Sanyo Special Steel Co., Ltd.
Financial Report for
The Year Ended March 31, 2023

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSAs of March 31, 2022 and 2023
Thousands of U.S.
Millions of yen

ASSETS
Current Assets:

2022

Cash and bank deposits (Notes 6 and 22)
Notes and accounts receivable - trade, and contract assets (Notes 6, 10, 11 and 27)
Electronically recorded monetary claims (Note 6)
Less: Allowance for doubtful accounts
Inventories (Notes 8 and 10)
Income taxes receivable
Deposits paid in parent company (Notes 6, 22 and 27)
Other
Total current assets¥

14,48369,0198,707(356)
113,512
18
7,924
7,196
220,503

dollars (Note 3)

2023

¥

21,653
66,372
11,637(449)
128,229
45
9,954
4,258
241,6992023$

162,144497,022
87,139(3,365)960,227
335
74,53931,894
1,809,935

Property, Plant and Equipment:
Land (Note 10)
Buildings and structures (Note 10)
M achinery and equipment (Note 10)
Construction in progress
Other (Note 10)
Less: Accumulated depreciation
Total property, plant and equipment

13,25975,042286,723
3,408
14,953393,385(281,410)
111,975

13,49674,816284,450
9,026
15,651
397,439(282,256)
115,183

101,064
560,248
2,130,072
67,588117,2072,976,179(2,113,642)
862,537

33,284
4,102
37,38632,441
3,677
36,118242,933
27,532
270,465

4,996
2
2,055
300
902
(208)
8,047

5,003
3
1,489
997
935
(209)
8,218

37,46823
11,153
7,464
7,003(1,566)
61,545Intangible Assets:
Goodwill
Other
Total intangible assets

Investments and Other Assets:
Investments in securities (Notes 6, 7 and 9)
Long-term loans receivable
Deferred tax assets (Note 14)
Net defined benefit assets (Note 13)
Other
Less: Allowance for doubtful accounts
Total investments and other assets
Total assets¥

1

377,911¥401,218$

3,004,482

Thousands of U.S.
Millions of yen

LIABILITIES AND NET ASSETS
Current Liabilities:

2022

Short-term loans (Notes 6, 10 and 12)
Current portion of long-term loans (Notes 6, 10 and 12)
Commercial paper (Note 6 and 12)
Notes and accounts payable - trade
Accounts payable - otherAccrued income taxes
Accrued expenses
Provision for environmental measures
Other (Notes 11 and 12)
Total current liabilities¥

34,3673,306
12,00149,426
10,262
5,475
12,6854
2,711
130,237

dollars (Note 3)

2023

¥

35,4818,251
30,99939,544
11,1204,654
11,823
4
5,516
147,3922023$

265,699
61,788232,133
296,118
83,272
34,852
88,53329
41,304
1,103,728

Long-term Liabilities:
Bonds payable (Notes 6 and 12)Long-term loans (Notes 6, 10 and 12)
Accrued directors' and corporate auditors' retirement benefits
Deferred tax liabilities (Note 14)
Provision for loss on guarantees
Provision for environmental measures
Net defined benefit liabilities (Note 13)
Other (Note 12)
Total long-term liabilities
Total liabilities

10,00019,324
68
4,743
1
207
12,165
2,321
48,82910,00011,571
56
5,279
1
133
8,752
2,010
37,802

74,884
86,645417
39,5338
997
65,535
15,059283,078

179,066

185,194

1,386,806

Contingent Liabilities (Note 25)
Net Assets (Note 15)
Shareholders' Equity:
Common stock:
Authorized 94,878,400 shares in 2022 and 2023
Issued 54,507,307 shares in 2022 and 2023
Capital surplus
Retained earnings
Less: Treasury stock, at cost (19,566 shares in 2022 and 21,557 shares in 2023)
Total shareholders' equity¥

53,80051,48685,733(28)
190,991¥

53,80051,503101,028(32)
206,299$402,877
385,676
756,533(242)
1,544,844

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

1,383
2,134
4,120
(1,634)
6,003

1,894
(1,101)
5,626
1,657
8,076

14,180(8,238)42,127
12,40560,474Non-controlling Interests

1,851

1,649

12,358

Total net assets

198,845

216,024

1,617,676

Total liabilities and net assets¥

2

377,911¥401,218$

3,004,482

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2022 and 2023
Thousands of U.S.
Millions of yen

2022

Net Sales (Note 28)
Cost of Sales (Notes 8 and 16)¥

dollars (Note 3)

2023

363,278¥2023

393,844$2,949,257

303,394

326,7902,447,132

59,88467,054502,125

38,46738,562

288,766

21,41728,492

213,359

Interest and dividends

263

478

3,579

Rent income

442

347

2,598

Exchange gains

164

494

3,701

Gross profit

Selling, General and Administrative Expenses (Notes 16 and 17)
Operating income

Other Income:

Other

243

287

2,146

1,112

1,606

12,024

(615)
(250)

(960)
(282)

(7,191)(2,104)

Other Expenses:
Interest
Other
Ordinary income(865)(1,242)(9,295)

21,66428,856

216,088

43

250

1,873

Extraordinary Gains and Losses:
Gain on sale of property, plant and equipment (Note 18)
Gain on sale of investment in securities (Note 7)

92

15

116

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

(193)

(651)

(4,878)Loss on liquidation of subsidiaries (Note 20)

(414)

(425)

(3,185)

Loss on evaluation of investments in securities (Note 7)

(219)

－

－

(691)

(811)

(6,074)

20,97328,045210,014

5,252
224

6,529
711

48,888
5,330

Income before income taxes

Income Taxes: (Note 14)
Current
Deferred
Net income

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

5,476

7,240

54,21815,49720,805

155,796230¥

15,26762¥

20,743

Yen

2022

462
$

155,334

U.S. dollars (Note 3)

2023

2023

Per Share:
Net income (Note 21)
Cash dividends¥

Net assets

280.1990.00
3,615.393¥

380.70100.003,934.50

$

2.85
0.75
29.46

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2022 and 2023
Thousands of U.S.
Millions of yen

2022

Net Income
Other Comprehensive Income (Loss):¥dollars (Note 3)2023

15,497¥2023

20,805$

155,796

Valuation difference on available-for-sale securities

(278)

511

3,825

Deferred gains (losses) on hedges

1,249(3,235)(24,222)

Foreign currency translation adjustments

4,828

1,591

11,917

Remeasurements of defined benefit plans

56

3,291

24,641

Share of other comprehensive income of affiliates accounted for by the equity method
Total other comprehensive income (Note 4)

Comprehensive Income

69

－

－

5,924

2,158

16,161

21,421

22,963

171,957

21,064

22,766

170,481

357

197

1,476

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

4

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2022

Number ofoutstanding
common shares

Balance at beginning of year

54,490,533

Millions of yen

Common stock

Capital surplus¥¥

53,80051,486

Retainedearnings¥

72,924

－

－

－

(6)

54,490,533

53,80051,486

72,918Net income attributable to owners of the parent

－

－

－

15,267

Cash dividends paid

－

－

－

(2,452)(2,913)

－

－

－

121

－

0

－

－

－

－

－

－
(2,792)

－
－

－
0

－
12,815

Cumulative effects of changes in accounting policies

Restated balance

Acquisition of treasury stock
Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2021, net
Total changes for fiscal year 2021
Balance at end of year

54,487,741¥

53,800¥51,486¥85,733

Millions of yen

Balance at beginning of year

T reasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

¥

¥

¥

(23)

1,661

885

Foreigncurrencytranslation
adjustments

¥

(650)

－

－

－

－

Net income attributable to owners of the parent

(23)
－

1,661
－

885
－

(650)
－

Cash dividends paid

－

－

－

－

Acquisition of treasury stock

(5)

－

－

－

0

－

－

－

－

－

－

－

－
(5)

(278)
(278)

1,249
1,249

4,770
4,770

Cumulative effects of changes in accounting policies

Restated balance

Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2021, net
Total changes for fiscal year 2021
Balance at end of year

¥

(28)

¥

1,383

¥

2,134

Millions of yen

Remeasurementsof defined
benefit plans

Balance at beginning of year¥

(1,690)

Cumulative effects of changes in accounting policies

Restated balance
Net income attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2021, net
Total changes for fiscal year 2021
Balance at end of year

¥

Total
¥

179,888－－(6)(1,690)－1,495－

179,882
15,267－－－－(2,452)
(5)

－

－

0

－

－

－

56
56

356
356

6,153
18,963(1,634)

5

Noncontrollinginterests
¥
1,495

¥

1,851

¥

198,845¥

4,120

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2023

Number ofoutstanding
common shares

Balance at beginning of year

54,487,741

Cumulative effects of changes in accounting policies

Restated balance
Net income attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2022, net
Total changes for fiscal year 2022
Balance at end of year

Millions of yen

Common stock

Capital surplus¥¥

53,80051,486

Retainedearnings¥

85,733－－－－54,487,741

53,80051,48685,733－－－

20,743－－－(5,448)(1,991)

－

－

－

－

－

－

－

－

－

17

－

－
(1,991)

－
－

－
17

－
15,29554,485,750¥

53,800¥51,503¥101,028

Millions of yen

Balance at beginning of year

T reasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

¥

¥

¥

(28)

1,383

2,134

Foreigncurrencytranslation
adjustments

¥

4,120

－

－

－

－

Net income attributable to owners of the parent

(28)
－

1,383
－

2,134
－

4,120
－

Cash dividends paid

－

－

－

－

Acquisition of treasury stock

(4)

－

－

－

－

－

－

－

－

－

－

－

－
(4)

511
511

(3,235)(3,235)

1,506
1,506

Cumulative effects of changes in accounting policies

Restated balance

Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2022, net
Total changes for fiscal year 2022
Balance at end of year

¥

(32)

¥

1,894

¥

(1,101)Millions of yen(1,634)

Noncontrollinginterests
¥
1,851

－

－

－

(1,634)－

1,851－

198,845
20,743－－－－(5,448)
(4)

－

－

－

－

－

17

3,291
3,291

(202)
(202)

1,871
17,179Remeasurementsof defined
benefit plans

Balance at beginning of year¥

Cumulative effects of changes in accounting policies

Restated balance
Net income attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2022, net
Total changes for fiscal year 2022
Balance at end of year

¥

1,657

6

¥

1,649

Total
¥

¥

198,845

216,024¥

5,626

Number ofoutstanding
common shares

Balance at beginning of year

54,487,741－

Cumulative effects of changes in accounting policies

Restated balance
Net income attributable to owners of the parent
Cash dividends paid
Acquisition of treasury stock
Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2022, net
Total changes for fiscal year 2022
Balance at end of year

Thousands of U.S. dollars (Note 3)

Common stock

Capital surplus$$

402,877－

385,550－

Retainedearnings$

642,001－

54,487,741－

402,877－

385,550－

642,001
155,334－－－(40,802)(1,991)
－

－
－

－
－

－
－

－

－

126

－

－

－

－

－

(1,991)
54,485,750－
402,877$$126
385,676$

114,532
756,533

Thousands of U.S. dollars (Note 3)

Balance at beginning of year

T reasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

$

$

$

(212)

10,355

15,985

Foreigncurrencytranslation
adjustments$

30,851－(212)－
10,355－
15,985－30,851

Net income attributable to owners of the parent

－

－

－

－

Cash dividends paid
Acquisition of treasury stock

－
(30)

－
－

－
－

－
－

Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2022, net

－

－

－

－

－

－

－

－

－

3,825

(24,223)

11,276

Cumulative effects of changes in accounting policies

Restated balance

Total changes for fiscal year 2022
Balance at end of year

(30)
$

(242)

3,825
$

14,180(24,223)$(8,238)

Thousands of U.S. dollars (Note 3)(12,236)

Noncontrollinginterests$
13,860－(12,236)－
13,860－1,489,031

Net income attributable to owners of the parent－－

155,334

Cash dividends paid
Acquisition of treasury stock

－
－

－
－

(40,802)
(30)

－

－

－

－

－

126

24,641
24,641(1,502)(1,502)

14,017
128,645

Remeasurementsof defined
benefit plans

Balance at beginning of year$

Cumulative effects of changes in accounting policies

Restated balance

Disposal of treasury stock
Change in ownership interest due to transactions
with non-controlling interests
Other changes for fiscal year 2022, net
Total changes for fiscal year 2022
Balance at end of year$

12,405

7$12,358

Total$$

1,489,031

1,617,676

11,276$42,127

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2022 and 2023
Thousands of U.S.
Millions of yen

2022

dollars (Note 3)

2023

2023

Cash Flows from Operating Activities:
Income before income taxes
Adjustments Depreciation and amortization
Amortization of goodwill
Increase in allowance for doubtful accounts
Increase in provision for bonuses
Increase in net defined benefit liabilities
Decrease in net defined benefit assets
Increase (decrease) in accrued directors' and corporate
auditors' retirement benefits, less payments
Decrease in provision for environmental measures
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
Loss (gain) on sale and disposition of property, plant and equipment
Loss on liquidation of subsidiaries
Changes in assets and liabilities:
Notes and accounts receivable - trade, and contract assets
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 investments in affiliates accounted for by the equity method
Decrease in long-term loans receivable
Payments into time deposits
Proceeds from withdrawal of time deposits
Payments of long-term loans receivable

Other, net
Net cash used in investing activities

8¥

20,973¥28,045$210,014

15,904
3,375
70
685
97
205
2

13,765
2,925
74
156
53
227
(12)

103,074
21,902
551
1,170
393
1,699
(92)

(274)
(2)
(263)
615
(92)
219
149
414

(80)
(0)
(478)
960
(15)
－
401
425

(598)
(2)
(3,579)
7,191
(116)
－
3,005
3,185

(23,620)(36,970)
25,217
1,160
7,864
263
(617)
(424)
7,086

1,389
(11,411)(14,390)(2,165)
19,869477(757)(7,434)
12,155

10,404(85,454)(107,759)(16,199)
148,789
3,573(5,668)(55,672)
91,022(13,832)
106
(711)
(2)
553

(13,576)
493
(276)
(3)
35

(101,665)
3,689(2,069)
(20)
260

－
203
(1,022)931(2)
478(13,298)788
3(1,066)
1,048
(4)
(208)
(12,766)5,900
19(7,981)7,849(31)(1,551)(95,600)

Thousands of U.S.
Millions of yen

2022

dollars (Note 3)

2023

2023

Cash Flows from Financing Activities:
Decrease in short-term loans
Increase in commercial paper¥(2,098)12,001¥(717)
18,998$(5,366)142,263

Proceeds from long-term loans
Repayment of long-term loans

11,000(15,110)300(3,414)

2,247(25,569)

Repayments of lease obligations
Payments for purchases of treasury stock(1,035)
(5)

(797)
(4)

(5,968)(30)

Proceeds from sales of treasury stock
Cash dividends
Cash dividends to non-controlling interests

0(2,449)(1)－(5,442)(37)－(40,748)
(279)

－
(17)

(344)
(17)

(2,575)
(130)

2,286

8,526

63,845

902

1,215

9,101

(3,024)24,881

9,130
21,85768,368
163,675

Purchase of shares of subsidiaries not resulting in change in scope of consolidation
Other, net
Net cash provided by 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 22)9¥21,857¥30,987$232,043

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

2. Summary of Significant Accounting Policies(1) Consolidation and investments in affiliates(a) Scope of consolidation and elimination
The Company had 37 subsidiaries as of March 31, 2023 (40subsidiaries as of March 31, 2022). The consolidated financial
statements include the accounts of the Company and its 37
subsidiaries. The 37 subsidiaries that have been consolidated forthe fiscal year ended March 31, 2023 are listed below:
Yohkoh Bussan Co., Ltd.
Santoku Kogyo Co., Ltd.
Santoku Tech Co., Ltd.
Santoku Seiken Co., Ltd.
Santoku Computer 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.
SKJ Metal Industries Co., Ltd.
Sanyo Special Steel Manufacturing India Private Limited
Sanyo Special Steel Trading (Shanghai) Co., Ltd.
Ovako Group AB and its 22 subsidiaries (“Ovako”)
and 2 subsidiaries
Mahindra Sanyo Special Steel Private Limited changed its
trade name to Sanyo Special Steel Manufacturing India Private
Limited on June 23, 2022.
Ovako Midco AB, Hillboms AB and Fastighets AB Synaren,which had been consolidated subsidiaries of Ovako Group AB,
were excluded from the scope of consolidation for the current
fiscal year since they were extinguished on January 23, 2023 in
the absorption-type merger with Ovako Group AB and its
subsidiary Ovako Sweden AB, which were the surviving
companies.
The consolidated subsidiaries, except for the seven 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., and Sanyo Special Steel Trading (Shanghai) Co., Ltd.,), use afiscal year ending March 31, which is the same as that of theCompany. The seven foreign subsidiaries use a fiscal year ending
December 31. For these seven subsidiaries, certain adjustments are
made, if appropriate, in preparing the consolidated financial
statements to reflect material transactions which occur between
their fiscal year-end and March 31.
For the purpose of preparing the consolidated financial
statements, all significant intercompany transactions, balances andrequirements from International Financial Reporting Standards andare compiled from the consolidated financial statements preparedby the Company as required by the Financial Instruments andExchange Law of Japan.

unrealized profits among the Companies have been eliminated.
(b) Investments in affiliates
The Company’s investment in AB Järnbruksförnödenheter, anaffiliate of the Company over which the Company has significant
influence, is accounted for by the equity method.
The Company’s investment in Advanced Green Components,
LLC, an affiliate of the Company over which the Company had
significant influence, was excluded from the scope of the equitymethod affiliates for the fiscal year ended March 31, 2023 since theCompany sold its entire interest in the affiliate.

(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,
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.
Revenues and expenses are translated into yen based on the
average exchange rate during the period.
These differences are recorded as foreign currency translation
adjustments.

(3) Securities
The accounting standard for financial instruments (“AccountingStandards for Financial Instruments” (Accounting Standards Boardof Japan (“ASBJ”) Statement No. 10)) requires that securities beclassified into four categories: trading securities, held-to-maturity
debt securities, equity securities issued by subsidiaries andaffiliates and available-for-sale securities. Except for the equity
securities issued by subsidiaries and affiliates, securities that theCompany 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. Equality securities withoutmarket prices classified as available-for-sale securities are carriedat cost. A decline in the value of available-for-sale securities isreflected in net 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 andcommodity futures contracts to reduce their exposure to market
risks from fluctuations in foreign currencies and electricity prices.

10

The Companies do not hold or issue financial derivative
instruments for trading purposes. If derivative transactions are usedas hedges and meet certain hedging criteria, the Companies use thedeferred hedge accounting method.
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.

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

fiscal year of accrual by the straight-line method over a period of
10 years, which is within the average remaining service years of
the employees.
Actuarial gains and losses are posted in expenses after the
consolidated fiscal year of accrual by the straight-line method overperiods of mainly 10 years and 17 years, which are 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
benefit expenses, certain consolidated subsidiaries have adopted asimplified method that determines the benefits payable assuming
the voluntary retirement of all employees at the fiscal year-end as
retirement benefit obligations.

(7) Depreciation and amortization(15) Income taxes

The Companies compute depreciation using the straight-line
method for property, plant and equipment.
For assets acquired on or before March 31, 2007, the Company
and its domestic subsidiaries depreciated the assets using thestraight-line method over five years from the year following the
fiscal year when depreciation up to the depreciable limit amount iscompleted.
Amortization of capitalized software costs for internal use iscomputed by the straight-line method based on the useful life of theasset estimated to be mainly five years. Amortization of otherintangible assets is computed by the straight-line method.

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 bases.

(5) Amortization of goodwill
Goodwill is amortized using the straight-line method over areasonably determined period on individual basis.

(6) Inventories(16) Accounting policy for revenue and expenses
The Companies recognize revenue based on the following fivestep approach.
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.

(8) Research and development costs
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. It was recorded as accrued expenses on the consolidatedbalance sheet.

(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 at overseas steelmaking plants is stated as the estimated cost at the end of the fiscal
year.

Revenue in the Companies are generated mainly from the sale ofspecial steel products in which the performance obligation is totransfer the merchandise and finished goods to the customer basedon the sales contracts.
The Companies recognize revenue when the customer receives
the merchandise and finished goods, control of the goods istransferred to the customer and the performance obligations are
satisfied.
However, the Companies and its subsidiaries recognize revenue
from domestic sales at the point of shipment in cases in which
control of the goods is transferred to the customer within areasonable period according to Paragraph 98 of the Implementation
Guidance on Accounting Standard for Revenue Recognition.
The transaction price is measured based on the contract withcustomers. In cases in which there is variable consideration in thecontract, it is estimated and included in the transaction price to theextent that there is no material reversal.
The consideration involved in the transaction does not contain asignificant financing component because the relevant payment
period is within a short-term after the satisfaction of theperformance obligation.

(14) Accounting methods for employees’ retirement benefits (17) Net income and cash dividends per share
In the calculation of retirement benefit obligations, the estimatedNet income per share is computed by dividing net income
amount of retirement benefits is attributed to the consolidated fiscal available for distribution to shareholders of common stock by theyear using the benefit formula basis.
weighted average number of shares of common stock outstanding
Prior service costs are posted in expenses from the consolidated
during the year. Diluted net income per share is not disclosed

11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 applicableto the respective years rather than those paid during the years.

(18) Cash and cash equivalents
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) Significant accounting estimates
Property, Plant and Equipment and Intangible Assets(a) Carrying amounts in the current year’s financial statements
Millions of yen

2022

Thousands of
U.S. dollars(Note 3)2023
2023
Property, Plant¥
111,975 ¥ 115,183 $
862,537
and Equipment
Intangible¥
37,386 ¥36,118 $
270,465
Assets(b) Significant accounting estimates for identified items
For property, plant and equipment and intangible assets, 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
group with its book value whenever there is an indication of
impairment in the asset or the asset group. If the recognition of an
impairment loss is deemed necessary, the book value is reduced to
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 each consolidated subsidiary is classified as
one asset group. In addition to the asset groups that recorded
impairment loss in the current consolidated fiscal year, the asset
groups of Sanyo Special Steel Manufacturing de México, S.A.de
C.V. and SKJ Metal Industries Co., Ltd., which had recognizedindications of impairment, did not record impairment loss because
the undiscounted future cash flows for each asset group exceeded
the book value.
Property, plant and equipment and intangible assets 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 andbusiness declines significantly.

(20) Additional information
On March 9, 2023, the Company was notified by MITSUI &CO., LTD. (hereinafter "MITSUI"), one of the minority
shareholders of Sanyo Special Steel Manufacturing India Private
Limited (hereinafter "SSMI"), that MITSUI was exercising its putoption under the shareholders agreement. Due to this exercise, theCompany is obligated to purchase from MITSUI all SSMI shares(3,046,821 shares) held by MITSUI.
The purchase price is to be determined in accordance with theprovisions of the shareholders agreement, and the financial impact
at this time is uncertain.

12

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 ¥133.54 to U.S. $1.00, the approximate rate of exchange as at March 31, 2023, 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 were as follows:
Thousands of U.S.
Millions of yen

2022

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 during the year
Remeasurements of defined benefit plans
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense)
Subtotal, net of tax
Share of other comprehensive income of an affiliate accounted for by the equity method
Increase during the year
Subtotal
Total other comprehensive income
¥

(297)
(92)
(389)
111
(278)

dollars (Note 3)

2023

¥

726
(11)
715
(204)
511

2023

$

5,435
(82)
5,353
(1,528)
3,825

2,407
(834)
1,573
(324)
1,249

(1,220)(2,854)(4,074)839(3,235)(9,136)(21,371)(30,507)
6,285(24,222)

4,828

1,591

11,917

(279)
182
(97)
153
56

4,229
150
4,379
(1,088)3,291

31,6701,117
32,787(8,146)
24,641

69
69
5,924

－
－
2,158

－
－
16,161¥$

5. Statements of cash flows
There were no significant non-cash transactions as of March 31, 2022 and 2023.

6. Financial Instruments(1) Status of financial instruments
The Companies procure funds required by their business plans through bank loans and bonds payable. Temporary surplus funds areinvested in short-term bank deposits, etc., with a low probability of loss of principal. The Companies use derivative transactions mainly
to hedge foreign currency operating transactions and electricity price fluctuation risk and limit the amounts to actual demand.
Notes and accounts receivable and electronically recorded monetary claims are exposed to the credit risk of customers. In order toreduce the risk, the Companies regularly monitor the maturity dates and balances of receivables of all customer accounts and evaluate thecredit risk of its main customers arising from any deterioration in their financial situation, etc., according to the Company regulations.
Notes and accounts receivable denominated in foreign currencies are exposed to exchange rate risks. The Companies reduce the risks bysettling both notes and accounts receivable and notes and accounts payable within the same foreign currencies and executing derivativetransactions (forward exchange contracts).
Deposits paid in parent company are deposits to Nippon Steel Corporation. The deposit and withdrawal of such funds are possible atany time. Investments in securities are mainly the shares of business partners. These shares are exposed to the risk of volatility in market
prices, and the Companies periodically monitor the market prices and regularly review their share portfolios taking into consideration
their relationships with their business partners.
Notes and accounts payable are paid within one year. Notes and accounts payable denominated in foreign currencies are exposed to13exchange rate risk. The Companies reduce the risk by settling both notes and accounts receivable and notes and accounts payable within
the same foreign currencies and executing derivative transactions (forward exchange contracts).
Certain foreign subsidiaries enter into derivative transactions (commodity futures trading) to manage the risk of purchased electricity
price fluctuation. The Companies execute and manage derivative transactions in accordance with the internal rules which stipulate thetransaction authority. For details on hedging instruments, hedging items, hedging policy and the methods used to evaluate hedge
effectiveness, refer to - Note 2(4), “Derivative transactions and hedge accounting.”
Bank loans, bonds payable and commercial paper are primarily used to procure funds related to operating and investing activities.
To manage liquidity risks, the Companies prepare and update cash flow plans as appropriate and maintain the liquidity on handnecessary to meet their obligations. Further, the Company has commitment line contracts in preparation for contingencies.
Because the risk of fluctuation is incorporated into the calculation of the fair values of financial instruments, the fair values may
fluctuate due to the adoption of different assumptions and other factors. In addition, the contract amounts of derivative transactions in thenotes to "Derivative Transactions" are not indicative of the market risk associated with derivative transactions themselves.

(2) Fair values of financial instruments
Carrying amounts, fair values and differences between carrying amounts and fair values of relevant items were as follows:
2022
Millions of yen

Book value(1) Investments in securities
Available-for-sale securities¥
4,011(2) Bonds payable(10,000)(3) Long-term loans (including current portion)(22,630)(4) Derivative transactions① Hedge accounting not applied
1② Hedge accounting applied

Fair value

¥

2,821

4,011
(9,974)(22,605)

Difference

－
26
25

¥

1

－

2,821

－

(※1) Debt is displayed by parentheses.
(※2) “Cash and bank deposits,” “Notes and accounts receivable - trade,” “Electronically recorded monetary claims,” “Deposits paid inparent company,” “Notes and accounts payable - trade,” “Short-term loans” “Commercial paper” and “Accounts payable” are omitted
because they are settled in a short period of time and their fair values approximate their book values.
(※3) Equity securities without market prices are not included in “(1) Investments in securities.” The book values of those financial
instruments were as follows:
Millions of yen

Unlisted equity securities¥

985

Carrying amounts, fair values and differences between carrying amounts and fair values of relevant items were as follows:
2023
Millions of yen

Book value

Fair value

Thousands of U.S. dollars (Note 3)

DifferenceBook value

Fair value

Difference(1) Investments in securities
Available-for-sale securities¥
4,716(2) Bonds payable(10,000)(3) Long-term loans (including current portion)(19,822)(4) Derivative transactions① Hedge accounting not applied② Hedge accounting applied

¥

4,716
(9,982)(19,684)

－
18
138

¥

$

35,319(74,884)(148,433)$

35,319(74,749)(147,405)

$

－
135
1,028

(4)

(4)

－

(32)

(32)

－

(1,198)(1,198)－(8,972)(8,972)－(※1) Debt is displayed by parentheses.
(※2) “Cash and bank deposits,” “Notes and accounts receivable - trade,” “Electronically recorded monetary claims,” “Deposits paid inparent company,” “Notes and accounts payable - trade,” “Short-term loans,” “Commercial paper” and “Accounts payable” are omitted
because they are settled in a short period of time and their fair values approximate their book values.
(※3) Equity securities without market prices are not included in “(1) Investments in securities.” The book values of those financial
instruments were as follows:
Millions of yen

Unlisted equity securities

¥

14

287

Thousands of U.S.
dollars (Note 3)

$

2,149

(3) Financial assets with maturities were as follows:
The aggregate maturities subsequent to March 31, 2022:
Millions of yen

Within 1 year

Cash and bank deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims
Deposits paid in parent company
Total

¥

14,48369,0198,707
7,924
100,133¥

1 year or more but
within 5 years

¥

¥

－
－
－
－
－

5 years or more but
within 10 years

¥

¥

－
－
－
－
－

10 years or more

¥

¥

－
－
－
－
－

The aggregate maturities subsequent to March 31, 2023:
Millions of yen

Within 1 year

Cash and bank deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims
Deposits paid in parent company
Total

¥

21,653
66,372
11,637
9,954
109,616¥

1 year or more but
within 5 years

¥

¥

－
－
－
－
－

5 years or more but
within 10 years

¥

¥

－
－
－
－
－

10 years or more

－
－
－
－
－

¥

¥

Thousands of U.S. dollars (Note 3)

Within 1 year

Cash and bank deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims
Deposits paid in parent company
Total

$

162,144497,022
87,13974,539820,844$

1 year or more but
within 5 years

$

$

－
－
－
－
－

5 years or more but
within 10 years

$

$

－
－
－
－
－

10 years or more

－
－
－
－
－

$

$

(4) Bonds payable, short-term loans, commercial paper and long-term loans were as follows:
The aggregate maturities subsequent to March 31, 2022:
Millions of yen

Within 1 year

Short-term loans
Commercial paper
Bonds payable
Long-term loans (including current portion)
Total

¥

34,367
12,001－
3,306
49,674¥

1 year or more but
within 5 years

¥

¥

－
－
10,00019,32429,3245 years or more but
within 10 years

¥

¥

－
－
－
－
－

10 years or more

¥

¥

－
－
－
－
－

The aggregate maturities subsequent to March 31, 2023:
Millions of yen

Within 1 year

Short-term loans
Commercial paper
Bonds payable
Long-term loans (including current portion)
Total

¥

¥

35,48130,999－8,251
74,731

1 year or more but
within 5 years

¥

¥

－
－
10,00011,571
21,571

5 years or more but
within 10 years

¥

¥

－
－
－
－
－

10 years or more

¥

¥

－
－
－
－
－

Thousands of U.S. dollars (Note 3)

Within 1 year

Short-term loans
Commercial paper
Bonds payable
Long-term loans (including current portion)
Total

$

$

265,699
232,133－
61,788559,620

15

1 year or more but
within 5 years

$

$

－
－
74,884
86,645
161,529

5 years or more but
within 10 years

$

$

－
－
－
－
－

10 years or more

$

$

－
－
－
－
－

(5) Fair values of financial instruments by level of inputs
Based on the observability and the significance of the inputs used to determine fair values, fair values of financial instruments arepresented by categorizing measurements into the following three levels:
Level 1 fair value: fair values measured by quoted prices of identical assets or liabilities in active markets.
Level 2 fair value: fair values measured using observable inputs other than Level 1.
Level 3 fair value: fair values measured using unobservable inputs.
When multiple inputs of different categories are used in measuring fair value, the Companies classify the fair value into the category
from which the lowest inputs are used.
(a) Financial instruments measured at fair values in the consolidated balance sheet
2022
Millions of yen

Level1

Investments in securities
Available-for-sale securities
Stock
Derivative transactions
Currency related
Commodity related
Total assets

Level2

¥

4,011

¥

－
－
4,011

Level3

¥

－

¥

9
2,937
2,946

T otal

¥

－

¥

－
－
－

¥

4,011

¥

9
2,937
6,957

Millions of yen

Level1

Derivative transactions
Currency related
Commodity related
Total liabilities

Level2

－
－
－

¥
¥

¥

Level3

124
－
124

¥

T otal

－
－
－

¥
¥

¥

124
－
124

¥

2023
Millions of yen

Level1

Investments in securities
Available-for-sale securities
Stock
Derivative transactions
Currency related
Commodity related
Total assets

Level2

¥

4,716

¥

－
－
4,716

Level3

¥

－

¥

6
184
190

T otal

¥

－

¥

－
－
－

¥

4,716

¥

6
184
4,906

Millions of yen

Level1

Derivative transactions
Currency related
Commodity related
Total liabilities

Level2

－
－
－

¥
¥

¥
¥

Level3

1,392
－
1,392

T otal

－
－
－

¥
¥

¥
¥

1,392
－
1,392

Thousands of U.S. dollars (Note 3)

Level1

Investments in securities
Available-for-sale securities
Stock
Derivative transactions
Currency related
Commodity related
Total assets

Level2$35,319$－－35,319Level3

$

－

$

45
1,380
1,425

T otal

$

－

$

－
－
－

$

35,319$45
1,380
36,744

Thousands of U.S. dollars (Note 3)

Level1

Derivative transactions
Currency related
Commodity related
Total liabilities$$

Level2

－
－
－

16

$
$

10,429－10,429Level3

$$

T otal－－－$$10,429－10,429(b) Financial instruments other than those measured at fair values in the consolidated balance sheet
2022
Millions of yen

Level1

Bonds payable
Long-term loans (including current portion)
Total liabilities

Level2

－
－
－

¥
¥

¥

Level39,974
22,60532,579

¥T otal

¥
¥

－
－
－

¥

－
－
－

¥

9,974
22,60532,579¥2023
Millions of yen

Level1

Bonds payable
Long-term loans (including current portion)
Total liabilities

Level2

－
－
－

¥
¥

¥

Level3

9,982
19,68429,666¥

T otal¥¥9,982
19,68429,666¥

Thousands of U.S. dollars (Note 3)

Level1

Level2

Level3

T otalBonds payable$－$
74,749$－$74,749Long-term loans (including current portion)－
147,405－
147,405
Total liabilities$－ $222,154$－$
222,154(※) Valuation techniques and inputs used in measuring fair values
Investments in securities
The fair values of listed equity securities are measured using quoted prices. The fair values are classified as Level 1 because thesecurities are exchanged in active markets.
Derivative transactions
The fair values of currency forward contracts are classified as Level 2 because the fair values are based on prices, etc., provided
by financial institutions. The fair values of derivative transactions for commodity related purchased electricity price risk areclassified as Level 2 because the fair values are measured using the discounted present value method using quoted market prices
and other observable inputs.

Bonds payable
The fair values of bonds payable issued by the Company are based on quoted market prices. However, the fair values of the bonds
are classified as Level 2 because the fair values are not determined by quoted market prices in an active market.
Long-term loans
The fair values of long-term loans are classified as Level 2 because the fair values are measured using the discounted present
value method, i.e., the interest rates that would be applicable to similar new loans and reflect the total amount of payment
obligations of principal and interest and the remaining payment period adjusted by credit risks.

7. Securities
The aggregate acquisition costs and fair values (book values) of marketable securities classified as available-for-sale securities as ofMarch 31, 2022 and 2023 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 3)

2022

2023

2023

Acquisition

Fair value

Unrealized gain

Acquisition

Fair value

Unrealized gain

Acquisition

Fair value

Unrealized gain

cost

(book value)(loss)

cost(book value)(loss)

cost(book value)(loss)

2,203

¥

4,716

¥

2,513

$ 16,496$ 35,319$

18,823

－
2,203

¥

－
4,716

¥

－
2,513

－
$ 16,496－$ 35,319$－
18,823

Securities whose book value exceeds acquisition cost:Stock¥ 1,999 ¥ 3,803 ¥
1,804 ¥
Securities whose acquisition cost exceeds book value:
Stock
213
208
(5)
Total ¥ 2,212 ¥ 4,011 ¥
1,799 ¥

Available-for-sale securities sold in the year ended March 31, 2022 and 2023 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 3)

2022

Stock

¥

2023

2023

Amounts

Realized

Realized

Amounts

Realized

Realized

Amounts

Realizedof salesgains

lossesof salesgains

lossesof sales

gains

553

¥

92

¥

－ ¥

35

¥

17

15

¥

－

$

260

$

116

Realized
losses$－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 to beother than temporary. For available-for-sale securities for which fair values are deemed extremely difficult to assess, when the value of
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 ¥219 million for the year ended March 31, 2022.

8. Inventories
Inventories held by the Companies at March 31, 2022 and 2023 consisted of the following:Thousands of U.S.
Millions of yen

2022

M erchandise
Finished products
Work-in-process
Raw materials and supplies
Total

¥

¥

dollars (Note 3)

2023

2,214
24,54858,08828,662
113,512

¥

2023

3,226
30,45558,79235,756
128,229¥$

24,159228,059
440,251
267,758
960,227$

The net loss included in cost of sales due to inventories written down for the years ended March 31, 2022 and 2023 were ¥137 millionand ¥673 million ($5,042 thousand), respectively.

9. Affiliates
Items relevant to affiliates at March 31, 2022 and 2023 were as follows:
Thousands of U.S.

Millions of yen

2022

Investments in securities (stocks)¥

dollars (Note 3)

2023

705

¥

2023

13

$

95

10. Assets Pledged as Collateral
A breakdown of assets pledged as collateral and the related secured liabilities as of March 31, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

Assets pledged as collateral:
Notes and accounts receivable - trade, and contract assets
Inventories
Land
Buildings and structures
M achinery and equipment
Other property, plant and equipment
Total
Secured liabilities:
Short-term loans (including current portion of long-term loans payable)
Long-term loans
Total

¥

dollars (Note 3)

2023

¥

4,914
3,867
3,361
135
178
318
12,773

¥

488
588
1,076

¥

2023

¥

4,984
4,281
3,469
145
360
627
13,866

¥

421
271
692

$

$

37,32532,05725,979
1,085
2,692
4,695
103,833

$

3,152
2,026
5,178

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

11. Receivables arising from contracts with customers, contract assets and contract liabilities
Receivables arising from contracts with customers, contract assets as of March 31, 2022 and 2023 were as follows :Thousands of U.S.
Millions of yen

2022

Notes receivable - trade
Accounts receivable - trade
Contract assets

¥

18

3,511
65,508－dollars (Note 3)

2023

¥

3,478
62,894－2023$

26,042
470,980－

Receivables arising from contracts with customers, contract liabilities as of March 31, 2022 and 2023 were as follows :Thousands of U.S.
Millions of yen

2022

Contract liabilities

dollars (Note 3)

2023

¥

111

¥

2023

42

$

313

12. Short-term Loans, Commercial Paper, Bonds Payable, Long-term Loans and Lease liabilities
Short-term loans at March 31, 2022 and 2023 represent bank overdrafts with weighted-average interest rates of 0.73% and 2.48%,
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¥13,458 million ($100,775 thousand). At March 31 2023, the total ¥13,458 million ($100,775 thousand) was unused.
Also, commercial paper at March 31 2022 and 2023 issued by the Company with weighted-average interest rates of (0.08) % and 0.02%.
Bonds payable at March 31, 2022 and 2023 consisted of the following:Thousands of U.S.
Millions of yen

2022

Bonds payable due 2024 with interest rates of 0.30% at M arch 31, 2022 and 2023 ¥dollars (Note 3)2023

10,000¥10,0002023$

74,884

The annual maturities of bonds payable outstanding at March 31, 2023 were as follows:
Thousands of U.S.

Year ending at March 31,
2025

Millions of yen¥

10,000dollars (Note 3)$

74,884Long-term loans at March 31, 2022 and 2023 consisted of the following:Thousands of U.S.
Millions of yen

2022

Loans from banks and other financial institutions due 2023 to 2027 withinterest rates ranging from 0.30% to 10.40% at M arch 31, 2022 and due 2024
to 2027 with interest rates ranging from 0.22% to 10.80% at M arch 31, 2023¥

22,630dollars (Note 3)

2023

¥

19,822

2023$

148,433

Lease obligations due 2024 to 2029 with interest rate of 1.50% at M arch, 31,2023

2,117

1,993

14,929Less: Current portion of long-term loans

24,747(3,982)
20,765

21,815(9,004)
12,811

163,362(67,425)
95,937¥¥$

The annual maturities of long-term loans outstanding at March 31, 2023 were as follows:
Thousands of U.S.

Year ending at M arch 31,
2025
2026
2027
2028
2029 and thereafter

Millions of yen

¥

¥

790
661
11,231111
18
12,811

dollars (Note 3)

$

$

5,916
4,947
84,112829
133
95,937

13. 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.

19

(1) Defined benefit plans(a) Movements in retirement benefit obligations, except plans applying the simplified method:
Thousands of U.S.
Millions of yen

2022

Balance at beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Prior service cost
Other
Balance at end of year¥¥

dollars (Note 3)

2023

21,092927
171(1,248)
(732)
(262)
678
20,626¥¥

20,626750
351(3,895)
(687)
－
(159)
16,9862023$$

154,4585,614
2,628(29,167)(5,146)－(1,187)
127,200(b) Movements in plan assets, except plans applying the simplified method:
Thousands of U.S.
Millions of yen

2022

Balance at beginning of year
Expected return on plan assets
Actuarial gain (loss)
Contributions paid by employer
Benefits paid
Other
Balance at end of year¥¥

dollars (Note 3)

2023

11,029195(1,758)
265
(157)
162
9,736

¥

¥

9,736
206
341
34
(195)
42
10,1642023$$

72,905
1,542
2,554
252
(1,458)
320
76,115(c) Movements in liability for retirement benefits of defined benefit plans applying the simplified method:
Thousands of U.S.
Millions of yen

2022

Balance at beginning of year
Retirement benefit costs
Benefits paid
Other
Balance at end of year¥¥

dollars (Note 3)

2023

953
134
(112)
－
975

¥

¥

975
147
(192)
3
933

2023

$

$

7,298
1,097
(1,435)26
6,986(d) Reconciliation from retirement benefits obligations and plan assets to liability (asset) for retirement benefits:
Thousands of U.S.
Millions of yen

2022

Funded retirement benefit obligations
Plan assets¥

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

20,626(9,736)
10,890975
11,865Net defined benefit liabilities
Net defined benefit assets
Total net liability (asset) for retirement benefits at end of year

12,165(300)
11,865¥20

dollars (Note 3)

2023

¥

¥

16,986(10,164)
6,822
933
7,755
8,752
(997)
7,755

2023

$

$

127,200(76,115)
51,085
6,986
58,071
65,535(7,464)58,071(e) Retirement benefit costs:
Thousands of U.S.
Millions of yen

2022

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain
Amortization of prior service cost
Retirement benefit costs based on the simplified method
Total retirement benefit costs
Extra retirement payments¥¥

dollars (Note 3)

2023

927
171
(195)
190
(4)
134
1,223
25

¥

750
351
(206)
182
(26)
146
1,197
117

¥

2023

$

5,614
2,628
(1,542)
1,364
(196)
1,099
8,967
878

$

(f) Remeasurements of defined benefit plans:
Thousands of U.S.
Millions of yen

2022

Prior service cost
Actuarial gain (loss)
Total

¥
¥

dollars (Note 3)

2023

257
(354)
(97)

¥
¥

(26)
4,405
4,379

2023

$

(196)
32,98332,787$(g) Accumulated remeasurements of defined benefit plans:
Thousands of U.S.
Millions of yen

2022

Prior service cost yet to be unrecognized
Actuarial gain yet to be unrecognized
Total

¥
¥

dollars (Note 3)

2023

(257)
2,414
2,157

¥
¥

(231)
(1,873)(2,104)2023$(1,730)(14,022)(15,752)$(h) Plan assets:① Plan assets comprise:

Equity securities
Cash and bank deposits
Other
Total

2022

2023

62%
33%
5%
100%

64%
31%
5%
100%

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.
(i) Actuarial assumptions
The principal actuarial assumptions at March 31, 2022 and 2023 were as follows:
2022

2023

Discount rate (mainly)
0.4%, 2.6%
0.6%, 3.9%
Long-term expected rate of return (mainly)
1.7%, 2.5%
1.5%, 4.8%
Expected rate of pay increase
3.7%
2.8%
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.

(2) Defined contribution plans
The Company and certain consolidated subsidiaries have contributed a total of ¥1,638 million and ¥1,603 million ($12,002 thousand)to the defined contribution plans for the years ended March 31, 2022 and 2023, respectively.

2114. Income Taxes
Significant components of deferred tax assets and liabilities at March 31, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

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)

dollars (Note 3)

2023

2,979
1,540
1,043

¥

2023

3,030
694
1,010

$

22,693
5,193
7,562

887

925

6,926

863
675
414
176
230
169
308
936
10,220(2,877)(1,425)(4,302)
5,918

863
724
646
176
437
406
179
1,086
10,176(2,974)(1,666)(4,640)
5,536

6,465
5,422
4,836
1,317
3,274
3,043
1,337
8,135
76,203(22,272)(12,472)(34,744)
41,459¥¥¥(3,779)(1,250)
(842)
(547)
(91)
(416)
(1,682)(8,607)(2,689)¥(3,569)(1,387)
(828)
(530)
(232)
(620)
(2,160)(9,326)(3,790)¥$$(26,723)(10,390)(6,200)(3,966)(1,738)(4,642)(16,180)(69,839)(28,380)$

Valuation allowance increased by ¥338 million ($2,531 thousand). The main factors in the increase were recognition of valuation
allowance for tax loss carryforwards.
Tax loss carryforwards and their deferred tax assets by expiration periods:
As of March 31, 2022
Millions of yen

2023

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

¥
¥

153
(153)
－

2024

¥
¥

237
(237)
－

2025

¥
¥

187
(180)
7

2026

¥
¥

146
(146)
－

2028 andbeyond

2027

¥
¥

105
(105)
－

¥

2,151
(2,056)95¥

T otal¥¥2,979(2,877)102(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, 2023
Millions of yen

2024

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

¥
¥

246
(246)
－

2025

¥
¥

181
(176)
5

2026

¥

134
(134)
－

¥

22

2027

¥
¥

113
(113)
－

2028

¥
¥

283
(283)
－

2029 andbeyond¥¥2,073(2,022)
51

Total

¥
¥

3,030
(2,974)56

Thousands of U.S. dollars (Note 3)

2024

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

$
$

1,846
(1,846)
－

2025

$
$

1,355
(1,314)
41

2026

$
$

1,001
(1,001)
－

2027

$
$

846
(846)
－

2028

$
$

2,119
(2,119)－2029 andbeyond$15,526(15,146)
$
380

Total

$

22,693(22,272)$421(b) The amount of tax loss carryforwards shown in the table above is after multiplying by the statutory income tax rate.
The reconciliation between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2022 and 2023
were as follows:
2022

2023

Statutory income tax rate

30.6 %

30.6 %

Add (deduct)
Non-deductible expenses, including entertainment expenses
Non-taxable income, including dividend income
Equalization tax
Increase (decrease) in valuation allowance
Effect of special tax credits

0.2
(0.1)
0.1
(2.4)
(0.6)

0.2
(0.1)
0.1
0.0
(1.7)

Difference in applicable tax rates between consolidated subsidiaries
Amortization of goodwill
Other
Effective income tax rate

(5.7)
4.9
(0.9)
26.1 %

(7.3)
3.2
0.8
25.8 %

15. 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 19, 2022, the directors approved cash dividends in the amount of ¥2,452
million. At the Company’s Board of Directors meeting held on, October 31, 2022, the directors approved cash dividends in the amount of¥2,997 million. At the Company’s Board of Directors meeting held on, May 18, 2023, the directors approved cash dividends in theamount of ¥2,452 million.

16. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years ended
March 31, 2022 and 2023 totaled ¥2,220 million and ¥2,019 million ($15,120 thousand), respectively. For the year ended March 31,
2023, research and development cost in the Specialty Steel, Metal Powders and Formed & Fabricated Materials segments amounted to¥1,626 million ($12,177 thousand), ¥360 million ($2,699 thousand) and ¥33 million ($244 thousand), respectively.

2317. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

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

dollars (Note 3)

2023

14,892
9,731
1
518
618
14

¥

2023

14,815
9,588
43
576
585
16

$

110,942
71,795
321
4,315
4,379
119

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, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

Land
Buildings and structures
M achinery and equipment
Total

－
37
6
43

¥

¥

dollars (Note 3)

2023

¥

2023

183
37
30
250

¥

$

$

1,372
273
228
1,873

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, 2022 and 2023 were as
follows:
Thousands of U.S.
Millions of yen

2022

Buildings and structures
M achinery and equipment
Other
Total

¥

¥

dollars (Note 3)

2023

24
86
83
193

¥

¥

2023

38
162
451
651

$

$

281
1,213
3,384
4,878

20. Loss on Liquidation of Subsidiaries
In the fiscal year ended March 31, 2022, the Company decided to liquidate P.T. Sanyo Special Steel Indonesia, a consolidated
subsidiary. The estimated amount of special retirement benefits, etc., to be incurred as a result of this liquidation (¥55 million) wasrecorded as loss on liquidation of subsidiaries.
The Company also decided to transfer a portion of the business of Siam Sanyo Special Steel Product Co., Ltd., a consolidated
subsidiary. As a result, a loss on liquidation of subsidiaries was recorded in impairment loss on the following asset group:
Segment

Formed andFabricatedMaterials

Company

Siam SanyoSpecial Steel
ProductCo., Ltd.

Location

Samutprakarn,
Thailand

Use

Type

Business
assetsBuildings and structures
Machinery and equipment
Construction in progress
Property, plant and equipment and other
Intangible assets and other
Total

Amount(Millions of yen)
¥
307
45
1
1
5
¥
359

The Companies group assets with consideration for business management segments. In principle, the Company is classified bybusiness segments, and each consolidated subsidiary is classified as one asset group.
Regarding the above asset groups, the changes in the range or method of use due to a transfer of a portion of the business havesignificantly reduced the recoverable amounts. Since the recoverable values declined below the book values, the book values werereduced to the recoverable values and the reductions were recorded as loss on liquidation of subsidiaries (¥359 million) in extraordinary
losses.
Recoverable value is based on the estimated transfer value determined by the net sales value.

24

In the fiscal year ended March 31, 2023, the Company decided to liquidate certain subsidiaries of Ovako Group AB, a consolidated
subsidiary. As a result, the estimated amount of facility removal costs and special severance payments, etc., (¥403 million ($3,018
thousand)) was recorded as loss on liquidation of subsidiaries.
In addition, the amount of special retirement benefits to be incurred as a result of a transfer a portion of the business of Siam SanyoSpecial Steel Product Co., Ltd., a consolidated subsidiary (¥22 million ($167 thousand)) was recorded as loss on liquidation ofsubsidiaries.

21. Net Income Per Share
Net income per share for the years ended March 31, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

Net income attributable to owners of the parent
Net income of common stock attributable to owners of the parent

15,267
15,267¥

dollars (Note 3)

2023

¥

2023

20,743
20,743$

155,334
155,334

Thousands of shares

2022
54,489Weighted-average number of shares of common stock

2023
54,486Yen

2022

Net income per share

U.S. dollars (Note 3)

2023

280.192023

380.702.85

The Companies had no dilutive securities for the years ended March 31, 2022 and 2023.

22. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2022 and 2023 consisted of the following:Thousands of U.S.
Millions of yen

2022

dollars (Note 3)

2023

2023

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

14,483
(550)
7,924

¥

21,653
(620)
9,954

$

162,144(4,640)74,539Cash and cash equivalents¥

21,857¥30,987$232,043

23. Accounting for Leases(1) Non-cancelable operating leases(a) As a lessee
Outstanding future lease payments under non-cancelable operating leases at March 31, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

Due within one year
Due after one year
Total

dollars (Note 3)

2023

2023

¥

219
1,022

¥

200
852

$

1,500
6,379

¥

1,241

¥

1,052

$

7,879

(2) IFRS 16 “Leases”(a) Outline of leased assets
Some overseas consolidated subsidiaries have applied IFRS 16 “Leases”. 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 consolidatedbalance 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.

2524. 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,
2022 were as follows:
Millions of yen
Contract

Contract

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

¥

¥

Fair value

after 1 year

114
59

¥

2
2
177

¥

－
－
－
－
－

¥

(7)
0
2
6
1

¥

Unrealized
gain (loss)

¥

¥

(7)
0
2
6
1

The contracted amount, fair value and unrealized gain (loss) of forward exchange contracts recognized for the year ended March 31,
2023 were as follows:
Millions of yen
Contract

Contract

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

¥

¥

Fair value

after 1 year

122
70

¥

0
1
193

¥

－
－
－
－
－

¥

(1)
2
0
(5)
(4)

¥

Unrealized

Contract

gain (loss)

amount

¥

¥

(1)
2

$

912
520

0
(5)
(4)

3
11
$ 1,446

Thousands of U.S. dollars (Note 3)
Contract
amountFair value

after 1 year

$

$

－
－
－
－
－

$

$

(10)
14
0
(36)
(32)

Unrealized
gain (loss)

$

$

(10)
14
0
(36)
(32)

(2) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied for the years ended March 31, 2022 and 2023 were as follows:(a) Currency-related transactions
2022
2023

M ethod of hedge accounting
Type of derivative transactions
M ain hedged items
Contract amount1 year or more amount of contract
Fair value

Principle method
Commodity futures contract
Selling Euros
Accounts payable - trade¥28,046 million¥11,971 million¥(116) million

Principle method
Commodity futures contract
S elling Euros
Accounts payable - trade¥33,559 million ($251,303 thousand)¥13,883 million ($103,959 thousand)¥(1,382) million ($(10,352) thousand)(b) Interest rate and currency swap transactions
Not applicable.
(c) Other
M ethod of hedge accounting
Type of derivative transactions
M ain hedged items
Contract amount1 year or more amount of contract
Fair value

2022

2023

Principle method
Commodity futures contract
Electricity¥1,372 million¥149 million¥2,937 million

Principle method
Commodity futures contract
Electricity¥159 million ($1,189 thousand)－¥184 million ($1,380 thousand)2625. Contingent Liabilities
Guarantees for loans of employees and others at March 31, 2022 and 2023 were as follows:
Thousands of U.S.
Millions of yen

2022

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

¥

dollars (Note 3)

2023

2

¥

2023

3

$

22

26. 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.

(3) Information about reportable segment profit or loss and other material items
Segment information for the years ended March 31, 2022 and 2023 were as follows:
For the year ended March 31, 2022
Millions of yen
Reportable segments(a) Sales and operating income :Net sales
Outside customers
Intersegment transactions
Total
Segment income(b) Other:
Depreciation
Amortization of goodwill
Impairment loss ※4

Specialty Steel

Metal Powder¥

340,691
9,589
350,280
20,144¥

14,895
3,375
－

¥

¥
¥

¥

Formed andFabricated Materials

4,555
－
4,555
818

¥

271
－
－

¥

¥

Other

17,961
0
17,961
360

¥

710
－
359

¥

¥

71
1,073
1,144
28

¥

8
－
－

¥

¥

Consolidated

Total

Adjustments

363,278
10,662373,940
21,350¥－(10,662)(10,662)¥67¥

15,884
3,375
359

¥

¥

(21)
－
－

total

¥

363,278－
363,278
21,417
15,863
3,375
359

1. The "Other" category is the information service segment not included in reportable segments.
2. Segment income adjustments are intersegment eliminations.
3. Segment income is adjusted with operating income in the consolidated statements of operations.
4. The impairment loss is included in loss on liquidation of subsidiaries (extraordinary losses) in the consolidated financial statements.
5. 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.

27

For the year ended March 31, 2023
Millions of yen
Reportable segments(a) Sales and operating income :Net sales
Outside customers
Intersegment transactions
Total
Segment income(b) Other:
Depreciation
Amortization of goodwill
Impairment loss

Specialty Steel

Metal Powder¥

368,508
8,546
377,054
26,983¥13,015
2,925
－

¥

¥
¥

¥

Formed andFabricated Materials

5,312
－
5,312
1,004

¥

97
－
－

¥

¥

Other

19,860019,860
367

¥

684
－
－

¥

¥

164
1,270
1,434
31

¥

4
－
－

¥

¥

Total

Adjustments

393,8449,816
403,660
28,385¥13,800
2,925
－

¥

¥

Consolidated
total－(9,816)(9,816)
107

¥

(35)
－
－

¥

¥

393,844－393,844
28,492
13,765
2,925－

Thousands of U.S. dollars (Note 3)
Reportable segments(a) Sales and operating income :Net sales
Outside customers
Intersegment transactions
Total
Segment income(b) Other:
Depreciation
Amortization of goodwill
Impairment loss

Formed andFabricated Materials

Specialty Steel

Metal Powder$ 2,759,535
63,9982,823,533$ 202,058$ 39,780－
39,780$ 7,521

$

$

$

$

97,457
21,902
－

725
－
－

$

Other

Total

Adjustments

Consolidated
total

148,722
1
148,723
2,747

$

1,220
9,511
10,731$231$ 2,949,257
73,5103,022,767$ 212,557$－(73,510)(73,510)$802$ 2,949,257－
2,949,257$ 213,359

5,121
－
－

$

$

$

$

30
－
－

103,333
21,902
－

(259)
－
－

103,074
21,902－

1. The "Other" category is the information service segment not included in reportable segments.
2. Segment income adjustments are intersegment eliminations.
3. Segment income is adjusted with operating income 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, 2022 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
For the year ended March 31, 2022
Millions of yen
Japan

Net Sales¥ 134,142(Sweden of(Germany ofEurope)Europe)¥ (41,256)¥ (40,563)

Europe¥161,214¥

Asia

North America

56,209

¥

9,857

Other

¥

1,856

Total

¥ 363,278

As of March 31, 2022
Millions of yen
Japan

Property, plant and equipment ¥65,119Europe¥37,252(Sweden of

Asia

Europe)¥ (30,270)

28

¥

5,691

North America

¥

11

Other

¥

3,902

Total

¥ 111,975

③ Information about major customers
Not applicable because there are no external customers whose sales account for 10% or more of the net sales in the consolidated
statements of income.
(b) Segment related information for the year ended March 31, 2023 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.
② Information about geographic areas
For the year ended March 31, 2023
Millions of yen

Net Sales

Japan

Europe¥ 150,488¥ 160,076(Sweden of(Germany ofEurope)Europe)¥ (41,198)¥ (40,467)

¥

Asia

North America

66,533¥

13,499

Other

¥

Total

3,248

¥ 393,844

Thousands of U.S. dollars (Note 3)

Net Sales

Japan

Europe$1,126,916$1,198,714(Sweden of(Germany ofEurope)Europe)$ (308,510)$ (303,030)

Asia

North America$ 498,225$ 101,081

Other

$

Total

24,321$2,949,257

As of March 31, 2023
Millions of yen
Japan

Property, plant and equipment ¥67,010(Sweden ofEurope¥Asia

Europe)37,287¥ (29,992)¥

North America

6,030

¥

48

Other

¥

Total

4,808

¥ 115,183

Thousands of U.S. dollars (Note 3)
Japan

Property, plant and equipment $ 501,802(Sweden ofEuropeEurope)$ 279,220$ (224,593)

$

Asia

North America

45,158

$

356

Other

$

Total

36,001$ 862,537③ Information about major customers
Not applicable because there are no external customers whose sales account for 10% or more of the net sales in the consolidated
statements of income.

(5) Information about the amount of amortization of goodwill and the unamortized amount of goodwill by reportablesegments
As of March 31, 2022
Millions of yen
Reportable segments
Specialty SteelUnamortized amount of goodwill ¥33,284

Metal Powder¥－

Formed andFabricated Materials

－

¥

Other

－

¥

¥

Total

Adjustments

33,284¥

Total

Adjustments

32,441¥－

Consolidated
total

¥

33,284As of March 31, 2023
Millions of yen
Reportable segments
Specialty SteelUnamortized amount of goodwill ¥32,441

Metal Powder¥－

Formed andFabricated Materials

－

¥

Other

¥

－

¥

－

Consolidated
total

¥

32,441Thousands of U.S. dollars (Note 3)
Reportable segments
Specialty SteelUnamortized amount of goodwill $242,933

Metal Powder$－

Formed andFabricated Materials

－

$

Other

$

－

Total

$

242,933

Consolidated
total

Adjustments

$

－

$

242,933

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.”

2927. Related Party Information(1) Related party transactions
Related party transactions for the year ended March 31, 2022 were as follows:
T ransactions during the year ended

Resulting account balances

March 31, 2022

Description oftransaction

AmountAmountAccount

Millions of yen

Millions of yen

Category:
Parent company
Name:
Nippon Steel Corporation
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:¥419,524 million

Deposit of funds

¥

9,578

Business content:
Production and selling of steel
products, etc.
Equity ownership percentage:

Deposits paid inparent company

¥

7,924

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.
Related party transactions for the year ended March 31, 2023 were as follows:
T ransactions during the year ended

Resulting account balances

March 31, 2023

AmountDescription oftransaction

Millions ofyenAmountThousands of
U.S. dollars

Account

Millions ofyen(Note 3)Thousands of
U.S. dollars(Note 3)Category:
Parent company
Name:
Nippon Steel Corporation
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:¥419,524 million
Business content:
Production and selling of steel
products, etc.
Equity ownership percentage:

Deposit of funds

¥

7,066

$

52,911

Deposits paid inparent company

¥

9,954

$

74,539Holding 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.

30Related party transactions with subsidiaries owned by the same parent company and subsidiaries of other related companies for theyear ended March 31, 2022 were as follows:
T ransactions during the year ended

Resulting account balances

March 31, 2022

Description oftransaction

AmountAmountAccount

Millions of yen

Millions of yen

Category:
Subsidiaries owned by the same
parent company
Name:
Nippon Steel Finance Co., Ltd.
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:¥1,000 million
Business content:
Engages in the group’s financing
operations
Equity ownership percentage:

Transfers of trade¥receivable

41,533

Accounts
receivable-other¥

10,129Not applicable
Relation with related party:
Transfers of trade 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.
Related party transactions with subsidiaries owned by the same parent company and subsidiaries of other related companies for theyear ended March 31, 2023 were as follows:
T ransactions during the year ended
March 31, 2023

Resulting account balances

AmountDescription oftransaction

Millions ofyenAmountThousands of
U.S. dollars

Account

Millions ofyen(Note 3)Thousands of
U.S. dollars(Note 3)Category:
Subsidiaries owned by the same
parent company
Name:
Nippon Steel Finance Co., Ltd.
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:¥1,000 million

Transfers of trade¥receivable

47,417$355,075

Accounts
receivable-other¥

10,178$76,216

Business content:
Engages in the group’s financing
operations
Equity ownership percentage:Not applicable
Relation with related party:
Transfers of trade 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.
Related party transactions between a consolidated subsidiaries and related parties for the years ended March 31, 2022 and 2023 wereas follows:
Not applicable.

31(2) Disclosures about the parent company and significant affiliates(a) 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.
(b) Financial statements of significant affiliates
Not applicable.

28. Revenue Recognition(1) Information about disaggregation of revenue from contracts with customers
The Companies operate in the Specialty Steel business, the Metal Powder business, the Formed and Fabricated Materials business, andOther business. The main products of each business segment were as follows. The Specialty Steel business includes various special steel
products such as bearing steel, engineering steel, stainless steel, heat resistant steel and tool steel. The Metal Powder business includes
metal powder products, and the Formed and Fabricated Materials business includes formed and fabricated materials made from special
steel bars and tubes. Each business sells products to Japan, Europe, Asia, etc.
Net sales of each business segment by geographic areas for the year ended March 31, 2022 were as follows:
For the year ended March 31, 2022
Millions of yen
Business segments
Metal Powder

Specialty SteelNet Sales
Japan
EuropeAsia
North America
Other
Total

¥

¥

120,202161,200
50,555
7,845
889
340,691

¥

¥

3,473
4
900
178
－
4,555

Formed andFabricated Materials¥¥

10,396
10
4,754
1,834
967
17,961

Total¥

134,071
161,21456,2099,857
1,856
363,207¥

Consolidated

Other

¥

total

71
－
－
－
－
71

¥

¥

¥

134,142
161,21456,2099,857
1,856
363,278

1. All net sales to outside customers are revenues arising from contracts with customers and are classified by country or region basedon the location of the customer.
2. The "Other" category is the information service segment and not included in the business segments.
Net sales of each business segment by geographic areas for the years ended March 31, 2023 were as follows:
For the year ended March 31, 2023
Millions of yen
Business segments
Metal Powder

Specialty SteelNet Sales
Japan
EuropeAsia
North America
Other
Total

¥

¥

135,512160,053
60,076
11,275
1,592
368,508

¥

¥

4,391
23
710
188
－
5,312

Formed andFabricated Materials¥¥

10,421
－
5,747
2,036
1,656
19,860

Total

¥

¥

150,324
160,076
66,533
13,4993,248
393,680

Consolidated

Other

¥

total

164
－
－
－
－
164

¥

¥

¥

150,488
160,076
66,533
13,4993,248
393,844

Thousands of U.S. dollars (Note 3)
Metal Powder

Specialty SteelNet Sales
Japan
EuropeAsia
North America
Other
Total

$

$

1,014,767
1,198,542
449,877
84,426
11,9232,759,535$$

32,886
172
5,316
1,406
－
39,780Formed andFabricated Materials$$

78,043－43,032
15,24912,398
148,722

Total

$

$

1,125,696
1,198,714
498,225
101,081
24,321
2,948,037

Consolidated

Other

$

$

1,220
－
－
－
－
1,220

total

$

$

1,126,916
1,198,714
498,225
101,081
24,321
2,949,257

1. All net sales to outside customers are revenues arising from contracts with customers and are classified by country or region basedon the location of the customer.
2. The "Other" category is the information service segment and not included in the business segments.

32

(2) Basic information to understand revenue from contracts with customers
Basic information to understand revenue from contracts with customers is as described in Note 2(16) "Accounting policy for revenue
and expenses.”(3) Information to understand the amount of revenue in the current and subsequent fiscal years
A description of contract assets and contract liabilities recorded on the consolidated balance sheet was omitted because those balanceswere immaterial.
Since there were no material transactions of the Companies with initial contract terms of more than 1 year, a description of transaction
price allocated to remaining obligations has been omitted.

29. Subsequent Events(Additional acquisition of subsidiary’s shares)(1) Overview of the Business Combination(a) Name of acquired company and description of business
Acquired company: Sanyo Special Steel Manufacturing India Private Limited
Business: Production and sale of special steel products(b) Date of the business combination
April 27, 2023
(c) Legal form of the business combination
Acquisition of shares from non-controlling shareholders(d) Name of the company after the business combination
Not changed(e) Other items regarding overview of transaction
On April 20, 2022, the Company was notified by Mahindra and Mahindra Limited (hereinafter "M&M"), one of the minority
shareholders of Sanyo Special Steel Manufacturing India Private Limited (hereinafter "SSMI"), that M&M was exercising its put-option
under the shareholders agreement. As a result of negotiations and discussions with M&M, on April 27, 2023, the Company purchasedfrom M&M all SSMI shares (3,475,264 shares) held by M&M.
The Company acquired an additional 22.81% of the voting rights of SSMI, resulting in the Company holding 80.0% of the voting
rights of SSMI.

(2) Overview of accounting treatment to be applied
In accordance with the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21) as well as the “Implementation
guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No.
10), the Company will account for the business combination as a transaction with non-controlling interests under the classification oftransactions under common control.

(3) Matters to be provided upon additional acquisition of subsidiary’s shares
Acquisition cost and breakdown by type of consideration
Consideration for acquisition: cash in the amount of INR (India rupee) 1,581 million (¥2,593 million, $19,418 thousand)Acquisition cost: INR (India rupee) 1,581 million (¥2,593 million, $19,418 thousand)(4) Change in the Company’s ownership interest due to the transactions with non-controlling shareholders(a) Cause for change in capital surplus
Additional acquisition of subsidiary’s shares(b) Amount of capital surplus decreased by transactions with non-controlling shareholders¥2,366 million ($17,720 thousand)33

Sanyo Special Steel Co., Ltd.
and Subsidiaries
Consolidated Financial Statements
For the Years ended March 31,
2022 and 2023
Together with Independent
Auditor’s Report
KPMG AZSA LLC

This independent auditor’s report prepared by KPMG AZSA LLC (including the one that issigned with electoronic signatures) shall not be reprinted, disclosed, quoted, summarized,
translated, cited, circulated or otherwise used, in whole or in part, to any third party including
posting on the web without prior written consent as specified by KPMG AZSA LLC, except forthe purpose of compliance with laws, regulations and the like, or for usage in response to anorder or request from an administrative or judicial body.

© 2023 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law
and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee. All rights reserved.

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, 2023 and 2022, 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, 2023 and 2022, 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.
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 the Company’s judgment as to whether an impairment loss should be recognizedon property, plant and equipment and intangible assets of Sanyo Special Steel Manufacturing deMéxico, S.A. de C.V.

The key audit matter

How the matter was addressed in our audit

In the consolidated balance sheet of theCompany as of March 31, 2023, property,
plant and equipment of ¥4,832 million andintangible assets of ¥135 million related to
Sanyo Special Steel Manufacturing deMéxico, S.A. de C.V. (hereinafter, “SMM”)

The primary procedures we performed to assess theappropriateness of the Company’s judgment as towhether an impairment loss should be recognized on
property, plant and equipment and intangible assets of
SMM included the following:established in November 2015 wererecognized.
While these assets are depreciated/amortizedin a systematic manner, they need to betested for impairment whenever there is anindication of impairment . The impairment
test is performed by comparing theundiscounted future cash flows that are
expected to be generated from the asset
groups with their carrying amounts. If therecognition of an impairment loss is deemednecessary, the carrying amount is reduced to
the recoverable amount, and the resulting
decrease in the carrying amount isrecognized as an impairment loss.
SMM identified an indication of impairment
since operating loss has continued in spite of
the improvement of the revenue due toincreased sales volume. Accordingly, theCompany performed an impairment test
during the current fiscal year. In the
impairment testing, undiscounted future cash
flows were estimated based on the businessplan of SMM prepared by management thatincorporated an increase in sales volume
including prospective new orders, anestimate which involved a degree of
uncertainty. Accordingly, management’s
judgment thereon had a significant effect on
the estimated undiscounted future cash flows.

(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls to determine
whether an impairment loss should be recognized on
property, plant and equipment and intangible assets.
(2) Assessment of the reasonableness of the estimatedundiscounted future cash flows
In order to assess the appropriateness of key
assumptions adopted in estimating the undiscounted
future cash flows, we inquired of the planningdepartment about the future uncertainty (increase insales volume) incorporated into the business plan of
SMM and the undiscounted future cash flows, which
served as the basis for the estimate. In addition, we:compared the sales volume included in thebusiness plan with the available external data on
the projection of automobile sales volume inNorth America; and

assessed the consistency of the projected increasein sales volume from prospective new orders withthe most recent orders and the progress ofnegotiations with customers.

We, therefore, determined that theappropriateness of the Company’s judgment
as to whether an impairment loss should berecognized on property, plant and equipment
and intangible assets of SMM was the mostsignificant in our audit of the consolidated
financial statements for this fiscal year, andaccordingly, a key audit matter.

Other Information
The other information comprises the information included in the disclosure documents that contain or
accompany the audited consolidated financial statements, but does not include the consolidated
financial statements and our auditor’s report thereon.
We do not perform any work on the other information as we determine such information does not exist.

Responsibilities of Management and the Audit & Supervisory Committee 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.
The Audit & Supervisory Committee is responsible for overseeing the directors’ performance of theirduties with regard to the design, implementation and maintenance of the Group’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 the Audit & Supervisory Committee regarding, among other matters, theplanned 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 the Audit & Supervisory Committee with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the Audit & Supervisory Committee, we determine those mattersthat 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 these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences ofdoing 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, 2023 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.
Yasuhiro Wada
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 31, 2023