Sanyo Special Steel Co., Ltd.
IR Briefing Regarding the Business Results for the FY2023 2Q
Q&A Summary

Date: Tuesday, October 31, 2023
Speaker : Katsuhiro Miyamoto, Representative Director and President
Kozo Takahashi, Director, Member of the Board and Managing Executive Officer
Takashi Yatsunami, Managing Executive Officer* Please be noted that the actual Q&A session was in Japanese and this English
translation is prepared for reference purpose only.
----------------------------------------------------------------------------------------Q．Could you tell us how you view the demand trend of bearing steel in Japan and Europe?
Shipment of bearing steel appear to be sluggish despite destocking being resolved.
A．Demand for automobile in Japan is recovering gradually and current shipment of bearing steel isslightly exceeding our expectation. Although we have conservative view of sales volume inEurope since the economy is sluggish due to rising interest rates, our profit margin is secured
successfully.
Q．Could you tell us how you evaluate the actual results of Sanyo and OVAKO in FY2023/1H?
A．Sanyo’s result was affected by negative factors such as cost inflows from the previous period.
OVAKO’s result was better than expected due to relatively reasonable energy prices inFY2023/2Q.
Q．Regarding changes from the previous FY2023 forecast, you explained rising iron scrap priceaffected Sanyo. Could you tell us the details of negative impact related to “sales price andproduct mix” and “raw material and fuel prices”?
A．Negative impact of raw material and fuel prices (-0.8 billion yen) includes effects of rising ironscrap prices. Regarding sales margin and product mix (-1 billion yen), impact of applying alloysurcharge and change in product mix are included. Impact of the surcharges are basically due totime lag, and amount of impact will depend on future raw material and fuel prices.
Q．Could you tell us why you see OVAKO’s sales volume in FY2023 forecast at a historically low
level of 560 thousand tons? Is there any concern that OVAKO’s market share is declining? Inaddition, what is the reason why OVAKO has maintained a higher profit margin than in the past
while sales volume is declining?
A．OVAKO‘s sales volume is not stagnant compared to competitors despite contracting demand inEurope. On the other hand, improved profit margin by base price increase and expanded
application of surcharges has contributed to further profit improvement compared to FY2020,
when sales volume was 570 thousand tons.
Q．Sanyo’s sales volume forecast for FY2023/3Q is decreased compared to FY2023/2Q. Could youtell us how you see sales volume in FY2023/2H considering demand trends by each customer
industry?
A．Production for construction and industrial machineries has remained stagnant despite gradualimprovements in automobile industry. Taking these factors into account, we intend to achieve atleast the same level of sales volume as FY2023/1H.

Q．Profitability of the formed and fabricated materials segment fluctuates from quarter to quarter.
Could you tell us what is the profit/loss projection for FY2023/2H?
A．Decrease in sales volume to China had a significant impact in FY2023/1H, but it is now gradually
recovering. In addition, cost impact due to increasing sales volume in Mexico has preceded profit
impact. Thus, we expect the profitability will recover in FY2023/2H.
Q．Recovery of sales volume for Sanyo and OVAKO is still stagnant. May we assume it to betransient due to economical deceleration? Could you tell us how you see long-term demand ofspecialty steel?
A．Although our sales volume has been affected by current economic slowdown, demand forautomotive applications is recovering, and we believe that demand for construction and industrial
machinery will eventually recover through increased capital investment. The recovery of theEuropean economy might be slower than that of Japan, but we are not pessimistic about thelong-term demand for specialty steel at all.
Q．Could you tell us about the market evaluation of CN steel products?
A．We consider CN (green) steel value is increasing in Europe and recognize that a start-up
steelmaker in Scandinavia has been successful with contracts to sell green steel at substantial
premium prices. There may be a growing acceptance among customers that products with low
environmental impact should be paid for their value.

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