Main

PACIFIC METALS CO., LTD.
Financial Results Briefing Session for the Six Months
Ended September 30, 2022
November 17, 2022

PACIFIC METALS Website:
https://www.pacific-metals.co.jp/en/
Inquiries:
General Administration Dept. (IR Group) TEL: +81-3-3201-6681

2

Table of Contents
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. Financial Results for the Six Months Ended September 30, 2022
(1) Financial results for the six months (Summary)(2) Financial results for the six months (Topics)(3) Consolidated ordinary profit and loss analysis

9
10
11

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2023
(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

13
14
15
16
17

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

19
22
23

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

Due to the situation
related to Russia andUkraine30,000Indonesia announced thebringing forward of thereintroduction of a nickel ore
export ban

Indonesia banned nickelore exports, and the
Ukraine situation
destabilized

500

400

Moves of reopening economic
activities in countries
expanded in some areas

20,000300
Indonesia relaxed thenickel ore export ban withconditions

200
10,000
Steady demand forstainless steel in China

0

2013

Trend inoperating results

2014
Fiscal year ended
March 31, 20132015
Fiscal year ended
March 31, 2014

2016
Fiscal year ended
March 31, 20152017
Fiscal year ended
March 31, 20162018
Fiscal year ended
March 31, 2017100

Mainly due to USChina trade tensions

2019
Fiscal year ended
March 31, 2018

Widespread
COVID-19 infections
2020

Fiscal year ended
March 31, 20192021
Fiscal year ended
March 31, 2020

2022
Fiscal year ended
March 31, 2021

0

Fiscal year ended
March 31, 2022

Net sales(million yen)

58,48856,40861,22547,64938,697

41,21049,062

44,13332,217

57,129Operatingprofit(million yen)

2,168

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

−493

4,806

Ordinary
profit(million yen)

4,920

−1,838−91−12,283

−515

−203

3,451

972

3,344

12,999

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)

4,000

75,0003,800

70,000For
nonSUS
35%

3,600
3,400

Ni user(2022)

65,000

For
SUS
65%

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

Stainless steel production

2023

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
Other
Indonesia
China
TaiwanSouth Korea
US
India
EuropeJapan(Unit: 1,000 tons)

71,9001,100
7,200

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

3,820

57,900

110

1,000
5,100

550
2,960

290

5,100

140
210

1,390

2,280

1,000
2,400
2,600

300

130
170

1,200

1,700

900
2,300
2,100
4,100

3,190

280

390

32,600

Other(Unit: 1,000 Ni tons)
AfricaEuropeNorth America and Latin America
Russia and the Middle East
Oceania
Indonesia (NPI)
3,840
China (NPI)
China
Asia (excluding China)
80

80
240

100
42,200

Outlook for nickel supply

390
30
90
110
70
290

30
110
130
80
320

400
720
460

7,000

7,400

2,800

2,900

180

210

230

320

2022

2025

2022

2025

2022

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)

LME nickel price(Unit: $/t)
40,000

1,800
1,600

Nickel ore procurement by China
Procurement volume(Unit: 1,000 tons)

LME nickel price(Unit: $/t)

80,00040,00070,0001,400

30,00060,00030,0001,200
50,0001,000
20,00040,00020,000800
30,000600
10,000400

20,00010,00010,000

200
0

0

0

0

(Year)

NPI in China

NPI in Indonesia

LME nickel price(Year)

Philippines

Indonesia

Others

LME nickel price8

2. Financial Results for the Six Months
Ended September 30, 2022

9

2. Financial Results for the Six Months Ended September 30, 2022
(1) Financial results for the six months (Summary)
Results for the fiscal
period ended
September 30, 2021

Forecast for the fiscal
period ended
September 30, 2022
(Announced on Jul. 29)

Results for the fiscal
period ended
September 30, 2022

AmountProfit rate

AmountProfit rate

AmountProfit rate

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

Year-on-year(%)

Vs
Forecast
announced on
Jul. 29(%)

24,098―25,068―17,642

―

−26.8

−29.6

Operating profit

952

4.0

−78

−0.3

−4,464(*)

−25.3

―

―

Ordinary profit

3,995

16.6

2,705

10.8

605(*)

3.4

−84.8

−77.6

Profit attributable to owner ofparent

3,405

14.1

2,294

9.2

229(*)

1.3

−93.3

−90.0

(Investment)

230

―

―

―

497

―

116.1

―

(Depreciation)

131

―

―

―

135

―

3.1

―

Net sales(*) Profit excluding inventory write-down of 5.9 billion yen (results for the fiscal period ended September 30,2022): operating profit: 1.5 billion yen, ordinary profit: 6.5 billion yen, profit: 6.1 billion yen

Results for the fiscal
period ended
September 30, 2021

Forecast for the fiscal
period ended
September 30, 2022
(Announced on Jul. 29)

Results for the fiscal
period ended
September 30, 2022

Year-on-year(%)

Vs
Forecast
announced on
Jul. 29(%)

Production volume (Ni t)

11,874

9,008

8,079

−32.0

−10.3

Sales volume (Ni t)

12,957

8,516

5,668

−56.3

−33.4

Applicable LME nickel price(US$/t)17,902

26,27926,720[Applicable LME nickel price(US$/lb.)]

49.3

1.7

[ 8.12 ][ 11.92 ][ 12.12 ]Applicable exchange rate(¥/US$)

109.16122.46131.4920.5

7.4

2. Financial Results for the Six Months Ended September 30, 2022

10(2) Financial results for the six months (Topics)(1) On the procurement front• Nickel ore price Procurement prices remained high• Energy costs
 Soaring raw material, fuel prices andelectricity costs led to a higher increasein production costs(3) On the production front (concerning the moltenmaterial leakage accident at an electric furnace)•

Resumption of operation of the affected
production facility (1 unit) Shifted to a policy of strategically controllingvolume to a certain level so as not to impair
profitability
 Schedule change for resumption of operationfrom the third quarter of the fiscal year ending
March 31, 2023 to the fiscal year ending
March 31, 2024

(2) On the sales volume front Impact from the molten material leakage
accident at an electric furnace
 A partial shift in raw material procurement byoverseas stainless steel producers to nickel pig
iron (NPI) and other materials that are more pricecompetitive Variation in capacity utilization rates of
production facilities in the stainless steel industry(4) 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 theCompany, the exchange rate applicable to
the Company, and in addition, the nickel
pig iron price as a partial reference,
resulting in sluggish income growth11

2. Financial Results for the Six Months Ended September 30, 2022
(3) Consolidated ordinary profit and loss analysis−3.4 billion yen(Unit: Billion yen)

100
10.0
Shifted to a policy of strategically controllingvolume to a certain level so as not to impair
profitability due to the recent rapid changes inthe sales environment and a shift in raw material
procurement by stainless steel producers

80
8.0
−5.1

60
6.0
40
4.0

Results forthe fiscal period
ended
September 30, 2021
4.0 billion yen

+12.0

20
2.0

Results forthe fiscal period
ended
September 30, 2022
0.6 billion yen

−5.9
+0.7

0
+1.1

-20
-2.0

−0.0
−13.3

-40
-4.0

+3.4

-60
-6.0
+3.5

-8.0
-80
-10.0
-100

+0.2

Results for fiscal Sales volume
period ended
September 30,
2021

We set selling price level based on the LME
nickel price, and in addition, the nickel pig ironprice as a partial reference, resulting in sluggish
income growth

LME price, etc. Exchange rates Sales volume

Factors in ferronickel sales−6.4 billion yen

Raw material
prices, etc.

Evaluation of
inventory

Ferronickel
depreciation

Factors in ferronickel cost of sales+1.0 billion yen

Ferronickel
selling
general andadministrative
expenses

Equity gains

Other+2.0 billion yen

Other

Results for fiscal
period ended
September 30,
2022

12

3. Full-Year Financial Results Forecast for
the Fiscal Year Ending March 31, 2023

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2023

13(1) Full-year financial results forecast (Summary)
Results for the fiscal
year ended
March 31, 2022

Forecast for the fiscal
year ending
March 31, 2023
(Announced on Jul. 29)

Forecast for the fiscal
year ending
March 31, 2023

Year-on-year(Announced on Oct. 28)(%)

AmountProfit rate

AmountProfit rate

AmountProfit rate

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

Vs
Forecast
announced on
Jul. 29(%)

Net sales

57,129―60,744―35,548

―

−37.8

−41.5

Operating profit

4,806

8.4

−1,516−2.5−9,997(*)

−28.1

―

―

Ordinary profit

12,999

22.8

2,508

4.1

−3,493(*)

−9.8

―

―

Profit attributable to owner ofparent11,368

19.9

2,167

3.6

−3,711(*)

−10.4

―

―

(Investment)

686

―

―

―

1,316

―

91.8

―

(Depreciation)

256

―

―

―

291

―

13.7

―

(*) Profit (loss) excluding inventory write-down of 3.2 billion yen (forecast for the fiscal year ending March 31, 2023):
operating profit (loss): −6.7 billion yen, ordinary profit (loss): −0.2 billion yen, profit (loss): −0.5 billion yen

Forecast for the fiscal year
ending March 31, 2023

1st half

2nd half

Full year

Forecast for
the fiscal
year ending
March 31,2023
(Announced
on Jul. 29)

Production volume (Ni t)

11,874

14,37526,24920,581

8,079

5,857

13,936

−46.9

−32.3

Sales volume (Ni t)

12,957

14,10327,06020,500

5,668

7,332

13,000

−52.0

−36.6

Applicable LME nickel price (US$/t)

17,902

20,56919,29025,08926,72022,112

24,119[Applicable LME nickel price(US$/lb.)][ 8.12 ][ 9.33 ][ 8.75 ][ 11.38 ][ 12.12 ][ 10.03 ][ 10.94 ]

25.0

−3.9

Applicable exchange rate (¥/US$)

109.16113.97111.67120.46131.49134.12132.9819.1

10.4

Results for the fiscal year
ended March 31, 2022

(Announced on Oct. 28)

Results forthe 1st half

Forecast forthe 2nd half

Forecast for
the full year

Yearon-year(%)

Vs
Forecast
announced
on Jul. 29(%)

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2023

14(2) Full-year financial results forecast (Topics)(1) On the production and sales volume
front•

Shifted to a policy of strategicallycontrolling volume
 Impact from the molten material leakage
accident at an electric furnace
 Impact of nickel pig iron (NPI) Expect a challenging environment withresults expected to fall short of the previous
forecast announced in July 2022

(3) 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, which may affect the netsales(2) On the production front (concerning the moltenmaterial leakage accident at an electric furnace)• Closely monitor the business environment
 Schedule to resume operation of the facility
once the volume control policy is lifted Expect to have the production facility itself
restored to a state such that resumption ofoperation will be possible during the third
quarter of the fiscal year ending March 31,
2023(4) On the procurement front• Increase in production costs
 Nickel ore prices remain high
 The rate of the increase in production
costs is accelerating because of soaring
energy costs, etc.
 A significant impact on profit expected3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2023

(3) Trend in sales destination by country[China]Decline in demand may lead to a
year-on-year decrease in production
for the first time since 2015

[India]Demand for NPI rises though
the surge in transport costs forferronickel subsided[Japan]Trend in production
rapidly change fromrecovery to downward[South Korea]
Typhoon damage to major mills
casts a shadow[Taiwan]Demand for ferronickel is on the decline
despite the improvement in production
volume after the cutback15

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2023

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

Results of previous year

Forecast for current year announced on Oct. 28
27,060

India

1,854

China
Taiwan7,162South Korea
Japan

14,103
12,957
636
3,934

2,756
604

16

We have shifted to a policy ofstrategically controlling volume to acertain level so as not to impair
profitability due to the global situation,
the molten material leakage accident at
an electric furnace, and the impact ofnickel pig iron on our sales
environment. Therefore, sales are
expected to decrease

6,236

13,000

1,218
3,228

226

3,480
905

5,028

5,273

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

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

2,551

1,509
5,668
10,300Results forthe fiscal year ended
March 31, 2022

151
101
1,203
802

7,332

2,503

75
2,450

802

1,300
0

3,412

3,507

Results for 1H ofthe fiscal year ending
March 31, 2023
(Announced on Oct. 28)

Forecast for 2H ofthe fiscal year ending
March 31, 2023
(Announced on Oct. 28)

6,919

Forecast for
the fiscal year ending
March 31, 2023
(Announced on Oct. 28)

3. Full-Year Financial Results Forecast for the Fiscal Year Ending March 31, 2023

17(5) Consolidated ordinary profit and loss analysis−16.5 billion yen(Unit: Billion yen)

200
20.0
160
16.0

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

Following the first half, we continue to shift
to a policy of strategically controllingvolume to a certain level so as not to
impair profitability due to the recent rapidchanges in the sales environment and ashift in raw material procurement bystainless steel producers

120
12.0
−15.7

80
8.0
40
4.0

Forecast for
the fiscal year−
endingMarch 31, 2023
−3.5 billion yen

+24.9

00

−3.2

−29.2

+0.9

−0.0

-40
-4.0

−1.8

−0.0

-80
-8.0
-120
-12.0

+6.7

-16.0
-160
-20.0
-200

+0.9

Results for the
fiscal year
ended March
31, 2022

Sales volume

We set selling price level based on the
LME nickel price, and in addition, thenickel pig iron price as a partial reference,
resulting to sluggish income growth

LME price, etc. Exchange rates Sales volume

Factors in ferronickel sales−21.6 billion yen

Raw material
prices, etc.

Evaluation of
inventory

Ferronickel
depreciation

Factors in ferronickel cost of sales+6.0 billion yen

Ferronickel
selling
general andadministrative
expenses

Equity gains

Other−0.9 billion yen

Other

Forecast for
the fiscal year
endingMarch 31, 2023

18

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

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

19(1) Summary of progress on major priority measures
Acceleration of consideration of
expansion into overseas
smelting business

Creation of new businesses that contribute tosociety•

Promotion of overseas smelting projects
and start-up of production•

Continuous promotion of projects with local partners inIndonesia to participate in overseas smelting business
Building of stronger relationships with resource-richcountries by applying our technological capabilities tooverseas smelting business

Promotion of production and sales of raw
materials for LIB materials

 Establishment of production process for raw
materials for LIB materials utilizing emulsion flow💡 What is “Emulsion Flow”?
Emulsion Flow is a solvent extraction method developed by
the Japan Atomic Energy Agency. It is an innovative method
enabling the separation of impurities, which is essential toensure product quality, in a single process of solution
pumping.

•

Promotion of new metal smelting projects

 Start of consideration of new metal smelting
business that utilize existing smelting facilities tocontribute to addressing the future shortage ofunderground resources💡 What is the new metal smelting business?
We aim to utilize rare metal resources including nickel in thebusiness.
* Image of a mine

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

20(1) Summary of progress on major priority measures
Diversification of business in Japan to contribute to a recycling-oriented society•

Restructuring of recycling business Considering a recycling business that leverages our strengths through collaboration with other companies,
including AMITA HOLDINGS CO., LTD.
 Conducting demonstration tests to manufacture and sell raw materials
for steelmaking and battery materials by utilizing by-products generated
by other companies Working on recycling by extracting precious metals from urban mine
resources using our melting processing technology while considering
its future commercialization

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

21(1) Summary of progress on major priority measures
Enhancement of corporate value by addressing sustainability issues•

Sustainability Promotion Council

 Promoting the resolution of important issues,
including the response to climate change, through asystem with executive officers of management ascouncil members✓Climate change initiatives• May: Endorsed the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD)• June: Disclosed climate change initiatives andresponse to the
TCFD (in the areasof governance,
strategy, risk
management, andmetrics and targets)* For more information, please visit
our website (sustainability section).

✓Upcoming initiatives• Start calculating Scope 3 emissions• Continuing to conduct scenario analysis covering the
1.5°C and 4°C scenarios to assess the resilience torisks and opportunities•

Reduction of GHG emissions

 Began studying electrification process using
microwaves to move away from fossil energy✓Decomposition and removal of crystallized watercontained in raw ores
✓Removal of unwanted components from recycled
nickel resources✓Pursuit of reductions in CO2 emissions (46%reduction in GHG emissions in FY2030 comparedto FY2013) and manufacturing costs💡 What is the electrification process using microwaves?

Fossil fuels have been used as a heat source, but this process will
expand the possibilities for utilizing renewable energy.
Also, the use of this process may lead to energy conservation given its
thermal efficiency.

22

4. Progress of Medium-term Business Plan PAMCO-2024(2) Ore procurement
1) Status of conclusion of long-term contracts
Fiscal year ended
March 31, 2021

Other party in long-term contracts

Fiscal year ended
March 31, 2022

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

Prior contract period

 Cagdianao Mining Corporation

Prior contract period

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

Fiscal year ending
March 31, 2023

Fiscal year ending
March 31, 2024

Fiscal year ending
March 31, 2025

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

 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)

 The Philippines  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

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

New Caledonia

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.

23

4. Progress of Medium-term Business Plan PAMCO-2024(3) ESG initiatives•

Initiatives to reduce GHG emissions

Pursuit of reductions in CO2 emissions (46% reduction in
GHG emissions in FY2030 compared to FY2013) andmanufacturing costs

EnvironmentPlease refer to page 21 of this material for details•

Together with local
communities

 Promote initiatives toensure diversity•

Reduction of cross-shareholdingsThe amount of five cross-shareholdings was reduced during
the fiscal year ending March 2023.

The Company will consider reducing the remaining crossshareholdings in due course.

 Deepen discussions on
the ideal state of director
compensation throughthe Nomination andCompensation
Committee (voluntary)(“Red Cross Activities” in Asahi PhotoNews)

Governance Currently working to shift
from Environmental andSocial Report toIntegrated Report, withan aim to issue the report
within this fiscal year

Cosponsoring local football club
Vanraure Hachinohe
Donation of a year’s supply ofnewspapers and a newspaper rack
to a local high school (photo at right)SocialUpcoming initiatives

 Further enhance
disclosure quality in linewith the TCFD

This material is not disclosure material under the Financial Instruments and Exchange Act and the Company does not guarantee the accuracy orcompleteness of the information.
Any forward-looking statements in this material are based on information available at the time of preparation and may differ from actual results due
to changes in circumstances that may arise in the future. Therefore, please refrain from making investment decisions based solely on this material.
The Company assumes no responsibility whatsoever for any damage resulting from the use of this material.
All copyrights, trademarks, and other intellectual property rights related to this material are the property of the Company.