Revision of2025 Mid-Term Management Plan
July 28, 2023

https://www.sanyo-steel.co.jp/Santo-kun(Our mascot)

Outline of Mid-Term Management Plan
Business Environment

Five Core Pillars
Further enhance corporate valueand global presence✓ Resource price inflation(decoupled from steel supply anddemand cycle)

Reinforce profitabilityof all global operations✓Carbon Neutrality
Strengthen ESG Initiatives✓Intensifying human resource
constraints

Achieve carbon neutrality
by FY2050

Promote DX© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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Financial Targets and Investment of Resources

Financial Targets

FY2025 Target

Original plan

Net sales

Approx. 420 billion yen

Approx. 280 billion yen

Ordinary income

Approx. 22 billion yen

Approx. 14 billion yen

ROEApprox. 7%

Approx. 5%

ROE (excluding goodwill amortization)

Approx. 8%

Approx. 6%

Investment of Resources
CAPEX (FY2023 - FY2025)
Number of employees(End of FY2025)

Approx. 16 billion yen/year Approx. 12 billion yen/year
Approx. 6,500

Approx. 6,400© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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Corporate Value

Reinforce Global Business Foundation
Enhance Resource InvestmentCAPEX: Approx. 16 billion yen/year (←Original plan: Approx. 12 billion yen/year)
Number of employees: Approx. 6,500 (← Original plan: Approx. 6,400)
Proactive investments with focus on carbon neutrality (including energy saving) and DX.
Securing necessary human capital globally.

Reinforce Profitability
Consolidated ordinary income: 22 billion yen (← original plan: 14 billion yen)
Consolidated ROE 8% (excluding goodwill amortization) (←Original plan: 6%)
Encountering volatile demand trends and sustained cost push, we will continuously: a) amend sales price flexibly based on value-in-use,b) expand and enhance surcharge system; and c) upgrade sales mix.
Taking advantage of our progressive technology, we will firmly capture demand in the fields of "EV" "wind power generation""high-speed railroad" and "hydrogen society".

Strengthen global business foundation and further enhance corporate value and presence
Sanyo (non-consolidated) will strengthen marketing competence responding to market segments and secure appropriate margins.
OVAKO will continue reinforcing profit structure by optimizing cost and leveraging carbon neutrality advantage.
SSMI will expand presence in the growing Indian market by promoting cost improvement in procurement etc. and strengthening
marketing competence through exploiting technical advantage.
Formed and fabricated materials business will further pursue profit growth by utilizing its global network.
Metal powder business will secure growth in highly profitable and advanced areas of 3D printers, semiconductor, DX and CN.
Sanyo group will explore growth opportunities globally to further enhance corporate value and presence.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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Reflect ESG Indicators in Executive Compensation
Original■Consolidated ordinary income

Five additionalindicators

Short-term performance incentives
Medium-to-long-term performanceincentives■ROEESG

From July 2023
■CDP score■Health management rating■Safety indicators■Ratio of female managers■Board effectiveness appraisal
by outside directors

Promote diversity■Further promote female managers
Ratio of female managers: 5.3% (end of FY2022) → 6.3% (end of FY2025) cf. industry average approx. 2%■Improve work-life balance
Usage rate of childcare leave: 80% or more for women, 50% or more for men (by FY2025 end)

■Promote health management
Aiming "White Top 500 company*”*Top 500 companies promoting health and productivity, certified by the Ministry of Economy, Trade and Industry© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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CN

Sanyo’s Roadmap to Carbon Neutrality
Approx. 15% reduction
by “Eco-process”, etc.

【CO₂ emissions of Sanyo】

FY20132018 2019 2020 2021 2022 2023

FY2050

FY203050% or more reduction
in CO2 emissions(Estimate) (Plan)

0.84(VS. FY2013)

0.77

0.57 0.49

0.710.54

Approx. 35% reduction by“Green energy utilization”

Contribution to CO2 reduction
through “Eco-products” and“Eco-solutions”(Million tons)

0.42

Further promotion of “Eco-process”
Utilization of cost-effective “Green energy”
Utilization of CCUS, etc.
In FY2030, contribution to CO2
reduction equivalent to approx.
20% of emissions in FY2013

Breakdown of Sanyo's CO2 emissions
OthersProcess emissions

Eco-process

2%（Coke, etc.）

16%

Natural Gas

Carbon Neutrality

FY2022
Electricity(Estimate)
0.54
45%
million tons*

37%*Scope 1+2 of Sanyo

Achieving
zero emissions

Green energyutilization*Introduction ofInternal carbon pricing
from FY2023.

*Commencement ofrenewable energy sources
utilization from FY2022.

Eco-products

Eco-solutions*ECOMAX® series,
TOUGHFIT™, etc.

*OVAKO: Inauguration offossil-free hydrogenelectrolyzer plant in FY2023© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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CN

OVAKO’s Roadmap to Carbon Neutrality
First in the world to heat steel using hydrogen
Decision to introduce
Fossil-free hydrogen electrolyzer plant

Carbon neutral in production
from January 2022

OVAKO’s Roadmap: CO2 emissions, scope 1&2(Total CO2e ton)
600,000

400,000

Reducedby 58%

Reduceby 80%

Reduceby 90%

2022

2030

2040

200,000✓OVAKO has utilized carbon offset program tobecome carbon neutral.
✓OVAKO has applied climate surcharge
to all customers.

Inauguration of fossil-freehydrogen electrolyzer plant

02015

2021

Made by Sanyo based on OVAKO's SUSTAINABILITY REPORT 2022

Top CO₂ emission intensity in the industry even
before offsetting

Breakdown of OVAKO's CO2 emissions
OthersElectricity

2%

Collaboration with customers

2%

Process emissions（Coke, etc.）■SKF has produced bearings with 90% less carbon
emission than its standard, using OVAKO´s highquality bearing steel.
■ OVAKO has participated in Volvo's climateneutral car project.

32%
CY20220.19
million tons
Combustion（LPG, Natural Gas, etc.)64%© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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DX

Conceptual Diagram of DX (Three Core Pillars)<Establish infrastructure for data utilization and transform business process and business model>

Data application
Utilize data and implementbusiness transformation

Application

Business reform
Business Efficiency WG

DX Infrastructure
Construction

Data collection

Build and operate DX
infrastructure reflecting
demands of both utilization andcollection

Implement efficient datacollection and accumulate data

System Infrastructure
Reform WG

System Infrastructure
Reform WG

Business Process Reform
WG

Collection

IT Data(Business system)

Integrated Database

Factory reform

Operation Efficiency WG

Production Process Reform
WG
Operation Efficiency WG

Data Storage

Collection

OT data(Operating system)

Data Claiming© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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DX

DX Roadmap

Establish infrastructure corresponding to changes in business environment and society
Reinforce corporate competitivenessTransform into Digital Company
・Establish sophisticated business foundation
・Enhance corporate value

Expand application of digital technology
・Improve efficiency of operation and production
・Transform business process and business model

Establish integrated information infrastructure
・Establish integrated database
・Visualize and “real-time” data

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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Financials

Details of Financial Targets
Net sales of 420 billion yen, ordinary income of 22 billion yen,and ROE (excluding goodwill amortization) of 8%, in FY2025
Further increase profit compared to FY2022 ordinary income (excluding one-offs of OVAKO)of 19.3 billion yen, and FY2023 forecast ordinary income of 20 billion yen.

Ordinary income (billion yen)

（Unit：billion yen）

Sales volume(kt/month)

420.0

Plan for FY 2025

FY2022

Original

Revision

4237

133.9

148.5

148.0

Sanyo

74.5

75.0

80.0

32

OVAKO

50.7

60.0

55.0

27SSMI

8.8

13.5

13.0

22

Net sales

393.8

280.0

420.0

1728.914.0[16.3]

22.0[25.0]

12

Ordinary income
Sanyo

*1

10.2

9.0

14.0

One-Offs 2021FY 1.8 billion yen
2022FY 9.6 billion yen

363.3

11.0

2SSMI-0.2

0.4

2.0-3

10％[12％]

5％[6％]

7％[8％]

-8

320

210.7

171.5

9.7

6.0

420

386.0

262.5

7

21.1

393.8

280.0

220

185.8
149.1
138.7

157.5

19.8

ＯVAKO

ROE

Net sales (billion yen)

11.5

11.7

10.7

19.3

20.0

120

22.0
14.0

9.4

20

-1.5
-4.8

Figures [in parentheses] exclude goodwill amortization.
*1 19.3 billion yen, excluding one-offs.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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Financials

Initiatives to achieve 1x PBR
ROE×PER

PBR

Mutual sale ofcross-shareholdings

Sustainable profit growth
Explore growth opportunities
Target for FY2025＝

Tradable share ratio increase(β decrease)

ROE (excl. goodwill amortization) 8%(improved from 37% at the end of FY2022)(Cost of capital approx. 8%)

Reducing cost of capital

Aiming for 1x PBR(Recent PBR approx. 0.7x)

Revision of Dividend Policy

Seamless dialogue with investors
Securing appropriate evaluation
for CN and ESG Initiatives
Reflection on stock priceComprehensively considering;
Dividend payout ratio (DPR):
Approx. 35%
DPR excluding goodwill amortization:
Approx. 30%
Actual dividend per share leveletc.

© 2023 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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(Cautionary Statement)
Business forecasts contained in this document are based on the information available at the time of
the release of this document, and actual results may differ from these forecasts due to various factorsthat may occur in the future. The business forecasts should not be interpreted as any commitment toor guarantee of future performance.

https://www.sanyo-steel.co.jp/