2,650

Results forthe fiscal year ended
March 31, 2023

Forecast for 1H ofthe fiscal year ending
March 31, 2024
(Announced on May 9)

Forecast for 2H ofthe fiscal year ending
March 31, 2024
(Announced on May 9)

Forecast for
the fiscal year ending
March 31, 2024
(Announced on May 9)

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2024

18(5) Consolidated ordinary profit and loss analysis(Unit: Billion yen)

+0.4 billion yen

2.0
-0.0

0.0

-0.0
-4.4

-2.0
-4.0
-6.0

-8.0

-0.5
+11.4

Results forthe fiscal year
ended
March 31, 2023
-5.0 billion yen

Forecast for
the fiscal year
endingMarch 31, 2024
-4.6 billion yen

-3.8

-10.0
-11.5

Along with reduced volume and the effect ofnickel pig iron on our selling price, a reversalof inventory valuation due to factors such as
reduced inventory is expected.
The equity gain forecast is conservative due
in part to the uncertain environment.

-12.0
+11.9

-14.0

-16.0
-2.4

-18.0

-0.2

-20.0

Results for the
fiscal year
ended March
31, 2023

Sales volume

LME price, etc. Exchange rates

Factors in ferronickel sales-14.1 billion yen

Sales volume

Raw material
prices, etc.

Evaluation of
inventory

Ferronickel
depreciation

Factors in ferronickel cost of sales+19.4 billion yen

Ferronickel
selling generalandadministrative
expenses

Equity gains

Other-4.9 billion yen

Other

Forecast for the
fiscal year
ending March
31, 2024

19

4. Progress of Medium-term Business
Plan PAMCO-2024

4. Progress of Medium-term Business Plan PAMCO-2024

20(1) Summary of progress on major priority measures
Progress Status/Future Initiatives
Acceleration of consideration of
expansion into overseas
smelting business• Promotion of overseas smelting projects and start-up of production

Creation of new businesses that
contribute to society• Realization of production and sales of raw materials for LIB materials

 With the aim of participating in overseas smelting business, we continue to hold discussions withlocal partners in Indonesia

 We continue to consider commercialization with a view to collaborating with other companies• Development of LIB recycling technology
 We have begun joint R&D with Emulsion Flow Technologies Ltd.

• Promotion of new metal smelting projects (see next page for details)
Diversification of business inJapan to contribute to a
recycling-oriented society• Restructuring of recycling business

Enhancement of corporate value
by addressing sustainability
issues• Reduction of GHG emissions

 We are currently evaluating steelmaking raw materials, etc. obtained in experimental trials withthe aim of manufacturing and selling raw materials for steelmaking and battery materials using
byproducts generated by other companies
 We are currently conducting initiatives for recycling based on
precious metal extraction from urban mining resources using
our melting technology and evaluating extracted precious metals
 We continue to consider an electrification process using
microwaves with the aim of breaking away from fossil fuels(excluding coal required for reduction) in rotary kiln operation in the Fe-Ni manufacturing
calcination process We are verifying the removal of crystalline water from ore using microwave heating in bench tests
 We are considering moving to tests covering a wider scope (investment)• Issuing of integrated report Issued in February 2023 (* For details, refer to the “Sustainability” section of our website.)4. Progress of Medium-term Business Plan PAMCO-2024

21(1) Summary of progress on major priority measures
Progress Status/Future Initiatives
Creation of new businesses that
contribute to society•

Promotion of new metal smelting projects

With the environment and society as our first consideration, we are considering new
metal smelting projects based on ocean floor resources Non-binding MOU with The Metals Company
We have concluded a non-binding MOU with The Metals Company (TMC), since it isscheduled to start commercial production in a polymetallic nodule in the Clarion-Clipperton
Zone at the end of 2024, in conjunction with which it is considering outsourcing smelting to
our Hachinohe Works from 2025 onward.
[Reasons for concluding MOU]
 To realize smelting of a polymetallic nodule with high added value, which may be
expected to improve the value of the Hachinohe Works.
 To handle polymetallic nodule smelting from 2025 onward, and we are evaluating thepossibility of producing intermediate materials for LIB and steelmaking raw materials.
 The two companies aim to conclude a binding MOU (memorandum of understanding)for smelting outsourcing in 2023.
[Matters agreed in the current MOU]
 Inspection and testing will be carried out to verify the Hachinohe Works’ production
equipment capacity and identify additional equipment requirements.
 We will consider and evaluate additional equipment for manufacturing matte products
from Ni-Cu-Co alloy.

With the environment and society as our first consideration, we will
pursue this initiative while monitoring and respecting trends atvarious organizations.

22

4. Progress of Medium-term Business Plan PAMCO-2024(2) Progress on investment plan
(Million yen)

PAMCO-2024
Forecast for the fiscal
year ended March 31,
2023

Results for the fiscal
year ended March
31, 2023

1) Capital investment

1,495

1,126

-369

472

Domestic business

53

70

17

0

2) ii) Overseas business,resources

5,506(*)

31-5,475

2,007

35

5

-30

57

7,089

1,232

-5,857

2,536

2) i)

2) iii) R&D investment
Total

Reason for differences between
PAMCO-2024 forecast for the
fiscal year ended March 31,
2023, and results for the fiscal
year ended March 31, 2023

Forecast for the
fiscalyear ending March
31, 2024

Change• The main reason is that, with regard to “2) ii) Overseas business,resources(*),” investment was postponed because the majority shareholder ofan overseas smelting project changed due to a restructuring.
• Going forward, we plan to resume discussions aimed at realizing the projectwith the new majority shareholder, and we expect to decide the timing ofinvestment based on the progress status.

23

4. Progress of Medium-term Business Plan PAMCO-2024(3) Ore procurement
1) Status of conclusion of long-term contracts
Other party in long-term contracts

Fiscal year ended
March 31, 2022

 Rio Tuba Nickel Mining Corporation (36% stake held by Pacific Metals)

Prior contract
period Taganito Mining Corporation (33.5% stake held by Pacific Metals)

Prior contract
period Cagdianao Mining Corporation

Prior contract
period MKM (1)Contract period: Jan. 2014 to Dec. 2023 (10 years)

 MKM (2)Contract period: Jan. 2016 to Dec. 2025 (10 years)

 Montagna SARL

Contract period: Apr. 2016 to Mar. 2026 (10 years)

Fiscal year ending
March 31, 2024

Fiscal year ending
March 31, 2025

Fiscal year ending
March 31, 2026

Contract period: Jan. 2022 to Dec. 2026 (5 years)

Renewed The Philippines

Fiscal year ended
March 31, 2023

Contract period: Jan. 2022 to Dec. 2026 (5 years)
Contract period: Jan. 2022 to Dec. 2026 (5 years)

 New Caledonia

3) Status of procurement

2) Procurement ratio•
Period covered by PAMCO-2024
100%

80%



60%




40%
20%
0%
Results for the fiscal
year ended March 31,
2022

Results for the fiscal
year ended March 31,
2023

New Caledonia

Forecast for the fiscal
year ending March 31,
2024

The Philippines

PAMCO-2024
Forecast for the fiscal
year ending March 31,
2025

•


Environment surrounding nickel ore procurement
The export ban on Indonesian ore came in effect in January
2014.
The export ban was relaxed temporarily between January
2017 and December 2019.
Afterwards, the export ban was reintroduced in January 2020.
Since then, ore supply and demand has remained tight.
The Company’s ore procurement policy
As an ongoing ore procurement policy, the Company ispushing forward with the expansion of the procurement ofores from New Caledonia.

24(Reference) Medium-term Business Plan Numerical Data
Fiscal year ended
March 31, 2023
20,81029,03728,454

Sales volume (Ni t)

20,50027,50027,50021,451 [ 9.73 ]

19,379 [ 8.79 ]19,290 [ 8.75 ]Applicable exchange rate (¥/US$)

111.05111.06111.07

Net sales (million yen)

50,21060,95860,801

Operating profit (million yen)

925

225

1,809

Ordinary profit (million yen)

3,844

2,822

4,549

Profit attributable to owners of parent (million yen)

3,513

2,415

4,058

Total assets (million yen)

89,59491,934

97,914

Net assets (million yen)

81,02682,41685,797

Investment (million yen)

7,089

1,869

9,484

Depreciation (million yen)

314

402

536

Results for the fiscal
year ended March 31,
2023

Forecast for the fiscal
year ending March 31,
2024

Production volume (Ni t)

13,380

7,083

Sales volume (Ni t)

12,3938,200

25,507 [ 11.57 ]22,686 [ 10.29 ]Applicable exchange rate (¥/US$)

135.26134.08Net sales (million yen)

34,852

20,899Operating profit (loss) (million yen)

-12,588-7,299Ordinary profit (loss) (million yen)

-4,960-4,569Profit (loss) attributable to owner of parent (million
yen)-5,026-4,778

Total assets (million yen)

78,82573,893

Net assets (million yen)

72,034

66,963

Investment (million yen)

1,232

2,536

Depreciation (million yen)

289

371

Applicable LME nickel price (US$/t) [US$/lb.]

Results and forecasts
for the PAMCO-2024
periodFiscal year ending
March 31, 2025

Production volume (Ni t)

Applicable LME nickel price (US$/t) [US$/lb.]

Planned figures for the
PAMCO-2024 period

Fiscal year ending
March 31, 2024

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