2025 Medium-term Management Plan

April 30, 2021

Table of Contents

2025 Medium-term Management Plan
1.

Business Environment and Basic Concept

2.

Basic Policies

3.

Financial Targets

4.

Comparison with previous medium-term

5.

Major Resource Allocation© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

2

1. Business Environment and Basic Concept(Domestic)<Business Environment>

 Specialty steel demand in Japan is expected todecrease due to changes in the social structure suchas aging demographics.
 Exports of specialty steel, whether direct or indirect,
are also expected to decline due to the growing
needs of local production for local consumption andreassessment of the global supply chain.
(Global) On global basis, demand for specialty steel is
expected to increase mainly in China and India.

<Basic Concept>
 Establish a lean and robust
corporate structure securing stableearnings by strengthening thebusiness foundation, and further
enhance corporate value in theglobal specialty steel market.

 Competition will intensify with domestic andoverseas specialty steel manufacturers due tochanges in the social and industrial structure, suchas increase of electrical vehicles (EV) etc.

 Quest for raw materials will intensify, particularly inthe area of steel scrap due to the surge of electric
furnaces operations to lessen carbon emission.
© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

3

2. Basic Policies (I)
1. Fortifying corporate value in the global specialty steel market
 Based on a compelling sense of crisis and urgency that we face an evident turning point of the businessenvironment, we will strengthen the cost competitiveness of the group as a whole by reducing both fixedand variable costs.

 We will also improve sales margins, upgrade sales mix, and secure and heighten our global market
position.

2. Reinforcing profitability of overseas businesses Ovako will reinforce its lean and robust corporate
structure, primarily by refining its cost-competitiveness.
 MSSS will further enhance its position in the Indian
market by reinforcing its sales strategy andcost-competitiveness.

3. Utilizing synergies with Nippon Steel and Ovako
 We will realize full synergies by FY2024 as planned by swift implementation of collaborative measuresin all areas including sales, production, procurement, etc.

© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

4

2. Basic Policies (II)4. Expanding technological superiority
 With the strength of our high-cleanliness steel, we will aim to
respond to new requirements and environmental challenges
arising from changes in the social and industrial structure.
 In particular, we focus on intensifying technologies that can
respond to further reliability and consistency requirements in fields such as EV,
wind power, railways, and hydrogen society, expected to expand globally.

5. Achieving carbon neutrality by 2050
 We will aim to achieve carbon neutrality by 2050, through the promotion of "eco-processes(energy conservation and higher efficiency in production)","green energy utilization", "eco-products (further reliable and consistentproducts for long-life bearings used in automobiles, wind power, railroads,
and metal powders for 3D printers etc.)", and "eco-solutions" (sharing energy-saving
technologies and productivity improvements among Ovako and MSSS)." We inaugurated the “Zero Carbon Promotion Committee” headed by our president and CEO, forpromoting and accomplishing carbon neutrality of the whole group.

6. Promoting digital transformation (DX) Utilizing latest digital technologies, we will further promote optimum operations (ex. operational
efficiency improvement and preventive maintenance by AI and IoT), quality improvement (ex.
detection accuracy improvement by AI), labor productivity improvement (ex. automation by RPA),
safety education (by VR), etc.
© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

5

2.Basic Policies (III)
7. Strengthening governance system and promoting diversity and health management
 We will strengthen our corporate governance system to meet the qualificationsof the Tokyo Stock Exchange prime market (from spring 2022).
 We will promote diversity management (extension of the retirement age to 65
years, further women empowerment, and nurturing global human resources) and healthmanagement with the aim of enabling all employees to succeed and develop regardless of theirindividual background or preference.

8. Boosting profitability of Formed & Fabricated Products and Metal Powder Businesses We will leverage the advantage of the integrated forging-turning manufacturing process to enhance
the profitability of the Formed & Fabricated Products Business.

 We will develop and expand sales of strategic items in the area of advanced information
technologies such as 5G and carbon neutrality etc. to boost the return in the Metal PowderBusiness.

9. Rearranging global corporate structure We will rearrange the global corporate structure through further reorganization, consolidation anddivestment.

© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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3. Financial Targets (Consolidated)
FY2025 earnings plan Net sales: Approx. 280 billion yen Ordinary income : Approx. 14 billion yen [Approx. 16.3 billion yen*] ROS: Approx. 5% [Approx. 6%*]

 ROE: Approx. 5% [Approx. 6%*]

*before amortization of goodwill[Key Assumptions] Iron scrap (purchase) 40,000 yen/t (Himeji area H2 market), Crude oil (Dubai) 60$/BL,
Exchange rate 100 yen/$, 112 yen/€

FY2025 financial indicators
 Equity ratio: Approx. 60%

 D/E ratio (Net): Approx. 0.2 times (FY2019 result: 0.27 times)

 D/EBITDA (Net) : Approx. 1 time

(FY2019 result: 54%)
(FY 2019 result: 2.9 times)

Shareholder returns
 We will aim a dividend payout ratio of around 30% against net income before
amortization of goodwill.

© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

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4. Comparison with previous medium-term<Previous medium-term (FY2017-FY2019)>
 We achieved to significantly expand our corporate scale through business restructuring,
including the acquisition or consolidation of Ovako (March 2019) and MSSS (June 2018).
In terms of earnings, we regrettably recorded a deficit in FY2019, mainly due to theeconomic downturn partly caused by conflicts between the United States and China, etc.
<2025 Medium-term Management Plan> We will aim to further increase corporate value by securing and expanding return on
consolidated basis, in particular by strengthening the profitability of overseas businesses.
(Unit：Billion yen, Ｔimes, Yen per stock)

previous medium-term
FY2017
Sales Volumeplan

134.7

148.5(Sanyo)
89.1
71.2
(Ovako)55.7(MSSS)
7.9
Net Sales
1,575
2,625
Ordinary Income
107▲15[14](Sanyo)
9940(Ovako)▲9(MSSS)▲14ROS
6.8％ ▲0.6％[0.5％]
ROE
5.6％ ▲2.0％[0.3％]
D/E ratio (Net)
0.22
0.27
EPS (Earnings Per Share)
218▲67[9]*[In parentheses] Before amortization of goodwill

75.0
60.0
13.5
2,800
140[163]9060
75％[6％]
5％[6％]
0.2
170[210]（Thousands of ton per month)89.1

FY2019FY2025Net sales(Billion yen)

Ordinary income(Billion yen)

2,800

300

2,625

Ordinary income
Net sales

250

200

2,500

1,858
1,715
1,491

1,575
1,387

140

150

100

97

115

117

107

94

50

0

1,500500▲15-502014FY 2015FY 2016FY 2017FY 2018FY 2019FY2025FY© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

85. Major Resource Allocation (Consolidated)
Capital expenditures
 Approx. 60 billion yen/5 years
・Limit within the amount of depreciation.
・Cost reduction, labor saving, carbon neutrality (energy conservation),
DX promotion, renovation, etc.
Research and development expenses
 Approx. 12.5 billion yen/5 years*Same level as previous medium-term

・”Creation of eco-processes and eco-products”
with the focus on carbon neutrality, etc.
Personnel plan
 6,726 people (as of the end of FY2019)→Approx. 6,400 people (as of the end of FY2025)
・On a non-consolidated basis, the retirement age was extended
to 65 years from FY2021.
・Group-wide rationalization of about 5%.
© 2021 Sanyo Special Steel Co., Ltd. All Rights Reserved.

9(Note)These materials were prepared based on information available as of the date of publication ofthese materials. Actual results may differ from these materials due to a variety of factors goingforward. No commitment or warranty is made.

Please note that the official text of this document has been prepared in Japanese. To the extent
there is any discrepancy between the English translation and original Japanese version, pleaserefer to the Japanese version.