Sanyo Special Steel Co., Ltd.

Financial Report for
The Year Ended March 31, 2022

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSAs of March 31, 2021 and 2022
Thousands of U.S.
Millions of yen

ASSETS

2021

dollars (Note 3)

2022

2022

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

10,924¥

14,483$

118,316

47,198－－－69,019563,839

Electronically recorded monetary claims (Note 6)

5,132

8,707

71,130Less: Allowance for doubtful accounts

(260)

(356)

(2,912)

73,123

113,512927,306

226

18

146

Deposits paid in parent company (Notes 6 and 23)

14,415

7,924

64,736

Other

7,151

7,196

58,791

157,909220,503

1,801,352

Land (Note 10)

12,826

13,259108,315

Buildings and structures (Note 10)73,15375,042613,037

Machinery and equipment (Note 10)273,285286,723

2,342,320

9,554

3,408

27,840Notes and account receivable - trade (Notes 6 and 10)
Notes and accounts receivable - trade, and contract assets (Notes 6 and 10)

Inventories (Notes 8 and 10)
Income taxes receivable

Total current assets

Property, Plant and Equipment:

Construction in progress
Other (Note 10)

13,963

14,953

122,151

382,781393,385

3,213,663(268,956)(281,410)(2,298,910)

113,825

111,975

914,753

Goodwill

34,17633,284

271,906

Other

4,046

4,102

33,514

38,22237,386

305,420

5,991

4,996

40,8132

2

18

Less: Accumulated depreciation
Total property, plant and equipment

Intangibles

Total intangible

Investments and Other Assets:
Investments in securities (Notes 6, 7 and 9)
Long-term loans receivable
Deferred tax assets (Note 13)

639

2,055

16,783Net defined benefit assets (Note 12)

1,836

300

2,452

Other

1,140

902

7,364

Less: Allowance for doubtful accounts

(203)

(208)

(1,695)

Total investments and other assets

9,405

8,047

65,735

Total assets¥ 319,361

1¥

377,911$3,087,260

Thousands of U.S.
dollars (Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2021

2022

2022

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

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

34,146¥34,367

13,727

3,306$

280,757
27,010－12,001

98,042

Notes and accounts payable - trade27,84649,426

403,771

Accounts payable - other12,07910,262

83,837

Accrued income taxes

650

5,475

44,7307,984

12,685

103,624

160

4

32

Commercial papers (Note 6)

Accrued expenses
Provision for environmental measures
Other (Note 11)

3,048

2,711

22,141

99,640130,237

1,063,944

Bonds payable (Notes 6 and 11)

10,00010,00081,693Long-term loans (Notes 6, 10 and 11)

12,42919,324

157,863

66

68

556

Deferred tax liabilities (Note 13)

2,729

4,743

38,749Provision for loss on guarantees

3

1

11

Total current liabilities

Long-term Liabilities:

Accrued directors' and corporate auditors' retirement benefits

Provision for environmental measures

310

207

1,684

Net defined benefit liabilities (Note 12)12,852

12,16599,381Other (Note 11)

1,444

2,321

18,957

Total long-term liabilities

39,833

48,829398,894

Total liabilities

139,473

179,066

1,462,838

Contingent Liabilities (Note 26)
Net Assets (Note 14)
Shareholders’ Equity:
Common stock:
Authorized 94,878,400 shares in 2021 and 2022
Issued 54,507,307 shares in 2021 and 2022¥

53,800¥53,800$439,508

Capital surplus

51,48651,486420,606

Retained earnings

72,92485,733

700,375

(23)

(28)

(231)

178,187

190,991

1,560,258

1,661

1,383

11,297

Deferred gains on hedges

885

2,134

17,438Foreign currency translation adjustments

(650)

4,120

33,657

Remeasurements of defined benefit plans(1,690)(1,634)(13,349)

206

6,003

49,043

Non-controlling Interests

1,495

1,851

15,121

Total net assets

179,888

198,845

1,624,422

319,361¥ 377,911$ 3,087,260

Less: Treasury stock, at cost (16,774 shares in 2021 and 19,566 shares in 2022)
Total shareholders’ equity

Accumulated Other Comprehensive Income:
Valuation difference on available-for-sale securities

Total accumulated other comprehensive income

Total liabilities and net assets¥2

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2021 and 2022
Thousands of U.S.
dollars (Note 3)

Millions of yen

2021

2022

2022

210,722¥ 363,278$ 2,967,719

187,949

303,3942,478,514

22,77359,884489,205

28,266

38,467314,245(5,493)

21,417

174,960

Interest and dividends

196

263

2,147

Rent income

539

442

3,609

Net Sales (Note 29)
Cost of Sales (Notes 8 and 15)¥

Gross profit

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

Other Income:

Income from deposit transfer following extinctive prescription

99

－

－

Exchange gains

539

164

1,340

Other

175

243

1,989

1,548

1,112

9,085

Interest

(641)

(615)

(5,025)

Other

(177)

(250)

(2,041)

(818)

(865)

(7,066)(4,763)

21,664

176,979(3,929)

－

－

(625)

(193)

(1,576)－(414)(3,388)Other Expenses:

Ordinary income (loss)

Extraordinary Gains and Losses:
Impairment loss (Note 21)
Loss on sale and disposition of property, plant and equipment (Note 19)
Loss on liquidation of subsidiaries (Note 20)
Extra retirement payments

(425)

－

－

Loss on evaluation of investments in securities

(30)

(219)

(1,791)Gain on sale of property, plant and equipment (Note 18)

－

43

355

Gain on sales of land

169

－

－

Gain on sale of investment in securities

84

92

755

(4,756)(691)(5,645)(9,519)20,973

171,334

Current

674

5,252

42,905

Deferred(1,231)

224

1,827

Income (loss) before income taxes

Income Taxes (Note 13):

Net income (loss)

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

3

¥

(557)

5,476

44,732(8,962)

15,497

126,602(2,092)

230

1,880

(6,870)¥15,267$

124,722

Yen

U.S. dollars (Note 3)

2021

2022

2022

Per Share:
Net income (loss) (Note 22)¥

Cash dividends
Net assets

4(126.07)¥280.19

$

2.29

¥

－

¥

90.00

$

0.74

¥

3,273.84¥ 3,615.39

$

29.54

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2021 and 2022
Thousands of U.S.
dollars (Note 3)

Millions of yen

2021

Net Income (Loss)
Other Comprehensive Income (Loss):¥

Valuation difference on available-for-sale securities

2022(8,962)¥2022

15,497$

126,602

1,099

(278)

(2,273)

530

1,249

10,205

Foreign currency translation adjustments

1,908

4,828

39,439Remeasurements of defined benefit plans

3,152

56

456

Deferred gains on hedges

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

Comprehensive Income (Loss)

(36)

69

567

6,653

5,924

48,394(2,309)21,421

174,99634

21,064

172,075(2,343)

357

2,921

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

5

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

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

Balance at beginning of year

54,494,173

Cumulative effects of changes in accounting policies
Restated balance
Net income (loss) attributable to owners of the parent

Millions of yen

Common stock

Capital surplus¥¥

53,80051,486

Retainedearnings¥

79,794－－－－54,494,173

53,80051,486

79,794－－－(6,870)

－

－

－

－

Acquisition of treasury stock(3,710)－－－

Disposal of treasury stock

70

－

(0)

－

Other changes for fiscal year 2020, net

－

－

－

－

(3,640)－(0)(6,870)Cash dividends paid

Total changes for fiscal year 2020
Balance at end of year

54,490,533¥

53,800¥51,486¥72,924

Millions of yen

Balance at beginning of year

Treasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

Foreigncurrencytranslation
adjustments

¥

¥

¥

¥

(20)

562

355

(2,772)

－

－

－

－

(20)

562

355

(2,772)

Net income (loss) attributable to owners of the parent

－

－

－

－

Cash dividends paid

－

－

－

－

Acquisition of treasury stock

(3)

－

－

－

Disposal of treasury stock

0

－

－

－

Other changes for fiscal year 2020, net

－

1,099

530

2,122

(3)

1,099

530

2,122

Cumulative effects of changes in accounting policies
Restated balance

Total changes for fiscal year 2020
Balance at end of year

¥

(23)

¥

1,661

¥

885

¥

Millions of yen

Balance at beginning of year

Remeasurementsof defined
benefit plans

Noncontrollinginterests¥¥(4,842)

3,840

Total

¥

182,203－－－(4,842)

3,840

182,203

Net income (loss) attributable to owners of the parent－－(6,870)Cash dividends paid

－

－

－

Acquisition of treasury stock

－

－

(3)

Disposal of treasury stock

－

－

0

3,152

(2,345)

4,558

3,152

(2,345)(2,315)

Cumulative effects of changes in accounting policies
Restated balance

Other changes for fiscal year 2020, net
Total changes for fiscal year 2020
Balance at end of year¥6

(1,690)

¥

1,495

¥

179,888(650)

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

Millions of yen

54,490,533

Balance at beginning of year¥¥

53,80051,486¥72,924

－

－

－

(6)

54,490,533

53,80051,486

72,918－－－15,267

Cumulative effects of changes in accounting policies
Restated balance

Retainedearnings

Common stock Capital surplus

Net income (loss) attributable to owners of the parent

－

－

－

Acquisition of treasury stock(2,913)－－(2,452)－

Disposal of treasury stock

121

－

0

－

Other changes for fiscal year 2021, net

－

－

－

－

Cash dividends paid－

(2,792)

Total changes for fiscal year 2021

54,487,741

Balance at end of year¥

0¥53,80051,486

12,815¥85,733

Millions of yen

Balance at beginning of year

Treasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

Foreigncurrencytranslation
adjustments

¥

¥

¥

¥

(23)

1,661

885

(650)

－
(23)

－

－

1,661

885

－
(650)

Net income (loss) attributable to owners of the parent

－

－

－

－

Cash dividends paid

－

－

－

－

Acquisition of treasury stock

(5)

－

－

－

Disposal of treasury stock

0

－

－

－

Other changes for fiscal year 2021, net

－

(278)
(278)

1,249

4,770

1,249

4,770

Cumulative effects of changes in accounting policies
Restated balance(5)

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¥

Cumulative effects of changes in accounting policies(1,690)Noncontrollinginterests

¥

1,495

Total

¥

179,888－－(6)(1,690)1,495

179,882

Net income (loss) attributable to owners of the parent－－

Cash dividends paid－－

15,267(2,452)Acquisition of treasury stock－－

Disposal of treasury stock－－

Other changes for fiscal year 2021, net

56

356

6,153

56

356

18,963

Restated balance

Total changes for fiscal year 2021
Balance at end of year¥7

(1,634)

¥

1,851

(5)
0

¥

198,845¥4,120

Number ofoutstanding
common shares

Balance at beginning of year

Thousands of U.S. dollars (Note 3)

54,490,533 $ 439,508$ 420,606$ 595,731

－

－

－

(47)

54,490,533

439,508

420,606

595,684－－－

124,722

Cumulative effects of changes in accounting policies
Restated balance

Retainedearnings

Common stock Capital surplus

Net income (loss) attributable to owners of the parent

－

－

－

(20,031)

Acquisition of treasury stock(2,913)－－－

Disposal of treasury stock

121

－

0

－

Other changes for fiscal year 2021, net

－

－

－

－

(2,792)－

0

104,691

54,487,741 $ 439,508$ 420,606$ 700,375

Cash dividends paid

Total changes for fiscal year 2021
Balance at end of year

Thousands of U.S. dollars (Note 3)

Balance at beginning of year

Treasury stock,at costValuationdifference on
available-forsale securities

Deferred gains
on hedges

Foreigncurrencytranslation
adjustments

$

$

$

$

(191)

13,5707,233(5,307)

－

－

－

－

(191)

13,5707,233(5,307)

Net income (loss) attributable to owners of the parent

－

－

－

－

Cash dividends paid

－

－

－

－

Acquisition of treasury stock

(41)

－

－

－

Disposal of treasury stock

1

－

－

－

－

(2,273)

10,20538,964(40)(2,273)

10,20538,964

Cumulative effects of changes in accounting policies
Restated balance

Other changes for fiscal year 2021, net
Total changes for fiscal year 2021
Balance at end of year

$

(231)

$

11,297$

17,438$

Thousands of U.S. dollars (Note 3)

Remeasurementsof defined benefit
plans

Balance at beginning of year$

(13,805)

Noncontrollinginterests$

12,209Total$ 1,469,554

－

－

(47)

(13,805)

12,2091,469,507

Net income (loss) attributable to owners of the parent－－

124,722

Cash dividends paid－－

(20,031)

Acquisition of treasury stock

－

－

(41)

Disposal of treasury stock

－

－

1

Other changes for fiscal year 2021, net

456

2,912

50,264456

2,912

154,915

15,121$ 1,624,422

Cumulative effects of changes in accounting policies
Restated balance

Total changes for fiscal year 2021
Balance at end of year$8

(13,349)$

33,657

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2021 and 2022
Thousands of U.S.
dollars (Note 3)

Millions of yen

2021

2022

2022

Cash Flows from Operating Activities:
Income (loss) before income taxes¥(9,519)¥20,973$

171,334

Adjustments Depreciation and amortization

14,187

15,904

129,920

Impairment loss

3,929

－

－

Amortization of goodwill

2,621

3,375

27,569

Increase in allowance for doubtful accounts

94

70

568

Increase (decrease) in provision for bonuses

(149)

685

5,593

Increase in net defined benefit liabilities

366

97

789

Decrease in net defined benefit assets

937

205

1,673

Increase (decrease) in accrued directors' and corporate

(4)

2

20

157

(274)

(2,235)auditors' retirement benefits, less payments
Increase (decrease) in provision for environmental measures
Increase (decrease) in provision for loss on guarantees

0

(2)

(13)

Interest and dividend income

(196)

(263)

(2,147)

Interest expense

641

615

5,025

Gain on sale of investments in securities

(84)

(92)

(755)

Loss on evaluation of investments in securities

30

219

1,793

Deposit transfer profit with completion of extinctive prescription

(99)

－

－

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

456

149

1,221

Loss on liquidation of subsidiaries

－

414

3,388

Extra retirement payments

425

－

－

Notes and accounts receivable - trade, and contract assets(1,334)(23,620)(192,960)

Inventories

6,365(36,970)(302,016)

Changes in assets and liabilities:

Notes and accounts payable - trade
Other, net
Subtotal

4,628

25,217206,001(1,967)

1,160

9,476

21,484

7,864

64,244

Interest and dividend income received

198

263

2,152

Interest expense paid

(646)

(617)

(5,040)

Income taxes refund (paid)
Net cash provided by operating activities

1,278

(424)

(3,466)22,314

7,086

57,890Cash Flows from Investing Activities:
Acquisition of property, plant and equipment(19,175)(13,832)(113,000)

Sale of property, plant and equipment

265

106

862

Acquisition of intangible assets

(971)

(711)

(5,806)

Acquisition of investments in securities

(2)

(2)

(18)

Sale of investments in securities

308

553

4,520

Collection of contingent consideration of investments in subsidiaries

117

－

－

Decrease in long-term loans receivable

203

203

1,657

Payments into time deposits(702)(1,022)(8,352)

Proceeds from withdrawal of time deposits

776

931

7,609

Payments of long-term loans receivable

(2)

(2)

(20)

Other, net
Net cash used in investing activities
9

(230)

478

3,909

(19,413)(13,298)(108,639)

Thousands of U.S. dollars(Note 3)

Millions of yen

2021

2022

2022

Cash Flows from Financing Activities:
Increase (decrease) in short-term loans

¥

964

¥

－

Increase in commercial paper(2,098)$12,001(17,142)
98,042

Proceeds from long-term loans－

11,00089,862

Repayment of long-term loans(5,577)(15,110)(123,440)

Repayment of lease obligations(831)(1,035)(8,452)

(4)

(5)

(42)

Payments for purchases of treasury stock
Proceeds from sales of treasury stock

0

0

2

Cash dividends(1)(2,449)(20,004)

Cash dividends to non-controlling interests

(1)

(1)

(10)

Other, net

(24)

(17)

(140)

Net cash provided by (used in) financing activities(5,474)

2,286

18,676

Effect of Exchange Rate Changes on Cash and Cash Equivalents

234

902

7,368

Net Decrease in Cash and Cash Equivalents(2,339)(3,024)(24,705)

Cash and Cash Equivalents at Beginning of the Year

27,22024,881

203,262

Cash and Cash Equivalents at End of the Year (Note 23)¥1024,881¥

21,857$

178,557

Sanyo Special Steel Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

2. Summary of Significant Accounting Policies(1) Consolidation and investments in affiliates(a) Scope of consolidation and elimination
The Company had 40 subsidiaries as of March 31, 2022 (41subsidiaries as of March 31, 2021). The consolidated financial
statements include the accounts of the Company and its 40
subsidiaries. The 40 subsidiaries that have been consolidated forthe fiscal year ended March 31, 2022 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.
P.T. Sanyo Special Steel Indonesia
SKJ Metal Industries Co., Ltd.
Mahindra Sanyo Special Steel Pvt. Ltd. (※)
Sanyo Special Steel India Pvt. Ltd.
Sanyo Special Steel Trading (Shanghai) Co., Ltd.
Ovako Group AB and its 25 subsidiaries (“Ovako”)(※) Mahindra Sanyo Special Steel Private Limited changed its
trade name to Sanyo Special Steel Manufacturing India Private
Limited on June 23, 2022.

From the year ended March 31, 2022, Ovako has changed its
fiscal year-end date from December 31 to March 31. As a result for
the year ended March 31, 2022, the Ovako fiscal year comprises 15
months.
From January 1, 2021 to March 31, 2021, Ovako had net sales of
30,383 million yen ($248,207 thousand), operating income of
2,747 million yen ($22,441 thousand), ordinary income and income
before income taxes of 2,529 million yen ($20,660 thousand), andgoodwill amortization of 672 million yen ($5,490 thousand).
(b) Investments in affiliates
Investments in Advanced Green Components, LLC and AB
Järnbruksförnödenheter, two affiliates of the Company over which
the Company has significant influence, are accounted for by theequity method.

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

Santoku Security Service Co., Ltd., which had been a
consolidated subsidiary of the Company, was excluded from the(3) Securities
scope of consolidation for the current fiscal year since it was
The accounting standard for financial instruments (“Accounting
extinguished on April 1, 2021 in the absorption-type merger withStandards for Financial Instruments” (Accounting Standards Board
Santoku Kogyo Co., Ltd., which was the surviving company.
of Japan (“ASBJ”) Statement No. 10)) requires that securities beclassified into 4 categories: trading securities, held-to-maturity debt
The consolidated subsidiaries, except for the 7 foreign
securities, equity securities issued by subsidiaries and affiliates andsubsidiaries (Sanyo Special Steel Manufacturing de México, S.A.
available-for-sale securities. Except for the equity securities issued
de C.V., Ningbo Sanyo Special Steel Products Co., Ltd., Siamby subsidiaries and affiliates, securities that the Company has are
Sanyo Special Steel Product Co., Ltd., Sanyo Special Steel U.S.A.,
all classified as available-for-sale securities.
Inc., P.T. Sanyo Special Steel Indonesia, SKJ Metal Industries Co.,
Under the standard, marketable securities classified as availableLtd., Sanyo Special Steel Trading (Shanghai) Co., Ltd.,) use afor-sale securities are carried at fair value with changes infiscal year ending March 31, which is the same as that of theunrealized holding gains and losses, net of the applicable income
Company. The 7 foreign subsidiaries use a fiscal year ending
taxes, included directly in net assets. Equality securities without
December 31. For these 7 subsidiaries, certain adjustments aremarket prices classified as available-for-sale securities are carriedmade, if appropriate, in preparing the consolidated financial
at cost. A decline in the value of available-for-sale securities isstatements to reflect material transactions which occur between
reflected in net loss for the period unless deemed to be temporary.
their fiscal year-end and March 31.
The cost of securities sold is determined by the moving average
For the purpose of preparing the consolidated financial
method.
statements, all significant intercompany transactions, balances and(4) Derivative transactions and hedge accounting
unrealized profits among the Companies have been eliminated.
Derivative financial instruments are stated at fair value.

11

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.
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.

year using the benefit formula basis.
Prior service costs are posted in expenses from the consolidated
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
benefits 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.

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

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

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

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

(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 based
Revenue in the Companies are mainly generated from the sale ofon past loss experience plus the amount estimated to be
special steel products in which the performance obligation is touncollectible based on an assessment of certain individual accounts.
transfer the merchandise and finished goods to the customer based(10) Provision for bonuses
on the sales contracts.
Provision for employees bonuses is provided at the estimated
The Companies recognize revenue when the customer receives
amount of bonuses to be paid to the employees in the following
the merchandise and finished goods, control of the goods isyear. It was recorded as accrued expenses on the consolidated
transferred to the customer and the performance obligations arebalance sheet.
satisfied.
(11) Accrued directors’ and corporate auditors’ retirement
However, the Companies and its subsidiaries recognize revenue
benefitsfrom domestic sales at the point of shipment in cases in which
Certain consolidated subsidiaries provide for lump-sum
control of the goods is transferred to the customer within apayments to retiring directors and corporate auditors based onreasonable period according to Paragraph 98 of the Implementationinternal rules.
Guidance on Accounting Standard for Revenue Recognition.
(12) Provision for loss on guarantees
The transaction price is measured based on the contract with
To provide for losses on guarantees, the Company makes acustomers. In cases in which there is variable consideration in theprovision for potential losses at the end of the fiscal year.
contract, it is estimated and included in the transaction price to the(13) Provision for environmental measuresextent that there is no material reversal.
Reserve for environmental measures for obligatory PCB
The consideration involved in the transaction does not contain atreatment in Japan and removing soil pollution on overseas steelsignificant financing component because the relevant paymentmaking plants is stated as the estimated cost at the end of the fiscal
period is within a short-term after the satisfaction of theyear.
performance obligation.

(14) Accounting methods for employees’ retirement benefits

In the calculation of retirement benefit obligations, the estimatedamount of retirement benefits is attributed to the consolidated fiscal(17) Net income and cash dividends per share
Net income per share is computed by dividing net income
available for distribution to shareholders of common stock by the12weighted-average number of shares of common stock outstanding
during the year. Diluted net income per share is not disclosed
because potentially dilutive securities are not issued.
Cash dividends per share shown for each year in the consolidated
statements of operations represent dividends declared as 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 Intangibles(a) Carrying amounts in the current year’s financial statements
Millions of yen

Thousands of
U.S. dollars

2021
2022
2022
Property, Plant¥
113,825 ¥ 111,975 $
914,753
and Equipment
Intangibles¥
38,222 ¥37,386 $305,420(b) Significant accounting estimates for identified items
For property, plant and equipment and intangibles to determine
whether the recognition of an impairment loss is required it isnecessary to compare the undiscounted future cash flows that are
expected to be generated from the asset or the asset groups with its
book value whenever there is an impairment indicator in the asset
or the asset groups. If the recognition of an impairment loss isdeemed necessary, the book value is reduced to the recoverable
amount, and the resulting decrease in the book value is recognized
as an impairment loss.
The Companies group assets with consideration for business
management segments. In principle, the Company is classified bybusiness segment and its consolidated subsidiaries are classified byeach company as one asset group. In addition to the asset groups
that recorded impairment loss in the current consolidated fiscal
year, the asset groups of Sanyo Special Steel Manufacturing deMéxico, S.A.de C.V., which are recognized indications of
impairment, did not record impairment loss because theundiscounted future cash flows exceeded the book value. The
book value of property, plant and equipment were recorded at
3,930 million yen ($32,105 thousand) and intangibles wererecorded at 115 million yen ($939 thousand).
Property, plant and equipment and intangibles, which wererecorded on the consolidated balance sheet at the end of the current
consolidated fiscal year have a significant impact on the
consolidated financial statements for the following consolidated
fiscal year when the business circumstances of the Companies areaffected by extreme changes in future economic conditions and thebusiness declines significantly.

(20) Changes in accounting policies(a) Application of accounting Standard for Revenue Recognition
The Company and its subsidiaries have applied the AccountingStandard for Revenue Recognition (ASBJ Statement No. 29,
March 31, 2020) on the relevant guidance issued by ASBJ from the
beginning of the current consolidated fiscal year.
As a result of this application, the Company and its subsidiaries

have changed their policy to recognize revenue at an amount
expected to be received in exchange for the promised goods orservices as control of such goods or services is transferred to thecustomer.
However, the Companies and its subsidiaries recognize domestic
sales at the point of shipment in cases in which control of the goods
is transferred to the customer within a reasonable period according
to Paragraph 98 of the Implementation Guidance on AccountingStandard for Revenue Recognition.
The application of the changes in accounting policies follows thetransitional treatment prescribed in Paragraph 84 of the AccountingStandard for Revenue Recognition such that the new accounting
policy was applied from the beginning balance of retained earningsof the current consolidated fiscal year to add to or deduct from theamount of beginning balance of retained earnings of the current
consolidated fiscal year the cumulative effects of applying
retrospectively the new accounting policy from the beginning of
the current consolidated fiscal year.
There has been no material effects on net income, the beginningbalance of retained earnings and earnings per share of the current
consolidated fiscal year.
(b) Application of accounting Standard for Fair Value
Measurement
The Company and its subsidiaries apply the AccountingStandard for Fair Value Measurement (ASBJ Statement No. 30,
July 4, 2019) to the consolidated financial statements from the
beginning of the consolidated fiscal year and prospectively apply
the new accounting policies under the Accounting Standard for
Fair Value Measurement in accordance with the transitional
provision set out in Paragraph 19 of the Accounting Standard for
Fair Value Measurement and Paragraph 44-2 of AccountingStandard for Financial Instruments (ASBJ Statement No. 10, July 4,2019). The effects on the consolidated financial statement were notsignificant.
In addition, fair value information of financial instruments bylevel are disclosed in Note 6 to the consolidated fiscal statements.
However, following the transitional treatment in Paragraph 7-4 ofthe Implementation Guidance on Disclosures about Faire Value of
Financial Instruments (ASBJ Guidance No. 19, July 4, 2019),
relevant information for the previous consolidated fiscal year is notprovided.
(c) Changes in the method of translating revenues and expenses ofoverseas subsidiaries, etc., into Japanese currency
Revenues and expenses of foreign subsidiaries, etc., had beentranslated into yen at the spot exchange rate on the closing date of
the foreign subsidiaries, etc., but the Companies have changed themethod of translation them to yen at the average exchange rateduring the period from this consolidated fiscal year.
As the importance of revenue and expenses of foreignsubsidiaries has increased, this change was made in order tomitigate the impact of temporary fluctuations in exchange rates on
profits and losses and to more appropriately reflect the profits andlosses of foreign subsidiaries, etc., that occur throughout theaccounting period in the consolidated financial statements.
Since the impact of this change has been immaterial, it has notbeen applied retroactively.

(21) Additional information13

Regarding COVID-19, it is still unclear when the pandemic isover. Even though restrictions on people’s movement have been
gradually eased as a result of various anti-COVID measures suchas vaccinations, there remains the possibility that the disease could
rebound.

In preparing the consolidated financial statements for the current
consolidated fiscal year, the Company assumed that demand forspecial steel would not drop significantly in the future and madethe accounting estimates such its evaluation of fixed assets andrecoverability of deferred tax assets on that basis.

14

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 ¥122.41 to U.S. $1.00, the approximate rate of exchange as at March 31, 2022, has been used forthese translations.

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

Millions of yen

2021
Valuation difference on available-for-sale securities
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense)
Subtotal, net of tax
Deferred gains on hedges
Increase 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

¥

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

2022
¥

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

2022
$

(2,427)(755)(3,182)909(2,273)

890
(227)
663
(133)
530

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

19,666(6,813)
12,853(2,648)
10,205

1,908

4,828

39,439

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

(279)
182
(97)
153
56

(2,278)
1,484
(794)
1,250
456

(36)
(36)
6,653

69
69
5,924

567
567
48,394

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

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

¥

¥

$

5. Statements of cash flows
There were no significant non-cash transactions as of March 31, 2021 and 2022.

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 of 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 deposits and withdrawals are possible at any 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 price and regularly review their portfolios taking into consideration of theirrelationships with their business partners.
Notes and accounts payable are paid within one year. Notes and accounts payable denominated in foreign currencies are exposed to15exchange rate risks. The Companies reduce the risks 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 have conducted derivative transactions (commodity futures trading) to cope with the risk of purchased
electricity price fluctuation. The Companies execute and control derivative transactions in accordance with the internal rules which
stipulate the transaction 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 for funds related to operating and investing activities.
To manage the liquidity risks of financing, the Companies prepare and update cash flow plans as appropriate and maintain liquidity on
hand. Further, the Company has commitment line contracts in preparation for contingencies.
Because the risks of fluctuation are incorporated into the calculation of fair value of financial instruments, the fair value may fluctuate
due to the adoption of different assumptions and other factors. In addition, the contract amounts of derivative transactions in the notes to"Derivative Transactions" are not indicative of the market risk associated with derivative transactions themselves.

(2) Fair value information for financial instruments
Carrying amounts, fair values and differences between carrying amounts and fair values of relevant items are as follows:
2021
Millions of yen
Book value

Fair value

Difference(1) Investments in securities
Available-for-sale securities¥ 4,859 ¥ 4,859 ¥－(2) Bonds payable(10,000)(9,981)19(3) Long-term loans(26,156) (26,267)(111)(4) Derivative transactions① Hedge accounting not applied
(6)
(6)
－
② Hedge accounting applied
1,086
1,086
－
(※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” and “Accounts payable” are omitted because they are settled
in a short period of time and their fair values approximate their book values.
(※3) The following financial instruments are not included in “(1) Investments in securities” because they do not have market prices andit is extremely difficult to determine their fair value. The book values of those financial instruments are as follows:
Millions of yen

Unlisted equity securities

¥

1,132

Carrying amounts, fair values and differences between carrying amounts and fair values of relevant items are as follows:
2022
Millions of yen
Book value

Fair value

Thousands of U.S. dollars
DifferenceBook value

Fair value

Difference(1) Investments in securities
Available-for-sale securities¥ 4,011 ¥ 4,011 ¥－ $ 32,767 $ 32,767 $－(2) Bonds payable(10,000)(9,974)
26(81,693)(81,480)
213(3) Long-term loans (including current portion)(22,630) (22,605)
25(184,873) (184,663)
210(4) Derivative transactions① Hedge accounting not applied
1
1
－
9
9
－
② Hedge accounting applied
2,821
2,821
－
23,04723,047－(※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 are as follows:

Unlisted equity securities

16

Millions of yen

Thousands of
U.S. dollars

¥

$

985

8,046

(3) Financial assets with maturities were as follows:
The aggregate maturities subsequent to March 31, 2021:
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

¥

¥

1 year or more but

5 years or more but

within 5 years

within 10 years

10,924 ¥47,198
5,132
14,41577,669 ¥

－ ¥
－
－
－
－ ¥

－ ¥
－
－
－
－ ¥

10 years or more

－
－
－
－
－

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

5 years or more but

within 5 years

within 10 years

¥

¥

－ ¥
－
－
－
－ ¥

－ ¥
－
－
－
－ ¥

10 years or more

－
－
－
－
－

Thousands of U.S. dollars
Within 1 year

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

$

$

118,316
563,839
71,13064,736
818,021

1 year or more but

5 years or more but

within 5 years

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, 2021:
Millions of yen
Within 1 year

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

¥

¥

1 year or more but

5 years or more but

within 5 years

within 10 years

34,146 ¥－13,72747,873 ¥－ ¥10,00012,42922,429 ¥

－ ¥
－
－
－ ¥

10 years or more

－
－
－
－

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

5 years or more but

within 5 years

within 10 years－ ¥－10,00019,32429,324 ¥

－ ¥
－
－
－
－ ¥

10 years or more

－
－
－
－
－

Thousands of U.S. dollars
Within 1 year

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

$

$

17

280,757 $98,042－27,010405,809 $1 year or more but

5 years or more but

within 5 years

within 10 years－ $$－81,693
157,863239,556 $

－ $
－
－
－
－ $

10 years or more

－
－
－
－
－

(5) Fair value information for financial instruments by level of inputs
Based on the observability and the significance of the inputs used to determine fair value, fair value information of financial
instruments is presented 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
Level 1

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

Level 2

Level 3

Total¥

4,011 ¥

－ ¥

－ ¥

4,011

¥

－
－
4,011 ¥

9
2,937
2,946 ¥

－
－
－ ¥

9
2,937
6,957

Millions of yen
Level 1

Derivative transactions
Currency related
Commodity related
Total liabilities

Level 2

－ ¥
－
－ ¥

¥
¥

Level 3

$
124 ¥
－
124 ¥

Total

－ ¥
－
－ ¥

124
－
124

Thousands of U.S. dollars
Level 1

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

Level 2

Level 3

Total$

32,767 $－ $－ $32,767$－－32,767 $77
23,99524,072 $

－
－
－ $

77
23,99556,839Level 1

Level 2Thousands of U.S. dollars

Derivative transactions
Currency related
Commodity related
Total liabilities

－ $
－
－ $

$
$

Level 3$
1,015 $－
1,015 $

Total

－ $
－
－ $

1,015
－
1,015

(b) Financial instruments other than those measured at fair values in the consolidated balance sheet
2022
Millions of yen
Level 1

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

Level 2

－ ¥
－
－ ¥

¥
¥

Level 3

Total

－ ¥
－
－ ¥

9,974 ¥$
22,60532,579 ¥9,974
22,60532,579Thousands of U.S. dollars
Level 1

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

$
$

18

Level 2

－ $－－ $81,480 $$184,663
266,143 $Level 3

Total

－ $
－
－ $

81,480184,663
266,143

(※) Valuation techniques and inputs used in measuring fair values
Investments in securities
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 value of currency forward contracts is classified as Level 2 because the fair value is based on prices, etc., provided byfinancial institutions. Fair values of derivative transactions for commodity related purchased electricity price risk is classified as
Level 2 because the fair value is measured using the discounted present value method using quoted market prices and otherobservable inputs.
Bonds payable
The fair value of the bonds payable issued by the Company is based on quoted market prices. However, the fair value of the bonds
is classified as Level 2 because the fair value is not determined by quoted market prices in an active market.
Long-term loans
The fair value of long-term loans is classified as Level 2 because the fair value is measured using the discounted present value
method, i.e., the interest rate that would be applicable to a similar new loan and that reflects the total amount of the payment
obligations of principal and interests and the remaining 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, 2021 and 2022 were as follows:
Millions of yen

Thousands of U.S. dollars

2021
Acquisition
cost

Fair value(book value)2022
Unrealized gain
(loss)

Acquisition
cost

Securities whose book value exceeds acquisition cost:Stock¥2,458 ¥
4,658 ¥
2,200 ¥
Securities whose acquisition cost exceeds book value:
Stock
213
201
(12)
Total
¥
2,671 ¥
4,859 ¥
2,188 ¥

1,999
213
2,212

Fair value(book value)2022
Unrealized gain
(loss)

Acquisitioncost¥

3,803 ¥

1,804 $

16,333¥208
4,011 ¥

(5)
1,799 $

1,741
18,074

Fair value(book value)$

31,069$1,698
32,767

Unrealized gain
(loss)$

14,736$(43)
14,693Available-for-sale securities sold in the year ended March 31, 2021 and 2022 were as follows:
Millions of yen

Thousands of U.S. dollars

2021
Amountsof sales

Stock

¥

308 ¥

2022

Realized
gains

Realized
losses84 ¥Amountsof sales

－ ¥

2022

Realized
gains

553 ¥

Realized
losses92 ¥Amountsof sales－ $4,520 $

Realized
gains

Realized
losses755 $－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 ¥30 million and ¥219 million ($1,791 thousand) for the year ended March
31, 2021 and 2022, respectively.

19

8. Inventories
Inventories held by the Companies at March 31, 2021 and 2022 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

¥

¥

2021
1,328
17,15632,32822,311
73,1232022
2,214
24,54858,08828,662
113,512

¥

¥

$

$

2022
18,085200,537
474,538
234,146927,306

The net loss (gain) included in cost of sales due to inventories written down for the years ended March 31, 2021 and 2022 were ¥(252)
million and ¥137 million ($1,119 thousand) , respectively.

9. Affiliates
Items relevant to affiliates at March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

Investments in securities (stocks)

¥

2021
637

¥

2022
705

2022
5,760

$

10. Assets Pledged as Collateral
A breakdown of assets pledged as collateral and the related secured liabilities as of March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

2021
Assets pledged as collateral:
Notes and accounts receivable - trade
Notes and accounts receivable - trade, and contract assets
Inventories
Land
Buildings and structures
Machinery 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

¥

3,382
－
2,613
3,057
－
－
－
9,052

¥

556
780
1,336

2022

¥

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

¥

488
588
1,076

¥

2022

$

－
40,144
31,59027,455
1,103
1,452
2,596
104,340

$

3,984
4,802
8,786

$

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

11. Short-term Loans, Bonds Payable and Long-term Loans
Short-term loans at March 31, 2021 and 2022 represent bank overdrafts with weighted-average interest rates of 0.54% and 0.73%,
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¥13,368 million ($109,208 thousand). At March 31 2022, the total ¥13,368 million ($109,208 thousand) was unused.
Bonds payable at March 31, 2021 and 2022 consisted of the following:
Millions of yen

Bonds payable due 2024 with interest rates of 0.30% at March 31, 2021 and 2022¥

2021
10,000¥2022
10,000Thousands of
U.S. dollars$

2022
81,693

The annual maturities of bonds payable outstanding at March 31, 2022 were as follows:Year ending at March 31,
2025

20

Millions of yen

Thousands of
U.S. dollars¥$

10,00081,693

Long-term loans at March 31, 2021 and 2022 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2021
Loans from banks and other financial institutions due 2022 to 2024 withinterest rates ranging from 0.13% to 10.15% at March 31, 2021 and due 2023
to 2027 with interest rates ranging from 0.3% to 10.40% at March 31, 2022¥

26,156

Lease obligations due 2023 to 2028 with interest rate of 1.50% at March, 31,2022

Less: Current portion of long-term loans
¥

2022

¥

22,6302022$

184,873

1,956

2,117

17,29028,112(14,432)
13,68024,747(3,982)
20,765202,163(32,532)
169,631¥$

The annual maturities of long-term loans outstanding at March 31, 2022 were as follows:Year ending at March 31,
2024
2025
2026
2027
2028 and thereafter

Millions of yen

Thousands of
U.S. dollars

¥

$

¥

8,603
645
261
11,172
84
20,765$70,2785,269
2,131
91,269684
169,631

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

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

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

¥

¥

21

2021
20,210
869
178
(332)
(578)
－
745
21,092¥¥

2022
21,092927
171(1,248)
(732)
(262)
678
20,626

Thousands of
U.S. dollars

$

$

2022
172,307
7,572
1,393(10,196)(5,979)(2,137)
5,542
168,502

(b) Movements in plan assets, except plans applying the simplified method:
Millions of yen

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

¥

¥

2021
8,422
156
3,701
28
(170)
(1,074)(34)
11,029¥¥2022
11,029195(1,758)
265
(157)
－
162
9,736

Thousands of
U.S. dollars

$

$

2022
90,102
1,595(14,359)
2,168(1,285)－
1,313
79,534(c) Movements in liability for retirement benefits of defined benefit plans applying the simplified method:
Millions of yen

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

¥

¥

2021
903
163
(97)
(16)
953

¥

¥

2022
953
134
(112)
－
975

Thousands of
U.S. dollars

$

$

2022
7,790
1,098
(927)
－
7,961

(d) Reconciliation from retirement benefits obligations and plan assets to liability (asset) for retirement benefits:
Millions of yen

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

2021
21,092(11,029)
10,063953
11,016

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

12,852(1,836)
11,016

Funded retirement benefit obligations
Plan assets

¥

¥

¥

¥

2022
20,626(9,736)
10,890975
11,865
12,165(300)
11,865

Thousands of
U.S. dollars

$

$

2022
168,502(79,534)
88,968
7,961
96,92999,381(2,452)
96,929(e) Retirement benefit costs:
Millions of yen

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
Loss on termination of corporate pension plans
Extra retirement payments¥¥(※) Loss on termination of corporate pension plans is included in other expenses.

22

2021
869
178
(156)
466
－
163
1,520
7
425

¥

¥

2022
927
171
(195)
190
(4)
134
1,223
－
25

Thousands of
U.S. dollars

$

$

2022
7,572
1,393
(1,595)
1,552
(36)
1,098
9,984
－
205

(f) Remeasurements of defined benefit plans:Millions of yen

2021
Prior service cost
Actuarial gain (loss)
Total

¥
¥

－
4,466
4,466

¥
¥

2022
257
(354)
(97)

Thousands of
U.S. dollars

$
$

2022
2,101
(2,895)(794)(g) Accumulated remeasurements of defined benefit plans:Millions of yen

2021
Prior service cost yet to be unrecognized
Actuarial gain yet to be unrecognized
Total

¥
¥

－
2,060
2,060

¥
¥

2022
(257)
2,414
2,157

Thousands of
U.S. dollars

$
$

2022
(2,101)
19,723
17,622(h) Plan assets:① Plan assets comprise:
2021
81%
16%
3%
100%

Equity securities
Cash and bank deposits
Other
Total

2022
62%
33%
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, 2021 and 2022 were as follows:
2021
2022
Discount rate (mainly)
0.1%, 1.1%
0.4%, 2.6%
Long-term expected rate of return (mainly)
1.3%, 1.9%
1.7%, 2.5%
Expected rate of pay increase
2.5%
3.7%
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 ¥1,308 million and ¥1,638 million ($13,384 thousand)to the defined contribution plans for the years ended March 31, 2021 and 2022, respectively.

2313. Income Taxes
Significant components of deferred tax assets and liabilities at March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

2021
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)

¥

¥

2022

3,249
1,802

¥

2,979
1,540

2022
$

24,335
12,584

1,307

1,043

8,525

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

887
863
675
414
176
230
169
308
936
10,220(2,877)(1,425)(4,302)
5,918

7,246
7,052
5,516
3,385
1,439
1,882
1,381
2,517
7,626
83,488(23,504)(11,638)(35,142)
48,346¥(2,593)(1,466)
(861)
(683)
(561)
(527)
(1,088)(7,779)(2,090)¥¥(3,779)(1,250)
(842)
(547)
(91)
(416)
(1,682)(8,607)(2,689)$$$(30,869)(10,210)(6,875)(4,468)(744)(3,397)(13,749)(70,312)(21,966)

Valuation allowance increased by ¥68 million ($545 thousand). The main factors in the increase were impairment loss and recognitionof valuation allowance for tax loss carryforwards.
Tax loss carryforwards and their deferred tax assets by expiration periods:
As of March 31, 2021
Millions of yen

2022
Tax loss carryforwards (a)Valuation allowance
Net deferred tax assets

¥
¥

62
(55)
7

2023
¥
¥

173
(173)
－

2024
¥
¥

2025

401
(401)
－

¥
¥

181
(181)
－

2026
¥
¥

152
(139)
13

2027 andTotal
beyond¥2,280 ¥
3,249
(1,745)(2,694)
¥
535 ¥
555

(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, 2022
Millions of yen

2023
Tax loss carry forwards (b)Valuation allowance
Net deferred tax assets

¥
¥

153
(153)
－

2024
¥
¥

237
(237)
－

2025
¥
¥

187
(180)
7

24

2026
¥
¥

146
(146)
－

2027
¥
¥

105
(105)
－

2028 andTotal
beyond¥2,151 ¥
2,979
(2,056)(2,877)¥95 ¥102

Thousands of U.S. dollars
2023
Tax loss carryforwards (b)Valuation allowance
Net deferred tax assets

$
$

1,253
(1,253)
－

2024
$
$

1,940
(1,940)
－

2025
$
$

1,521
(1,468)
53

2026
$
$

1,190
(1,190)
－

2027
$
$

859
(859)
－

2028 andTotal
beyond$ 17,572 $ 24,335(16,794)(23,504)
$
778 $
831

(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 was asfollows:
Statutory income tax rate
30.6%
Add (deduct)
Non-deductible expenses, including entertainment expenses
0.2
Non-taxable income, including dividend income(0.1)
Equalization tax
0.1
Decrease in valuation allowance(2.4)
Effect of special tax credits(0.6)
Difference in applicable tax rates between consolidated subsidiaries(5.7)
Amortization of goodwill
4.9
Other
(0.9)
Effective income tax rate
26.1%
The reconciliation between the statutory income tax rate and the effective income tax rate for the year ended March 31, 2021 was not
required to be disclosed due to loss before income taxes.

14. Net Assets
Under the Japanese Corporate Law (the “Law”), the entire amount of the issue price of new shares is required to be accounted for ascommon stock. However, a company may, by a resolution of the Board of Directors, account for an amount not exceeding 50% of theissue price of the new shares as additional paid-in capital, which is included in capital surplus. However, an increase resulting from ashare exchange can be included in capital surplus up to the full amount.
The Law provides that the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve, incases in which a dividend distribution of surplus is made.
Under the Law, additional paid-in capital may be used to eliminate or reduce a deficit or may be capitalized by a resolution of theshareholders' meeting, and legal earnings reserve may be used to eliminate or reduce a deficit by a resolution of the shareholders’meeting. Legal earnings reserve is included in retained earnings in the accompanying financial statements.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, however, all additional paidin capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings respectively, which arepotentially available for dividends.
The maximum amount that a company can distribute as dividends is calculated based on its non-consolidated financial statements inaccordance with the Law.
At the Company’s Board of Directors meeting held on October 29, 2021, the directors approved cash dividends in the amount of¥2,452 million. At the Company’s Board of Directors meeting held on May 19, 2022, the directors approved cash dividends in theamount of ¥2,452 million.

15. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years ended
March 31, 2021 and 2022 totaled ¥2,110 million and ¥2,220 million ($18,132 thousand), respectively. For the year ended March 31,
2022, research and development cost in the Specialty Steel, Metal Powders and Formed & Fabricated Materials segments amounted to¥1,680 million ($13,723 thousand), ¥502 million ($4,097 thousand) and ¥38 million ($312 thousand), respectively.

25

16. Employment Adjustment Subsidies
Employment adjustment subsidies of the Companies recorded in manufacturing costs and selling, general and administrative expenses
at March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

Employment adjustment subsidies

¥

2021
2,153

¥

2022
127

$

2022
1,034

17. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

2021
9,896
7,733
38
341
578
15

¥

2022
14,892
9,731
1
518
618
14

2022
121,654
79,494
10
4,228
5,052
115

$

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, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

2021
Buildings and structures
Machinery and equipment
Total

2022
－
－
－

¥
¥

¥

37
6
43

¥

$
$

2022
300
55
355

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, 2021 and 2022 were as
follows:
Thousands of
U.S. dollars

Millions of yen

2021
Buildings and structures
Machinery and equipment
Other
Total

¥

¥

26

1
255
369
625

2022
¥

¥

24
86
83
193

$

$

2022
194
702
680
1,576

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 yen ($452
thousand)) was recorded 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:
AmountAmountSegment
Company
Location
Use
Type(Millions of (Thousands ofyen)
U.S. dollars)
Buildings and structures
¥
307 $
2,509
Formed andFabricatedMaterials

Siam SanyoSpecial Steel
Product
Co.,Ltd.

Samutprakarn,
ThailandBusiness
assets

Machinery and equipment

45

364

Construction in progress

1

10

Property, plant and equipment and other1

12

Intangibles and other

5

41

Total
¥
359 $
2,936
The Companies group assets with consideration for business management segments. In principle, the Company is classified bybusiness segments and its consolidated subsidiaries are classified by each company as one asset group.
Regarding the above asset 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 yen ($2,936
thousand)) in extraordinary losses.
The recoverable value is based on the estimated transfer value calculated by the net sales value.

21. Impairment Loss
In the fiscal year ended March 31, 2021, the impairment loss was recorded on the following asset group:
Segment

Company

Location

Use

Type
Buildings and structures

Amount(Millions of
yen)
¥
1,027

Machinery and equipment
Specialty
Steel

Mahindra
Sanyo Special
Steel Pvt. Ltd.

Maharashtra,
India

Business
assets

1,970

Land

151

Construction in progress

766

Property, plant and equipment and other

15

Intangibles and other

0
Total

¥

3,929

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

2722. Net Income Per Share
Net income (loss) per share for the years ended March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

Net income (loss) attributable to owners of the parent
Net income (loss) of common stock attributable to owners of the parent

¥
¥

2021
(6,870)(6,870)¥¥2022
15,267
15,267$$

2022
124,722
124,722

Thousands of shares

2021
54,492

Weighted-average number of shares of common stock2022
54,489Yen

Net income (loss) per share¥2021(126.07)

U.S. dollars¥

2022
280.19

2022
2.29

$

The Companies had no dilutive securities for the years ended March 31, 2021 and 2022.

23. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2021 and 2022 consisted of the following:
Millions of yen

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

¥

¥

2021
10,924(458)
14,41524,881¥¥

2022
14,483(550)
7,924
21,857

Thousands of
U.S. dollars

$

$

2022
118,316(4,495)64,736
178,557

24. Accounting for Leases(1) Non-cancelable operating leases(a) As a lessee
Outstanding future lease payments under non-cancelable operating leases at March 31, 2021 and 2022 were as follows:
Millions of yen

Due within one year
Due after one year
Total

¥
¥

2021
264
1,192
1,456

¥
¥

2022
219
1,022
1,241

Thousands of
U.S. dollars

$
$

2022
1,788
8,348
10,136(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.

2825. Derivatives(1) Derivative transactions to which hedge accounting was not applied
Currency-related transactions
The contracted amount, fair value and unrealized gain (loss) of forward exchange contracts recognized for the year ended March 31,
2021 were as follows:
Millions of yen
Contract
amountafter 1 year

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

¥

¥

Unrealized
gain (loss)

Fair value

45 ¥
13

－
－

1
2
61 ¥

－
－
－

¥

¥

(4) ¥
(0)

(4)
(0)

0
(2)
(6) ¥

0
(2)
(6)

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
amountafter 1 year

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

¥

¥

114
59
2
2
177

¥

¥

－
－
－
－
－

Thousands of U.S. dollars
Unrealized
gain (loss)

Fair value¥

Contract
amount

(7) ¥
0

(7)
0

$

2
6
1

2
6
1

14
14
$ 1,447

¥

¥

938
481

Contract
amountafter 1 year

$

$

－
－
－
－
－

Unrealized
gain (loss)

Fair value$$(58) $
3

(58)
3

13
51
9

13
51
9

$

(2) Derivative transactions to which hedge accounting was applied
Derivative transactions to which hedge accounting was applied for the years ended March 31, 2021 and 2022 were as follows:① Currency-related transactions
2021
2022
Method of hedge accounting
Principle method
Principle method
Type of derivative transactions
Forward exchange contracts
Forward exchange contracts
Selling Euros
Selling Euros
Main hedged items
Accounts payable - trade
Accounts payable - trade
Contract amount¥17,331 million¥28,046 million ($229,116 thousand)1 year or more amount of contract¥4,571 million¥11,971 million ($97,793 thousand)Fair value¥1,164 million¥(116) million ($(948) thousand)② Interest rate and currency swap transactions
Not applicable.

29

③ Other2021
Principle method
Commodity futures contract
Electricity¥2,124 million¥794 million¥(78) million

Method of hedge accounting
Type of derivative transactions
Main hedged items
Contract amount1 year or more amount of contract
Fair value

2022
Principle method
Commodity futures contract
Electricity¥1,372 million ($11,211 thousand)¥149 million ($1,217 thousand)¥2,937 million ($23,995 thousand)

26. Contingent Liabilities
Guarantees for loans of employees and others at March 31, 2021 and 2022 were as follows:
Thousands of
U.S. dollars

Millions of yen

2021
UCHIDA-SATO TECH (THAILAND) CO., LTD.

¥

2022
2

¥

2022
2

$

19

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

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

(3) Information about reportable segment profit or loss and other material items
Segment information for the years ended March 31, 2021 and 2022 was as follows:
For the year ended March 31, 2021
Millions of yen
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Adjustments

210,722¥

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

Intersegment transactions
Total
Segment income (loss)

193,402¥3,456 ¥

13,735

¥

129 ¥

－

¥

210,722

6,260

－

0

1,445

7,705

(7,705)－

199,6623,456

13,735

1,574

218,427(7,705)

210,722¥(5,241)

¥

263 ¥

(615)

¥

46 ¥

(5,547)¥54¥(5,493)¥

13,211

¥

252 ¥

687

¥

9 ¥

14,159¥(30) ¥

14,129

－

－

－

2,621

－

2,621

(b) Other:
Depreciation
Amortization of goodwill

2,621

Impairment loss
3,929
－
－
－
3,929
－
3,929
1. The "Other" category is the information service segment not included in reportable segments.
2. Segment income (loss) adjustments are intersegment eliminations.
3. Segment income (loss) is adjusted with operating loss in the consolidated statements of operations.
4. As information about segment assets and liabilities is not used to determine the distribution of management resources and evaluatebusiness results, the Companies are not required to disclose information about segment assets and liabilities.

30

For the year ended March 31, 2022
Millions of yen
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Adjustments

363,278¥

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

340,691

Total
Segment income¥

4,555 ¥

17,961

¥

71 ¥

－

¥

363,278

9,589

－

0

1,073

10,662(10,662)－

350,280

4,555

17,961

1,144

373,940(10,662)

363,278

Intersegment transactions¥

20,144

¥

818 ¥

360

¥

¥

14,895¥¥28 ¥21,350¥67¥

21,417¥(b) Other:
Depreciation

271 ¥

710

8 ¥

15,884(21) ¥

15,863

Amortization of goodwill

3,375

－

－

－

3,375

－

3,375

Impairment loss (※4)

－

－

359

－

359

－

359

Thousands of U.S. dollars
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Consolidated
total

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

2,783,197

Segment income

37,208 $146,726$

588 $ 2,967,719－$$ 2,967,719

78,335

－

0

8,769

87,104(87,104)－

2,861,532

37,208

146,726

9,357

3,054,823(87,104)

2,967,719

Intersegment transactions
Total

$

$

164,563$6,682 $

2,940

$

228 $

174,413$547$

174,960$

121,680$

2,211 $

5,804

$

62 $

129,757$(166) $

129,591－－－

27,569－27,569(b) Other:
Depreciation
Amortization of goodwill

27,569Impairment loss (※4)
－
－
2,936
－
2,936
－
2,936
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.

(4) Related Information(a) Segment related information for the year ended March 31, 2021 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, 2021
Millions of yen
Japan

Net sales¥

83,836(Swedenof Europe)

Europe¥84,296¥(Germanyof Europe)(21,855) ¥(20,717) ¥North
AmericaAsia

35,744

¥

5,714

Other

¥

1,132

Total

¥

210,722

As of March 31, 2021
Millions of yen
Japan

Property, plant and equipment¥

67,821 ¥Europe(Sweden of Europe)

37,028 ¥(29,982) ¥

31

Asia

5,202 ¥

North
America

Other

24 ¥

3,750 ¥

Total

113,825

③ Information about major customers
For the year ended March 31, 2021
Net sales
Related segment
Millions of yen
Specialty Steel¥
22,765Marubeni-Itochu Steel Inc.

(b) Segment related information for the year ended March 31, 2022 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, 2022
Millions of yen
Japan

Net sales¥

134,142(Swedenof Europe)

Europe¥161,214¥(Germanyof Europe)(41,256) ¥North
AmericaAsia(40,563) ¥56,209

¥

9,857

Other

¥

1,856

Total

¥

363,278

Thousands of U.S. dollars

Net sales

Japan

Europe$ 1,095,841$ 1,317,003$(Swedenof Europe)(Germanyof Europe)Asia(337,032) $(331,370) $459,186

North
America$

80,524

Other

Total

$ 15,165$ 2,967,719

Other

Total

As of March 31, 2022
Millions of yen
Japan

Property, plant and equipment¥

65,119 ¥Europe(Sweden of Europe)

37,252 ¥(30,270) ¥

Asia

North
America

5,691 ¥

11 ¥

3,902 ¥

111,975

Thousands of U.S. dollars

Property, plant and equipment

$

Japan

Europe(Sweden of Europe)

531,974 $

304,322 $(247,284) $Asia

46,490 $North
America

Other

91 $

31,876 $Total

914,753③ 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.

32

(5) Information about the amount of amortization of goodwill and the unamortized amount of goodwill by reportablesegments
As of March 31, 2021
Millions of yen
Reportable segments
Specialty SteelUnamortized amount of goodwill¥

Metal Powder

34,176 ¥Formed andFabricated Materials

－

¥

Other

－ ¥

Total

－ ¥

Consolidated
total

Adjustments

34,176 ¥－¥34,176

As of March 31, 2022
Millions of yen
Reportable segments
Specialty SteelUnamortized amount of goodwill¥

Metal Powder

33,284 ¥Formed andFabricated Materials

－

¥

Other

－ ¥

Total

－ ¥

Consolidated
total

Adjustments

33,284 ¥－¥33,284

Thousands of U.S. dollars
Reportable segments
Specialty Steel

Metal Powder

Formed andFabricated Materials

Other

Total

Adjustments

Consolidated
total

Unamortized amount of goodwill$
271,906 $
－ $
－ $
－ $
271,906 $－ $271,906
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.”

28. Related Party Information(1) Related party transactions
Related party transactions for the years ended March 31, 2021 were as follows:
Transactions during the year ended
March 31, 2021
AmountDescription oftransaction
Millions of yen

Resulting account balances
Account

AmountMillions of yen

Category:
Parent company
Name:
Nippon Steel Corporation
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:¥419,524 million
Deposits paid in
Deposit of funds¥
17,973¥
14,415parent company
Business content:
Production and selling of steel
products, etc.
Equity ownership percentage:
Holding 53.07% directly
Holding 0.10% indirectly
Relation with related party:
Deposit of funds
Deposit of funds is transaction by CMS and the transaction amount represents the average outstanding balance during the fiscal year.

33

Related party transactions for the years ended March 31, 2022 were as follows:
Transactions during the year ended
March 31, 2022
AmountDescription ofMillions ofThousands oftransaction
yen
U.S. dollars

Resulting account balances
Account

AmountMillions ofThousands ofyen
U.S. dollars

Category:
Parent company
Name:
Nippon Steel Corporation
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:¥419,524 million
Deposits paid in
Deposit of funds ¥9,578$ 78,239¥ 7,924$ 64,736
parent company
Business content:
Production and selling of steel
products, etc.
Equity ownership percentage:
Holding 53.07% directly
Holding 0.10% indirectly
Relation with related party:
Deposit of funds
Deposit of funds is transaction by CMS and the transaction amount represents the average outstanding balance during the fiscal year.
Related party transactions with subsidiaries owned by the same parent company and subsidiaries of other related companies for theyears ended March 31, 2021 were as follows:
Transactions during the year ended
March 31, 2021
AmountDescription oftransaction
Millions of yen

Resulting account balances
Account

AmountMillions 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:
Transfers of trade
Accounts
¥
9,259
¥
6,090
¥1,000 million
receivable
receivable-other
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.

34

Related party transactions with subsidiaries owned by the same parent company and subsidiaries of other related companies for theyears ended March 31, 2022 were as follows:
Transactions during the year ended
March 31, 2022
AmountDescription ofMillions ofThousands oftransaction
yen
U.S. dollars

Resulting account balances
Account

AmountMillions ofThousands ofyen
U.S. dollars

Category:
subsidiaries owned by the same
parent company
Name:
Nippon Steel Finance Co.,Ltd.
Head office address:
Chiyoda-ku, Tokyo
Paid-in capital:
Transfers of trade
Accounts¥ 41,533$ 339,294¥ 10,129$ 82,750¥1,000 million
receivable
receivable-other
Business content:
Engages in the group’s
financing operations
Equity ownership percentage:Not applicable
Relation with related party:
Transfers of accounts 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, 2021 and 2022 wereas follows:
Not applicable.

(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.

3529. Revenue Recognition(1) Information about disaggregation of revenue from contracts with customers
The Companies operates in the Specialty Steel business, the Metal Powder business, the Formed and Fabricated Materials business,and other business. The main products of each business segment are 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 businessincludes 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 are as follows.
For the year ended March 31, 2022
Millions of yen
Business segments
Specialty SteelNet sales
Japan
EuropeAsia
North America
Other
Total

¥

¥

120,202 ¥161,200
50,555
7,845
889
340,691 ¥Metal Powder

Formed andFabricated Materials

3,473 ¥
4900
178－
4,555 ¥

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

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

Consolidated
total

Other

¥

71 ¥
－
－
－
－
71 ¥

¥

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

Thousands of U.S. dollars
Business segments
Specialty SteelNet sales
Japan
EuropeAsia
North America
Other
Total

$

$

981,965 $
1,316,884
412,996
64,083
7,269
2,783,197 $Metal Powder

Formed andFabricated Materials

28,361 $
35
7,355
1,457
－
37,208 $84,927 $84
38,835
14,984
7,896
146,726 $Total

1,095,253
1,317,003
459,186
80,524
15,165
2,967,131

Consolidated
total

Other

$

$

588 $
－
－
－
－
588 $

1,095,841
1,317,003
459,186
80,524
15,165
2,967,719

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 not included in the business segments.

(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 is omitted because those balances
are immaterial.
Since there are no material transactions with initial scheduled contract terms of more than 1 year in the Companies, a description oftransaction price allocated to the remaining obligation is omitted.

30. Subsequent Events
On April 20, 2022, the Company was notified by Mahindra and Mahindra Limited (hereinafter "M&M"), one of the minority
shareholders of Mahindra Sanyo Special Steel Private Limited (hereinafter "MSSS"), that M＆M was exercising its put-option under theshareholders agreement. Due to this exercise, the Company is obligated to purchase from M&M all of MSSS shares (3,475,260 shares)
held by M&M.
The transfer price is to be determined in accordance with the provisions of the shareholders agreement, and the financial impact at thistime is uncertain.

36

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, 2022 and 2021, 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, 2022 and 2021, 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 intangibles of Sanyo Special Steel Manufacturing de México,
S.A. de C.V.

The key audit matter

How the matter was addressed in our audit

In the consolidated balance sheet of the Company asof March 31, 2022, property, plant and equipment of¥3,930 million and intangibles of ¥115 million
related to Sanyo Special Steel Manufacturing deMéxico, S.A. de C.V. (hereinafter, “SMM”)
established in November 2015 were recognized.

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 intangibles of
SMM included the following:(1) Internal control testingWhile these assets are depreciated/amortized in asystematic manner, they need to be tested for
impairment whenever there is an impairment
indicator. The impairment test is performed bycomparing the undiscounted future cash flows thatare expected to be generated from the asset groups
with their carrying amounts. If the recognition of an
impairment loss is deemed necessary, the carrying
amount is reduced to the recoverable amount, andthe resulting decrease in the carrying amount isrecognized as an impairment loss.
SMM identified an impairment indicator since therealization of profits was delayed compared to what
had been budgeted for in the initial business plan.
Accordingly, the Company performed an impairment
test during the current fiscal year. In the impairment
testing, undiscounted future cash flows were
estimated based on the business plan of SMM
prepared by management that incorporated anincrease in sales volume including prospective neworders, an estimate which involved a degree of
uncertainty. Accordingly, management’s judgment
thereon had a significant effect on the estimatedundiscounted future cash flows.
We, therefore, determined that the appropriateness of
the Company’s judgment as to whether an
impairment loss should be recognized on property,
plant and equipment and intangibles of SMM was of
most significance in our audit of the consolidated
financial statements for this fiscal year, andaccordingly, a key audit matter.

We tested the design and operating effectiveness ofcertain of the Company’s internal controls todetermine whether an impairment loss should berecognized on property, plant and equipment andintangibles.
(2) Assessment of the reasonableness of theestimated undiscounted 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 (a sales
volume increase) incorporated into the business planof 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
increase in sales volume from prospective neworders with the most recent orders and theprogress of negotiations with customers.

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, 2022 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 3 to the consolidated financial statements.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company and its
subsidiaries which are required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan.
Naoki Sugita
Designated Engagement Partner
Certified Public Accountant
Yu Kohno
Designated Engagement Partner
Certified Public Accountant
Tatsuya Furusawa
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Osaka Office, Japan
August 30, 2022
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.