Sanyo Special Steel Co., Ltd.

Financial Report for
The Year Ended March 31, 2021

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSAs of March 31, 2020 and 2021
Thousands of U.S.
dollars (Note 3)

Millions of yen

ASSETS

2020

2021

2021

Current Assets:
Cash and bank deposits (Notes 6 and 23)¥

27,782¥

10,924$

98,670Notes and accounts receivable - trade (Notes 6 and 10)

44,88347,198426,321

Electronically recorded monetary claims

6,031

5,132

46,352

Less: Allowance for doubtful accounts

(175)

(260)

(2,349)Inventories (Notes 8 and 10)

78,652

73,123

660,491

Income taxes receivable

1,954

226

2,044

－

14,415130,206

Deposits paid in parent company (Note 23)
Other
Total current assets

4,392

7,151

64,592

163,519

157,909

1,426,327

Property, Plant and Equipment:
Land (Note 10)

13,24912,826

115,850

Buildings and structures (Note 10)

72,08873,153

660,760

Machinery and equipment (Note 10)264,185

273,285

2,468,480

Construction in progress

13,491

9,554

86,301Other
Less: Accumulated depreciation
Total property, plant and equipment

13,138

13,963

126,119

376,151

382,7813,457,510(259,263)(268,956)(2,429,376)

116,888

113,825

1,028,134

35,63034,176

308,701

Intangibles
Goodwill
Other
Total intangible

3,591

4,046

36,54839,221

38,222345,249

4,158

5,991

54,114

Investments and Other Assets:
Investments in securities (Notes 6, 7 and 9)
Long-term loans receivable

203

2

19

Deferred tax assets (Note 13)

2,055

639

5,768

Net defined benefit assets (Note 12)

944

1,836

16,580Less: Allowance for doubtful accounts

1,182
(207)

1,140
(203)

10,304(1,834)

Total investments and other assets

8,335

9,405

84,951

Other

Total assets

The accompanying notes are integral parts of these statements.

¥ 327,963

1¥

319,361$2,884,661

Thousands of U.S.
dollars (Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2020

2021

2021

Current Liabilities:
Short-term loans (Notes 6, 10 and 11)¥

32,834¥34,146$308,428

Current portion of long-term loans (Notes 6, 10 and 11)

5,502

13,727

123,993

Notes and accounts payable - trade (Note 6)

22,387

27,846

251,526

Accounts payable - other

18,87812,079109,108

Accrued income taxes
Accrued expenses
Provision for environmental measures

390

650

5,871

7,623

7,984

72,121

59

160

1,448

2,913

3,048

27,521

90,586

99,640900,016

Bonds payable (Notes 6 and 11)

10,00010,00090,326Long-term loans (Notes 6, 10 and 11)25,934

12,429112,264

Other
Total current liabilities

Long-term Liabilities:

Accrued directors' and corporate auditors' retirement benefits
Deferred tax liabilities (Note 13)
Provision for loss on guarantees

69

66

593

3,540

2,729

24,6513

3

26

Provision for environmental measures

248

310

2,798

Net defined benefit liabilities (Note 12)

13,635

12,852116,087

Other

1,745

1,444

13,043

Total long-term liabilities

55,174

39,833359,788

Total liabilities

145,760

139,473

1,259,804

Contingent Liabilities (Note 26)
Net Assets (Note 14)
Shareholders’ Equity:
Common stock:
Authorized 94,878,400 shares in 2020 and 2021
Issued 54,507,307 shares in 2020 and 2021¥

53,800¥53,800$485,956

Capital surplus

51,48651,486

465,056

Retained earnings

79,794(20)

72,924(23)

658,688(211)

185,060

178,187

1,609,489

562

1,661

15,004355(2,772)

885

7,997

(650)

(5,868)(4,842)(6,697)(1,690)(15,265)

206

1,868

Non-controlling Interests

3,840

1,495

13,500Total net assets

182,203179,888

1,624,857

327,963¥ 319,361$ 2,884,661

Less: Treasury stock, at cost (13,134 shares in 2020 and 16,774 shares in 2021)

Total shareholders’ equity

Accumulated Other Comprehensive Income:
Valuation difference on available-for-sale securities
Deferred gains on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income

Total liabilities and net assets

The accompanying notes are integral parts of these statements.

¥2

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2020 and 2021
Thousands of U.S.
dollars (Note 3)

Millions of yen

2020

2021

2021

262,453¥ 210,722$ 1,903,365

230,625

187,949

1,697,673

31,82822,773

205,692

33,245(1,417)28,266

255,310(5,493)(49,618)

Interest and dividends

367

196

1,767

Rent income

335

539

4,867

Income from sale of emission allowances

181

－

－

Income from deposit transfer following extinctive prescription

－

99

895

Exchange gains

－

539

4,870

Net Sales
Cost of Sales (Notes 8 and 15)¥

Gross profit

Selling, General and Administrative Expenses (Notes 15 and 17)
Operating loss

Other Income:

Other

171

175

1,583

1,054

1,548

13,982

(830)
(166)

(641)

(5,787)－(177)－(1,598)(818)(7,385)(1,521)(4,763)(43,021)－(3,929)(35,490)(1,289)－－Other Expenses:
Interest
Exchange losses
Other

(162)
(1,158)

Ordinary loss

Extraordinary Gains and Losses:
Impairment loss (Note 21)
Amortization of goodwill (Note 20)
Loss on sale of investment securities and others

(647)

－

－

Loss on sale and disposition of property, plant and equipment (Note 19)

(498)

(625)

(5,649)－(425)(3,841)

(248)

(30)

(274)

Extra retirement payments
Loss on evaluation of investments in securities
Gain on sale of property, plant and equipment (Note 18)

50

－

－

Gain on sales of land

5

169

1,528

Gain on sale of investment in securities
Loss before income taxes

849

84

764

(1,778)(4,756)(42,962)(3,299)(9,519)(85,983)

383
620

674
(1,231)

6,087(11,116)

1,003(4,302)(557)(5,029)(8,962)(80,954)

Income Taxes (Note 13):
Current
Deferred
Net loss

Net Loss Attributable to Non-controlling Interests
Net Loss Attributable to Owners of the Parent

The accompanying notes are integral parts of these statements.

(585)
¥

3

(3,717)(2,092)¥(6,870)(18,899)$(62,055)

Yen

U.S. dollars (Note 3)

2020

2021

2021

Per Share:
Net loss (Note 22)¥(67.14)¥ (126.07)$(1.14)Cash dividends

¥

15.50

¥

－

$

－

Net assets¥

3,273.07¥ 3,273.84

$

29.57

The accompanying notes are integral parts of these statements.

4

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2020 and 2021
Thousands of U.S.
dollars (Note 3)

Millions of yen

2020

Net Loss
Other Comprehensive Income (Loss):

¥

2021

(4,302)¥2021(8,962)$(80,954)

Valuation difference on available-for-sale securities(1,616)

1,099

9,928

Deferred gains on hedges
Foreign currency translation adjustments

355(2,796)

530
1,908

4,790
17,229Remeasurements of defined benefit plans(4,913)

3,152

28,472

Share of other comprehensive income of affiliates accounted for by the equity method

Total other comprehensive income (loss) (Note 4)

Comprehensive Income (Loss)

(9)

(36)

(328)

(8,979)6,653

60,091(13,281)(2,309)(20,863)(12,623)(658)

34(2,343)

307(21,170)

Comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests

The accompanying notes are integral parts of these statements.

5

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2020
Number ofoutstanding
common shares

57,437,307

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock

Millions of yen

Common stock

Capital surplus¥¥

53,800

－
－
－

－
－
－

－
(2,930,000)－(2,930,000)
54,507,307 ¥Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2019, net
Total changes for fiscal year 2019
Balance at end of year

55,896－－－－53,800¥Retainedearnings¥

85,716－－－(0)(3,717)(2,205)－(4,410)－(4,410)51,486－－(5,922)
79,794－¥

Millions of yen

Treasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2019, net
Total changes for fiscal year 2019

¥

¥

¥

Balance at end of year¥

(1,924)

2,178－－(2,507)
1
4,410
－
1,904
(20)

¥

－

Foreigncurrencytranslation
adjustments

¥

－
－
－
－
－
(1,616)

－
－
－
－
－
355

－
－
－
－
－
(2,732)(1,616)355(2,732)

562

¥

355

¥

Millions of yen

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2019, net

Remeasurementsof defined
benefit plans

Noncontrollinginterests

¥

¥

－
－
－
－
－
(4,913)

Total changes for fiscal year 2019¥6

(4,842)

4,503

Total

¥

－
－
－
－
－
(663)

(4,913)

Balance at end of year

The accompanying notes are integral parts of these statements.

71

3,840

200,200(3,717)(2,205)(2,507)1－(9,569)

(663)
¥

(40)

(17,997)¥

182,203(2,772)

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2021
Number ofoutstanding
common shares

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock

Millions of yen

Common stock

54,507,307 ¥Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2020, net
Total changes for fiscal year 2020

－
－
－

－
－
－
－
54,507,307 ¥Balance at end of year

53,800－－－Retainedearnings

Capital surplus¥

51,486¥

79,794－－－(6,870)
－
－

－

(0)

－

－
－

－
－

－
－

－
53,800(0)51,486¥¥(6,870)72,924

Millions of yen

Treasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

Foreigncurrencytranslation
adjustments

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2020, net
Total changes for fiscal year 2020

¥

¥

¥

¥

Balance at end of year

¥

(20)

562

355

－
－
(3)
0
－
－

－
－
－
－
－
1,099

－
－
－
－
－
530

－
－
－
－
－
2,122

(3)

1,099

530

2,122

(23)

¥

1,661

¥

885

¥

Millions of yen

Remeasurementsof defined benefit
plans

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2020, net

¥

¥

¥

7

(1,690)

3,840

Total

¥

－
－
－
－
－
(2,345)

3,152

Balance at end of year

The accompanying notes are integral parts of these statements.

(4,842)

Noncontrollinginterests

－
－
－
－
－
3,152

Total changes for fiscal year 2020

(2,772)(6,870)
－
(3)
0
－
4,558

(2,345)¥

1,495

182,203(2,315)¥

179,888(650)

Number ofoutstanding
common shares

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stockThousands of U.S. dollars (Note 3)

Common stock

54,507,307 $

485,956

－
－
－

－
－
－

Disposal of treasury stock－

Cancellation of treasury stock
Other changes for fiscal year 2020, net－－－

Total changes for fiscal year 2020
Balance at end of year

54,507,307 $Retainedearnings

Capital surplus$

465,056$

720,743－－－(62,055)
－
－

－

(0)

－

－
－
－

－
－
(0)

－
－
(62,055)

485,956$

465,056$

658,688

Thousands of U.S. dollars (Note 3)

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2020, net

Treasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

Foreigncurrencytranslation
adjustments

$

$

$

$

(178)

5,077

－
－
(34)
1
－
－
(33)

Total changes for fiscal year 2020
Balance at end of year

$

(211)

3,207

－
－
－
－
－
9,927
9,927
$

15,004

－
－
－
－
－
4,790
4,790
$

7,997

－
－
－
－
－
19,173
19,173$Thousands of U.S. dollars (Note 3)

Remeasurementsof defined benefit
plans

Balance at beginning of year
Net loss attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Other changes for fiscal year 2020, net

$

$

－
－
－
－
－
28,472

Total changes for fiscal year 2020

28,472

Balance at end of year

The accompanying notes are integral parts of these statements.

(43,737)

Noncontrollinginterests¥

8(15,265)¥(25,041)

Total

34,684$ 1,645,767

－
－
－
－
－
(21,184)(62,055)－(34)
1－
41,178(21,184)(20,910)

13,500¥ 1,624,857(5,868)

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2020 and 2021
Thousands of U.S.
dollars (Note 3)

Millions of yen

2020
Cash Flows from Operating Activities:
Loss before income taxes
Adjustments Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in net defined benefit liabilities
Decrease (increase) in net defined benefit assets
Increase (decrease) in accrued directors' and corporate
auditors' retirement benefits, less payments
Increase (decrease) in provision for environmental measures
Increase (decrease) in provision for loss on guarantees
Interest and dividend income
Interest expense
Gain on sale of investments in securities
Loss on evaluation of investments in securities
Deposit transfer profit with completion of extinctive prescription
Loss (gain) on sale and disposition of property, plant and equipment
Extra retirement payments
Changes in assets and liabilities:
Notes and accounts receivable - trade
Inventories
Notes and accounts payable - trade
Other, net
SubtotalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by operating activities
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment
Sale of property, plant and equipment
Acquisition of intangible assets
Acquisition of investments in securities
Sale of investments in securities
Proceeds from sales of shares of parent
Collection of contingent consideration of investments in subsidiaries
Decrease in long-term loans receivable
Proceeds from withdrawal of time deposits
Payments into time deposits
Payments of long-term loans receivable
Other, net
Net cash used in investing activities

The accompanying notes are integral parts of these statements.

9¥(3,299)2021¥(9,519)2021$(85,983)

15,034
－
4,231
46
2,735
(1,382)20

14,187
3,929
2,621
94
366
937
(4)

128,146
35,49023,674
851
3,304
8,463
(32)

(5)
(1)
(367)
830
(202)
248
－
442
－

157
0
(196)
641
(84)
30
(99)
456
425

1,416
1
(1,767)
5,787
(764)
274
(895)
4,121
3,841

31,062
15,442(19,327)(1,423)44,084365(837)(4,187)39,425(1,334)6,365
4,479(1,967)21,484
198
(646)
1,278
22,314(12,049)
57,491
40,461(17,776)
194,054
1,791(5,836)
11,542201,551(18,572)
312
(840)
(2)
1,291
871
4,709
201
785
(717)
－
(501)
(12,463)(19,175)
265
(971)
(2)
308
－
117
203
776
(702)
(2)
(230)
(19,413)(173,204)
2,398(8,770)
(15)
2,783
－
1,055
1,829
7,012
(6,341)(19)(2,077)(175,349)

Thousands of U.S. dollars(Note 3)

Millions of yen

2020
Cash Flows from Financing Activities:
Increase (decrease) in short-term loans
Increase (decrease) in commercial paper
Proceeds from long-term loans
Repayment of long-term loans
Repayment of lease obligations
Payments for purchases of treasury stock
Proceeds from sales of treasury stock
Cash dividends
Cash dividends to non-controlling interests
Other, net
Net cash used in financing activities¥

Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Year
Cash and Cash Equivalents at End of the Year (Note 23)

The accompanying notes are integral parts of these statements.

10¥(18,322)(8,000)12,253(1,312)(971)(2,507)0(2,204)(4)(26)(21,093)
(441)
5,428
21,792
27,220

2021

¥

¥

2021

964
－
－
(5,577)
(831)
(4)
0
(1)
(1)
(24)
(5,474)234(2,339)27,22024,881

$

$

8,704
－
－
(50,375)(7,506)
(34)
1
(7)
(13)
(211)
(49,441)
2,117(21,122)245,865
224,743

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of SanyoSpecial Steel Co., Ltd. (the “Company”) and its consolidated
subsidiaries (together, the “Companies”) have been prepared on thebasis of accounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure

requirements from International Financial Reporting Standards,
and are compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments
and Exchange Law of Japan.

2. Summary of Significant Accounting Policies(1) Consolidation and investments in affiliates

whether long-term or short-term, are translated into Japanese yen at
the exchange rate prevailing at each balance sheet date. Resulting
gains and losses are included in net income or loss for the period.
All assets and liabilities of the foreign subsidiaries are translated
into Japanese yen at the exchange rate prevailing at each balance
sheet date. All income and expense accounts for the year are alsotranslated at that rate. These differences are recorded as foreign
currency translation adjustments.

(a) Scope of consolidation and elimination
The Company had 41 subsidiaries as of March 31, 2021 (41subsidiaries as of March 31, 2020). The consolidated financial
statements include the accounts of the Company and its 41
subsidiaries. The 41 subsidiaries that have been consolidated forthe fiscal year ended March 31, 2021 are listed below:
Yohkoh Bussan Co., Ltd.
Santoku Kogyo Co., Ltd.
Santoku Tech Co., Ltd.
Santoku Seiken Co., Ltd.
Santoku Computer Service Co., Ltd.
Santoku Security Service Co., Ltd.
Sanyo Special Steel Manufacturing de México, S.A. de C.V.
Ningbo Sanyo Special Steel Products Co., Ltd.
Siam Sanyo Special Steel Product Co., Ltd.
Sanyo Special Steel U.S.A., Inc.
P.T. Sanyo Special Steel Indonesia
SKJ Metal Industries Co., Ltd.
Mahindra Sanyo Special Steel Pvt. Ltd.
Sanyo Special Steel India Pvt. Ltd.
Sanyo Special Steel Trading (Shanghai) Co., Ltd.
Ovako Group AB and its 25 subsidiaries (“Ovako”)(3) Securities

The consolidated subsidiaries, except for the 33 foreignsubsidiaries (Sanyo Special Steel Manufacturing de México, S.A.
de C.V., Ningbo Sanyo Special Steel Products Co., Ltd., Siam
Sanyo Special Steel Product Co., Ltd., Sanyo Special Steel U.S.A.,
Inc., P.T. Sanyo Special Steel Indonesia, SKJ Metal Industries Co.,
Ltd., Sanyo Special Steel Trading (Shanghai) Co., Ltd., andOvako) use a fiscal year ending March 31, which is the same asthat of the Company. The 33 foreign subsidiaries use a fiscal year
ending December 31. For these 33 subsidiaries, certain adjustments
are made, if appropriate, in preparing the consolidated financial
statements to reflect material transactions which occurred between
their fiscal year-end and March 31.
For the purpose of preparing the consolidated financial
statements, all significant intercompany transactions, balances andunrealized profits among the Companies have been eliminated.
(b) Investments in affiliates
Investments in Advanced Green Components, LLC and AB
Järnbruksförnödenheter, two affiliates of the Company over which
the Company has significant influence, are accounted for by theequity method.

(2) Foreign currency translation
Foreign currency transactions are translated into Japanese yen at
the exchange rate prevailing at the respective transaction date. All
monetary assets and liabilities denominated in foreign currencies,

The accounting standard for financial instruments (“AccountingStandards for Financial Instruments” (Accounting Standards Boardof Japan (“ASBJ”) Statement No. 10)) requires that securities beclassified into 4 categories: trading securities, held-to-maturity debt
securities, equity securities issued by subsidiaries and affiliates andavailable-for-sale securities. Except for the equity securities issued
by subsidiaries and affiliates, securities that the Company has are
all classified as available-for-sale securities.
Under the standard, marketable securities classified as availablefor-sale securities are carried at fair value with changes in
unrealized holding gains and losses, net of the applicable income
taxes, included directly in net assets. Non-marketable securities
classified as available-for-sale securities are carried at cost. A
decline in the value of available-for-sale securities is reflected in
net income or loss for the period unless deemed to be temporary.
The cost of securities sold is determined by the moving averagemethod.

(4) Derivative transactions and hedge accounting
Derivative financial instruments are stated at fair value.
The Companies use foreign exchange forward contracts, interest
rate swaps and commodity futures contracts to reduce their
exposure to market risks from fluctuations in foreign currencies,
interest rates and electricity prices. The Companies do not hold or
issue financial derivative instruments for trading purposes. If
derivative transactions are used as hedges and meet certain hedging
criteria, the Companies use the deferred hedge accounting method.
In addition, with regard to interest rate swap transactions thatmeet the criteria, the exceptional method has been adopted. And,
with regard to interest rate and currency swap transactions thatmeet the criteria, the unified method (the exceptional method, theallocation method) has been adopted. Using these methods, theCompanies do not account for gains and losses on those interest
rate swap transactions on a fair value basis, but recognize theinterest on an accrual basis.
The Companies compare the total change in cash flow or rate
fluctuation of hedging instruments and those of hedged items every
half year and evaluate the hedge effectiveness based on the
differences.

11

(15) Income taxes(5) Amortization of goodwill

The asset-liability method is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets andliabilities and their tax basis.

Goodwill is amortized using the straight-line method over areasonably determined period on individual basis.

(6) Inventories
Inventories are stated at the lower of moving average cost or net
realizable value.

(16) Revenue recognition
Sales are generally recognized at the time the goods aredelivered or shipped to customers.

(7) Depreciation and amortization
The Companies compute depreciation using the straight-line
method for property, plant and equipment.
In its domestic subsidiaries, the assets acquired on or before
March 31,2007 are depreciated using the straight method over 5
years from the following fiscal year when depreciation up to thedepreciable limit amount is completed.
Amortization of capitalized software costs for internal use iscomputed by the straight-line method based on the useful life
estimated to be mainly 5 years. Amortization of other intangible
assets is computed by the straight-line method.

(17) Net income and cash dividends per share
Net income per share is computed by dividing net income
available for distribution to shareholders of common stock by theweighted-average number of shares of common stock outstanding
during the year. Diluted net income per share is not disclosed
because potentially dilutive securities are not issued.
Cash dividends per share shown for each year in the
consolidated statements of operations represent dividends declared
as applicable to the respective years rather than those paid during
the years.

(8) Research and development costs(18) Cash and cash equivalents

Research and development costs are charged to profit or loss as
incurred.

(9) Allowance for doubtful accounts
Allowance for doubtful accounts is provided at an amount basedon past loss experience plus the amount estimated to beuncollectible based on an assessment of certain individual accounts.

(10) Provision for bonuses
Provision for employees bonuses is provided at the estimatedamount of bonuses to be paid to the employees in the following
year.

(11) Accrued directors’ and corporate auditors’ retirement
benefits
Certain consolidated subsidiaries provide for lump-sum
payments to retiring directors and corporate auditors based oninternal rules.

(12) Provision for loss on guarantees
To provide for losses on guarantees, the Company makes aprovision for potential losses at the end of the fiscal year.

(13) Provision for environmental measures
Reserve for environmental measures for obligatory PCB
treatment in Japan and removing soil pollution on overseas steelmaking plants is stated as the estimated cost at the end of the fiscal
year.

(14) Accounting methods for employees’ retirement benefits
In the calculation of retirement benefit obligations, the estimatedamount of retirement benefits is attributed to the consolidated fiscal
year using the benefit formula basis.
Actuarial gains and losses are posted in expenses after the
consolidated fiscal year of accrual by the straight-line method overa period of mainly 10 years and 17 years, which is within the
average remaining service years of the employees.
Providing for lump-sum payments to retiring executive officers
is calculated based on internal rules.
In the calculation of net defined benefit liabilities and retirement
benefits expenses, certain consolidated subsidiaries adopt a
simplified method that regards the benefits payable assuming thevoluntary retirement of all employees at the fiscal year-end as
retirement benefit obligations.

Cash and cash equivalents in the consolidated statements of cash
flows consists of cash on hand, bank deposits able to be withdrawn
on demand, short-term investments with an original maturity of
three months or less and which represent a minor risk offluctuations in value and deposits paid in parent company.

(19) Consumption tax
In Japan, a consumption tax, with certain exemptions, is imposedon the domestic consumption of goods and services. The
consumption tax rate is 8% until September 30, 2019 and mainly
10% from October 1, 2019. The consumption tax imposed on the
Company and its domestic subsidiaries’ sales to customers is
withheld at the time of sale and is subsequently paid to the national
government. The consumption tax withheld upon sale is notincluded in the amount of “net sales” in the consolidated
statements of operations but is recorded as a liability. The
consumption tax imposed on the purchases of products,
merchandise and services from vendors borne by the Company andits domestic subsidiaries is not included in costs or expenses but isrecorded as an asset. The balance of consumption tax withheld, netof consumption tax paid, is included in “Other current liabilities” inthe consolidated balance sheets.

(20) Reclassifications and restatement
Certain prior year amounts have been reclassified to conform tothe current year presentation.

(21) Significant accounting estimates
Property, Plant and Equipment, and Intangibles(1) Carrying amounts in the current year’s financial statements
Property, Plant and Equipment are recorded at 113,825
million yen ($1,028,134 thousand) and intangibles are recorded
38,222 million yen ($345,249 thousand).
(2) Significant accounting estimates for identified items
For Property, Plant and Equipment and intangibles todetermine whether the recognition of an impairment loss isrequired it is necessary to compare the undiscounted future cash
flows that are expected to be generated from the asset or the asset
groups with its book value whenever there is an impairment
indicator in the asset or the asset groups. If the recognition of an
impairment loss is deemed necessary, the book value is reduced to12the recoverable amount, and the resulting decrease in the bookvalue is recognized as an impairment loss.
The Companies group assets with consideration for business
management segments. In principle, the Company is classified bybusiness segment and its consolidated subsidiaries are classified byeach company as one asset group. In addition to the asset groupthat recorded impairment loss in the current consolidated fiscal
year, the asset groups of Santoku Tech Co., Ltd and Siam SanyoSpecial Steel Product Co., Ltd., which are recognized indicationsof impairment, did not record impairment loss because theundiscounted future cash flows exceeded the book value.
Property, Plant and Equipment and Intangibles, which wererecorded on the consolidated balance sheet at the end of the current
consolidated fiscal year have a significant impact on the
consolidated financial statements for the following consolidated
fiscal year when the business circumstances of the Companies areaffected by extreme changes in future economic conditions and thebusiness declines significantly.

(22) Changes in accounting policies(Changes in accounting policies that are difficult to distinguishfrom changes in accounting estimates)
The depreciation method for Property, Plant and Equipment of
the Company and its domestic subsidiaries was changed to thestraight- line method for the current consolidated fiscal year fromthe declining-balance method mainly used in the past.
The Companies considered the following issues to change thedepreciation method from the viewpoint of unifying the groupaccounting policies on global basis as overseas subsidiaries that
adopt the straight-line method have become increasingly important
within the Group since Ovako converted into a consolidated
subsidiary.
The facilities used by the Companies are expected to operate
steadily in the future, and there is little risk that the products andthe facilities will become obsolete due to changes in the market
environment or technology. Accordingly, the Companies
determined that it was more appropriate to adopt the straight-line
method as the depreciation method.
In addition, the Companies decided to make changes from thecurrent consolidated fiscal year to synchronize with the start offull-scale operation of the Company’s new facilities in the No.2
Bar &Wire Rod Mill.
As a result, compared with using the declining-balance method,
operating loss, ordinary loss and loss before income taxes for thecurrent consolidated fiscal year was 1,936 million yen ($17,489
thousand) less respectively.

(23) Standards and guidance not yet adopted
The following were issued but not yet adopted.
(The Company and its domestic subsidiaries)“Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 31, 2020)“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 26, 2021)
1. Overview

The above standard and guidance provide comprehensive
principles for revenue recognition. Under the standard andguidance, revenue is recognized by applying the following 5 steps.
Step 1: Identify contracts with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performanceobligations in the contract.
Step 5: Recognize revenue when the entity satisfies a
performance obligation.
2. Effective date
Effective from the beginning of the fiscal year ending March 31,
2022.
3. Effects of the application
Regarding the adoption of the standard, the Companies followed
the transitional treatment outlined in Article 84 of the AccountingStandard. Under the treatment, the cumulative effect ofretroactively applying the new accounting policy to periods prior to
the beginning of the year ending March 2022 is adjusted in the
beginning retained earnings of the year ending March 2022 andapplied to the new accounting policy from the beginning balance ofthe current fiscal year. The effect on retained earnings in the
beginning balance of the current fiscal year was not material.

(24) Changes in presentation method(Consolidated statements of operations)“Gain on sales of land” in “Gain on sale of property, plant andequipment” in “extraordinary gains” in the previous consolidated
fiscal year is presented separately for the current consolidated
fiscal year because it has become significant in amount. To reflect
this change in presentation, the consolidated financial statements
for the previous consolidated fiscal year have been reclassified. As
a result, 55 million yen of “Gain on sale of property, plant andequipment” in the consolidated financial statements for theprevious consolidated fiscal year has been presented as 5 million
yen of “Gain on sales of land” and 50 million yen of “Gain on saleof property, plant and equipment. ”(Adoption of “Accounting Standard for Disclosure of
Accounting Estimates”)
The Companies adopted ASBJ Statement No. 31 “AccountingStandard for Disclosure of Accounting Estimates” (March 31,2020) for the consolidated financial statements for the current
consolidated fiscal year, and, therefore, significant accounting
estimates are disclosed in the Notes to Consolidated Financial
Statements.
The note does not include information for the prior consolidated
fiscal year in accordance with the transitional provision set out inparagraph 11 of the Accounting Standard.

(25) Additional information
In its preparation of the consolidated financial statements for thecurrent fiscal year, the demand for special steel is expected to bestable in future even though COVID-19 could affect the global
economy and we made the accounting estimates such as evaluationof fixed assets and recoverability of deferred tax assets.

13

3. U.S. Dollar Amounts
The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan.
These translations should not be construed as representations that the Japanese yen amounts actually represent or have been or could be
converted into U.S. dollars. The rate of ¥110.71 to U.S. $1.00, the approximate rate of exchange as at March 31, 2021, has been used forthese translations.

4. Consolidated Statements of Comprehensive Income
Amounts reclassified to net income in the current year that were recognized in other comprehensive income in the current or previous
periods and the tax effects for each component of other comprehensive income are as follows:
Thousands of
U.S. dollars

Millions of yen
2020
2021

Valuation difference on available-for-sale securities
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense)
Subtotal, net of tax
Deferred gains on hedges
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense)
Subtotal, net of tax
Foreign currency translation adjustments
Increase (decrease) during the year
Remeasurements of defined benefit plans
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense)
Subtotal, net of tax¥(1,951)46(1,905)289(1,616)

¥

2021

1,526
(42)
1,484
(385)
1,099

$

13,781(376)
13,405(3,477)
9,928

1,225
(774)
451
(96)
355

890
(227)
663
(133)
530

8,039
(2,047)
5,992(1,202)4,790(2,796)

1,908

17,229(6,475)(153)(6,628)
1,715(4,913)

4,006
460
4,466
(1,314)
3,152

36,1884,155
40,343(11,871)
28,472(9)(9)(8,979)

(36)
(36)
6,653

(328)
(328)
60,091

Share of other comprehensive income of affiliates accounted for by the equity method

Increase (decrease) during the year
Subtotal
Total other comprehensive income (loss)

¥

¥

$

5. Statements of cash flows
Significant non-cash transactions at March 31, 2020 and 2021 were as follows:
Thousands of
U.S. dollars
2021

Millions of yen
2020
2021

Cancellation of treasury stock

¥

4,410

¥

－

$

－

6. Financial Instruments(1) Status of financial instruments
The Companies procure funds required by our business plans through bank loans and bonds payable, and temporary surplus funds areinvested in short-term bank deposits, etc., with low probability of loss of principal. The Companies use derivative transactions mainly tohedge foreign currency, interest rate and electricity price fluctuation risk and limit the amount to actual demand.
Notes and accounts receivable are exposed to the credit risk of customers. In order to reduce such risk, the Companies regularly
monitor the maturity dates and balances of receivables of all customers’ accounts and evaluate the credit risk of its main customers
arising from the deterioration of their financial situation, etc., according to Company regulations. Notes and accounts receivable
denominated in foreign currencies are exposed to exchange rate risks. The Companies reduce such risks by settling both notes andaccounts receivable and notes and accounts payable with the same foreign currencies and executing derivative transactions (forward
exchange contracts).
Deposits paid in parent company are deposits to Nippon Steel Corporation, and their deposit and withdrawal are possible at any time.

14

Investments in securities are mainly shares of business partners. Their shares are exposed to the risk of volatility in market prices though,the Companies periodically monitor the market price and regularly review their portfolios taking into consideration of their relationships
with business partners.
Notes and accounts payable are paid within one year. Notes and accounts payable denominated in foreign currencies are exposed to
exchange rate risks. The Companies reduce such risks by settling both notes and accounts receivable and notes and accounts payable withthe same foreign currencies and executing derivative transactions (forward exchange contracts).
Bank loans and bonds payable are primarily for funding related to operating and investing activities. For the exchange rate fluctuation
risks about loans in foreign currency and the interest rate fluctuation risks about loans with floating interest rate, the Companies reducesuch risks using to hedge derivative transactions (currency swap and interest rate swap contracts).
In addition, certain foreign subsidiaries have conducted derivative transactions (commodity futures trading) to cope with thefluctuation risk of purchased electricity price. The Companies have executed and controlled derivative transactions in accordance with
the internal rules which stipulated the transaction authority. For details on hedging instruments, hedging items, hedging policy and themethod for evaluating hedging effectiveness concerning hedge accounting, please refer to the aforementioned Note 2 (4), “Derivativetransactions and hedge accounting.” For liquidity risks of financing, the Companies manage them by preparing and updating the cash
flow plans as appropriate and maintaining the liquidity on hand. Further, the Company has commitment line contracts in preparation forcontingencies.
The fair values of financial instruments include values based on market price and values obtained by reasonable estimates when thefinancial instruments do not have a market price. Since certain assumptions are necessary for the calculation of such values, the values
may change when different assumptions are adopted.
(2) Fair values of financial instruments
Book values and fair values of the financial instruments on the consolidated balance sheet as of March 31, 2020 are set forth in thetable below. Certain financial instruments were excluded from the table as the fair values were not available (see Note 2 below).
Millions of yen(1) Cash and bank deposits(2) Notes and accounts receivable - trade(3) Deposits paid in parent company(4) Investments in securities
Available-for-sale securities(5) Notes and accounts payable - trade(6) Short-term loans (including current
portion of long-term loans payable)(7) Accounts payable(8) Bonds payable(9) Long-term loans(10) Derivative transactions①Hedge accounting not applied②Hedge accounting applied

Book value

Fair value¥ 27,782
44,883－¥ 27,782
44,883－

2,940(22,387)

2,940(22,387)－－(38,336)(38,336)－(18,878)(10,000)(25,934)(18,878)(9,982)(25,939)

－
18
△5

(45)
408

(45)
408

－
－

(※) The Debt is displayed by ( ).

15Difference

¥

－
－
－

Book values and fair values of the financial instruments on the consolidated balance sheet as of March 31, 2021 are set forth in the tablebelow. Certain financial instruments were excluded from the table as the fair values were not available (see Note 2 below).
Millions of yen(1) Cash and bank deposits(2) Notes and accounts receivable - trade(3) Deposits paid in parent company(4) Investments in securities
Available-for-sale securities(5) Notes and accounts payable - trade(6) Short-term loans (including current
portion of long-term loans payable)(7) Accounts payable(8) Bonds payable(9) Long-term loans(10) Derivative transactions① Hedge accounting is not applied② Hedge accounting is appliedThousands of U.S. dollars

Book value

Fair value

Difference¥ 10,924
47,19814,415¥ 10,924
47,19814,415

4,859(27,846)

4,859(27,846)－－

43,892(251,526)

43,892(251,526)－－(47,873)(47,873)－(432,421)(432,421)－(12,079)(10,000)(12,429)(12,079)(9,981)(12,540)

－
19
△111

(109,108)(90,326)(112,264)(109,108)(90,154)(113,267)－
172△1,003

(6)
1,086

(6)
1,086

－
－

(52)
9,811

(52)
9,811

－
－

¥

－
－
－

Book value$

Fair value

98,670426,321130,206$

98,670426,321130,206

Difference

－
－
－

$

(※) The Debt is displayed by ( ).
1. Methods used to estimate fair values of financial instruments and matters about investments in securities and derivativetransactions.
(1) Cash and bank deposits, (2) Notes and accounts receivable – trade and (3) Deposits paid in parent company
The book value approximates the fair value because of the short-term maturities of these instruments.
(4) Investments in securities
Market prices and quoted prices are used for the fair value of equity securities.
See Note 7, “Securities.”(5) Notes and accounts payable-trade, (6) Short-term loans (including current portion of long-term loans payable) and (7) Accounts payable
The book value approximates the fair value because of the short-term maturities of these instruments.
Short-term loans payable include the current portion of long-term loans.
(8) Bonds payable
The fair value of bonds payable is valued at the market price.
(9) Long-term loans
The discounted cash flow method is used to estimate the fair value of long-term loans by using marginal borrowing rates as the discount rate.
(10) Derivative transactions
See Note 25, “Derivatives.”

2. Non-marketable securities whose fair values were not available were excluded from investments in securities above. These
instruments as of March 31, 2020 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen
2020
2021

Shares of affiliates
Other securities

¥

671
547

¥

637
495

$

2021
5,753
4,469

3. The aggregate maturities subsequent to March 31, 2020 for financial assets with maturities were as follows:
Millions of yen
Within 1 year

Cash and bank deposits
Notes and accounts receivable - trade

¥

Total

¥

16

1 year or more but

5 years or more but

within 5 years

within 10 years

27,782 ¥44,883
72,665 ¥

－ ¥
－
－ ¥

－ ¥
－
－ ¥

10 years or more－－－

The aggregate maturities subsequent to March 31, 2021 for financial assets with maturities were as follows:
Millions of yen
Within 1 year

Cash and bank deposits
Notes and accounts receivable - trade
Deposits paid in parent company

¥

Total

¥

1 year or more but

5 years or more but

within 5 years

within 10 years

－ ¥
－
－
－ ¥

10,924 ¥47,19814,41572,537 ¥10 years or more

－ ¥
－
－
－ ¥

－
－
－
－

Thousands of U.S. dollars
Within 1 year

Cash and bank deposits
Notes and accounts receivable - trade
Deposits paid in parent company

$

Total

$

1 year or more but

5 years or more but

within 5 years

within 10 years

－ $
－
－
－ $

98,670 $426,321130,206
655,197 $10 years or more

－ $
－
－
－ $

－
－
－
－

4. The aggregate maturities subsequent to March 31, 2020 for short-term loans, bonds payable and long-term loans were as follows:
Millions of yen
Within 1 year

Short-term loans (including current portion of long-term loans payable) ¥Bonds payable
Long-term loans

Total

1 year or more but

5 years or more but

within 5 years

within 10 years－ ¥10,00025,93435,934 ¥38,332 ¥－－38,332 ¥¥10 years or more

－ ¥
－
－
－ ¥

－
－
－
－

The aggregate maturities subsequent to March 31, 2021 for short-term loans, bonds payable and long-term loans were as follows:
Millions of yen
Within 1 year

Short-term loans (including current portion of long-term loans payable) ¥Bonds payable
Long-term loans

Total

1 year or more but

5 years or more but

within 5 years

within 10 years－ ¥10,00012,42922,429 ¥47,873 ¥－－47,873 ¥¥10 years or more

－ ¥
－
－
－ ¥

－
－
－
－

Thousands of U.S. dollars
Within 1 year

Short-term loans (including current portion of long-term loans payable) $Bonds payable
Long-term loans

Total

$

1 year or more but

5 years or more but

within 5 years

within 10 years－ $$90,326112,264
202,590 $432,421 $－－432,421 $10 years or more

－ $
－
－
－ $

－
－
－
－

7. Securities
1. The aggregate acquisition costs and fair values (book values) of marketable securities classified as available-for-sale securities as ofMarch 31, 2020 and 2021 were as follows:
Millions of yen

Thousands of U.S. dollars

2021

2020
Fair value (bookAcquisition costvalue)

Unrealized gain
(loss)

Securities whose book value exceeds acquisition cost:Stock¥1,134 ¥
1,906 ¥
Securities whose acquisition cost exceeds book value:
Stock
1,103
1,034
Total

¥

2,237 ¥

2,940 ¥

Fair value (bookAcquisition costvalue)

772 ¥

2,458 ¥

2021
Unrealized gain
(loss)

4,658 ¥

2,200

Acquisition cost

Fair value (bookvalue)$

22,202 $42,073 $Unrealized gain
(loss)

19,871

(69)

213

201

(12)

1,925

1,819

(106)

703 ¥

2,671 ¥

4,859 ¥

2,188 $

24,127 $43,892 $19,76517

2. Available-for-sale securities sold in the year ended March 31, 2020 and 2021 were as follows:
Millions of yen

Thousands of U.S. dollars

2021

2020
Amountsof salesStock¥

Realized
gains

2,163 ¥

849 ¥Realized
losses647 ¥Amountsof sales

2021

Realized
gains

308 ¥

Realized
lossesAmountsof sales

－ $

84 ¥

Realized
gains

2,783 $

Realized
losses－764 $3. The Companies recognize impairment loss on available-for-sale securities when the market value declines by more than 50 percent,or the market value declines by more than 30 percent but less than 50 percent and the Companies' management determines the decline tobe other than temporary. For available-for-sale securities for which fair values are deemed extremely difficult to assess, when the valueof those securities substantially declines, the Companies recognize impairment loss, except for cases in which the future recoverability ofthe value of those securities is reasonably supported.
Impairment loss on available-for-sale securities recognized ¥248 million and ¥30 million ($274 thousand) for the year ended March 31,
2020 and 2021, respectively.

8. Inventories
Inventories held by the Companies at March 31, 2020 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021
1,328
17,15632,32822,311
73,1232020

Merchandise
Finished products
Work-in-process
Raw materials and supplies
Total

¥

1,820
19,762
34,62322,44778,652

¥

¥

¥

$

$

2021
11,995
154,960
292,006
201,530
660,491

The net loss (gain) included in cost of sales due to inventories written down for the years ended March 31, 2020 and 2021 were ¥121
million and ¥(252) million ($(2,279) thousand), respectively.

9. Affiliates
Items relevant to affiliates at March 31, 2020 and 2021 were as follows:
Millions of yen
2020
2021

Investments in securities (stocks)

¥

671

¥

637

Thousands of
U.S. dollars

2021
5,753

$

10. Assets Pledged as Collateral
A breakdown of assets pledged as collateral and the related secured liabilities as of March 31, 2020 and 2021 were as follows:
Millions of yen
2020
2021

Assets pledged as collateral:
Notes and accounts receivable - trade
Inventories
Land
Buildings and structures
Machinery and equipment
Total

¥

Secured liabilities:
Short-term loans (including current portion of long-term loans payable)
Long-term loans
Total

¥

2,509
2,757
3,504
1,008
2,457
12,235

¥

1,176
296
1,472

The assets above were pledged as collateral for bank guarantees in addition to the liabilities above.

18

¥

¥

3,382
2,613
3,057
－
－
9,052

¥

556
780
1,336

Thousands of
U.S. dollars

2021
$

$

30,54923,601
27,615－－
81,765

$

5,025
7,048
12,073

11. Short-term Loans, Bonds Payable and Long-term Loans
Short-term loans at March 31, 2020 and 2021 represent bank overdrafts with weighted-average interest rates of 1.09% and 0.54%,
respectively. In business in Japan, it is customary for short-term borrowings to be rolled over every year. For short-term financing, theCompanies have commitment line contract arrangements with several financial institutions for an aggregate maximum amount of¥13,270 million ($119,860 thousand). At March 31 2021, the total ¥13,270 million ($119,860 thousand) was unused.
Bonds payable at March 31, 2020 and 2021 consisted of the following:
Millions of yen
2020
2021

Bonds payable due 2024 with interest rates of 0.30% at March 31, 2020 and 2021¥

10,000¥10,000Thousands of
U.S. dollars$

2021
90,326

The annual maturities of bonds payable outstanding at March 31, 2021 were as follows:Year ending at March 31,

Millions of yen

Thousands of
U.S. dollars

2025

¥

$

10,00090,326Long-term loans at March 31, 2020 and 2021 consisted of the following:
Millions of yen
2020
2021

Loans from banks and other financial institutions due 2021 to 2024 withinterest rates ranging from 0.13% to 10.90% at March 31, 2020 and due 2022
to 2024 with interest rates ranging from 0.13% to 10.15% at March 31, 2021¥

Lease obligations due 2022 to 2027 with interest rate of 1.50% at March, 31,2021
Other payables due 2020 to 2021 with interest rate of 4.05% at March 31,2020

Less: Current portion of long-term loans¥

31,433¥

26,156

Thousands of
U.S. dollars

2021

$

236,258

2,223

1,956

17,662

3
33,659(6,205)27,454－
28,112(14,432)
13,680－253,920(130,355)
123,565¥$

The annual maturities of long-term loans outstanding at March 31, 2021 were as follows:Year ending at March 31,

Millions of yen

Thousands of
U.S. dollars

2023
2024
2025
2026
2027 and thereafter

¥

$

¥

19

3,564
8,165
1,718
123
110
13,680$32,19373,74815,518
1,108
998
123,565

12. Retirement Benefits
The Company has funded defined benefit lump-sum payment plans and defined contribution pension plans for employee retirement
benefits. The domestic consolidated subsidiaries have similar plans.
As a result of setting up retirement benefit trusts, some severance indemnity plans are funded and make lump-sum payments based onsalary and length of service as retirement benefits.
Certain overseas consolidated subsidiaries have funded or unfunded defined benefit pension plans and defined contribution pension
plans for employee retirement benefits.
The defined benefit pension plans of the Company and certain consolidated subsidiaries calculate net defined benefit liabilities andretirement benefit costs by the simplified method.

Defined benefit plans(1) Movements in retirement benefit obligations, except plans applying the simplified method:
Millions of yen
2020
2021

Balance at beginning of year
Service cost
Interest cost
Actuarial gain (loss)
Benefits paid
Other
Balance at end of year¥¥

19,072
790
237
1,387
(816)
(460)
20,210¥¥20,210
869
178
(332)
(578)
745
21,092Thousands of
U.S. dollars

$

$

2021
182,553
7,846
1,611(2,997)(5,222)
6,726
190,517(2) Movements in plan assets, except plans applying the simplified method:
Millions of yen
2020
2021

Balance at beginning of year
Expected return on plan assets
Actuarial gain (loss)
Contributions paid by employer
Benefits paid
Decrease from the termination of corporate pension plans
Other
Balance at end of year¥¥

11,418218(2,850)
35
(415)
－
16
8,422

¥

¥

8,422
156
3,701
28
(170)
(1,074)(34)
11,029Thousands of
U.S. dollars

$

$

2021
76,074
1,411
33,432
256(1,538)(9,697)(314)
99,624(3) Movements in liability for retirement benefits of defined benefit plans applying the simplified method:
Millions of yen
2020
2021

Balance at beginning of year
Retirement benefit costs
Benefits paid
OthersBalance at end of year

¥

¥

20

821
185
(94)
(9)
903

¥

¥

903
163
(97)
(16)
953

Thousands of
U.S. dollars

$

$

2021
8,156
1,471
(879)
(134)
8,614

(4) Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits:
Millions of yen
2020
2021

Funded retirement benefit obligations
Plan assets¥

Unfunded retirement benefit obligations
Total net liability (asset) for retirement benefits at end of year

20,210(8,422)
11,788903
12,691

Net defined benefit liabilities
Net defined benefit assets
Total net liability (asset) for retirement benefits at end of year

13,635(944)
12,691¥¥¥

21,092(11,029)
10,063953
11,016
12,852(1,836)
11,016

Thousands of
U.S. dollars

$

$

2021
190,517(99,624)
90,8938,614
99,507116,087(16,580)
99,507(5) Retirement benefit costs:
Millions of yen
2020
2021

Service cost
Interest cost
Expected return on plan assets
Net actuarial gain (loss) amortization
Retirement benefit costs based on the simplified method
Total retirement benefit costs
Loss on termination of corporate pension plans
Extra retirement payments

¥

790
237
(218)
(150)
185
844
－
－

¥

¥

¥

869
178
(156)
466
163
1,520
7
425

Thousands of
U.S. dollars

$

$

2021
7,846
1,611
(1,411)4,211
1,471
13,72867
3,841

Loss on termination of corporate pension plans is included in other expenses.
(6) Remeasurements of defined benefit plans:Millions of yen
2020
2021

Actuarial gain (loss)¥(6,628)¥

4,466

Thousands of
U.S. dollars$

2021
40,343(7) Accumulated remeasurements of defined benefit plans:Millions of yen
2020
2021

Actuarial gain yet to be unrecognized

¥

6,526

¥

2,060

Thousands of
U.S. dollars$

2021
18,606(8) Plan assets:① Plan assets comprise:
2020
67%
24%
9%
100%

Equity securities
Cash and bank deposits
Other
Total

2021
81％
16％
3％
100％

Assets in retirement benefit trusts accounted for 10% of total plan assets at March 31, 2020.
② Long-term expected rate of return
Current and target asset allocations and historical and expected returns on various categories of plan assets have been considered indetermining the long-term expected rate of return.

21

(9) Actuarial assumptions
The principal actuarial assumptions at March 31, 2020 and 2021 were as follows:
2020
2021
Discount rate (mainly)
0.1%, 2.3%
0.1%, 1.1%
Long-term expected rate of return (mainly)
1.7%, 2.9%
1.3%, 1.9%
Expected rate of pay increase
3.0%
2.5%
Certain foreign consolidated subsidiaries use the expected rate of pay increase.
The Companies do not describe the expected rate of pay increase because they, other than certain foreign consolidated subsidiaries,
mainly adopt a point basis and the effect on the calculation of retirement benefit obligations is immaterial.

Defined contribution plans
The Company and certain consolidated subsidiaries have contributed a total of ¥1,453 million and ¥1,308 million ($11,812 thousand) tothe defined contribution plans for the years ended March 31, 2020 and 2021, respectively.

2213. Income Taxes
1. Significant components of deferred tax assets and liabilities at March 31, 2020 and 2021 were as follows:
Thousands of
U.S. dollars

Millions of yen

2020
Deferred tax assets:
Tax loss carryforwards
Net defined benefit liabilities
Amortization of transition obligations corresponding to contributionof certain marketable securities to employee retirement benefit trusts
Gain on investment of certain marketable securities to employee retirement
benefit trusts
Impairment loss
Accrued bonuses
Unrealized gains
Devaluation loss on marketable securities
Excess depreciation of depreciable assets
Devaluation loss on inventories
Business tax payable
Other
Gross deferred tax assets
Valuation allowance for tax loss carryforwards
Valuation allowance for deductible temporary differences
Less: Valuation allowance
Total deferred tax assets¥¥

Deferred tax liabilities:
Depreciation, etc., of foreign subsidiaries
Adjustment of carrying amount based on fair value
Reserve for deferred capital gains from property, plant and equipment
Securities to employee retirement benefit trusts
Net defined benefit assets
Unrealized holding gains on securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

¥

¥

2021

2,786
2,710

¥

2021

3,249
1,802

$

29,35016,279

2,089

1,307

11,802

603
－
513
191
215
201
266
83
587
10,244(2,367)(628)(2,995)
7,249

502
1,006
464
267
224
200
135
107
660
9,923
(2,694)(1,540)(4,234)
5,689

4,531
9,087
4,191
2,413
2,024
1,807
1,216
966
5,966
89,632(24,337)(13,916)(38,253)
51,379¥(2,643)(2,157)(880)(1,110)
(822)
(142)
(980)
(8,734)(1,485)¥¥(2,593)(1,466)
(861)
(683)
(561)
(527)
(1,088)(7,779)(2,091)$$$(23,423)(13,245)(6,168)(7,774)(5,067)(4,761)(9,825)(70,263)(18,884)

Valuation allowance increased by ¥1,239 million ($11,195 thousand). The main factors in the increase were impairment loss andrecognition of valuation allowance for tax loss carryforwards.
2. Tax loss carryforwards and their deferred tax assets by expiration periods:
As of March 31, 2020
Millions of yen
2021

Tax loss carryforwards (a)Valuation allowance
Net deferred tax assets

¥
¥

23
(23)
－

2022

¥
¥

206
(206)
－

2023

¥

2024

252
(252)
－

¥

¥
¥

362
(362)
－

2026 andbeyond

2025

¥
¥

141
(141)
－

¥
¥

1,802 ¥
(1,383)
419 ¥

total
2,786
(2,367)419(a) The amount of tax loss carryforwards shown in the table above is after multiplying by the statutory income tax rate.
As of March 31, 2021
Millions of yen
2022

Tax loss carry forwards (a)Valuation allowance
Net deferred tax assets

¥
¥

62
(55)
7

2023

¥
¥

173
(173)
－

2024

¥

401
(401)
－

¥

23

2025

¥
¥

181
(181)
－

2027 andbeyond

2026

¥
¥

152
(139)
13

¥
¥

2,280 ¥
(1,745)
535 ¥

total
3,249
(2,694)555

Thousands of U.S. dollars
2022

Tax loss carryforwards (a)Valuation allowance
Net deferred tax assets

$
$

562
(499)
63

2023

$
$

1,570
(1,570)
－

2024

$
$

3,618
(3,618)
－

2025

$
$

2027 andbeyond2026

1,631(1,631)
－

$
$

1,372
(1,253)
119

total

$

20,597 $(15,766)$
4,831 $

29,350(24,337)
5,013(a) The amount of tax loss carryforwards shown in the table above is after multiplying by the statutory income tax rate.
3. The reconciliation between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2020 and 2021
were not required to be disclosed due to loss before income taxes.

14. Net Assets
Under the Japanese Corporate Law (the “Law”), the entire amount of the issue price of new shares is required to be accounted for ascommon stock. However, a company may, by a resolution of the Board of Directors, account for an amount not exceeding 50% of theissue price of the new shares as additional paid-in capital, which is included in capital surplus. However, an increase resulting from ashare exchange can be included in capital surplus up to the full amount.
The Law provides that the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve, incases in which a dividend distribution of surplus is made.
Under the Law, additional paid-in capital may be used to eliminate or reduce a deficit or may be capitalized by a resolution of theshareholders' meeting, and legal earnings reserve may be used to eliminate or reduce a deficit by a resolution of the shareholders’meeting. Legal earnings reserve is included in retained earnings in the accompanying financial statements.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, however, all additional paidin capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings respectively, which arepotentially available for dividends.
The maximum amount that a company can distribute as dividends is calculated based on its non-consolidated financial statements inaccordance with the Law.
At the Company’s Board of Directors meeting held on May 27, 2020, the directors approved of no cash dividends. At the Company’s
Board of Directors meeting held on May 27, 2021, the directors approved of no cash dividends.

15. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years ended
March 31, 2020 and 2021 totaled ¥2,476 million and ¥2,110 million ($19,063 thousand), respectively. For the year ended March 31,
2021, research and development cost in the Specialty Steel, Metal Powders and Formed & Fabricated Materials segments amounted to¥1,537 million ($13,880 thousand), ¥526 million ($4,754 thousand) and ¥47 million ($429 thousand), respectively.

16. Employment adjustment subsidies
Employment adjustment subsidies of the Companies recorded in manufacturing costs and selling, general and administrative expenses
at March 31, 2020 and 2021 were as follows:
Thousands of
U.S. dollars
2021

Millions of yen
2020
2021

Employment adjustment subsidies

¥

－

¥

2,153

$

19,44917. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2020 and 2021 were as follows:
Millions of yen
2020
2021

Packing and delivery expenses
Salaries
Provision of allowance for doubtful accounts
Provision for bonuses
Retirement benefit expenses
Provision for directors' retirement benefits¥

24

11,598
8,929
53
395
445
18

¥

9,896
7,733
38
341
578
15

Thousands of
U.S. dollars
2021$

89,384
69,849
341
3,083
5,217
138

18. Gain on Sale of Property, Plant and Equipment
The components of gain on sale of property, plant and equipment for the years ended March 31, 2020 and 2021 were as follows:
Thousands of
U.S. dollars
2021

Millions of yen
2020
2021

Machinery and equipment

－

50

－

19. Loss on Sale and Disposition of Property, Plant and Equipment
The components of loss on sale and disposition of property, plant and equipment for the years ended March 31, 2020 and 2021 were as
follows:
Thousands of
U.S. dollars
2021

Millions of yen
2020
2021

Buildings and structures
Machinery and equipment
Others
Total

¥

¥

50
188
260
498

¥

1
255
369
625

¥

$

8
2,299
3,342
5,649

$

20. Amortization of goodwill
Due to the impairment of shares of consolidated subsidiaries, goodwill is amortized in a lump sum pursuant to theprovisions of Paragraph 32 of the “Practical Guidelines on Capital Consolidation procedures in Consolidated Financial
Statements.”
21. Impairment Loss
For the current fiscal year, the impairment loss was recorded on the following asset group:
Segment

Company

Location

Use

Type
Buildings and structures

Amount(Millions of
yen)
¥
1,027

Machinery and equipment
Specialty
Steel

Mahindra
Sanyo Special
Steel Pvt. Ltd.

Land
Maharashtra,
India

Business assets Construction in progress
Property, Plant and Equipment andothersIntangibles and others
Total

¥

Amount(Thousands of
U.S. dollars)

$

9,277

1,970

17,798

151

1,361

766

6,919

15

134

0

1

3,929

$

35,490

The Companies group assets with consideration for business management segments. In principle, the Company is classified bybusiness segments and its consolidated subsidiaries are classified by each company as one asset group.
Regarding the above asset group, the indication of impairment was recognized due to consecutive operating losses. Therefore, as aresult of estimating the future cash flows, since the recoverable value declined below the book value, the book value was reduced to therecoverable value and the reduction was recorded as the impairment loss (3,929 million yen ($35,490 thousand)) in extraordinary losses.
The recoverable value is calculated by estimating value in use, and applying a discount rate of 12.0 % to future cash flow.

2522. Net Loss Per Share
Net loss per share for the years ended March 31, 2020 and 2021 were as follows:

Net loss attributable to owners of the parent
Net loss of common stock attributable to owners of the parent¥¥

Millions of yen
2020
2021

Thousands of
U.S. dollars
2021(3,717)(3,717)$$¥¥(6,870)(6,870)(62,055)(62,055)

Thousands of shares
2020

Weighted-average number of shares of common stock

2021

55,36454,492Yen
2020

Net loss per share¥(67.14)

U.S. dollars
2021

2021

¥

(126.07)$(1.14)The Companies had no dilutive securities for the years ended March 31, 2020 and 2021.

23. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2020 and 2021 consisted of the following:
Millions of yen
2020
2021

Cash and bank deposits
Time deposits with deposit terms of over 3 months and other
Deposits paid in parent company
Cash and cash equivalents¥¥

27,782(562)－
27,220¥¥10,924(458)
14,41524,881Thousands of
U.S. dollars
2021

$

$

98,670(4,133)130,206
224,743

24. Accounting for Leases
1. Non-cancelable operating leases
As a lessee
Outstanding future lease payments under non-cancelable operating leases at March 31, 2020 and 2021 were as follows:
Millions of yen
2020
2021

Due within one year
Due after one year
Total

¥
¥

274
1,376
1,650

¥
¥

264
1,192
1,456

Thousands of
U.S. dollars
2021

$
$

2,386
10,766
13,152

2. IFRS 16 “Leases”(a) Outline of leased assets
Some overseas consolidated subsidiaries have applied IFRS 16 “Leases” from the beginning of the previous consolidated fiscal year.
The vehicle and rent expenses on real estate of the subsidiary are recorded as right-of-use assets. Right-of-use assets are included in“Other” of property, plant and equipment in the consolidated balance sheet.
(b) Accounting for the depreciation and amortization of leased assets
Right-of-use assets are depreciated using the straight-line method over the shorter period of the lease term or the estimated useful life.

2625. Derivatives(1) Derivative transactions to which hedge accounting was not applied
Currency-related transactions
The contracted amount, fair value and unrealized gain (loss) of forward exchange contracts recognized for the year ended March 31,
2020 were as follows:
Millions of yen
Contract
amountFair value
after oneyear

Contract
amountForward exchange contracts:
BuyingU.S. dollars
Japanese yen¥

Selling
U.S. dollars
Euros
Total

¥

501 ¥
87

－
－

1
4
593 ¥

－
－
－

¥

¥

Unrealized
gain (loss)(42) ¥
(1)

(42)
(1)

0
(2)
(45) ¥

0(2)(45)

The contracted amount, fair value and unrealized gain (loss) of forward exchange contracts recognized for the year ended March 31,
2021 were as follows:
Millions of yen
Contract
amountUnrealized
Fair value gain (loss)
after oneyear

Contract
amountForward exchange contracts:
BuyingU.S. dollars
Japanese yen
Selling
U.S. dollars
Euros
Total

¥

¥

45
13
1
2
61

¥

¥

－
－
－
－
－

¥

¥

(4) ¥
(0)

(4)
(0)

0
(2)
(6) ¥

0
(2)
(6)

Thousands of U.S. dollars
Contract
Contract
amountUnrealized
amountafter one Fair value gain (loss)
year

$

$

407
113
10
22
552

$

$

－
－
－
－
－

$

$

(40) $
(0)

(40)
(0)

8
(20)
(52) $

8
(20)
(52)

(2) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied for the years ended March 31, 2020 and 2021 were as follows:① Currency-related transactions
2020
2021
Method of hedge accounting

Principle method

Principle method

Type of derivative transactions

Forward exchange contracts

Forward exchange contracts

Selling Euros

Selling Euros

Main hedged items

Accounts payable - trade

Accounts payable - trade

Contract amount¥22,386 million¥17,331 million ($156,548 thousand)1 year or more amount of contract¥7,413 million¥4,571 million ($41,287 thousand)Fair value¥295 million¥1,164 million ($10,518 thousand)27

② Interest rate and currency swap transactions
2020
2021
Unified method of interest rate and―currency swap transactions
Type of derivative transactions
Interest rate and currency swap transactions―
Payment fixed, receipt floating
Receive floating US$ and pay fixed yen
Main hedged items
Short-term loans―
Contract amount¥2,929 million―
1 year or more amount of contract――
Fair value※1―※1 Because interest rate and currency swap transactions accounted for by the unified method (the exceptional method, the allocation
method) are managed together with the short-term loans that are the hedged items, the fair value is included in the fair value of theshort-term loans.
Method of hedge accounting③ Other
Method of hedge accounting
Type of derivative transactions
Main hedged items
Contract amount1 year or more amount of contract
Fair value

2020
Principle method
Commodity futures contract
Electricity¥1,008 million―¥112 million

2021
Principle method
Commodity futures contract
Electricity¥2,124 million ($19,186 thousand)¥794 million ($7,174 thousand)¥(78) million ($(706) thousand)

26. Contingent Liabilities
Guarantees for loans of employees and others at March 31, 2020 and 2021 were as follows:
Thousands of
U.S. dollars
2021

Millions of yen
2020
2021

¥

UCHIDA-SATO TECH (THAILAND) CO., LTD.

3

¥

2

$

17

27. Segment Information(1) General information about reportable segments
The Companies' reportable segments are the business units for which the Company is able to obtain separate financial information inorder for the Board of Directors to determine the distribution of management resources and evaluate business results. Each operating
division develops business activities and establishes comprehensive strategies for domestic and overseas markets according to the
products it handles. Therefore, the Companies consist of business segments according to their products based on operating divisions andhave determined the reportable segments, as "Specialty Steel," "Metal Powder" and "Formed and Fabricated Materials."
The "Specialty Steel" segment includes the manufacture and sale of various special steel products such as bearing steel, engineering
steel, stainless steel, heat resistant steel and tool steel. The "Metal Powder" segment includes the manufacture and sale of metal powder
products. The "Formed and Fabricated Materials" segment includes the manufacture and sale of formed and fabricated materials madefrom special steel bars and tubes.

(2) Accounting methods and basis of measurement for reportable segment profit or loss and other material items
The accounting methods applied to the reportable segments are generally the same as those described in Note 2, "Summary of
Significant Accounting Policies," except that inventories are stated at cost to evaluate business results. Segment income is based on
operating income. Intersegment transactions are based on market prices.

(Changes in depreciation method for Property, Plant and Equipment)
As described in “(Changes in accounting policies that are difficult to distinguish from changes in accounting estimates),” thedepreciation method for Property, Plant and Equipment of the Company and its domestic subsidiaries was changed to the straight-line
method for the current consolidated fiscal year from the declining balance method mainly used in the past.
As a result, compared with using the declining-balance method, for the current consolidated fiscal year, the segment loss in “Specialty
Steel” and “Formed and Fabricated Materials” decreased by 1,804 million yen ($16,293 thousand) and 99 million yen ($893 thousand)respectively and the segment income in “Metal Powder” and “Other” increased by 32 million yen ($289 thousand) and 2 million yen($15 thousand) respectively.

28

(3) Information about reportable segment profit or loss and other material items
Segment information for the years ended March 31, 2020 and 2021 was as follows:
For the year ended March 31, 2020
Millions of yen
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Adjustments

Consolidated
total(a) Sales and operating income (loss):
Net sales
Outside customers¥

Intersegment transactions
Total
Segment income (loss)－ ¥240,237 ¥

4,126 ¥

17,938 ¥152 ¥262,453 ¥

262,453

8,132

－

0

1,721

9,853

(9,853)－248,369

4,126

17,938

1,873

272,306(9,853)

262,453¥(1,676) ¥263 ¥(121) ¥

67 ¥

(1,467) ¥50 ¥(1,417)¥

13,891 ¥

347 ¥

754 ¥

12 ¥

15,004 ¥(26) ¥

14,978

2,942

－

－

－

2,942

－

2,942

－

－

－

－

－

－

－

(b) Other:
Depreciation
Amortization of goodwill
Impairment loss

1. The "Other" category is the information service segment not included in reportable segments.
2. Segment income (loss) adjustments are intersegment eliminations.
3. Segment income (loss) is adjusted with operating loss in the consolidated statements of operations.
4. As information about segment assets and liabilities is not used to determine the distribution of management resources and evaluatebusiness results, the Companies are not required to disclose information about segment assets and liabilities.
5. Amortization of goodwill does not include the amortization of goodwill (¥1,289 million) included in extraordinary loss.
For the year ended March 31, 2021
Millions of yen
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Adjustments

Consolidated
total(a) Sales and operating income (loss):
Net sales
Outside customers¥

Intersegment transactions
Total
Segment income (loss)－ ¥193,402 ¥3,456 ¥

13,735 ¥129 ¥210,722 ¥

210,722

6,260

－

0

1,445

7,705

(7,705)－

199,6623,456

13,735

1,574

218,427(7,705)

210,722¥(5,241) ¥263 ¥(615) ¥

46 ¥(5,547) ¥54 ¥(5,493)¥

13,211 ¥

252 ¥

687 ¥

9¥

14,159 ¥(30) ¥

14,129Amortization of goodwill

2,621

－

－

－

2,621

－

2,621

Impairment loss

3,929

－

－

－

3,929

－

3,929

(b) Other:
Depreciation

29

Thousands of U.S. dollars
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Consolidated
total

Adjustments(a) Sales and operating income (loss):
Net sales
Outside customers

$

Total
Segment income (loss)

124,063 $－ $1,746,927 $

31,216 $56,544－1

13,05369,598(69,598)－

1,803,471

31,216124,064

14,212

1,972,963(69,598)

1,903,365

Intersegment transactions

1,159 $ 1,903,365 $

1,903,365$(47,339) $2,379 $

(5,553) $410 $(50,103) $485 $(49,618)$(b) Other:
Depreciation

119,334 $2,278 $

6,207 $

74 $

127,893 $(271) $

127,622

Amortization of goodwill

23,674－－－

23,674－

23,674

Impairment loss

35,490－－－35,490－35,4901. The "Other" category is the information service segment not included in reportable segments.
2. Segment income (loss) adjustments are intersegment eliminations.
3. Segment income (loss) is adjusted with operating loss in the consolidated statements of operations.
4. As information about segment assets and liabilities is not used to determine the distribution of management resources and evaluatebusiness results, the Companies are not required to disclose information about segment assets and liabilities.

(4) Related Information(a) Segment related information for the year ended March 31, 2020 was as follows:① Information about products and services
As described in “General information about reportable segments,” the Companies are not required to disclose information about
products and services.

② Information about geographic areas
1. Net sales
As of March 31, 2020
Millions of yen
Japan

Net sales¥

108,997

Europe (Sweden of Europe)

¥

North
AmericaAsia

99,906 ¥ (24,509) ¥43,892¥Others8,476 ¥

1,182

Total

¥

262,453

2. Property, plant and equipment
As of March 31, 2020
Millions of yen
Japan

Property, plant and equipment ¥65,866

Europe (Sweden of Europe)¥

36,330 ¥ (28,989) ¥North
AmericaAsia

10,274¥

Others

27 ¥

4,391

Total

¥

116,888③ Information about major customers
For the year ended March 31, 2020
Net sales

Related segment

Millions of yen

Marubeni-Itochu Steel Inc.

¥

29,603Specialty Steel(b) Segment related information for the year ended March 31, 2021 is as follows:① Information about products and services
As described in “General information about reportable segments,” the Companies are not required to disclose information about
products and services.

30

② Information about geographic areas
1. Net sales
As of March 31, 2021
Millions of yen
Japan

Net sales¥

83,836

Europe (Sweden of Europe)

¥

North
AmericaAsia

84,296 ¥ (21,855) ¥35,744¥

Others5,714 ¥

Total

1,132

¥

210,722

Thousands of U.S. dollars
Japan

Net sales$

757,254

Europe (Sweden of Europe)

$

North
America

Asia

761,411 $ (197,404) $322,865$

51,609 $OthersTotal

10,226$ 1,903,365

OthersTotal

2. Property, plant and equipment
As of March 31, 2021
Millions of yen
Japan

Property, plant and equipment ¥67,821

Europe (Sweden of Europe)

¥

North
AmericaAsia

37,028 ¥ (29,982) ¥

5,202

¥

24 ¥

3,750

¥

113,825

Thousands of U.S. dollars
Japan

Property, plant and equipment $612,601

Europe (Sweden of Europe)

$

North
AmericaAsia334,457 $ (270,819) $46,991$214 $OthersTotal

33,871$ 1,028,134③ Information about major customers
For the year ended March 31, 2021
Net sales
Millions of yen

Marubeni-Itochu Steel Inc.

¥

Related segment

Thousands of U.S. dollars

22,765$

205,625

Specialty Steel(5) Information about the amount of amortization of goodwill and the unamortized amount of goodwill by reportablesegments
As of March 31, 2020
Millions of yen
Reportable segments
Specialty SteelUnamortized amount of
goodwill¥

35,630 ¥Metal Powder

Formed andFabricated Materials

－¥

Other

－¥

Total

－¥

35,630 ¥Consolidated
total

Adjustments－¥

35,630

As of March 31, 2021
Millions of yen
Reportable segments
Specialty SteelUnamortized amount of
goodwill¥

34,176 ¥Metal Powder

Formed andFabricated Materials

－¥

Other

－¥

Total

－¥

34,176 ¥Consolidated
total

Adjustments－¥

34,176

Thousands of U.S. dollars
Reportable segments
Specialty SteelUnamortized amount of
goodwill$

308,701 $Metal Powder

Formed andFabricated Materials

－$

－$

Other

Total

－$

308,701 $Consolidated
total

Adjustments－$

308,701

The amount of amortization of goodwill is omitted because the information is disclosed in “(3) Information about reportable segment
profit or loss and other material items.”

3128. Related Party Information(Related party transactions)(1) Related party transactions for the years ended March 31, 2020 were as follows:
Not applicable.
(2) Related party transactions for the years ended March 31, 2021 were as follows:
Transactions during the year ended
Resulting account balances
March 31, 2021
AmountAmountAmountAmountDescriptionofAccount
Millions ofMillions ofThousands of U.S.
Thousands ofdollars
U.S. dollars
transactionyenyenCategory:
Parent company
Name:
Nippon Steel Corporation
Head office address:
Chiyoda-ku, Tokyo
Deposits
Paid-in capital:
paid in¥419,524 million
Deposit of¥
17,973 $162,340¥
14,415 $130,206
funds
Business content:
parentProduction and selling of steel
company
products,etc
Equity ownership percentage:
Holding 53.07% directly
Holding 0.10% indirectly
Relation with related party:
Deposit of funds
Deposit of funds is transaction by CMS and the transaction amount represents the average outstanding balance during the fiscal year.
(3) Related party transactions with subsidiaries owned by the same parent company and subsidiaries of other related companies for theyears ended March 31, 2020 were as follows:
Not applicable.
(4) Related party transactions with subsidiaries owned by the same parent company and subsidiaries of other related companies for theyears ended March 31, 2021 were as follows:
Transactions during the year ended
Resulting account balances
March 31, 2021
AmountAmountAmountAmountDescriptionofAccount
Millions ofMillions ofThousands of U.S.
Thousands ofdollars
U.S. dollars
transactionyenyenCategory:
subsidiaries owned by thesame parent company
Name:
Nippon Steel Finance Co.,Ltd.
Head office address:
Chiyoda-ku, Tokyo
Accounts
Paid-in capital:
Transfers of¥1,000 million
trade¥9,259 $
83,633¥
6,090 $
55,010receivablereceivable
Business content:
other
Engages in the group’s
financing operations
Equity ownership percentage:Not applicable
Relation with related party:
Transfersofaccounts
receivables
Regarding the Company’s accounts receivables, “Account Receivable Sales Contract” with Nippon Steel Finance Co.,Ltd. has beenconcluded and the account receivables have been transferred.
(5) Related party transactions between a consolidated subsidiaries and related parties for the years ended March 31, 2020 and 2021 wereas follows:
Not applicable.

32

(Disclosures about the parent company and significant affiliates)(1) Information about the parent company
Nippon Steel Corporation is listed on the Tokyo Stock Exchange, Nagoya Stock Exchange, Fukuoka Stock Exchange and Sapporo
Stock Exchange.
(2) Financial statements of significant affiliates
Not applicable.

33Independent auditor’s report
To the Board of Directors of Sanyo Special Steel Co., Ltd.:
OpinionWe have audited the accompanying consolidated financial statements of Sanyo Special Steel Co., Ltd.
(“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”), which
comprise the consolidated balance sheets as at March 31, 2021 and 2020, the consolidated statements ofoperations,comprehensive income, changes in net assets and cash flows for the years then ended , andnotes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2021 and 2020, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Emphasis of Matter
We draw attention to Note 2(22) to the consolidated financial statement which describes thedepreciation method for Property, Plant and Equipment of the Company and its domestic subsidiaries
was changed to the straight-line method for the current consolidated fiscal year from the decliningbalance method mainly used in the past. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Appropriateness of management’s judgment concerning the identification of an impairment
indicator for goodwill of Ovako Group AB
The key audit matter

How the matter was addressed in our audit

In the consolidated balance sheet of Sanyo Special
Steel Co., Ltd (hereinafter, the “Company”) as ofMarch 31, 2021, goodwill of ¥34,176 million, thatwas recognized when Ovako Group AB(hereinafter, “Ovako”) was converted into a
consolidated subsidiary in March 2019, represents
approximately 11% of total assets.

The primary procedures we performed to assess
the appropriateness of management’s judgment
concerning the identification of an impairment
indicator for goodwill of Ovako included thefollowing:

Whenever there is an impairment indicator for
goodwill, it needs to be tested for impairment bycomparing the undiscounted future cash flows thatare expected to be generated from the related asset
groups (larger units including goodwill) with theircarrying amounts. If the recognition of an
impairment loss is deemed necessary, the carrying
amount is reduced to the recoverable amount, andthe resulting decrease in the carrying amount isrecognized as an impairment loss.
As a result of the decrease in volume of orders inOvako since automobile sales volume in Europe
dropped mainly due to the U.S.-China trade
conflict and the spread of COVID-19, Ovako hasrecognized recurring operating losses (after theamortization of goodwill) in the fisical years 2019and 2020. However, management determined that
there was no impairment indicator for the current
fiscal year because it was expected to generate
positive operating income for the next period(fisical year 2021) as set forth in the business planof Ovako. The business plan that served as thebasis for the aforementioned management
judgment assumed a sales volume increase due tofuture demand recovery for special steels in
Europe, and such projection involved a degree of
uncertainty.
We, therefore, determined that appropriateness ofmanagement’s judgment concerning theidentification of an impairment indicator for
goodwill of Ovako was one of the most significant
matters in our audit of the consolidated financial
statements for this fiscal year, and accordingly, a
key audit matter.

(1) Internal control testing
We tested the design and operating effectivenessof certain of the Company’s internal controls todetermine whether there was an impairment
indicator for goodwill.
(2) Assessment of the appropriateness of thejudgment concerning the identification of an
impairment indicator for goodwill
We inquired of management about the basis forthe significant assumptions adopted bymanagement in order to assess the reasonablenessof the estimated operating income for the next
fiscal year that was derived from the business planof Ovako and used by management in determining
whether there was an impairment indicator for
goodwill. In addition, in order to assess its
reliability in the light of the requirements ofaccounting standards, we:compared the sales volume included in thebusiness plan with the available external dataon the projection of automobile sales volume
in Europe, and examined the consistency
with the most recent volume of order.

Appropriateness of an impairment loss on property, plant and equipment and intangibles of
Mahindra Sanyo Special Steel Pvt. Ltd.
The key audit matter

How the matter was addressed in our audit

For the fiscal year ended March 31, 2021, SanyoSpecial Steel Co., Ltd (hereinafter, the“Company”) recognized an impairment loss of¥3,929 million related to the property, plant andequipment and intangibles of Mahindra SanyoSpecial Steel Pvt. Ltd. (hereinafter, “MSSS”) thatwas converted into a consolidated subsidiarythrough an additional share acquisition in June
2018.

The primary procedures we performed to assess
the appropriateness of an impairment loss onproperty, plant and equipment and intangibles ofMSSS included the following:

While these assets are depreciated/amortized in asystematic manner, they need to be tested for
impairment whenever there is an impairment
indicator. The impairment test is performed bycomparing the undiscounted future cash flows thatare expected to be generated from the asset groups
with their carrying amounts. If the recognition of
an impairment loss is deemed necessary, thecarrying amount is reduced to the recoverable
amount, and the resulting decrease in the carrying
amount is recognized as an impairment loss.
As a result of the decrease in volume of orders in
MSSS since automobile sales volume in India
dropped mainly due to the spread of COVID-19,
MSSS has recognized recurring operating losses
for some consecutive years, indicating
impairment. Accordingly, the Company
performed an impairment test during the current
fiscal year. In the impairment testing,undiscounted future cash flows were estimatedbased on the mid-term business plan of MSSS
prepared by management that incorporated a sales
volume increase in the market, an estimate which
involved a degree of uncertainty. Accordingly,
management’s judgment thereon had a significant
effect on the estimated undiscounted future cash
flows.
In addition, if the recognition of an impairment
loss is deemed necessary, estimating the discountrate used to calculate the recoverable amountbased on the value in use requires a high degree ofexpertise in valuation.

(1) Internal control testing
We tested the design and operating effectivenessof certain of the Company’s internal controls todetermine whether an impairment loss onproperty, plant and equipment and intangibles
should be recognized and to measure an
impairment loss.
(2) Assessment of the reasonableness of theestimated undiscounted future cash flows
In order to assess the reasonableness of key
assumptions adopted in estimating theundiscounted future cash flows, we inquired of theplanning department about the future uncertainty(a sales volume increase) incorporated into the
mid-term business plan of MSSS and theundiscounted future cash flows, which served as
the basis for the estimate. In addition, we:assessed whether uncertainty wasappropriately incorporated into theundiscounted future cash flows by comparing
and examining the consistency between thesales volume under the mid-term businessplan of MSSS and available external data on
the projection of automobile sales volume inIndia.

(3) Assessment of the reasonableness of theestimated discount rate
We compared the discount rate used to calculate
the value in use with the discount rate
independently calculated by a valuation specialistin our domestic network firms.

We, therefore, determined that appropriateness ofan impairment loss on property, plant andequipment and intangibles of MSSS was one of
the most significant matters in our audit of theconsolidated financial statements for this fiscal
year, and accordingly, a key audit matter.

Responsibilities of Management and Audit and Supervisory members and Audit and Supervisory
Board for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan.
Audit and Supervisory members and Audit and Supervisory Board are responsible for overseeing thedirectors’ performance of their duties with regard to the design, implementation and maintenance of theGroup’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.


Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with Audit and Supervisory members and Audit and Supervisory Board regarding,among other matters, the planned scope and timing of the audit, significant audit findings, including
any significant deficiencies in internal control that we identify during our audit.
We also provide Audit and Supervisory members and Audit and Supervisory Board with a statementthat we have complied with relevant ethical requirements regarding independence, and communicate
with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with Audit and Supervisory members and Audit and Supervisory
Board, we determine those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit matters. We describe thesematters in our auditor’s report unless law or regulation precludes public disclosure about the matter orwhen, in extremely rare circumstances, we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2021 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 3 to the consolidated financial statements.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company and its
subsidiaries which are required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan.
Naoki Sugita
Designated Engagement Partner
Certified Public Accountant
Yu Kohno
Designated Engagement Partner
Certified Public Accountant
Tatsuya Furusawa
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Osaka Office, Japan
August 30, 2021
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.